# LINDSAY CORP (LNN) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from LINDSAY CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/836157/000095017024117056/lnn-20240831.htm
Accession: 0000950170-24-117056
Filing date: 2024-10-24
Report date: 2024-08-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/LNN/
All MD&A years: /company/LNN/mda/
Previous year: /company/LNN/mda/fy2023/ (FY 2023)
Next year: /company/LNN/mda/fy2025/ (FY 2025)

ITEM 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Concerning Forward—Looking Statements

This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical are forward-looking and reflect expectations for future Company performance. In addition, forward-looking statements may be made orally or in press releases, conferences, reports, on the Company’s web site, or otherwise, in the future by or on behalf of the Company. When used by or on behalf of the Company, the words “expect,” “anticipate,” “estimate,” “believe,” “intend,” “will,” “plan,” “predict,” “project,” “outlook,” “could,” “may,” “should,” and similar expressions generally identify forward-looking statements. For these statements throughout the Annual Report on Form 10-K, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The entire sections entitled “Financial Overview and Outlook” and “Risk Factors” should be considered forward-looking statements.

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A. Readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results or conditions, which may not occur as anticipated. Actual results or conditions could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein, as well as others not now anticipated. The risks and uncertainties described herein are not exclusive and further information concerning the Company and its businesses, including factors that potentially could materially affect the Company’s financial results, may emerge from time to time. Except as required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

Company Overview

The Company manufactures and markets center pivot, lateral move, and hose reel irrigation systems. The Company also produces and markets irrigation controls, chemical injection systems, remote monitoring and irrigation scheduling systems. These products are used by farmers to increase or stabilize crop production while conserving water, energy, and labor. Through its acquisitions and third-party commercial arrangements, the Company has been able to enhance its capabilities in providing innovative, turn-key solutions to customers through the integration of designs, controls, and pump stations. The Company sells its irrigation products primarily to a world-wide independent dealer network, who resell to their customers, the farmers. The Company’s irrigation production facilities are located in the United States, Brazil, Türkiye, France, China and South Africa, and also has distribution and sales operations in the Netherlands, Egypt, Australia, and New Zealand. The Company also manufactures and markets, through distributors and direct sales to customers, various infrastructure products, including moveable barrier systems for traffic lane management, crash cushions, preformed reflective pavement tapes, and other road safety devices, through its production facilities in the United States and Italy, and has produced road safety products in irrigation manufacturing facilities in China, Brazil and Türkiye. In addition, the Company’s infrastructure segment produces railroad signals and structures.

For the business overall, the global, long-term drivers of population growth, water conservation and environmental sustainability, the need for increased food production, and the need for safer, more efficient transportation solutions remain positive. Key factors which impact demand for the Company’s irrigation products include total worldwide agricultural crop production, the profitability of agricultural crop production, agricultural commodity prices, net farm income, availability of financing for farmers, governmental policies regarding the agricultural sector, water and energy conservation policies, the regularity of rainfall, regional climate conditions, food security concerns and foreign currency exchange rates. A key factor which impacts demand for the Company’s infrastructure products is the amount of spending authorized by governments to improve road and highway systems. Much of the U.S. highway infrastructure market is driven by government spending programs. For example, the U.S. government funds highway and road improvements through the Federal Highway Trust Fund Program. This program provides funding to improve the nation’s roadway system. In November 2021, the Infrastructure Investment and Jobs Act was enacted and included a five-year reauthorization of the Fixing America's Surface Transportation (FAST) Act. This legislation also introduced $110 billion in incremental federal funding planned for roads, bridges, and other transportation projects, which the Company anticipates may support higher demand for its transportation safety products.

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The Company continues to have an ongoing, structured, acquisition process that it expects to generate additional growth opportunities throughout the world and add to its irrigation and infrastructure capabilities. The Company is committed to achieving earnings growth by global market expansion, improvements in margins, and strategic acquisitions.

