Lindsay Corp (LNN) 2015 Q3 法說會逐字稿

Good morning. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation third-quarter 2015 earnings call.

(Operator Instructions)

During this call, management may make forward-looking statements that are subject to risks and uncertainties which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company and statements preceded by -- followed by or including the words expectation, outlook, could, may, should, or similar expressions. For these statements, we claim the protection of the Safe Harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

I would now like to turn the call over to Mr. Rick Parod, President and Chief Executive Officer.

Good morning, and thank you for joining us today. With me on today's call is Jim Raabe, Lindsay Corporation's Chief Financial Officer, and Lori Zarkowski, our Chief Accounting Officer.

Total revenues for the third quarter of FY15 were $160.7 million, 5% less than the same quarter last year. US and international irrigation equipment revenues decreased in the quarter and were partially offset by substantial increases in infrastructure sales. Operating margins decreased to 13.4% in the quarter compared to 14.8% in the same quarter last year.

Net earnings were $12.9 million or $1.10 per diluted share compared with $16.5 million or $1.28 per diluted share in the prior-year quarter. For the first nine months of FY15, total revenues were $436.6 million, decreasing 7% from the same period last year. Net earnings were $29.5 million or $2.46 per diluted share compared to $40.2 million or $3.11 per diluted share in the prior year.

Foreign currency exchange negatively affected year-to-date sales by approximately 3% and operating earnings by a little more than 2%. For the irrigation segment in total, sales were $131.3 million, 12% lower than the same quarter last year. Irrigation operating margins decreased to 15.1% of sales from 18.8% of sales due to competitive pricing pressure and deleveraging of fixed expenses on lower revenue.

In the US irrigation market, revenues were $86.7 million for the third quarter, decreasing 2% from the same period last year and declining 8% excluding the revenue from the newly acquired Elecsys Corporation. The lower US irrigation equipment revenue is primarily resulting from approximately $4 million less of storm damage sales as opposed to the same time last year.

While lower commodity prices and reduced farm income have dampened farmer sentiment regarding investments, we are now at the end of the primary selling season for North America, and farmers' attention is now on planting. While planting in the US has been behind schedule in many counties due to wet weather, we don't believe this has had much impact on demand in the quarter.

While weather conditions and the impact is difficult to predict, there does not appear to be a current catalyst for sustainable corn price improvement at this time. As a reminder, the fourth quarter of FY14 also included approximately $15 million or more of revenue related to storm damage, which was unusually high and unlikely to recur this year.

In the international markets, revenues for the third quarter were $44.6 million, decreasing 27% over the same quarter last year, with 10% revenue decline due to currency exchange and 10% revenue decline attributable to reductions in Europe, reflecting similar crop conditions as the US. Most of the remaining decrease in international markets was in China where delinquent receivables restricted sales opportunities.

While we have experienced softening in some of the more mature international markets due to lower commodity prices, we remain optimistic regarding agricultural projects. However, we have experienced some increase in competitiveness on larger projects including some manufacturers outside the US given the rise in the dollar.

For the first nine months of FY15, total irrigation segment revenues decreased 14% to $354.3 million. In the US irrigation market, revenues were $219.1 million, 16% lower than the prior year. In the international market, irrigation revenues were $135.2 million, 12% lower than the prior year and declining approximately 5% excluding the foreign-exchange impact.

Infrastructure segment revenues were $29.4 million in the quarter, increasing 41% from the same quarter last year. Road Zipper System and road safety product revenues continue to lead the year-over-year improvement.

The infrastructure segment generated operating income of $6.5 million in the quarter, 22.1% of revenue. While Road Zipper System sales remained project-based and lumpy, road safety revenues are up 51% in the quarter, reflecting increased market penetration and share gains. In addition, gross margins have increased significantly on road safety products as a result of higher volumes and manufacturing efficiencies implemented.

