Good morning. My name is Kayla, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation First Quarter 2017 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 those statements preceded by, followed by, or including the words, expectations, 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 Brian Ketcham, Lindsay Corporation's Chief Financial Officer, Lori Zarkowski, our Chief Accounting Officer. Total revenues for the first quarter of fiscal 2017 were $110.4 million, a decrease of 9% over the same quarter last year. Both U.S. and international irrigation equipment revenues decreased in the quarter while infrastructure revenues were slightly higher than a year ago. Net earnings for the quarter were 900,000 or $0.08 per diluted share compared to $6.9 million or $0.62 per diluted share in the prior year. Irrigation equipment revenue in North America was lower than we expected that which led to under-absorbed factory overhead coupled with higher operating expenses, all contributed to the lower net earnings. The impact of foreign currency translation was slightly positive for the quarter in comparison to prior year affecting revenue by $1.3 million or 1% with minimal impact on operating income. Sales for the irrigation segment in the first quarter were $89.9 million, an 11% decrease over the same quarter last year. In the U.S. irrigation market revenues were weaker than expected decreasing 15% from the same period last year. The lower irrigation revenue in the quarter reflected lower unit volume partially offset by higher average selling prices from the pass-through of increased fuel costs. Our first quarter falls between selling season during harvest in North America and this periods revenue is usually not indicative of the next full selling season which begins in our second quarter and continues through the third quarter. During the first quarter farmers are generally assessing harvest results and developing planting plans for the next year. We believe that farmers are taking a wait-and-see approach and deferring equipment purchases in the current environment. Revenues from other irrigation components including pump…

[Operator Instructions] Our first question comes from the line of Nathan Jones from Stifel.

Good morning, Rick, Brian and Lori. Just start in irrigation. You talked about farmers deferring purchases. We've heard obviously crop prices being a big issue and farmers being worried about some of Trump's policies, particularly on trade. Do you get the feeling that this is deferring out of the first quarter into the second or third quarter, or is it deferring out of your 2017 into later years?

I'm not sure I picked up all of that Nathan because it broke up a little a bit. But I think what you are asking is, are these factors deferring volume into other quarter or deferring into another year is that correct?

Yes sir.

I don't think we know what’s really happening. As I said early on and would continue to say that the first quarter for us is a very difficult one because it really isn’t indicative of what we see in the selling season. This one has been particularly challenging from the standpoint of less what we expected in the North American market, so it was quieter than we've expected, but it's too soon to really understand what that means. I haven't seen anything that would indicate that we would expect volume this year to be down significantly or down as much as we saw necessarily in the first quarter. I think there's definitely a malaise out there. There is a wait-and-see attitude from farmers regarding a number of factors including the new administration. But if I were just betting, I'd say that the single biggest factor right now is they're making their planting decisions to determine what they should do to improve their profitability this next year. And they haven't really decided yet and we are reckoning it down until we get into the selling season or at least another month or two out.

Okay. And then if we could just look at the margins overall in irrigation, you guys have had fairly significantly higher margins in irrigation in lower revenue quarters, which would lead me to believe that there's some of these one-time charges or non-recurring charges were fairly significant. Can you give us more details on kind of what the core margins were and what the impact of those one-time warranty costs and other things were?

Let me just give a overview and I'll turn it over to Brian to give more detail. I think the key things to think about in the irrigation margins are one pricing from the selling margin standpoint was stable. We did not see a deterioration in selling margins in irrigation. So the factors were more internal. And part of the absorption issue from our standpoint was we expected volume in North America to be bigger and we had forecasted internally that were higher than what it turned out to be and we attempted to ramp down as that happened but what that caused was some unabsorbed overhead of which more action has been taken since the quarter closed to deal with that. So that's definitely a factor and there's a few others as well. The international sales mix was a little bit different than what we expected. We also had at least one fairly sizable project in there that was a fairly low margin turnkey type international project. I'm not going to get into a lot of specifics on it, but it was one where we knew that it was going to be a little lower margin and if it presented some other great opportunities for us, so that one also impacted the quarter in this. And as I said I'll let Brian add any more details to that.

Yes, just to break it down a little bit further I think the margin decline overall in irrigation it was just in the U.S. it was probably little over two points of margin decline, and again most of that was the under absorption as well as the warranty costs in the quarter. On the international side it was a little of our point decline and again that's primarily the regional - the difference in regional mix year-over-year.

