Lindsay Corp (LNN) 2018 Q2 法說會逐字稿

Good morning.

My name is Chad, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Lindsay Corporation Second Quarter 2018 Earnings Call.

(Operator Instructions) Please note, this event is being recorded.

During this call, management may make forward-looking statements that are subject to risks and uncertainties, which reflect management's current beliefs, 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 those statements preceded by, followed by or including the words; expectation, outlook, could, may, should or similar expressions.

Through 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. Tim Hassinger, President and Chief Executive Officer.

Please go ahead, sir.

Good morning and thank you for joining our call.

With me on today's call is Brian Ketcham, Chief Financial Officer; and Lori Zarkowski, our Chief Accounting Officer.

As you know, the objective of this call is to discuss our Quarter 2 results.

Before we jump into that overview, I'll make a few introductory comments.

In our past quarter's earnings call, I provided an overview of my initial observations during my first 2 months at Lindsay.

Now that more time has passed, those observations have started to move into actions.

I want to update you on what has occurred, what we want to achieve, and an overview of the initiatives currently underway.

My intent will be to continue to update you on our progress related to these initiatives that we'll be focused on over the next several quarters.

First, let's address the primary challenge that creates the need for change across the company.

As all of you know, during the past 4 years, the irrigation business has been unfavorably impacted by the lower crop commodity prices and farm income.

The Lindsay leadership team can't change these external factors, but we can ensure our company is in a better position to compete and deliver meaningful results in this environment.

It's my view that self-help is needed to align to this new market reality.

And because of that, an improvement plan is now underway to put Lindsay in a better competitive position.

Earlier this quarter, we internally announced that 4 senior leadership positions have been eliminated.

The employees in those positions have left the company and their roles will not be backfilled.

The individuals in those leadership roles contributed a lot to Lindsay and their contributions are appreciated.

In addition to these changes, we have hired a well-known consulting company to initiate a diagnostic review of the entire company.

They are partnering with the Lindsay team to identify areas where simplification and cost reductions can be achieved.

Many of these projects are underway.

So although I don't have the results from these actions to communicate to you, I can provide an overview of what we are expecting to achieve from these efforts.

We are targeting to deliver results similar to our 2011 and 2014 years through our self-help efforts.

In order to achieve results similar to 2013, which was our best year for operating income, we will need an improved marketplace.

Returning to 2011 and 2014 performance leads us to target an operating margin range of 11% to 12%, without any improvement in the market environment.

This compares with our fiscal 2017 result of 7.8%.

To achieve this level of improvement, we have completed an internal diagnostic review and identified the key areas of self-help that we will focus on.

I mentioned in the Quarter 1 call the need to address our global work processes.

Currently, we have projects in place that will address the need to standardize and automate several of our key work processes.

It is my expectation that this improvement will allow us to reduce work and be more efficient in target areas of the company.

Additional projects we have launched are focused on designing the optimum manufacturing footprint to ensure we address excess capacity where it exist, ensure our SG&A spend is aligned to our recent margin results and further integrate the back-office activities across the various business units.

For sourcing, further leverage can be gained by moving these activities to a more global-centered approach.

Another example to highlight is the effort we're taking to address the needed changes in the company's culture that better aligned Lindsay to this new market reality.

We have completed a company-wide culture assessment and identified the desired behaviors that need to be in place to ensure the company's capabilities and strengths are aligned to the strategy.

Receptivity from the entire organization has been positive.

Programs are now underway to adjust how we do our work.

We have a lot going on across the company right now, and all of this is aligned to the desired outcome.

We want to simplify the way we conduct our business and aligned to that, improve our productivity to build a foundation for growth.

Later, we will open the call to address your questions related to the self-help approach I've outlined.

So now let's move to our Q2 results.

And for that, I'll turn the call over to Brian.

Thank you, Tim, and good morning, everyone.

To begin, I would like to cover a couple of items that had a significant impact on our reported quarterly results.

The first item relates to the enactment of the U.S. Tax Cuts and Jobs Act or U.S. tax reform during the quarter.

