<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended August 31, 1996 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ---- SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------ -------
Commission File No. 0-17116
-------
Lindsay Manufacturing Co.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 47-0554096
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Box 156, East Highway 91, Lindsay, Nebraska 68644
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 402-428-2131
------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Common Stock, $1.00 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
---
As of November 18, 1996, 6,332,916 shares of the registrant's Common Stock were
outstanding and the aggregate market value of all Common Stock held by
non-affiliates (6,032,568 shares) was $272,973,702 based upon the final sales
price on the Nasdaq National Market on such date.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Stockholders are incorporated herein by
reference into Parts I, II and IV.
Portions of the Proxy Statement pertaining to the February 7, 1997 annual
stockholders' meeting are incorporated herein by reference into Part III.
Exhibit index is located on page 10-12.
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ITEM 1 - BUSINESS
(a) Lindsay Manufacturing Co. ("Lindsay" or the "Company") is a leading
designer, manufacturer and international and domestic marketer, under its
"Zimmatic" trademark, of electrically powered automatic continuous move systems
for the irrigation of agricultural crops and related products and services.
Lindsay also produces and sells large diameter tubing; manufactures and
assembles products for other manufacturers (such as corn planters and
sub-assemblies for construction equipment).
Lindsay was founded in 1955, and incorporated under Nebraska law in 1969.
DEKALB Energy Company, ("DEKALB", formerly DEKALB Corporation) acquired Lindsay
in 1974 through its merger into Lindsay Manufacturing Co., a wholly-owned
Delaware subsidiary of DEKALB. The company was a wholly-owned subsidiary of
DEKALB until October 1988.
(b) Industry segment information is included in Part II, Item 8, Footnote K.
The information required by this item is incorporated by reference from the
1996 Annual Report to Stockholders on page 23.
(c) PRODUCT. Lindsay's irrigation systems are primarily of the center pivot
type, with a small portion of its products consisting of the lateral move type.
Both are automatic continuous move systems consisting of sprinklers mounted on
a water carrying pipeline which is supported approximately 11 feet off the
ground by a truss system suspended between moving towers. Due to lower price
and simplicity of operation, center pivots currently account for over 95
percent of Lindsay's irrigation system sales.
A typical center pivot for the North American market is approximately
1,300 feet long and is designed to circle within a standard quarter-section of
land, which comprises 160 acres, wherein it irrigates approximately 135 acres.
A typical center pivot for the international market is also approximately 1,300
feet long. Center pivot or lateral move systems can also be custom designed
and can irrigate from 25 to 500 acres.
A center pivot system represents a significant investment to a farmer. A
typical center pivot system, fully installed, requires an investment of up to
approximately $60,000 to $70,000. Approximately one-half of such expenditure
is for the pivot itself and the remainder is attributable to installation of
additional equipment such as wells, pumps, underground water pipe, electrical
supply and a concrete pad upon which the pivot is anchored. Lindsay estimates
that there are approximately 140,000 to 150,000 center pivot irrigation systems
in operation worldwide, resulting in a significant replacement parts business.
TYPES OF IRRIGATION - COMPETITIVE PRODUCTS. Center pivot and lateral
move irrigation systems compete with three other types of irrigation: flood,
drip and other mechanical devices. The bulk of the worldwide irrigation is
accomplished by the traditional method of flood irrigation. Flood irrigation
is accomplished by either flooding an entire field, or by providing a water
source (ditches or a pipe) along the side of a field, which is planed and
slopes slightly away from the water source. The water is released to the crop
rows through gates in the ditch or pipe, or through siphon tubes arching over
the ditch wall into some of the crop rows. It runs down through the crop row
until it reaches the far end of the row, at which time the water
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source is moved and another set of rows are flooded. In "drip" or "trickle"
irrigation, perforated pipe is installed on the ground or buried underground at
the root level. Several other types of mechanical devices irrigate the
remaining irrigated acres. These other types of mechanical devices are not
generally being replaced and no longer generate significant sales.