Okay. Thanks very much.

Our next question comes from the line of Mike Shlisky from Seaport Global.

Good morning, guys. I wanted to touch on what might happen to the mix of crops next year and what that might mean for your business. Looking at the crop price today, it may look a little bit better for soybeans next year than for corn. So just give us kind of thoughts, if we do see more soybean acres planted this coming season and less corn planted this coming season, will that affect the usage or parts on your equipment that's installed today in a different way than if we had the other way around? Or any kind of impact that might happen if we were to see a big shift towards soybeans in 2017?

Well, I can't say that would have a significant impact on the expected volume from a standpoint of whether it's soybeans or corns, obviously some are in rotation and there is a is number of different factors there, but there's definitely projections that would show corn acreage reducing during this next year and shifting to soybeans. I think the one thing that I would think is an important factor in this as we found that corn prices tend to be a very significant driver of farmer sentiment in general. Now that may shift a little bit with more soybean acres planted, however it is historically been for a long time that corn is a big impact on that farmer sentiment. I think if corn prices rise more, whether it's due to planting more acres in soybeans and less than corn, I think it will still be beneficial from my overall commodity standpoint and beneficial to drive more demand for our product. It won't necessarily be which of the commodities they’re growing it may be just what happens with commodity prices as a result.

Okay. Is there a certain date in which you'd like to see the corn prices rise by? I mean, to have it done by, let' say, April 1 or a different timing there?

Not necessarily, I'd say that when we start to see the - when we start to see the market really open up is in that January, February timeframe and probably early February is when farmers are generally made these planting decisions and they are beginning to make some decisions regarding purchasing. As we see our prices if prices rise in that February to say April time period, it'll be beneficial to our business because that is getting into the primary selling season and it will create a more positive farmer sentiment and we'll likely to see that have a decent impact for us.

Okay. Also touching on your balance sheet here separately, I do see the inventories on your balance sheet are actually up from the prior year from a dollar standpoint and your sales are down. The outlook doesn't necessarily look like it's going to be a huge growth year. So kind of wondering, are there any excess inventories that you have on your balance sheet today? Anything that you had as far as big projects that could have caused it to be up this much, or are you going to have possibly work down some inventories over the next couple of quarters here?

Yes Mike, this is Brian. When you look at year-over-year the entire increase is coming from the international irrigation business. I think domestically it's comparable, but I think we have given soft demand we saw on the first quarter we got opportunities to manage our inventory to a lower level, but I think just the year-over-year comparison increases coming off from the international irrigation business.

Okay. If I could squeeze in one last one here about your expense reduction you might be taking in irrigation, could you just clarify, Rick, if you have costs that were in the first quarter or in the very near term to help figure out what cost to reduce, did you say you're going to have a payback multiple times that cost? Will that come within the same year, or will it be over a period of a different time frame? And I guess secondly, do you feel you're going to have to just do kind of a restructuring plan that's something broader or larger to help address where the market is today and in the near term?

There was a number of factors that to cover in the question you are asking, I'd say first that the from an overall standpoint as we saw the impact of the first quarter actions were taken in a primary irrigation factory to address some of the unabsorbed overhead and expenses related. There is also additional actions that are being addressed and developed now regarding the incremental SG&A expenses or other areas where we can make some reductions and maybe people thinks could be projects to defer the things of that nature. I think that from an overall irrigation standpoint we have a pretty lean organization today because we have downsized as we saw the market decline through the cycle. However there's always more opportunities to look for efficiencies or improvements that we can make, so that's one part of it. So action has been taken, action is continuing to be investigated in terms of things we can do, it may come through postponement and deferral projects, I will see significant major headcount reduction that kind of thing because we are pretty lean as it is today. The other aspect we're looking at is a manufacturing footprint to see if there's some things that we can do in terms of consolidating manufacturing operations from one area to another and those are not decisions that are made but they are important ones but a little bit of it depends on what we see as we come into the season now within the next month or two. So these are big decisions that will be evaluating over the next couple of months and taking action as appropriate. Now to come back to another one that I mentioned as we do have a cost reduction - fairly major cost reduction initiative and our cost of goods sold using some consultant is primarily looking at things like our procurement costs and expenses of materials. And in that area that's the one where I commented that I would expect the benefits this year to be a multiple of the expenses that were occurring this year for that. So there's amount of it that's a fixed expense but we expect to realize multiple of those benefits in our cost of goods sold throughout the year.