For the first nine months of FY15, infrastructure revenues increased 46% to $82.3 million with operating margins of 19.5%. Year-to-date road safety product revenues are up 44% with significantly increased gross margins.

For the total Company, gross profit in the third quarter was $46.4 million or 28.9% of sales versus $48.2 million or 28.4% of sales in the same quarter last year. Gross margins in irrigation decreased by approximately 1 percentage point as compared to the same quarter last year. A continuation of the competitive pricing environment and cost deleverage on lower sales had a negative impact on margins but were partially offset by lower steel costs and lower warranty costs.

Infrastructure gross margins increased by approximately 10 percentage points, primarily due to the improved product mix of road safety products and Road Zipper System sales and leases. Operating expenses in the third quarter increased to $24.9 million from $23 million in the prior-year period. Operating expenses increased $2.4 million due to the inclusion of the recently acquired Elecsys business plus $800,000 increase in health insurance claims offset by $1.3 million reduction in other discretionary expenses in the quarter.

Year-to-date SG&A expenses have been reduced from 2014 levels by $2.6 million excluding the addition of Elecsys since 2015 impact of environmental expenses, acquisition expenses and higher health-care claims. Additional savings are anticipated in the fourth quarter.

The order backlog at May 31, 2015 was $53.2 million compared to $73.6 million May 31, 2014. The May 31, 2015 backlog includes $12.3 million of backlog for Elecsys Corporation.

Year-over-year irrigation backlog levels excluding Elecsys have decreased, reflecting the reduced demand from storm damage as compared to the same time last year and the change in agricultural market conditions as well as completion of some large projects. Infrastructure backlog has also decreased due to completion of the Golden Gate bridge Project.

Overall, backlog has return to levels consistent with the third quarter of FY11 and 2012. Our backlog typically represents some longer-term irrigation and infrastructure projects as well as short lead time orders, and therefore as I have indicated in the past, backlog is generally not a good indication of future quarters revenues.

Cash and cash equivalents were $154 million at the end of the quarter and were $28 million lower than the same quarter last year. We've continued the execution of our capital allocation plan, including $120 million in cumulative stock repurchases through the end of the quarter under our $150 million repurchase authorization. The strength of our balance sheet continues to position us for additional growth through acquisitions and other initiatives to drive improved returns for shareholders.

In summary, we have now completed the primary irrigation equipment selling season in North America. As anticipated, irrigation equipment revenues have remained constricted due to reduced agricultural commodity prices affecting farmers' willingness to invest in capital equipment. While irrigation equipment revenues declined year over year, the declines were partially offset by significant improvements and growth in our infrastructure segment.

With favorable growing conditions in the US so far this year, it's difficult to see a near-term catalyst for improving irrigation equipment demand. However, we know from prior history that weather patterns and crop markets can change conditions quickly.

Our experienced management team has navigated through these cycles before and during cyclical trough periods such as this. We effectively cut cost where we can while at the same time maintaining investments and implementing our key strategies and growth initiatives.

US irrigation market has been most affected by the decline in the cycle, and our management team at our factory in Lindsay, Nebraska has reduced headcount by 25% over the last 12 months and 50% since the peak of the cycle in 2013. At the same time, they have continued to drive lean enhancements to improve the efficiency of the operations.

Now as we continue to navigate through this agricultural cycle, I'd like to thank our exceptional dedicated employees who continue to demonstrate flexibility in adjusting to the changing market conditions through their willingness to do whatever is necessary to meet the needs of our customers and create value for our shareholders. As we look forward into 2016 and beyond, we will continue to monitor market conditions and identify areas to reduce costs and improve productivity.

At the same time, we will also continue to invest in developing products and in geographic expansion in markets that we see as having the greatest potential for growth. And as US regulators contemplate and implement changes in standards for road safety products, we will make appropriate internal investments in our infrastructure product line as well.

Overall, long-term trends remain positive as the need for increased agricultural production to meet the needs of the growing population will continue to drive irrigation equipment demand. We are consistently enhancing our position to meet the challenges and to take advantages of the opportunities we see in the markets we serve.

