Rick Parod - President and CEO Jim Raabe - CFO Lori Zarkowski - CAO.

Brett Wong - Piper Jaffray Ryan Connors -- Janney Montgomery Scott Tim Mulrooney - William Blair Joe Mondillo - Sidoti & Company Kevin Bennett - Sterne Agee David Rose - Wedbush Securities Chris Shaw - Monness Crespi Peter Van Roden - Spitfire Capital.

Good morning. My name is Victoria, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lindsay Corporation Third Quarter 2014 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session.

(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, 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. You may begin..

Good morning and thank you for joining us today. Joining 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 fiscal 2014 were $169.9 million, 23% lower than the same quarter last year.

Irrigation revenue declined 26% from the same quarter last year, partially offset by a 13% increase in infrastructure revenue. Operating margins were 14.8% in the quarter, compared to 18% in the same quarter last year.

Net earnings were $16.5 million or $1.28 per diluted share, compared with [indiscernible] decreasing 13% from the same period last year. Net earnings were $40.2 million or $3.11 per diluted share, compared to $60.1 million or $4.66 per diluted share in the first nine months of last year.

For the irrigation segment, sales totaled $149 million in the quarter, decreasing 26% from the same quarter last year. Irrigation operating margins were 18.8% of sales versus 21.9% last year, due to the deleveraging of fixed expenses on lower revenue. In the U.S. irrigation market, revenues declined 26% to $88.1 million for the quarter.

Excluding sales from Lakos filtration business acquired, U.S. irrigation sales declined 31% in the quarter, reflecting the significantly contracted market when compared to last year due to the reduced drought impact and lower crop prices. Corn prices have declined roughly 30% as compared to a year ago and the current forecast for 2014 U.S.

net farm income, while higher than the 10-year average is 27% below 2013. The elimination of the enhanced Section 179 tax depreciation benefit has also likely contributed to the market headwinds for equipment sales. However, it is difficult to estimate the effect, given the change in commodity prices.

As the third quarter drew to a close, spring storms across the plains states created additional demand for replacement units, aiding revenue somewhat and increasing U.S. irrigation backlog. In the international market, revenues for the third quarter were $60.9 million decreasing $21.7 million over the prior year quarter.

The revenue reduction was primarily due to the near completion of the Iraq contract, which contributed $16 million of revenue in the third quarter of last year and only $400,000 in revenue in the recent quarter.

As noted in the release, the escalation of hostilities in Iraq in June has created some uncertainties for completion of the contract as we've been unable to complete installation in some areas of the country. At the end of the quarter, we had a receivable from the contract of approximately $2.5 million, which is not yet due.

There is also a $1.9 million performance bond outstanding, securing our obligation for completion of the contract. We do not believe it is necessary or appropriate to establish a reserve for bad debt or for the performance bond at this time, but we will continue to evaluate the situation.

In other international markets, declines have occurred in many regions compared to the same period last year, partially offset by increases in Australia and the inclusion of Lakos international sales.

The combination of lower crop prices, delays in government subsidized funding for equipment purchases in Brazil and conflict in Ukraine and Middle East have created near term market headwinds.

It's important to note that year-over-year international sales comparisons will be impacted again in the fourth quarter by the Iraq contract, which contributed $17.4 million in revenue in the prior year fourth quarter. For the first nine months of fiscal 2014, total irrigation segment revenues decreased 17% to $414.1 million. The U.S.

irrigation revenues were $260.8 million, decreasing 21% from the previous year and the international irrigation revenues were $153.3 million, decreasing 8% from the previous year. The international decrease to date is due primarily to the lower contract revenue in Iraq.

Infrastructure segment revenues were $20.9 million in the quarter, increasing 13% from the same quarter last year, reflecting increases in road safety products, rail products and Road Zipper system revenues.

Infrastructure segment operating margin increased to 4.3% of sales as compared to 1.1% in the third quarter last year, driven by their revenue increase and cost leveraging. For the first nine months of fiscal 2014, infrastructure revenues have increased 26% to $56.3 million, with increases in nearly all product lines.