Perfect, thanks guys. Appreciate it. Happy Holidays.

Our next question comes from the line of Tyler Etten from Piper Jaffray.

Good morning Rick and team. I was just wondering if we could continue the talk of corn prices and potential impact in the spring. Right now South America is shaping up to have a potential large corn crop. How does that affect your guys' assumptions, and how do you think this will play out as they're harvesting in the early spring?

We have heard that there is potentially a large corn crop, I don't think that this is going to have a significant impact at this point I think that has been expected and is not surprising possibly in commodity prices as we see them today. I think the bigger factors will be now what happens going forward in terms of the plantings and what takes place terms of acreage planted not just U.S. but even potentially globally but also demand and I think what we see is that there is obviously significant pressure over the next number of years in terms of increasing demand with population changes and more moving into middle class. So demand will continue to strengthen and improve but in the near term I don't really see a major change from let's say the South American crop having it a big impact I think much of that has been anticipated from what I've seen.

Okay. So you are thinking that the planting intentions for next year will have more of an impact. Right now the early USG estimate is 90 million acres of corn in the US. Is that where you guys are at, or do you have a different assumption as of right now?

No, I think we're in that same area from an assumption standpoint believe that I've been watching for the overall Ag marketing perspective within that that kind of range and I think that also is basically priced in. However if there is a major shift that takes places from farmers in the planting plan this year from that, that obviously could have some kind of an impact but I think that's kind of what's expected at this stage. And if that was the case if it does come in that range in terms of the corn acreage, I would expect to see a fair amount of stability in corn prices but again there's some unknown until we get into the start of the season.

Okay, that's helpful, thank you. And maybe shifting gears a little bit to infrastructure. We had talked a little bit about the Trump effect on irrigation, but just any updated thoughts on infrastructure spending with a new administration? And more importantly, any sort of timing that any impact would have in 2017? Thanks.

Well there certainly been a lot of positive comments regarding infrastructure spending and I believe that there is real intention to expand infrastructure spending which would be beneficial to us because I do think fare amount of it would be in roads and bridges which definitely need the spending and repair and expansion. So from our standpoint that would all be very favorable. I would say that the current fastback which is in place is not a significant or really - a major step up in investment from what we've seen in the past in Highway Bill and what we're seeing is whether some stability, it's not a significant impact in the market at this point. But I do think that the kind of infrastructure spending that the talk about administration could be very beneficial to our infrastructure business overall. However, I think there's a lot that remains to be seen where the money is going to come from and how that will be done. One more thing I would add to that but I think is really important is our Road Zipper system product is such a great product for getting more out of existing infrastructure and I think it's be at one that should really be considered a lot of applications to get more on bridges and highways with minimal investment without having to completely build another bridge or add significant lanes to existing highways.

Thanks. And sorry if I missed it. On timing, do you think this would be more if there was to be an impact, maybe the second half of 2017, or do you think that there would be any sort of anything sooner than that?

I apologize, I did not comment on the timing. I honestly don't know, I would hate to speculate on it because I do think that - there is so much that has to be decided with this new administration coming in, I really couldn't speculate in, I would say that I couldn't see really much of anything happening in the first half of '17, I guess that probably best case may be second half.

Got it. Thanks. I'll pass it along.

Our next question comes from the line of Joe Mondillo from Sidoti & Company.

Hi guys. Good morning. I just wanted to touch on the irrigation margin again. Just in terms of the decremental margins were a lot larger than we've seen in the past. We've seen 15% decline or so in the U.S. operations here in this down cycle, but we haven't seen decremental margins of over 60% like we saw in this quarter. So just wondering, in the past couple years or several years, were you recognizing a lot more cost restructuring as opposed to now, sort of thinking that maybe this cycle was sort of turning and not anticipating a quarter with such a big decline like we saw here, and that's why we haven't seen decremental margins like this, or is it something else? I know you mentioned that there was the warranty factor as well as the international, but just wondering what you could say on that.