We recognized tax expense of $2.6 million or $0.24 per diluted share as the estimated impact of implementing U.S. tax reform during the quarter.

This includes onetime impacts from the deemed repatriation transition tax on certain foreign earnings and from the remeasurement of deferred tax items at the lower federal rate.

The second item relates to costs incurred in connection with our Foundation for Growth performance improvement initiative that Tim referred to in his opening comments.

Second quarter results include pretax costs of $2.3 million, comprised of severance costs and professional consulting fees incurred in connection with this initiative.

The after-tax impact of these costs amounted to $1.7 million or $0.15 per diluted share.

Additional costs anticipated in connection with this initiative over each of the next several quarters are expected to be recovered through improved operating income in fiscal 2020.

The remainder of my comments regarding the second quarter will refer to adjusted results, which omit the impacts of U.S. tax reform and the foundation for growth initiative and are detailed in the Regulation G disclosure at the end of the press release.

Total revenues for the second quarter of fiscal 2018 were $130.3 million, an increase of 5% over the same quarter last year.

Net earnings for the quarter were $6 million or $0.56 per diluted share compared with $5 million or $0.47 per diluted share in the prior year.

Irrigation segment revenues for the second quarter were $111.9 million, an increase of 5% over the same quarter last year.

In the North America irrigation market, revenues increased 23%, driven by higher irrigation system sales volume in a number of regions.

Revenues from other irrigation product lines including pump and filtration systems increased modestly in comparison to the prior year.

In the international irrigation markets, revenues in the second quarter decreased 22% compared to the same quarter last year.

Last year's second quarter included revenues from a couple of larger projects in developing markets that did not repeat in the current period, while demand in core international markets remain stable.

Total irrigation segment operating income for the second quarter increased 11% compared to the prior year as a result of additional sales volume leverage in North America, irrigation operating margin for the quarter was 11.2% of sales compared to 10.6% of sales in the prior year.

Infrastructure segment revenues for the second quarter were $18.5 million, an increase of 3% over the same quarter last year.

Increased Road Zipper systems revenue was partially offset by lower revenue from North America road safety products.

Infrastructure segment operating income for the second quarter increased 58% compared to the prior year as a result of improved margin mix coming from a higher proportion of Road Zipper revenue.

Infrastructure operating margin for the quarter was 13.6% of sales compared to 8.9% of sales in the prior year.

The order backlog at the end of the second quarter was $90.2 million, an increase of $27.9 million over the same time last year.

The backlog includes an order received during the quarter to deploy a Road Zipper system on the Richmond-San Rafael Bridge near San Francisco.

The value of this order is approximately $9.3 million and delivery is expected to begin in the first quarter of fiscal 2019.

Also added to backlog during the quarter were follow-on orders valued at approximately $11 million from an existing customer in Japan.

These orders are expected to be delivered in the third and fourth quarters of fiscal 2018.

Cash and cash equivalents were $102.2 million at the end of the quarter compared to $121.6 million at the end of the prior fiscal year.

Cash was utilized in the quarter to fund working capital increases in support of sales growth as well as capital expenditures and dividend payments.

No share repurchases were made during the quarter.

However, a total of $63.7 million remains available under our share repurchase authorization.

The strength of our balance sheet continues to position us to pursue growth initiatives, both organic and through acquisitions and other initiatives to drive improved returns for shareholders.

We would also like to share a couple of recent events with you today.

On March 6, we hosted an educational event entitled Water Matters at our Elecsys technology design and manufacturing facility in Olathe, Kansas.

The event focused on efficient irrigation and the role it plays in precision agriculture and emerging smart farming practices.

It featured a panel discussion with growers and other industry experts as well as hands-on demonstrations of some of the cutting-edge technology that's driving precision irrigation, including our FieldNET Advisor, irrigation recommendation tool.

Also at the Water Matters event, we announced a new data connection between our FieldNET Advisor tool and the John Deere Operations Center, providing growers with increased access to farm irrigation data and helping them to reduce data entry and improve productivity.