While the status of a multi-year highway bill continues to create uncertainty for the near term, we're pleased with the progress and improvements in our infrastructure segment and are confident will continue to see growth over the longer term.

Gross profit in the third quarter was $48.2 million or 28.4% of sales versus $63 million or 28.7% of sales in the same quarter last year. Gross margin and irrigation declined less than one percentage point with the decline primarily reflecting fixed cost deleverage and lower sales volume.

Our sales people and dealers report increased price competition; however we've experienced minimal price impact to date. Infrastructure gross margins improved by approximately three percentage points on a mix shift and cost leveraging on higher sale.

Operating expenses in the third quarter decreased by approximately $500,000 compared to the same period last year. Excluding the inclusion of the acquired Lakos filtration business, operating expenses decreased $2.7 million, with the largest decreases in incentive compensation and bad debt expense.

Operating expenses were 13.6% of sales for the quarter, compared to 10.7% of sales for the same period last year, reflecting the revenue decline. The order backlog on May 31, 2014, was $73.6 million, compared to $80 million on May 31, 2013. Year-over-year backlog for the U.S.

irrigation and infrastructure market increase and international irrigation backlog declined. The higher U.S. irrigation backlog reflects replacement of machine orders received at the end of the quarter, driven by the spring storms.

The current year infrastructure backlog includes the $12.8 million order for the Road Zipper system project and the Golden Gate Bridge, which we expect to recognize in revenue in fiscal 2015. The prior year international irrigation backlog included $23 million remaining on the project in Iraq, which is now down to $2.6 million.

Our backlog typically represents long-term projects as well as short lead time orders and therefore is generally not a good indication of the next quarter’s revenue. Cash and cash equivalents of $182.1 million were $11.8 million higher compared to the same time last year, while debt decreased $1.1 million.

Cash generated from operations over the last 12 months were partially offset by capital expenditures, dividend payment, share repurchase and the Lakos acquisition completed in the fourth quarter last year.

Our current estimate for capital expenditures for 2014 is between $10 million to $15 million, which is down significantly from investments at the beginning of the year due to project timing. The specific project delayed are generally capacity expansion projects in developing markets, delayed by government approval processes or regional conflicts.

During the quarter, we repurchased 129,000 shares for $11.2 million and year-to-date have repurchased 208,000 shares for $117.8 million. We continue to execute against our capital allocation plan announced January 2014. In summary, the U.S. irrigation market has slowed significantly in recent quarters as compared to the same time last year. U.S.

irrigation revenues have contracted due to a significant reduction in commodity prices, reduction in the central plains drought condition and a reduction in accelerated depreciation benefit, partially offset by demand caused by spring storm damage.

International markets remain active, but with some projects delayed due to lower commodity prices or by regional conflict. Despite the current market headwinds, we're optimistic about the future and are expanding our global irrigation equipment manufacturing capacity.

The infrastructure business has improved its profit profile and generated growth in a continuing environment of constrained government spending. We believe this business will continue to grow and improve in profitability as we gain share in each of the markets and as we identify and develop new Road Zipper system applications worldwide.

In addition, our balance sheet remains strong. We will continue to invest in growth and productivity, both organically and through acquisition and we'll utilize excess cash to improve returns to shareholders.

In addition we'll continue to pursue strategic synergistic acquisitions that further differentiate our market position and add new growth opportunities. We will maintain our acquisition discipline to ensure we achieve value creation for shareholders. I would now like to open it up for any questions..

(Operator Instructions) Your first question comes from the line of Brett Wong with Piper Jaffray. Mr. Wong [indiscernible] speakerphone, please pick up the handset..

Hello..

Hello, yes. Good morning..

Sorry, good morning. Sorry about that. There is always some technical problem. Thanks for taking my questions. I was just wondering if you can quantify the replacement units in the backlog that will result in the storms..