I would now like to open it up for your questions.

(Operator Instructions)

Brian Drab from William Blair.

Good morning Rick, good morning Jim.

Good morning.

First question just on the infrastructure side, the margins there, 22%, really impressive. And when I look back to historical results, second quarter of 2011, you did 15% operating margin on about that same level of revenue. And now is the period where I think you had about 50% of revenue coming from the Mexico City QMB project.

So can you talk a little bit about what enabled you to get the 22% margin? What has changed since then in that business, and it seems like quite a bit of a mix was just your road safety or non-QMB type product. How do you explain that 22% margin, or help us understand that. Thanks.

Since that time Brian, we have had significant changes that have taken place in the infrastructure business including expense reductions, cost reductions and improvements in our manufacturing processes. And as you said, there is also a mix difference from that time period to today.

And to put it into a little more perspective, in the past quarter, more than 50% of the revenue for the infrastructure business in the quarter was from road safety products with some good margins that are generated off of that project line. That's a significant change that has taken place in the mix, but at the same time, we have benefited from the volume plus efficiency improvements and changes that have been made in the infrastructure expense and cost structure.

Okay, thanks. So I guess if you're able to sustain that level of revenue in the infrastructure segment that this isn't -- we shouldn't be surprised if we can sustain operating margin of high teens or even low 20%s going forward?

I think the way I would characterize it is we've made some really good progress in terms of the cost structure and expense structure, but in addition to that in gaining market penetration and market share with our road safety products. So from that, I would expect that we would continue that initiative.

At the same time we may have a little bit of a seasonal impact where this is the season to see some of the-- let's say the leases on QMB which were not a major factor but are still a factor, but also road safety products installed. So there's a little bit of a seasonal impact, but in addition I do believe that we made some very significant progress.

Okay, thanks, and can you talk a little bit about the pricing environment in the irrigation segment? Seems like pricing is holding in pretty well given the margins that you are achieving, and what do you see going forward into -- I guess obviously the least interesting quarter seasonally?

As we have discussed in previous quarters, we have definitely seen a change in the pricing from Trinity. There is more competitiveness as the market contracted through this trough of the cycle, and we've seen that continue through this past quarter.

At the same time, we benefited some from lower steel cost, which did help in terms of our cost of goods sold. We also as mentioned had a little lower cost in expenses in warranty and some other items, but competitive pricing has continued and I believe we are responding appropriately and well to those conditions.

Okay, and just the last one for me, which regions were you seeing the most competition internationally?

I don't know that I could really split out international markets specifically in terms of increased competitiveness. I would say wherever we see larger projects, which I would say we've seen a little bit more probably in Africa and Middle East recently, we've seen increased competition, which includes seeing some of our European competitors who have been a little more dormant in the past, we haven't really heard much from them, reemerging a bit. So we are starting to see more competition than we have had, but overall there is not any one specific market that stands out as increased competitiveness.

Okay, great, thanks, and congrats on the great results in the quarter.

Thank you.

Schon Williams from BB&T Capital Markets.

Hi, good morning gentlemen.

Good morning.

I wanted to be -- I guess clear on the infrastructure demand. How much of this do you feel -- significant upside in revenues, how much do you feel is the market actually perking up a bit and the demand environment versus more the internally generated risky factors, better market penetration, better share gains?

It is difficult to split that out into a specific quantity, Schon, in that I would just say that we have seen significant improvement in our road safety product sales. Part of it is due to some things we have seen in the competitive environment meaning we are selling more in terms of our end terminals than we have in the past, partially due to what I think some other competitors or competitors maybe going through.

But we have picked up market share, and we have increased our market penetration meaning getting approved in more markets than we have been in the past. So there is overall a strategy to expand our road safety product sales that has been effective in doing that, and with decent margins as well.