New Accounting Standards Issued

See Note 2, New Accounting Pronouncements, to the Company’s consolidated financial statements for information regarding recently issued accounting pronouncements.

Critical Accounting Estimates

In preparing the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), management must make a variety of decisions which impact the reported amounts and the related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In reaching such decisions, management applies judgment based on its understanding and analysis of the relevant facts and circumstances. Certain of the Company’s accounting policies are critical, as these policies are most important to the presentation of the Company’s consolidated results of operations and financial condition. They require the greatest use of judgments and estimates by management based on the Company’s historical experience and management’s knowledge and understanding of current facts and circumstances. Management periodically re-evaluates and adjusts the estimates that are used as circumstances change. Following is the accounting policy management considers critical to the Company’s consolidated results of operations and financial condition:

Warranties

The Company’s accounting policy on accounting for its product warranties is critical because it includes significant judgments and estimates by management about the amount, nature, and timing of future product-related warranty costs.

The Company generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods and/or usage of the product. At the time a sale is recognized, the Company records the estimated future warranty costs. The Company generally determines its total future warranty liability by applying historical claims rate experience to the amount of equipment that has been sold and is still within the warranty period. In addition, the Company records provisions for known warranty claims.

The Company periodically reviews the assumptions used to determine the liabilities for product warranties and adjusts its assumptions based upon factors such as actual failure rates and cost experience. A number of factors could affect actual failure rates and cost experience, including the amount and timing of new product introductions, changes in manufacturing techniques or locations, components or suppliers used. If actual costs differ from the estimates, an adjustment may be made to the product warranty liability.

Financial Overview and Outlook

Operating revenues in fiscal 2024 were $607.1 million, a 10 percent decrease compared to $674.1 million in the prior year. Irrigation segment revenues decreased 12 percent to $513.9 million and infrastructure segment revenues increased 6 percent to $93.2 million. Net earnings for fiscal 2024 decreased 8 percent to $66.3 million or $6.01 per diluted share compared with $72.4 million or $6.54 per diluted share in the prior year. The impact on net earnings of lower irrigation revenues was partially offset by higher infrastructure revenues that carry a favorable margin mix and by higher other income, driven by an increase in interest income and favorable foreign currency translation results, and by a lower effective income tax rate resulting from the realization of certain tax credits.

The global drivers for the Company’s irrigation segment are population growth and the attendant need for expanded food production and efficient water use. The need for irrigated agricultural crop production, which depends upon many factors, include the following primary drivers:

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Agricultural commodity prices - As of August 2024, corn prices were approximately 19 percent lower and soybean prices approximately 29 percent lower, when compared to August 2023. The reduction in commodity prices is due primarily to higher production levels anticipated in calendar 2024 that are resulting in increased supply and higher commodity inventory levels. Agriculture commodity prices fluctuate based on supply factors, such as global production and inventory levels and the ongoing conflict between Ukraine and Russia, which is in addition to demand factors such as food and feed consumption, biofuel production and the level of China's demand for agricultural imports.

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•
Net farm income - As of August 2024, the U.S. Department of Agriculture (the “USDA”) estimated U.S. 2024 net farm income to be $140.0 billion, a decrease of 4 percent from the USDA’s final U.S. 2023 net farm income of $146.5 billion. This projected decrease is resulting primarily from a reduction in government support payments and cash receipts for crops that is being partially offset by lower input costs.

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Weather conditions – Demand for irrigation equipment is often positively affected by storm damage and prolonged periods of drought conditions as producers look for ways to reduce the risk of low crop production and crop failures. Conversely, demand for irrigation equipment can be negatively affected during periods of more predictable or abundant natural precipitation.