Well I would say that the revenue gain on replacement of the storm damage machines in the quarter was not really significant and was less than 5% of our irrigation segment revenue in the quarter and in addition the -- for the revenue in the quarter, the replacement orders contributed to an increase in backlog for U.S.

irrigation at the end of the quarter. I would characterize it in that manner..

Okay. And now you have mentioned that the backlog is typically more longer term. I am just wondering if any thoughts on timing for some of the replacement units..

For the replacement units that are really very rapid in terms of timing, typically what we see in our backlog is that it consists of some longer term projects at times like the Iraq project, but then a lot of the other irrigation backlogs that we would have is generally going to turn very quickly and the need for those machines in terms of the storm damage launches is very immediate.

So they would like to have those very quickly..

Is there -- with them coming back in any risk to crop damage or anything like that other than what happened from the storm?.

There can be and it really depends on the situation, but I would say that in some markets, it's really dependent on being able to have the irrigation or order to get good consistent crop.

So while you may have some crop damage and going in and taking out the old machine or adding in the new one, it's probably a minimal in comparison to losing your entire crop by not irrigating..

Great thanks.

And then just in the domestic market, are there any specific regions that you are seeing have significantly more weakness than others?.

Let's say that the largest decreases we saw were really in the -- as we even talked about in the previous quarter, we're in the Midwest corn belt region, including the great plains.

This was the same region that was really most affected by the drought last year, which fueled record irrigation equipment demand in the past and that's generally where we've seen that change..

Okay. And are you still seeing some good growth on the Eastern side of corn belt or….

Well, we've seen good growth in some markets in pockets and I couldn’t really speak specifically in terms of what regions, but I would say that the primary region where we've seen the decrease has been the area where we saw the significant increase due to the draught..

Great thanks. I'll hop back in line..

Thank you..

Your next question comes from the line of [John] (ph) with BB&T Capital Markets..

Hi. Good morning. This is John, filling in for Schon..

Good morning..

Good morning..

Hi.

One of your irrigation competitors recently said they're calling for kind of flattish year-over-year growth in the back half of calendar 2014, is that in line with your expectations or you guys seeing something little different than that?.

Well, we don't really give guidance and I would say that we would really kind of characterize this as we were in the, what we consider to be a change in the Ag cycle and obviously from where we were in the past couple of years, which were really bullish with the drought conditions that we had.

And I would say that we've really kind of entered this tough period of the cycle where we've seen the lower commodity prices and high ending stocks in corn.

The real question is that we typically get when we see these conditions, which we've seen in the past is how long will it last and how far will it go, which is very difficult to know because all of them are a little bit different and usually when it takes some kind of a significant weather event of something else to happen in order to change that situation and right now, we don't see that on the horizon.

But I think I would necessarily make a projection or give guidance but to say I believe that we're in a different trough -- we're in a trough period now compared to what we've seen in the past couple of years and the commodity prices do make a difference.

We're also seeing that the expansion of new markets in some of the developing areas that we participated in have added more corn acreage, which creates a situation in terms of some of these conditions could take longer of the work through in terms of working down stocks of corn or other grains.

So every ones are a little bit different, but I would say in the years that I've seen this occur, we will work through it and we're very bullish on the long term, but short term, it may be a little bit tough core period..

Okay, great. That's helpful.

And then switching gears to infrastructure with the Golden Gate Bridge project, you have an update on the timing in fiscal 2015, because I remember seeing an article not too longer that mentioned the total project might be delayed into spring or summer of 2015, but I don't know if you guys had any additional commentary there?.

For the last estimates that we've seen on this would really put the revenue recognition for us certainly into our fiscal 2015 and we're probably looking at a January, February time period for our work. That's the latest information I've got. I don't have anything more current than that..

Okay, perfect.

And then just kind of sticking with that, are you expecting any significant ramp up in QMB deliveries in Q4 of this year and the kind of normal seasonal uptick in shipments we should expect?.

Well again, I don't want to get into any kind of guidance or forecast in this.