Details of both of these items can be found online in our Investor Relations newsroom.

At this time, I'd like to turn the call over to the operator to take your questions.(Operator Instructions) The first question will come from Mike Shlisky with Seaport Global.

So I want to start off by first asking about your long-term margin targets.

Just trying to get a feel for what to put into my model here and how to have value your stock?

So as you say that you -- if you're planning to get to 11%, 12% for operating profit, assuming no market improvement from here, are you kind of saying that that's what you hope to get in the future in a somewhat trough market?

And it might go up from there in a better market?

Yes, Mike.

This is Tim.

What you said is -- let me just playback.

We are targeting 2011, 2014 and we are saying that we believe through our self-help actions and we'll go into more detail here if you'd like, of what we are focused on.

We can achieve at that level, which is at 11% to 12%.

Now if we are going to go beyond that, sitting here today, the organization that we have, we are saying we would need some market environment help related to that.

So that's exactly what we're outlining here.

Okay.

I guess, I'm asking in the sense that there are cycles in form of CapEx, in form of interest in your product.

It was somewhere at a lower stage right now, given where it's come from.

Are you saying that you can get in future troughs of the market, let's say down the road, these kind of margins have been 12% going forward?

And in a up market, it will be -- it should be somewhat better than that, just given the way that you might get some volume leverage?

Yes, we would expect to benefit from market improvement.

So again, we're focused in this environment, which we would all say and expect that this is what would be described as the trough, get to the 11% to 12%.

And then be in position to realize market growth that would have come and we would expect to benefit from that also.

Okay.

Okay.

I also wanted to ask just a little bit more detail about, is this segment -- is this plan supposed to impact both segments equally?

Are the challenges that you think the company can overcome similar to both?

Or is it more focused on one versus the other?

No, it's across the company.

And I'm happy to go through a little more the detail here because I think there's going to be a lot of questions on this.

We're focusing on sourcing.

There's opportunities for a more global reach.

That's across both companies, obviously.

Manufacturing footprint, not only do we have -- it's addressing sites across both businesses, but we have leverage between those businesses.

So it does impact that.

Commercial will be across both businesses and our G&A improved global process is gaining more efficiency in back offices would also be across both businesses.

So it is a full company look.

And -- great.

That's great color.

I also wanted to just switch gears for a second and discuss the John Deere Operations Center.

That's something I've been asking you guys about for, I would say, 5 years you and the previous management team.

It seems like that is a pretty big deal because most farmers want to have one screen in their cab.

I guess, I'm kind of asking how important was that to you?

Is that something you've been pursuing for a long time?

Is it just Lindsay exclusive or do the other guys have access to John Deere?

And finally, can you connect with other tractors' company systems as well as John Deere's?

Yes.

So Mike, happy to address this.

And I'd like to broaden your question because I think it's important that we talk about FieldNET Advisor in total and the John Deere deal is part of the improvements that we're bringing forward.

Today, we expect by the end of this year, we'll be launching FieldNET Advisor in 17 countries, and this is compared to this past year, where it was on only 2 crops in the U.S. So right now, there's 9 crops available.

And by the end of this year, we expect that to expand to 12.

At the Water Matters outing that Brian mentioned, there was improved FieldNET mobile app that was rolled out.

But the other -- if you were to say bigger news that came out was this agreement with John Deere.

We're really excited about that.

That allows FieldNET Advisor to be connected with the John Deere operations center.

In a simple way what it says is, it simplified things for farmers.

They are able to now take the data that they had in the John Deere approach and be able to connect that directly to FieldNET Advisor.

It saves them time, and actually improves the precision.

Are we the only one?

No, this is not an exclusive agreement.

But we see it as definitely a way of expanding our reach with FieldNET Advisor in the market.

Okay.

And if I could squeeze one last one here.

I'm sure somebody would have asked, but I'll just ask it.

About the price of steel and aluminum, can you give me a sense as to how Lindsay is facing the current environment for your various metals?