•
Governmental policies - A number of government laws and regulations can impact the Company’s business, including:

o
The Agriculture Improvement Act of 2018 (the “Farm Bill”) was signed into law in December 2018 and provides a degree of certainty to growers, including funding for the Environmental Quality Incentives Program, which provides financial assistance to farmers to implement conservation practices, and is frequently used to assist in the purchase of center pivot irrigation systems. In November 2023, Congress voted to extend the Farm Bill through September 30, 2024, at which date it expired without new legislation or another extension. It is expected that Congress will address the Farm Bill when it returns to session after the November 2024 elections and before benefits run out at the end of the calendar year.

o
Changes to U.S. income tax laws enacted in December 2017 increased the benefit of certain tax incentives, such as the Section 179 income tax deduction and Section 168 bonus depreciation, which are intended to encourage equipment purchases by allowing 100 percent of the cost of equipment to be treated as an expense in the year of purchase rather than amortized over its useful life. This benefit is being phased out by 20 percent per year over a five-year period, beginning in 2023. For calendar 2024, the allowable deduction is 60 percent of the cost of equipment and in calendar 2025 the allowable deduction will drop to 40 percent.

o
Biofuel production continues to be a major demand driver for irrigated corn, sugar cane and soybeans as these crops are used in high volumes to produce ethanol and biodiesel. On June 21, 2023, the U.S. Environmental Protection Agency (“EPA”) announced a final rule setting biofuel volume requirements for the Renewable Fuels Standard (RFS) program for 2023, 2024, and 2025. The final volume requirements reflect an increase in total gallons of renewable fuel of approximately 3 to 4 percent in each successive year.

o
Many international markets are affected by government policies such as subsidies and other agriculturally related incentives. While these policies can have a significant effect on individual markets, they typically do not have a material effect on the consolidated results of the Company.

•
Currency –The value of the U.S. dollar fluctuates in relation to the value of currencies in a number of countries to which the Company exports products and maintains local operations. The strengthening of the dollar increases the cost in the local currency of the products exported from the U.S. into these countries and, therefore, could negatively affect the Company’s international sales and margins. In addition, the U.S. dollar value of sales made in any affected foreign currencies will decline as the value of the dollar rises in relation to these other currencies.

U.S. net farm income levels in calendar 2023, although lower than historically high 2022 levels, supported farmer profitability and demand for investment in the first half of fiscal 2024. However, the forecasted decline in estimated 2024 net farm income has led to tempered demand for irrigation equipment during the second half of fiscal 2024, and is expected to continue into at least fiscal 2025 until the outlook for net farm income may improve. The Company has been able to maintain its pricing for irrigation equipment while inflationary pressure on steel and other raw material costs, as well as freight and logistics costs, have moderated.

The most significant opportunities for growth in irrigation sales over the next several years continue to be in international markets where irrigation use is less developed and demand is driven not only by commodity prices and farm income, but also by food security, water scarcity and population growth. While international irrigation markets remain active with opportunities for further development and expansion, regional political and economic factors,

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including armed conflict, currency conditions and other factors can create a challenging environment. The Company continues to monitor the Ukraine and Russia conflict for both short and long-term implications and has suspended new business activity in Russia and Belarus since February 2022. Sales with Russian, Ukrainian, and Belarusian customers have historically represented less than 5 percent of consolidated revenues. Additionally, international results are heavily dependent upon project sales which tend to fluctuate and can be difficult to forecast accurately. In May 2024, the Company announced a multi-year supply agreement to provide irrigation systems and remote management and scheduling technology for a large project in the Middle East and North Africa (MENA) region. The project is valued at over $100 million in revenue, with equipment deliveries beginning in the fourth quarter of fiscal 2024 and expected to continue through the first quarter of fiscal 2026.

In the infrastructure business, demand for the Company's transportation safety products largely depends on government spending for road construction and improvements. The enactment of the Infrastructure Investment and Jobs Act ("IIJA") in November 2021 marked the largest infusion of federal investment into infrastructure projects in more than a decade. This legislation introduced $110 billion in incremental federal funding, planned for roads, bridges, and other transportation projects, which the Company anticipates may translate into higher demand for its transportation safety products as funds are appropriated and states begin to implement projects. This additional funding has supported an increase in Road Zipper System™ leasing revenues that the Company realized in fiscal 2024. The federal programs under IIJA run through September 2026 with funding extending up to two years beyond that date.