I'll just say that we continue to work the QMB Road Zipper system market very aggressively with a lot of activity in terms of interest in various markets around the world, but really a matter of the point just talking about any specific one or to predict the timing on those..

Okay, that's perfect. I'll hop back in queue. Thanks..

Your next question comes from the line of Ryan Connors with Janney Montgomery..

Great. Thank you. Couple of questions for me. First Rick, I wondered if you could talk about kind of the price cost dynamics.

I know as you’ve mentioned, we're moving into a different point in the cycle in irrigation and obviously that presumably will have some pricing ramifications and yet some of the key input prices and those things for example and in the news about kind of running up lately.

So what's your view going forward on kind of your ability to recoup some of that and maintain margin on the pricing side?.

Well, first I'll comment on the competitive situation a bit and say that the situation is definitely competitive, but not unlike other years and if commodity prices remain at this level or trend lower, we anticipate that there will be an increase in competitive intensity, which we think we're really well positioned for and in our adoption of lean and our Nebraska irrigation factory is deep and broad in the organization and we've demonstrated the ability to ramp up and ramp down if necessary to minimize the deleverage effect as the market contracts.

So we can't eliminate it, but we'll minimize that deleveraging effect. In addition, we look forward in terms of buying the major commodity such as steel and zinc and others that are important to our manufacturing process and in some cases we'll do pre-buys or hedge wherever necessary.

So that's another action we'll take and we can't prevent the competition from really fighting aggressively on price. We tend to differentiate on offering as much as we can, but we're really well positioned to compete wherever this is going to go..

Okay. And then I guess that kind of segues to my next question, one of the ways that you’ve historically differentiated is with technology. I know the FieldNET system has been very successful.

Can you kind of give us an update on the recent movement in the technology side and how you see that playing out? I know Trimble has gotten a little more active on the irrigation side with their new pivot control system. I know Ag expense has been -- having some success.

So where do you see that going to and do you think when we can be -- remain as relevant in that side of the business as it has been historically?.

One of the things that we do internally is we're very objective in terms of looking at competition and we never get cocky in terms of really underestimating where that's going to go and I would say that our objective view, we're seeing a lot more competition, more that are kind of focusing in this area in terms of the technology and the offering of a more complete solution from the irrigation information or the let's say growing information part of the cycle.

At the same time, I would say that FieldNET has been very successful in terms of market penetration and very successful on delivering on the value proposition that it offers, which is very significant and somewhat unique.

We will continue to be aggressive in adding additional features and developing FieldNET and continue to build out that offering in many different ways and while we see competition from some good companies and large companies that's interesting plays for them and new plays for them, they're still relatively small pieces and really not the same value proposition that FieldNET offers.

So that's probably where I'll leave it, but I would say that this is a very important piece of our business that we will continue to aggressively expand and grow..

Great. Well, thanks for your time today..

Thank you..

Your next question comes from the line of Tim Mulrooney with William Blair..

Good morning, Rick..

Good morning..

I've a question on your domestic irrigation segment, where looking at the model, actually this is for total irrigation revenue, we see that typically seasonality suggest that your irrigation revenue will decline about 30% from the third quarter to the fourth quarter, is there any reason this year we should expect anything different?.

One factor that is difficult to factor into some degree is the storm damage aspect because we do have storm damage replacement machines in backlog that will be revenue in the fourth quarter.

As I've said, I am not really going to get into guidance or really splitting out that specifically, but I would say that it does help our fourth quarter somewhat from a typical year..

Okay. That's helpful. Thank you.

And then did you guys give how much Lakos contributed to irrigation in the fiscal third quarter?.

We didn’t specifically split that out and I don't really have that number available on hand, but we have not specifically split out Lakos revenue and it is split between our domestic and international numbers in the irrigation segment..

Okay.

It's like two third domestic and a third international, is that about right?.

I couldn’t say. I don't really know and Jim if you have anything on that..

No, it can generally be anywhere from 20% international but two third international. It will fluctuate, but in that range, yes..