What's the first part of that Joe would be that - there was a surprise in terms of how low the revenue was in the first quarter in the North American market which caught our factory by surprise as well as I mentioned and normally we are probably a little closer to our forecast and this was off a bit. So they were not able to respond as quickly as they probably - historically due in terms of taking costs out. So that caused a little bit of it if, it was just a tough guess to try to figure out where this quarter was going to come in being the end of the season and - end of the cycle are season weather and between the two seasons. So they missed that and that caused the significant part of it.

Okay. And then in terms of that, do you think there's - what kind of pricing are you seeing in the industry? And do you think the higher prices that you initiated to push through the higher material costs caused anything regarding the lower volume?

The indications we have is that the pricing changes we've made did not cause the later - a lower volume, no. I can't say that for faculty, the indications that we received from our people and the dealer network have been but that was not the factor, it is just a quiet period out there in terms of growers making decisions and buying equipment. It does vary some by region so we could see if one region were little higher and we did see this was primarily a corn belt phenomenon because most of the corn belt was down to that extent. We saw couple of pockets that were up little higher but in general it was not based on prices much of that was just plain wait-and-see approach to find out what's going to happen next.

Okay. And can you tell us at what point in time, what part of the month or what month would you expect to start to see if this was just deferred volume?

I would expect that mid-January will start to get an indication of what the farmers are thinking and hopefully I will start to see the beginning of the season in terms of placing orders. There are some factors however that are not known and I do think that the - whatever is going to happen with the new administration and whatever concern they may have about that could delay that decision-making. I don't know that it's going to have a big impact because I can't think of anything more specific that would cause them to delay but I do know that farmers as many of us are not certain what will be the actions from the administration may take a wait-and-see approach before making capital goods purchases. But outside of that I would say mid-January to the end of January, first few weeks of February is where we’ll start to see a really turn on.

Okay. And last one for me. The QMB business, just wondering if you could update us on that? Do you see any maybe big projects on the horizon? I know it's very lumpy and you haven't seen much aside from the Golden Gate project, but just wondering if there's anything going on there?

There is a lot going on in terms of quoting activity and interest in QMB Road Zipper projects. As we commented earlier - I commented earlier, we also had increased production levels in the Road Zipper product line during the quarter which was beneficial to absorption in the infrastructure business and that was for projects that are in the pipeline. In anticipation of some of it is due to orders and backlog, some of it is projects and pipeline that we have a high level of confidence in. So there's definitely confidence of new projects coming in and we continue to see a very strong interest in the product line.

That's not related to anything the size of the Golden Gate project on the horizon? Is that just smaller type leasing, related to leasing, or smaller type projects?

What currently is in backlog is that would be smaller type projects some sales, some leasing and what we see in potential projects in the pipeline are some as big as the Golden Gate. Theirs is a couple in there but determining the timing of those is very difficult. I can't say those are the high probability ones but I'd say that there is some very good projects in the pipeline and even I’d go so far as to say probably more than we've seen in a number of years in terms of some good-sized project in that pipeline that give me a lot of confidence in it.

Okay, great. Thanks a lot. Happy Holidays.

Our next question comes from the line of Chris Shaw from Monness, Crespi.

Hi, good morning everyone. How are you doing?

Good morning.

Just a little more question on the pricing in irrigation. Are you able to pass through the higher steel cost, and is it happening in both the U.S. and the international markets, and is one easier to do than the other?

Yes Chris, this is Brian. Yes, what we've seen domestically while primarily domestically over the past years, a little bit of a roller coaster on the steel costs bottomed-out probably about this time last year and then starting in March went on a pretty good run and peaked in the June time period, kind of came back down through October and then recently is gone on another run. Because of the inventory that we carry we have avoided the peaks in that market prices of steel but we've been successful in passing those long and as Rick indicated earlier I don't think it's had any impact on overall demand. I think it's probably been less volatile in the international markets and we thought we have adjusted pricing in international markets as well.

And then just thinking about it, I guess you have - steel's a decent cost input into the infrastructure side, too. Does your contracts on that side allow for price escalators for raw materials?

There's not a lot of long-term contracts on the infrastructure side, it's mostly with orders that are placed – we're able to pass along those increases fairly quickly there.