And are you looking at putting in a surcharge to your customers and dealers?

Or is it more of an ongoing pricing -- a more permanent pricing action?

Yes.

So Mike, we will look at steel.

First of all, it's fair to say we're all reading the same material as this situation plays out.

I want to make a key point here.

Our primary concern that we have is that there could be trade retaliation against U.S. commodity crop exports, but we are monitoring this situation closely.

As you can imagine, we're in close contact with our suppliers and our Washington D.C.-based advisory firms, just getting their view on the latest developments.

But we are focused to continue to pass price increases on to address this cost escalation as we've done in prior periods.

And for example, we just recently announced a steel surcharge to help offset this cost escalation that's occurred.

The next question comes from Ryan Connors with Boenning and Scattergood.

I wanted to ask a little bit about, actually, the international irrigation business.

It's always been a really tough business to forecast and the visibility isn't great.

And obviously, we see a pretty big decline on the tough comparison here.

It looks like based on the backlog, the outlook is pretty good.

But can you just help us out there?

I know you don't give any guidance per se on that front, but just kind of help us figure out how to think about modeling that international side, given its lumpiness and how you think about the outlook there?

Yes, and I'll be happy to, let me give you a little color on that.

First of all, year-to-date pricing pressure has increased versus prior year.

We do have what we would describe as a good pipeline of projects in place for the second half of the year.

If you look at our core business, and the best way to describe it, I'll say, traditional irrigation markets, they are up slightly year-over-year.

But due to the shift in the large projects, we've seen a year-over-year decline for this business.

So hopefully, that gives you a little better perspective with how we're seeing the international right now.

It does.

And then you mentioned the trade fears.

And I took your comments more related to what happens to commodities and crop flows and things like that.

What about your international business?

And the -- like potential impact there of exporting to certain markets and so forth?

Have you done any work handicapping any of that?

Well, there definitely could be some shifting of production side and we need to be prepared to address that shift in demand.

So we have done all of the what-ifs, if you want to say, and tried to think through where we would want to shift resources, et cetera.

So yes, we have done that, but it's quite a fluid situation right now.

And I can't say with any confidence that -- give you direction on that, only to say, we have thought it through and feel like we got a plan in place to be able to respond if a significant shift were to occur.

Understood.

Fair enough.

And my last one is more -- I guess, somewhat strategic in nature.

You've talked a lot here on the call about the internal cost-related aspects of your, kind of, optimization and restructuring initiatives.

One of the things you've talked about in the past is kind of reviewing the different businesses, many -- some of which are still relatively independent.

And looking at those based on returns on capital and strategic fit, can you update us on that side of the effort?

Yes, it's clearly part of the foundation effort that we are underneath -- undergoing.

It is a full portfolio review, Ryan, as you had mentioned in your report.

I mean, we're looking at each of our businesses from a profitability standpoint and a connection to the strategic fit to our core businesses and trying to determine which ones are contributing.

And on the other side, if they are not to those levels, what actions need to be taken.

So it is a full portfolio review.

We're well into that right now.

Okay.

And -- I mean, you don't want to tip your hand, obviously.

But would it be -- would you anticipate that there would be portfolio moves stemming from that, ultimately?

Or do you think it's more an issue of, kind of, better integrating some of those businesses?

Yes.

Ryan, the best answer I can give you is, I'm looking forward the next quarter giving you an update on what we've learned on that.

I -- it's too early to say.

We are literally right in the middle of the analysis and evaluation.

The next question will be from Joe Mondillo with Sidoti & Company.

Just wanted to touch on the domestic irrigation side of the business.

Was -- did something happen a year ago in the first half of '17, where -- sort of caused you to lose some share?

It seems like you sort of underperformed maybe peers a year ago, and now it seems like you're may be retaking share because you saw very strong growth in the last 2 quarters here on the domestic side.

So just wondering, if you could comment on what's going there at the domestic business?