I guess would it be fair to call the demand environment good, would you call it robust? What are just your general thoughts on demand separate from your specific product expansion?

Given the lack of a long-term Highway Bill in place, I would never call it robust at this stage. I would probably say it has definitely improved some from what we saw a couple of years ago, but I would not call it robust. You may categorize it as good, but I still think that more of it is emphasis that we have placed on expanding that product line than it is really the specific market itself.

Okay, and what are you hearing most recently just in terms of your contacts on the Highway Bill? It looks like there was some movement through the Senate here recently. Just any general thoughts there would be helpful.

I have a hard time predicting anything regarding the Highway Bill other than to say it is a continual discussion and I'm optimistic we will still get one in place. I have no really estimate in terms of the timing of that. I know that there is ongoing discussion of that as we speak.

Okay. And maybe one more if I could, could you just call out what was the contribution from Elecsys to operating income, and how much was purchase accounting, how much was that a headwind in the quarter?

This is Jim. I would say that basically we are still amortizing most of the purchase accounting costs, and so it was -- from a fully loaded standpoint, it was pretty close to breakeven. We are -- excluding the purchase accounting adjustments, since we have acquired it we are still in the mid-teens margins, so the margins have been good and the sales volumes have been good.

We did finish some of the amortization like the inventory stepped-up amortization and those types of things in the quarter. Not going to call out a specific number, but we should start seeing more positive contributions from that going forward.

Just so I'm clear, mid-teens operating margin excluding some of the purchase accounting?

That is correct.

Okay, thanks guys. I will get back in the queue.

Thank you.

Nathan Jones from Stifel.

Good morning guys.

Good morning.

Rick, you alluded a little bit to increased sales of end terminals here and issues that one of your competitors is having, I think everybody knows the issues Trinity is having that. Are you able to quantify what you think the positive impact to you was from that?

We don't break out the specific sales by product category in our infrastructure business. I would say that the majority of our road safety product increases are probably in end terminals, but the product category itself has been, the road safety products has been increasing overall. But the largest percentage of increase is probably in the end terminals.

Okay, and would you attribute the majority of that increase to the issues that Trinity are having?

Will I wouldn't go that far. I would say that what we have learned as we have gone along is that we had opportunities to expand our market penetration and market share through working with additional states to get our product certified and accepted.

And we have done that, and through that time, we have seen a continual expansion of our road safety sales in general and primarily in our end terminals. I will not attribute it to what any specific competitor is going through, but certainly it has had some factor.

And I think what I would add, Nathan, is I think our team has done a really good job, and they are already leading up to what occurred there in expanding our distribution as well as in some of the international markets as well. So we've seen some -- we started to get some traction in some markets outside of the US as well.

Okay, fair enough. Obviously the domestic irrigation segment had a quite a bit improved comp this quarter. If you ex out the storm revenues from last year, ex out the contribution from Elecsys, you are probably only down about 5% organically there after several quarters of the cyclical downturn being in the 15% to 30% range.

Given the annual nature of the business, can you talk about what drove the improved comp there, the better sequential revenue that we haven't seen in the third quarter for the last two or three years? Just any color you can provide us on the relatively good result there.

There's nothing really specific that comes to mind. I would say when you look at the results, you see that most of the markets from a domestic standpoint behaved as we would have expected where we were down, was primarily still corn belts from a comparative standpoint. There were a little bit of differences there, and again, that's also the area where we had more of the storm damage from last year as well.

I'd say that we have seen let's say more of a stabilizing of the market in terms of the impacts that we expected throughout and towards the end of our selling season. Another factor to look at in terms of the revenue through the quarter is really that split out in our product sales on domestic machines in terms of what went into conversion, dry land and replacement.

And we also saw a really there more of a return to the more normalized a third, a third, a third type levels. Wasn't quite that, we saw about 29% in conversion, 33% in dryland and 38% in replacement.