As of August 31, 2024, the Company had an order backlog of $180.9 million compared with $78.7 million at August 31, 2023. Included in these backlogs are amounts of $36.5 million and $3.8 million, respectively, for orders that are not expected to be fulfilled within the subsequent twelve months. The backlog in both segments was higher compared to the prior year, with the increase in irrigation backlog resulting from the addition of the large project in the MENA region. The Company’s backlog can fluctuate from period to period due to the seasonality, cyclicality, timing, and execution of contracts. Backlog typically represents long-term projects as well as short lead-time orders; therefore, it is generally not a good indication of the revenues to be realized in succeeding quarters.

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Results of Operations

The following “Fiscal 2024 Compared to Fiscal 2023” section presents an analysis of the Company’s consolidated operating results displayed in the Consolidated Statements of Earnings and should be read together with the information in Note 18, Industry Segment Information, to the consolidated financial statements. A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on October 19, 2023, which is available free of charge on the SEC’s website at www.sec.gov and the Company’s website at www.lindsay.com under the tab “Investor Relations – SEC Filings.”

Fiscal 2024 Compared to Fiscal 2023

The following table provides highlights for fiscal 2024 compared with fiscal 2023:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

(1)
Includes corporate general and administrative expenses of $29.9 million and $31.8 million for fiscal 2024 and 2023, respectively.

(2)
See Note 18 Industry Segment Information, to the consolidated financial statements, for further details regarding segments.

Revenues

Operating revenues in fiscal 2024 were $607.1 million, a decrease of 10 percent or $67.0 million, compared to $674.1 million in fiscal 2023. Irrigation segment revenues of $513.9 million, decreased $72.1 million, or 12 percent, and infrastructure revenues increased $5.1 million, or 6 percent, compared to the prior fiscal year. The irrigation segment provided 85 percent of Company revenue in fiscal 2024 as compared to 87 percent in fiscal 2023.

North America irrigation revenues in fiscal 2024 were $302.1 million, a decrease of 2 percent or $7.4 million, from $309.5 million in fiscal 2023. Higher unit sales volume in the current year was more than offset by lower sales of replacement parts, the impact of a less favorable mix of shorter machines, and slightly lower average selling prices compared to the prior fiscal year.

International irrigation revenues in fiscal 2024 were $211.7 million, a decrease of 23 percent or $64.7 million, from $276.5 million in fiscal 2023. The decrease resulted primarily from lower sales volumes in Brazil and other Latin America markets compared to the prior fiscal year. In Brazil, market demand declined due to a significant drop in local commodity prices that had a negative impact on farmer profitability and liquidity. This decrease was partially offset by higher revenues from project sales in developing markets compared to the prior fiscal year. The impact of foreign currency translation on current year revenues was not meaningful compared to the prior fiscal year.

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Infrastructure segment revenues in fiscal 2024 were $93.2 million, an increase of $5.1 million, or 6 percent, from $88.1 million in fiscal 2023. The increase was primarily attributable to higher Road Zipper System lease revenues, which were partially offset by lower Road Zipper System project sales and lower sales of road safety products compared to the prior fiscal year.

Gross Profit

Gross profit was $191.1 million for fiscal 2024, a decrease of $21.9 million, or 10 percent, compared to $213.0 million for fiscal 2023. The decrease in gross profit resulted primarily from lower revenues in irrigation. Gross margin was 31.5 percent of sales for fiscal 2024 compared to 31.6 percent of sales for fiscal 2023. Increased gross margin in infrastructure resulted primarily from a more favorable margin mix of revenues with higher Road Zipper System lease revenues compared to the prior fiscal year. This favorable impact was offset by lower irrigation gross margin resulting from a decrease in revenues without a corresponding reduction in fixed operating costs.