Okay. Thank you. Just one more.

Could you give a breakdown -- sometimes you give a breakdown of domestic irrigation in the quarter with regards to what percent was replacement versus conversion, versus dry land, do you have that handy?.

I do, yes. The replacement percentage was roughly 36% of whole goods shipped. Dry land was 38% that's adding irrigation for the first time and conversion was 26%, that converting from a flood or gravity irrigation. So we've seen a higher percentage of replacements. Dry land is still holding up pretty well.

We've seen it during the drought conditions in the high 40% ranges close to 15%. It's now 38%. Replacement is still pretty good and part of that I am sure is because of the storm damage machines that were also in replacement..

Okay. Got it. Thanks Rick. Thank you, Jim..

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

Hi guys.

How are you doing?.

Good morning..

Just wanted to ask you a question on sort of how you're looking at cost controlling.

I know you mentioned ex-Lakos, you saw I think operating cost down $2.7 million, but I am wondering the detrimental margins are above 40% the last sort of three on average, in the last three quarters and with the outlook of a record harvest may be this year translating into down acreage next year, just wondering how you are looking at your cost situation and if there is any other levers that you can pull to cut the cost structure?.

Well I'll make this comment into two sectors here -- two different segments. First is in the -- from a manufacturing cost or the cost of goods sold perspective and I would say that we're going to continue to do what we need to in terms of hedging cost whether it's steel or zinc or whatever those are.

And with the implementation of lean in our manufacturing operations, which creates a lot of flexibility but also allows us to deleverage as much as we can and minimize that impact.

At the same time on the operating expense side, I would say we've tightened the belt and made reductions where we felt it was appropriate and at the same time, we're continuing to invest in product development and geographical expansion and really developing the strategies and the synergies between our businesses and developing differentiation in our business segments, which helps our margins long term.

We're well positioned given our market strength and balance sheet to continue to make those investments and others that create shareholder value including share repurchase and acquisitions as we go through this period.

Obviously, we will continue to reevaluate our operating expense position as we learn more about the market and where things are going and make adjustments accordingly that we feel are appropriate, but we will maintain our strategic direction..

Okay. Great.

And then in terms of the international business, it seems like you highlighted a little bit more of a caution this quarter and it's understandable just given what we've been seeing, but I am just wondering if are you actually starting to see a slowdown in orders or is it just a caution given what we've been seeing in these particular regions around the world?.

Let me describe it as a caution because we're seeing some of the commodity price impact to some degree in all of the international markets, but to a limited degree still and yet at the same time while we're dealing with the commodity price issue, we had the conflicts in the Middle East, which certainly affects that market.

Ukraine and Russia, which creates some difficult market conditions there at this time, but we'll get past those and we expect to continue to see growth in Brazil, China and Ukraine, Russia, parts of South America, parts of Africa and while we're experiencing some contraction right now, we expect that financial investors in Ag will continue to make investment in new projects around the world as part of food security initiatives and other things.

So it still makes sense to see good growth in the long term in these international markets, but they are going through just a little bit of a rough time right now..

Okay.

So in terms of -- I know you don't like to give guidance, but the first half of the year you were averaging $40 million to $50 million, is that far off given what you are seeing, just trying to understand how difficult the environment is given your comments?.

Well again I don't want to give guidance and I would say that I wouldn’t describe it as difficult.

I would say that there are some challenges right as I've described, but what we have also seen in the last couple of months is we've seen projects in some of the international markets that were somewhat delayed due to investors holding back because of commodity price changes or investment in let's say Ukraine or Russia because of the conflicts that are taking place right now.

And yet the interest is still very strong and is still there where I believe that that will continue is just a matter of some delays. So I can't really predict in terms of timing of projects or anything of that nature. I will just say that the drivers are still very, very strong and we would expect that to continue..

Okay. Great.