Okay. Then a question on Road Zipper potential for new bids. I always forget, what kind of competition do you come up against when you quote a [indiscernible] medium barrier project? Is there only just the one competitor, or how many are out there, do you know?

Generally speaking we don't really have any competition on Road Zipper projects. What we do find is sometimes in a – let’s say if it's a some type of a maintenance projects we might be up against some standard concrete barrier that they may not move and be looking at different concepts in that process but generally when it comes through - if they are looking at a movable barrier we're it.

Okay, great. Thanks a lot.

Our next question comes from the line of Brian Drab of William Blair.

Hi, good morning guys. We're kind of deep into the call here, and it might just be me but I still really feel like I don't have any idea how to forecast OpEx for Q2. Clearly, we in the analyst community, we're pretty good at forecasting the revenue for the first quarter, but off by $0.50 or so in EPS. So I'm wondering if you could step through what, in more detail, these one-time items, warranty, increased product development, consulting, legal, severance and medical, and maybe put some rough dollar figures around those? And then also comment on which ones carry over into the future periods and to what extent.

Okay, Brian, this is Brian. Just first of all on the SG&A expenses, the increase that you saw in the engineering and R&D, we would expect to remain at that level or slightly higher for the balance of the year due to the additional product development and testing costs. On the other increases that you mentioned were primarily at that unallocated corporate expense level and we should see those fall off for the balance of the year. China, you I think in the past I've indicated roughly around $20 million in corporate expense for the year and we would expect to be around that if not slightly less as we go through the year which means from where we were in the first quarter. Overall just as a little guidance on the SG&A I think we're - if you put it in perspective to where we were last year backing up environmental charge we were probably about 19.5, 19.6 on SG&A. And this year we're planning at around 19% level overall for the year and that's where we planned the year and we will continue to manage through that level. Our first quarter was obviously above that, so we've got some work to do to get back to that for the balance of the year.

Okay, that's helpful. So the engineering and research expense, the $4.3 million, that's - what you're saying is that's a pretty good run rate to estimate for the future quarters here for the rest of the year?

Yes, I think it can very little bit quarter-to-quarter, but I think on average it will continue at that level. It could be slightly higher in particular quarters depending on the activity levels, but that's included in my overall SG&A number that I gave you.

Okay. And then can you give us any sense for that consulting/legal line item for the quarter? How that ended? Did that show up at all in the fourth quarter number, or that's all incremental and new in the first quarter?

No, we had some of that starting in the fourth quarter as well. And I would expect that that will on the consulting side will tail off as we go through the year as well.

Okay, thanks. And then I don't know if you mentioned yet, but could you give us some detail around what the component was that needed to be fixed in the field?

Without getting into the specific component we'd say it was fuel fixed on part. And it was a interesting one where this was something that really came up probably about year and half to two years ago and we thought it was done. And we had a couple of dealers that submitted some claims recently for some I think some products and inventory to be repaired. So that's really where this came from and it was a little bit of a surprise. But we've also found in the past to that when we see low markets in quiet period, our dealers do spend a little more time working through their inventory and outstanding items. So sometimes we get these bigger hits of warranty items that are really carryovers from when they're really busy and don't have time to deal with it, and I think there's a little bit of that that took place here.

Got it, okay. And then one last quick one. In the international markets it sounded like the mix weighed on margins to some extent there. Can you comment on what was that change in mix in terms of the geographies?

Yes, Brian, one of the things if we look at the breakdown of international, Canada is included in our international business and that market was down probably more than any other ones which is it kind of behaves more like the U.S. market. And then there's I think as Rick mentioned international project in the quarter that was at probably lower than average margins. So it's really that year-over-year change in mix.

All right. Okay, thank you very much.

At this time there appears to be no more questions. Mr. Parod, I'll turn the call back over to you for closing remarks.

With 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 solutions. Our offerings include the broad line of market-leading irrigation solutions for agriculture providing the best irrigation management and control technology, engineered integrated pumping systems, filtration solutions, as well as providing energy absorbing both safety solutions and solutions for expanding the capacity of existing roads and bridges. We are committed to creating shareholder value through investments in organic growth, dividend increases, strategic water-related acquisitions and share repurchases congruent with our capital allocation plan. We would like to thank you for your questions and participation in this call today and would like to wish you all a very safe and joyous holiday season. Thank you.

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