Operating Expenses

The Company’s operating expenses of $114.4 million for fiscal 2024 increased $3.6 million, or 3 percent, compared to fiscal 2023 operating expenses of $110.8 million. Increased selling expense was partially offset by cost reductions in other areas compared to the prior fiscal year.

Other Income (Expense), net

Other income amounted to $2.4 million in fiscal 2024 compared to other expense of $1.8 million in fiscal 2023. The change resulted primarily from a $2.4 million increase in interest income and a reduction in interest expense of $0.6 million compared to the prior fiscal year. The current year was also impacted by the unfavorable effects of foreign currency transaction gains and losses of approximately $0.6 million compared to the prior fiscal year.

Income Taxes

The Company recorded income tax expense of $12.8 million and $28.0 million for fiscal 2024 and 2023, respectively. Lower income tax expense in the current fiscal year resulted from lower earnings before income tax as well as a lower effective tax rate compared to the prior fiscal year. The effective tax rate was 16.2 percent and 27.9 percent for fiscal 2024 and 2023, respectively. The lower effective tax rate in the current fiscal year reflects the impact of one-time benefits in Brazil totaling $5.9 million along with a decreased proportion of earnings in higher rate foreign jurisdictions compared to the prior fiscal year. The impact of other discrete items in fiscal 2024 and 2023 was not significant.

Net Earnings

Net earnings for fiscal 2024 were $66.3 million, or $6.01 per diluted share, compared to $72.4 million, or $6.54 per diluted share, for fiscal 2023.

Liquidity and Capital Resources

The Company’s cash and cash equivalents totaled $190.9 million at August 31, 2024 compared with cash, cash equivalents, and marketable securities of $166.3 million at August 31, 2023. The increase resulted from the excess of cash provided by operating activities over the cash used in investing and financing activities. The Company requires cash for financing its receivables and inventories, paying operating expenses and capital expenditures, and for dividends and share repurchases. The Company meets its liquidity needs and finances its capital expenditures from its available cash and funds provided by operations along with borrowings under the credit arrangements that are described below. In the normal course of business, the Company enters into contracts and commitments which obligate the Company to make future payments. The Company does not have any additional off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. The Company believes its current cash resources, projected operating cash flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all of its expected working capital needs, planned capital expenditures and dividends. The Company may require additional borrowings to fund potential acquisitions in the future.

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The Company’s total cash and cash equivalents held by foreign subsidiaries amounted to $84.3 million and $64.6 million as of August 31, 2024, and 2023, respectively. The Company considers earnings of foreign subsidiaries to be indefinitely reinvested, and would need to accrue and pay incremental state, local, and foreign taxes if such earnings were repatriated to the United States. The Company does not intend to repatriate the funds and does not expect these funds to have a significant impact on the Company’s overall liquidity.

Net working capital was $367.4 million at August 31, 2024 as compared with $351.4 million at August 31, 2023. Cash flows provided by operating activities totaled $95.8 million during the year ended August 31, 2024 compared to $119.7 million provided by operating activities during the prior fiscal year. The decrease in cash flows provided by operating activities resulted from lower net earnings and a lower reduction in working capital compared to the prior fiscal year.

Cash flows used in investing activities totaled $25.9 million during the year ended August 31, 2024 compared to $47.4 million during the prior fiscal year. Capital spending was $29.0 million in fiscal 2024 compared to $18.8 million in fiscal 2023. Fiscal 2023 also included outflows of $30.8 million for the acquisition of a business.

Cash flows used in financing activities totaled $38.6 million during the year ended August 31, 2024 compared to $17.3 million during the prior fiscal year. During the current fiscal year, the Company repurchased $22.5 million of common stock.

Capital Allocation Plan

The Company’s capital allocation plan is to continue investing in revenue and earnings growth, combined with a defined process for enhancing returns to stockholders. Priorities for the use of cash under the Company’s capital allocation plan include:

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Investment in organic growth including capital expenditures and expansion of international markets,

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Synergistic acquisitions that provide attractive returns to stockholders,

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Dividends to stockholders, along with expectations to increase dividends over time, and

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Opportunistic share repurchases taking into account cyclical and seasonal fluctuations.