Yes, Joe, I'll give you where I'm seeing the business today and I'll take advantage of the fact that Brian's here with me and he can give you some perspective of last year, since I wasn't here during that time frame.

As we see our business this quarter, we -- our North America revenue increased 23% versus the prior year.

Our year-to-date look is what we do believe we've increased market share in this region.

We would say it's been driven by several factors here: one, the market across this region has increased at a faster rate in the areas where Lindsay has a higher share of market.

We believe we benefited from what we would describe as a technology leadership position.

And there has been some early buying, given the uncertainty around steel prices.

So those are 3 factors that we believe that contributed to the 23% growth versus the prior year.

Let me turn it over to Brian and he can give you a little context of how that compares to the prior year.

Yes, Joe.

One thing in the prior year that we had talked about last year was in the second quarter, the domestic business was impacted unfavorably from harsh weather conditions in the Northwest part of the U.S. So that plays into a little bit of the year-over-year improvement as far as having a little bit more of a favorable comparison.

Okay.

So there's nothing related to pricing, differing between your sort of strategy over the last year compared to your peers because the growth do seem a little different from what your peers?

And then also, your peers seem to be talking about low single digits in the near term for the domestic region.

Do you share that sort of outlook?

Well, we don't give outlook.

But what I can say is that a couple of dynamics to be aware of is: one, there is risk that farmers will delay purchases due to the tariffs and dynamic around steel, et cetera.

So that is a risk that we're monitoring closely.

We would say that our expectation is that the second half will not grow as fast as it did in the first half of the year.

Okay.

I wanted to also ask you about a couple of projects that you have on the infrastructure side.

I just was wondering if you could provide an update on the Alex Fraser project, just in terms of timing.

I think previously, you said that it's going to be third quarter, seemingly sounded like primarily fourth quarter and could bleed into the first quarter.

Is that the same sort of expectation?

Yes.

The timing on Alex Fraser hasn't changed from what we had said last quarter.

And then the 2 new larger orders, the Japan order, that will be third and fourth quarter this year.

The San Rafael Bridge will be first quarter into second quarter next year.

Okay.

And also sticking on the infrastructure side.

Excluding any of these large projects, this quarter and the last quarter, the margin has been pretty solid and it's been based on mix in terms of the Road Zipper.

How do you think about that mix?

Is that sustainable?

Is this recurring Road Zipper leasing?

Or -- how do you think about the mix in terms of margin going forward?

Should that be maintained at the rate that we're seeing?

Yes.

I think, obviously, the Road Zipper has a positive impact on our margin mix and we saw that in this quarter.

So to the extent that over -- I would say the next 3 or 4 quarters, we've got some real solid business with the Road Zipper that we would see improved margins on average.

Is -- this past quarter that we just saw, is that more based on leasing, so that should be sort of recurring?

Or is it sort of project based?

I'm just trying to sort of think about it because the project based is -- tends to be sort of lumpy.

So I'm just trying to think about it long term, excluding maybe lumpy projects?

Yes.

Our second quarter -- from a seasonality standpoint, there's not a lot of road construction going on.

So the leasing tends to follow the road construction season.

So this was more project oriented in the second quarter.

Okay.

And then, just lastly, I was wondering if you could comment on acquisitions.

Where does that fall within the strategy?

I know -- on one of your slides, you talk about capital allocation and sort of ranking uses of cash.

You haven't been very active at all in acquisitions.

And it seemingly sounds like now you got your hands tied with this business optimization plan.

Just wondering, if you can comment on sort of near-term or long-term strategy in terms of cash and acquisitions?

Yes.

Joe, this is Tim.

And let me make a few comments on that.

And this is one where I would say, a lot of progress has been made since the last earnings call where we were still working within what was described as the 100-day plan.

We know what we want.

We're actively looking in those spaces now.

Our key focus is if we can expand and/or leverage our core businesses.

So in essence, we're looking to add to our innovation strategy and/or find bolt-on cost synergy opportunities that have an attractive payback.

So those are the 2 broad areas that we're looking at right now.