And year to date, the numbers are closer to one third with 30% in conversion and 32% dryland and 38% replacement. So overall we are seeing what I would consider to be more normalized stabilized conditions in the selling season that were just finished up.

Okay, that's helpful. Thanks very much.

Thank you.

Brett Wong from Piper Jaffray.

Hey guys, thanks for taking my question. Just wanted to look into the infrastructure business a little but more. Rick, you mentioned getting more approvals in more markets than before as part of the benefit that you've realized here.

Can you talk to the strategy to continue to penetrate new markets? Are there significantly more markets you can get into? And what does that timing look like? And how does that impact demand?

I can't get really too specific on that, Brett. I'd say it's an ongoing process, and we have the list of the ones that we know that we have still to go in terms of gaining approvals and certain product categories. And we have a group that is aggressively working that list to work through issues, and we do find at times that while we will go through a process, we may get a rejection the first time.

We will be back again to have further discussion with the state DOT to understand what the reason is. And usually there may be some technicalities or technical issues in terms of some paperwork that may be submitted that has to get worked through, so it's an ongoing process.

And I'd say there are more states, we are certainly not complete, and we have certainly a continual list of the main states, let's say the larger states that we still think are opportunities. And from that I would say that we still have some good-sized opportunities in front of us but we're making really good progress.

Okay, and just in terms of the visibility into the infrastructure segment, when you do get approval in a state, when do you start to see demand on sales really ramp there?

Sometimes it will be immediate because they may have a need that may trigger the discussion for approval. And sometimes it may be never in terms of we could see -- we get onto the list but not really see or at least we haven't seen that happen yet in a state.

But I would say more often than not, it would be fairly short-term that we would begin to see the benefits of that. We have had some where that need has specifically driven the discussion. Therefore, it was pretty -- fairly quick process.

Okay, great, thanks, and just looking at irrigation on the international side, can you just talk to the startup of the Turkey facility has gone? You mentioned last time that you plan to ship there this April. And then on -- how that is going, and when can we expect to see an improvement on the international irrigation margin stemming from the Turkey operations?

The Turkey facility is going very well in terms of it is up and running as we talked about last time, and we have shipped units from that facility. There's a portion of it that is not complete yet.

We still have one building that is being constructed, and the galvanizing operation that is going to be opened up, and that isn't ready yet -- a ways to go. They have just really started construction recently.

Once we get to full production levels, meaning the galvanizing]facility up and the demand that will drive more production through that facility, we will really see the benefits of that. So it's going to take a little while before we see that.

It could happen fairly quickly depending on what happens with some specific projects that we are working, or it could take a little bit longer. So it's difficult to predict the timing, but it will say that we won't get the full benefit that we would expect until we have the galvanizing operation up, and that is still probably six months away before we are at that point.

Excellent, that's perfect, thanks for the color.

Kevin Bennett from Sterne, Agee & Leach.

Good morning guys.

Good morning.

Rick, first question on the international front, can you talk but what you are seeing in Brazil right now?

Brazil is holding up pretty well. We haven't really seen any significant change. We did see a little delay in some orders as they were going through discussions on tsunami and modern influx in terms of the funding and projects.

Overall, we're still pretty positive about the situation in Brazil, and orders have held up pretty good -- like I said, there was a little bit of a delay. We do know that many of the funding projects are now being put into place, and I have seen the funding I believe it is under the modern program or the subsidy on the interest rate. That is now changing the rates from a subsidized 4% interest rate to I think 7.5% now with the new program.

So that may have some impact in terms of demand for this next year, with equipment buyers. But it's really too early to tell. But in general, I think Brazil is still -- by the way, that interest rate is lower for irrigation equipment than it is for other ag equipment.

So it's a good rate, it continues to be a very good rate for the growers. But in addition I would say the markets we are still very positive about. We see a lot of growth opportunities in Brazil in general, but it remains to be seen how they react to the new rates.

That is helpful. And then on the cost front in irrigation, can you help quantify the impact of lower material cost and the lower warranty expense.