And then just lastly, in terms of your acquisition strategy, just wondering if there is any different viewpoints that you take in a downturn versus the very robust period that we've seen in the last few years, is there any chance that we see a pick-up of acquisitions or anything like that, just wondering what your viewpoint is going into the trough time period here..

Well strategically it doesn’t change anything that we plan or do from an acquisition standpoint in terms of we're still looking for water related acquisitions and acquisitions that are synergistic to our core business and basically build on differentiation and continue to build our offering from a total solution standpoint.

Now from an opportunistic standpoint, this may create some new opportunities because the market is a little softer in some areas, but outside of that, it doesn’t really change anything from a strategic level in terms of acquisition..

Okay. Great. Thanks a lot..

Thank you..

Your next question comes from the line of Kevin Bennett with Sterne Agee..

Hey guys. Good morning..

Good morning..

One piece of clarification real quick, the breakdown you gave of replacement dry land, is that just domestic or is that total irrigation?.

That is just domestic..

Okay.

And then can you -- is there any chance that you can give me those numbers for the third quarter of last year?.

I believe we have those -- Jim has those. Just give us a second here..

Sure..

The third quarter of last year was 46% dry land, 23% conversion and 31% replacement..

Got it. Thank you.

And then second to what Joe was talking about on the international side, I know you guys have always thrown out that 15% long term growth rate in that business, do you think that needs to come down a little bit given what's going on in Ukraine and some of these areas or are you still comfortable with that as it's not really guidance, but just kind of a target..

Well if you were to try and apply it to any one quarter or a short term period, I would say that's difficult to predict and that….

Sure..

…a kind of forecast, but taken from a longer term perspective, no, I don't feel that we would change that at this point.

I think there are some factors kind of in play primarily Ukraine in terms of what happens there that could impact that, but I still believe there are so many growth opportunities throughout the world for efficient irrigation that I wouldn’t change that estimate at this time..

Got it. Okay.

And then if you -- I guess, if you look year-over-year and back out Iraq, it looks like it was -- the international piece was down about 10% organically I'll call it, can you just go through some of your major markets and just talk about which ones were down and which ones may have been up, just to get a better sense of kind of what's going on there ex-Iraq?.

Without getting too specific, I would say a number of them were down.

One of them that was -- that has been very strong for the last few years certainly has been Brazil and we did see it lower in the quarter, primarily due to the government subsidized funding delays, which we would expect to improve after the next election and hopefully that will get turned back on again.

But outside of that, there was no real specific market. We've seen some delays or let's say some reductions in China, which we've talked about a little bit in the past due to some government tender delays and things of that nature.

Nothing really significant, but the primary ones were the Middle East, which was the Iraq contract and Brazil due to the government funding..

Got it. That's super helpful.

And then a couple more; one, I know you guys are working on a plant in Turkey, is that part of what's been delayed or is that still slated for next year?.

Well the plant in Turkey is under construction and we're in the process of hiring for key positions for that plant at this time.

It is delayed, but we do expect to be operational probably by the end of the calendar year and we had many months of delays in gaining the appropriate approvals in country that we needed, but the project is now really proceeding according to our revised schedule, but that's one of a couple of projects in let's say developing markets that's delayed due to government approvals and those types of processes..

Got it.

Are there any others that you would like to call out?.

Not specifically at this time. I may talk about them in the future as we get to capital invested, but not at this time..

Got you. Okay. And then last one for me, on the infrastructure piece of the business, I know there's been alarm bells going off regarding the highway trough fund running at it might, excuse me, in a couple of months.

Have you seen that impact your business at all? Are you customers talking about it or you are just kind of figure it will get fixed?.

Well I can say everybody is talking about it and I don't think there was an assumption of anything getting fixed, may be there a belief that it will be -- in the long term I think there is faith, but I would say the way we look at this is the new leadership we have in the business, now there has been a new request for expansion of profit in our business in each of our markets actually we are participating in and the infrastructure business management focus on better utilization of recourses and production planning, we've seen continual albeit a slow recovery in the U.S.

market with roadway infrastructure segment in general and in both construction and general repairs. We think we're pretty well positioned and as we see a multi-year highway build put in place that will be beneficial to the business. So we think something will happen. It's just a matter of timing and it has to take place..