The next question comes from Kyle Dicke with William Blair.

This is Kyle Dicke on for Brian Drab.

Just digging into the growth plan that was outlined a little bit more.

I know you discussed a lot of the different initiatives.

But are there any specific ones that you would highlight as having the greatest potential or offered a low-hanging fruit kind of in the near term?

Well, we are avoiding going into details on each one.

I will say in an overall, we're finding, if I can say, good value in each one of those buckets that we've outlined.

And it's difficult to give you an exact estimate on it because we really are right in the middle of trying to scope in and validate the assumptions that are in place.

So difficult to answer your question.

But only I would say is, really encouraged that the buckets that we've outlined here, all have potential value creation.

So we are staying focused in deploying people towards each one of them.

Okay.

And then, you kind of view this as a steady progress towards that target in 2.5 years or so.

Is there gradual improvement or is it more of a step function as you get out into 2020 after some of the costs flow through?

Well, these projects will come through.

As you can imagine, they've got a wide range of variables to them.

So I don't believe this is going to be linear.

We'll see improvement as we move towards our goal of realizing this margin goal in 2020.

But it's not going to be just a step-up of exact same amount every quarter.

They will come at different stages.

Okay.

And then just quickly, looking at kind of the working capital there.

Looks like receivables have been growing a little bit.

Is there anything underlying going on there?

Is it just related to revenue growth?

And what's kind of driving that increase in the receivables?

Yes, Kyle.

The receivables I would say are -- part of it is tied to the revenue growth.

I would say another part of it is just the timing of when some of the revenue was recognized later in the quarter.

I would expect the receivables to come probably back in line as we go forward.

Next question will be from Chris Shaw of Monness, Crespi.

So the quick ones.

You mentioned you put through a steel surcharge.

Do you know have the competitors in the space also come out with similar surcharges?

At this point, we are focused on what we are doing and we are monitoring that closely.

Chris, I'm going to avoid trying to represent what our competitors are doing.

Okay.

Then if I could switch gears on the -- I guess, the outlook for 2020 and the strategy there.

I mean, it seem -- to get back to that sort of margin level you talked about, maybe it's around $20 million in sort of cost saves or efficiency gains.

And some of that 2011, I'm just curious what you sort of view as may be what happened over that time period?

Was it just the case of when the band got really high and that couple of year period in there that the cost structure also sort of increased?

And then it was never cutback?

Or is there something else?

Is it just normal inflation over time that wasn't offset?

Do you have any perspective on what happened sort of over that time frame?

Chris, I'll give you my view.

And then, I have Brian jump in, again.

Kind of like we said earlier since he's got a little more of the history and give it.

I've seen it.

I saw it in my former company, where we went through a similar process.

When the Ag market was growing, it was growing at a very rapid rate.

And it was all hands-on deck in essence to get product.

And at the -- what that causes and in not just Lindsay, in any organization, there are so many efficiencies that can come into play.

So we are going back and trying to identify and address them.

At the same time, there were some acquisitions.

And we are taking more of an integration approach and trying to find efficiencies across those different entities.

I would describe our effort today as more assertive in trying to achieve that than what had existed before.

Brian, anything you would add to what I've just said there?

Yes, I think -- just adding to that, I think the '11 and '14 results are not in the peak Ag -- of the Ag cycle.

But -- so over that period of time from, say, '13 to '17, not only has the Ag market come down, but we -- within the company, there has also been some structural changes.

We did have a couple of acquisitions.

We've -- we added the Turkey manufacturing facility during that time.

So some structural changes in the company during that time frame.

So -- to get back to where we want to be, that's where we're looking at potential structural changes going forward.

You guys anticipate any sort of significant, like asset write-offs or write-downs or -- to help with that?

Well, we do expect that there will be additional costs over the next several quarters.

And it could include severance fees, asset rationalization, to your point, consulting fees, et cetera.

Expectation is that these will be recovered through improved operating income in fiscal year 2020.

To answer the question how much, big, small, et cetera?