Capital Expenditures

Capital expenditures for fiscal 2025 are expected to range from approximately $50 million to $55 million, including equipment replacement, productivity improvements, new product development and commercial growth investments. An increase over recent levels of capital expenditures relates to modernization and productivity improvements planned at certain manufacturing facilities. The Company’s management does maintain flexibility to modify the amount and timing of some of the planned expenditures in response to economic conditions.

Dividends

In fiscal 2024, the Company paid cash dividends of $1.41 per common share or $15.5 million to stockholders as compared to $1.37 per common share or $15.1 million to stockholders in fiscal 2023.

Share Repurchases

The Company’s Board of Directors authorized a share repurchase program of up to $250.0 million of common stock with no expiration date. Under the program, shares may be repurchased in privately negotiated and/or open market transactions as well as under formalized trading plans in accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The Company repurchased $22.5 million of common shares during the year ended August 31, 2024. There were no shares repurchased during the years ended August 31, 2023 and 2022. The remaining amount available under the repurchase program was $41.4 million as of August 31, 2024.

Long-Term Borrowing Facilities

Senior Notes. The Company has outstanding $115.0 million in aggregate principal amount of unsecured Senior Notes, Series A (the “Senior Notes”). The entire principal of the Senior Notes is due and payable on February 19, 2030. Interest on the Senior Notes is payable semi-annually at a fixed annual rate of 3.82 percent. Borrowings under the

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Senior Notes are unsecured. The Company used the proceeds of the sale of the Senior Notes for general corporate purposes, including acquisitions and dividends.

Revolving Credit Facility. The Company has outstanding a $50.0 million unsecured Amended and Restated Revolving Credit Facility (the “Revolving Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”) expiring August 26, 2026. The Company intends to use borrowings under the Revolving Credit Facility for working capital purposes and to fund future acquisitions. At August 31, 2024 and 2023, the Company had no outstanding borrowings under the Revolving Credit Facility. The amount of borrowings available at any time under the Revolving Credit Facility is reduced by the amount of standby letters of credit issued by Wells Fargo then outstanding. At August 31, 2024, the Company had the ability to borrow up to $50.0 million under the Revolving Credit Facility. The Revolving Credit Facility may be increased by up to an additional $50.0 million at any time, subject to additional commitment approval. The Revolving Credit Facility was amended to transition the benchmark rate from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”). Borrowings under the Revolving Credit Facility bear interest at a variable rate equal to the SOFR plus a margin of between 100 and 210 basis points depending on the Company’s leverage ratio then in effect (which resulted in a variable rate of 6.67 percent at August 31, 2024), subject to adjustment as set forth in the loan documents for the Revolving Credit Facility. Interest is paid on a monthly to quarterly basis depending on loan type. The Company currently pays an annual commitment fee on the unused portion of the Revolving Credit Facility. The fee is between 0.125 percent and 0.2 percent (0.125 percent at August 31, 2024) on the unused balance depending on the Company’s leverage ratio then in effect.

Borrowings under the Revolving Credit Facility have equal priority with borrowings under the Company’s Senior Notes. Each of the credit arrangements described above include certain covenants relating primarily to the Company’s financial condition. These financial covenants include a funded debt to EBITDA leverage ratio and an interest coverage ratio. In the event that the loan documents for the Revolving Credit Facility were to require the Company to comply with any financial covenant that is not already included or is more restrictive than what is already included in the arrangement governing the Senior Notes, then such covenant shall be deemed incorporated by reference into the Senior Notes for the benefit of the holders of the Senior Notes. Upon the occurrence of any event of default of these covenants, including a change in control of the Company, all amounts outstanding thereunder may be declared to be immediately due and payable. At August 31, 2024 and 2023, the Company was in compliance with all financial loan covenants contained in its credit arrangements in place as of each of those dates.