Got you. Okay. Thank you guys so much. Appreciate it..

Thank you..

Your next question comes from the line of David Rose with Wedbush Securities..

Good morning. Thank you for taking my questions. I was hoping we can follow-up just on pricing.

If you could may be parse out a little bit of where you're seeing the pricing pressure in terms of smaller or direct competitor in small versus large of the players and if there is any regional component to this and how are you seeing pricing pressure, are you seeing in formal rebates, are you seeing in direct price reductions and if you could provide a little more color on that..

Well, as I mentioned in the comments, we've seen the -- we've primarily heard it more anecdotally from our sales people and our dealers and we do have discussions with our dealers regarding specific competitive situations as they arise. I wouldn’t describe it as specifically regional or broad and widespread.

I would say that -- as I commented on earlier really it's had minimal if any impact on us to date. I would say a pretty small impact. So I am not really concerned about it at this point. Like I said, my bigger concern with this is depending on where the market goes in the future and going forward..

Okay. That's helpful. And then in terms of mitigating the impact on margins and from a revenue decline, can you may be break out a little bit more from lean in terms of where you saw some of the improvement or at least the mitigation, is it in labor or is it on cost of quality, was it in procurement, maybe provide a little bit more color..

This is Jim and I think I will just say it really is more the overall management of the plant from a productivity-labor standpoint.

We are seeing deleverages you would expect from just the overall fixed cost structure, but I think we've done a very good job in just managing the overall labor cost and making sure we've got full productivity in the plant or as much as we can in a situation like this. From a purchasing standpoint we always have efforts ongoing.

I wouldn’t say there is any significant items call out there. I would just say it's kind of more of the overall managing the productivity..

Okay. And how many shifts are you running in the U.S.

plant irrigation?.

I would say it's generally one probably a couple in some departments as necessary. There may be another one or two departments that could be running three shifts, but generally in the one to two..

Okay. Great. Thank you..

[Operator instructions] Your next question comes from the line of Chris Shaw with Monness Crespi..

Hey, good morning, everyone.

How are you doing?.

Good. Good morning..

I was curious -- I was surprised that you had -- you didn’t buyback more shares during the quarter, I think it looked like, it was maybe $11 million worth after doing I think six or so last quarter when we only had few weeks to actually do it, [few million of cash is] (ph) arriving with a reason you weren’t more aggressive there -- is there some redo and potential M&A maybe going forward..

No Chris, I think it’s more -- our overall approach is, this is a $100 million to $150 million repurchase that we see executing over the 24 month period, and our view really hasn't changed, which is we want to be active in the market and we also want to be opportunistic and I think that’s really where we stand is that I think what we’ve shown in the last couple of quarters is that we do expect to execute at some level, but those -- the level will vary based on where we see opportunities.

So I don’t think I would really comment more than that. Maybe it really isn’t related to any other outlook item, I think we have leveraged by the very strong balance sheet and significant amount of cash. So I think we have the flexibility we need for acquisitions and other types of things.

It’s just we’re going to be thoughtful about the process on the repurchase..

And on deals in this pipeline, is getting bigger or smaller or you just finding problems with getting the right valuations from the target or are there other factors that are slowing up any potential deals?.

Hey, this is Rick, I think in terms of the deals I would say that we’re -- the pipeline is very active. We have a lot of potentials that we’re looking at and as I commented last quarter, many of them are smaller than we’d like to see, that’s still the case.

They’re primarily smaller deals that add in nicely and there’s a synergy with our existing business. Some cases, price expectations are challenging. Many that's not the case but it's a matter of just finding the right deal and being able to get those close. So I think the pipeline is as good as it’s ever been.

In fact probably I’d characterize it more as continually increasing..

And then, shifting gears, I guess have more recent experience of what happened to your business in irrigation when you have a period of dryness or drought, but -- and a feeling like this where it's a little bit more rainy or floods some there a little bit.