I got to go back to my earlier comment.

We are just literally in the middle of the valuation.

So it is too early for us to give an estimate on that.

The next question is a follow-up from Mike Shlisky with Seaport Global.

A couple of quick follow-ups here for you.

First, on the John Deere Operations Center.

Is there opportunity to retrofit existing systems?

Is there a set top opportunity there?

Or is it just more like downloading the latest software update?

It's just going to be a new inclusion.

And then secondly, with the expansion of the overall equipment system in general, both through crops and through countries, can you help size that for us?

I mean, is there a big revenue opportunity there that would kind of move the yield in the next couple of quarters?

Yes, Mike.

This is Brian.

Just in regard to the John Deere connection, I think what's unique about this for Lindsay is that it's connecting with FieldNET Advisor, which has the irrigation recommendation capabilities.

So what it's doing is downloading crop details, planting dates, et cetera, that are already captured in the John Deere system.

And then that's used in the FieldNET Advisor to provide the irrigation recommendation.

So we are uniquely positioned from that regard.

In terms of the additional crops that are being added this last year in the U.S., it was corn and soybeans.

Now there are a number of different crops being added.

It's -- as far as the revenue growth, we really haven't talked about breaking that out at this particular time.

Okay.

All right.

And then the other thing I wanted to ask about was South America.

There's been a bit of a drought situation in Argentina recently, affecting this year's crop.

It's a modest sized country.

Can you give us a sense as to what your presence is in that part of the world?

And how you might -- now that you have this opportunity to maybe address a dry country, what do you do?

Is there a plan for the coming planting season, which will be, let's say, a quarter or 2 away here?

Yes.

Mike, we do have a position in Argentina.

Our market share in Brazil is higher than it is in Argentina, but we do see, as you said, an opportunity for business as a result of the drought there.

So business as usual from that standpoint.

We do business there just like we do in our other countries through a dealer network.

So I don't see anything changing there, just other than there may be more of an opportunity in the short term than had existed the prior few years.

I guess, I was asking, is there any kind of special marketing plan or discounting plan that you think you can do to kind of get people to start adopting the system or updating the system there?

Or is it just going to be the usual every year sale process?

Yes.

And Mike, I'm going to avoid this forum being any place where we would announce that there is any change on that.

I hope you can appreciate from a competitive standpoint.

Next is a follow-up from Joe Mondillo with Sidoti & Company.

I'm still trying -- having a tough time exactly figuring out to the degree of what you're looking at in terms of international irrigation in the back half of the year?

It sounds like you definitely are expecting an improvement from the first half of the year.

But do you anticipate returning to fiscal '17 levels?

Or when do you expect to return to growth?

Are any of these sort of large projects in terms of the mix, is that expecting to return?

Any more color on international irrigation would be helpful.

Yes, Joe.

This is Brian.

We are expecting international to show growth year-over-year from 2017.

So that means it is second-half loaded.

It also does depend on some of the projects that Tim had referred to.

So the timing of some of that can shift, but our expectation right now is that we would show growth over 2017 for the full year.

Okay.

For the full year, you're saying?

Correct.

Okay.

And has anything been sort of -- because I know you've talked about in the past couple of quarters, inventory has been up, backlog has been up.

And I think in the last couple of conference calls, you've cited international irrigation being a reason.

Has anything been pushed out as far as some of those things that you saw 3 to 6 months ago?

Or is everything sort of on schedule?

No.

I think that's part of the dynamic that has occurred in the second quarter.

Some project business that we had inventory planned forgot moved out.

But in total, the increase in inventory is coming from domestic irrigation as well as international irrigation and infrastructure now with the backlog that we've got there.

Ladies and gentlemen, this concludes our question-and-answer session.

I would like to turn the conference back over to Tim Hassinger for any closing remarks.

Well, thanks for the interest and participation in today's call.

This concludes our second quarter earnings call.

I'm looking forward to updating you on our progress in Quarter 3 call to be held at the end of June.

Thank you for attending.

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.