And then secondly on that front, I see headcount at Lindsay is down 25%. Is that at a place you want it, or is there more room to go there?

This is Jim. Let me take -- relative to the margins overall, as Rick said earlier, I think the pricing has held up pretty well through the quarter. And then the cost benefits that we had from the steel offset most of that. If you remember last quarter, we had about 3% total, and we didn't get much benefit from the steel cost, but we are starting to get it now and that offset most of the pricing.

We did have some deleverage and we had a little bit of warranty adjustments on some of our warranty items that were out there, which pretty much offset. Those were relatively minor. So it's manly the pricing and the steel costs that make up the netting of the 1% down.

Okay. And then two more quick ones. First on the infrastructure business, if we think about just the QMB sales, can you help us, if we look at the third quarter of 2015 versus the third quarter of 2014, were they up, down, the same?

QMB revenues would have been up in the third quarter of 2015 versus 2014. We're not talking about very big numbers in total, so I hesitate to draw much conclusion from that other than to say it's a little bit bigger. And I think the difference in 2015 would probably be more lease revenue, and there wasn't really a large QMB project in 2015 or 2014.

Okay, perfect. And lastly on the buyback, you guys are getting towards the end of the $150 million.

Rick, what are your thoughts about re-upping that going forward given that your cash balance is still almost double your targeted balance? How should we think about that going forward?

I think as you mentioned, we are getting close to that authorization level, and as we get to the end of that, we will certainly reevaluate and decide what we will do next. But I'm not really going to speculate or comment on that now other than to say that is definitely up for reassessment soon.

Okay, fair enough, thank you guys.

Thank you.

David Rose from Wedbush Securities.

Good morning. This is actually James calling in for David. Can you hear me?

Yes, yes, good morning.

My first question on irrigation margins, I know you guys gave a pretty good overview of different factors impacting margins, but wanted to see if you could add to that and maybe talk about the progress of your consolidation of your electronics manufacturing. And any improvement in the organization and perhaps talk about sustaining those margins going forward.

I think in terms of the consolidation piece, I would say that consolidation is basically complete in terms of consolidating into the Elecsys operation now. I am not really able to give you any specific number in terms of what that estimated savings is at this stage, but I think we have commented in the past on what our estimate was on an annualized basis like $1.5 million from the consolidation, which is still very much our expectation and on target.

And the second part of the question I think was more in terms of the margin sustainability question, is that correct?

Yes. And maybe if you could talk about project mix, was there any shift there maybe year-over-year or sequentially, that benefited or impacted your margins as well?

In terms of product mix within irrigation, there is really not any significant mix shift that we saw. I would say that in terms of sustainability on margins will depend on a couple of different things. One is the competitive environment, and we do know that competitive intensity is a little greater in these times as I said than when we're in the trough of a cycle.

So it will depend a little bit on what happens with our competition, and we will do what we can in all aspects to maintain or gain share. That doesn't mean gaining share through pricing, but we definitely will defend our position.

So from that standpoint it depends a little bit on the competitive environment, but I am optimistic that we are in a very good sustainable position in the sense of our manufacturing efficiencies, lean implementation in our factories, and other factors including we are fortunate that we are seeing a low steel price environment today versus what we have seen in some other time periods.

Okay. And quickly on Elecsys performance, seems like sales have not necessarily grown organically although backlog seems to have improved. Can you talk about your expectations for growth opportunities and cross selling opportunities in the near term and long term?

We do see substantial growth opportunities for Elecsys longer-term. Short-term our focus and emphasis has really been on the integration of our electronics into Elecsys, and that's been a primary focus.

We also know there will be some challenges as they move forward in terms of some sales mix changes with Elecsys, but we see additional growth opportunities in the current market space which include both oil and gas and irrigation, and also in new markets, with the utilization of their existing technologies. We see opportunities to expand their core business in addition to the cost savings and what I considered to be some strategic advantages that we get through their capabilities added to our product line.