In the past, does that drive down demand, I mean obviously relative -- it was really drier but from a normal season, do you see people less inclined to put in the irrigation just when they have a good season -- you guys have a history of that, that you can point?.

So I would describe it as obviously during periods of drought, it's really top of mind for everyone in terms of how to enhance the yield of their crop and obviously irrigation is the number one method for being able to do that, but it’s also the number one method for -- from a consistency standpoint in terms of crop yield.

Obviously there’s other things in terms of seed and fertilizers and things that take place, but consistently applying that water during their growing cycle is extremely important which our kinds of irrigation can do.

Now, when it comes to flooding that's taking place, obviously it's difficult to sell the equipment into regions that are flooded, you can't do that. Regions that are flooding where there is too much water they're not thinking about irrigation at that point.

However, what they're really looking at longer term is what I would consider to be more dramatic weather cycles than what we’ve seen in the past where we’ve seen the cycle of droughts and flooding and things that are taking place in different markets.

So, many areas where we have seen farmers not interested in irrigation in the past and some of the mid-western states where they’ve sufficiently had enough rainfall, didn’t have enough rainfall in the 2011-2012 time period with drought and even though they may be getting it now and there maybe some flooding longer term, they’ll probably still consider irrigation because that's going to be the best path to consistency in terms of the crop.

So, that's really how they’re looking at it while they may not be looking at irrigation this year because they’re flooded or have water issues. That will change as the cycles change..

Okay. Thank you..

The next question -- you do have a follow-up from John Duni with BB&T Capital Markets..

Hi, thanks, just one quick follow up.

You briefly talked about your thoughts on the highway bill but I want to get your take on Section 179, it looks like we're seeing some positive developments recently in the house, but I didn't know if you were able to offer any additional colors, do you have any expectations to the bill or anything you’ve heard recently?.

So I think the only color I'd add to it is that everything that we've heard ex fired was that it would probably be renewed and at some level we don’t really know what level that will be.

However, I think that it’s likely that it will be renewed at the end of calendar year, which really won’t do any good obviously for our fiscal year this year, it may make a difference for us next year in terms of demand.

But at this point I’d say, it really has no impact on fiscal 2014 for us, but our expectation is it probably will get renewed but in today's political environment it's anybody's guess..

Okay. Great. Thanks for taking my questions..

Thank you..

Final question comes from the line of Peter Van Roden with Spitfire Capital..

Hey guys..

Good morning..

Just a quick question once again on domestic pricing. I think in the past you guys have talked about how you don’t see a ton of value trying to capitalize in order to gain market share.

And so if that’s the case, are there any of your competitors that you see being in financial distress from the drop-off, did they kind of fly a little bit too close to the sun and put themselves in trouble or is the competitive market pretty healthy right now because everyone has done so well over the past couple of years..

I think it’s more of the latter. I think everyone is in pretty good shape. I think on a -- looking at a more global basis we have some competitors that occasionally get into some difficult financial times because of spreading too thin or growing too fast and investing too much too quickly.

So we may see some opportunities that come out of that occasionally little more price aggression and things like that, which is usually short lived. But generally I would say that everybody is in pretty good shape and our competitive environment is really pretty solid.

As I stated earlier, I do think it as, depending on what happens with commodity prices or more importantly farmer sentiment and market demand, things could get more aggressive, but I’m not overly concerned because we’re well positioned given our lean and other things that we saw implemented throughout our operations..

Got it. Thanks guys..

Thank you..

That will conclude the Q&A session for today’s call. I would now like to turn the conference back over to Mr. Parod, for any closing remarks..

While we've experienced a near term decline from peak irrigation revenues drivers for the company's markets and population growth, expanded food production, efficient water use and infrastructure expansion, support our long term growth goals.

We’re 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 thank you for your questions and participation in this call. Thank you..

Again, thank you for your participation. This concludes today’s conference. You may now disconnect..