Okay, thank you.

Thank you.

Chris Shaw from Monness, Crespi, Hardt.

How are you doing?

Good morning.

When you cite the breakout, and you talk about replacement, I know replacement includes both parts and replacements to the systems, but can you break out between those three how much is part and how much is actually a full system?

The replacement number that I refer to is whole goods. We don't really break out our parts revenue in total as part of our revenue, but this is a replacement in terms of whole goods number. As we're looking at the whole goods going out the door, we split that out the best that we can based on the dealer's representations as far as what percentage went through conversion, dryland or replacement.

Just to get an idea, there has been a lot of rain obviously throughout the corn belt. Typical high irrigation areas. With that impact and all their usage of their I would think but also the need for replacing parts throughout the season, is that something we should worry about? Do you have any thoughts on that?

The wet weather definitely impacts how much they will run the machine and also in some cases had an impact in terms of their starting up of machines, which could delay some of the start up meaning that some of the parts replacements could come a little bit later in the cycle. Especially we will see some parts going in after the spring start up. There is a little bit of a delay.

It could impact parts requirements maybe at the end of the season or potentially into next season depending on how much they run, but I wouldn't say I'm really concerned about that yet. I would say that what we often see if there is a really wet spring as we have seen is sometimes there's a delay in terms of machines being installed, and we really didn't see that as having an impact in the quarter although I think they're probably still a machines that may be sitting out there to get installed yet. But overall I don't really see that as a significant impact on parts business for the future.

You guys are obviously in Nebraska so you might know, but have there been summers where they got enough moisture out that there that there was no need for a lot of farmers to run them all summer, or is that very rare?

I haven't seen that, not in this region where they won't run them. I have seen that there will be a later start up because of spring rains or even some earlier summer rains, but as the summer progresses, but I haven't seen a time when they haven't needed them.

Thanks a lot.

(Operator Instructions)

Peter Van Roden from Sapphire Capital.

Hey guys. Good morning. First question on the North America business, excluding all the noise around Elecsys, and the storm orders only being down 5% seems like a great result considering everything else in the ag market. Do you guys see domestic business dropping or is it too early to call that?

I certainly wouldn't call it at this point one way or the other. I would say that if you follow some of the agricultural commodity analysts, I think they would say it's very difficult to call it at this point what will happen with corn prices. I think there is some optimism in terms of corn prices being near bottom or at bottom, but it is certainly too soon to call and I don't think there's anyone in a position that could call that at this time.

Got it. And then just on the decremental margins in your business, I guess they were a little bit worse than I would have thought. I think a lot of that has to do with the Elecsys acquisitions.

Do you know what margins were excluding Elecsys? I can figure it out on my own, but if you provide the number now, it would be easier.

Yes, I think -- this is Jim. And I would just say essentially the margin flow-through on a year-over-year basis in the quarter excluding Elecsys is about where we would think it would be. As you said, it's a little bit higher on the decrease in volume, but that is almost entirely attributable to the Elecsys coming through on a purchase accounting adjusted number is pretty close to breakeven.

Okay, got it. That's all I have. Thanks guys.

Thank you.

There are no more questions at this time. I hand the call back over to you sir.

The global long-term drivers of water conservation, population growth, importance of biofuels and the need for safer, more efficient Transportation Solutions remain positive. We are uniquely positioned for developing and delivering turnkey irrigation solutions for agriculture, providing the best irrigation management and control technology, offering a broad line of market-leading irrigation solutions, engineering integrated pumping and filtration solutions for landscape and industrial applications as well as providing energy absorbing safety solutions and quickchange movable barriers that expand the capacity of existing road and bridge infrastructure.

We are committed to creating shareholder value from investments in organic growth, dividend increases, strategic water related acquisitions and share repurchases congruent with our capital allocation plan. We thank you for your questions and participation in this call.

This is the end of today's call. You may now disconnect.