Center pivot irrigation offers significant advantages when compared with
other types of irrigation. It requires less labor and monitoring; it can be
used on sandy ground which, due to poor water retention ability must have water
applied frequently; it can be used on uneven ground, thereby allowing
previously unsuitable land to be brought into production; it can also be used
for the application of fertilizers, insecticides, herbicides or other chemicals
(termed "chemigation"); and it conserves water and chemicals through precise
control of the amount and timing of its application.
MARKETS - GENERAL. Water is an essential and critical requirement for crop
production, and the extent, regularity and frequency of water application is a
critical determinant in crop performance and yield.
The fundamental factors which govern the demand for center pivot and
lateral move systems are essentially the same in both the domestic and
international markets. Demand for center pivot and lateral move systems is
determined by whether the increased value of crop production attributable to
center pivot or lateral move irrigation exceeds any increased costs associated
with installing and operating the equipment. Thus, the decision to install a
center pivot or lateral move system reflects the profitability of agricultural
production, which is determined primarily by the prices of agricultural
commodities and the costs of other farming inputs. In recent years, a critical
factor has been the extent to which governments, in pursuing agricultural,
social and other policies and objectives, have subsidized agricultural
profitability and regulated production.
In addition, demand for center pivots and lateral moves depends upon the
need for the particular operational characteristics and advantages of such
systems in relation to alternative types of irrigation, primarily flood.
Selection of center pivot or lateral move systems, over competitive types of
irrigation, is aided by the fact that agricultural production is continually
forced to become more efficient in its use of the basic natural resources of
land, water and energy. Increasing global population not only increases demand
for agricultural output, but also places additional and competing demands on
land, water and energy. As center pivot and lateral move systems are required
where the soil is sandy, the terrain is not flat, there is a shortage of
reliable labor, water supply is restricted and conservation is critical, and/or
chemigation will be utilized, Lindsay expects demand for center pivots and
lateral moves to increase relative to other irrigation methods.
UNITED STATES MARKET. The information required by this item is
incorporated by reference from the 1996 Annual Report to Stockholders under the
heading "Operations Overview" on pages 6 through 11.
INTERNATIONAL MARKET. The information required by this item is
incorporated by reference from the 1996 Annual Report to Stockholders under the
heading "Operations Overview" on pages 6 through 11.
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COMPETITION. During the 1970's there were over 30 domestic manufacturers
of center pivot irrigation systems, while seven manufacturers remain today.
Lindsay believes that Lindsay and Valmont Industries, Inc. ("Valmont"), the top
two manufacturers, represent 75 percent to 85 percent of the market. Although
detailed market information is not available, Lindsay believes its portion of
the international market is greater than Valmont's, but its domestic market is
somewhat smaller than that of Valmont.
There is manufacturing overcapacity in the center pivot and lateral
move industry, with resulting price competition. Competition also occurs in
areas of product quality and durability, product characteristics, retention and
reputation of local dealers, post-sale service, and, at certain times of the
year, the availability of systems and their delivery time. Lindsay believes it
generally competes favorably with respect to these factors.
DIVERSIFIED PRODUCTS AND SERVICES
The information required by this item is incorporated by reference from
the 1996 Annual Report to Stockholders under the heading "Operations Overview"
on pages 6 through 11.
SEASONALITY/CYCLICALITY
Irrigation equipment sales are seasonal by nature. Farmers generally
order systems to be delivered and installed before the growing season.
Shipments to North American customers usually peak during Lindsay's second and
third quarters for the spring planting period. Lindsay's expansion into
diversified manufacturing complements its irrigation operations by using
available capacity and reducing seasonality.
ORDER BACKLOG
As of September 1, 1996 and 1995, Lindsay had an order backlog of
approximately $26 million and $15 million, respectively. At year end fiscal
1996, Lindsay had a $16.6 million order backlog for irrigation equipment. This
was up from year end fiscal 1995's irrigation equipment order backlog of $7.4
million. Lindsay believes that the farmer's confidence level during July and
August of 1996 was higher than 1995 due to stronger agricultural commodity
prices, resulting in an increased order backlog. At year end fiscal 1996,
order backlog for diversifed products totaled $9.1 million, up 28% from $7.1
million at fiscal 1995 year end.
Lindsay manufactures a center pivot or lateral move system only upon a
firm order. International orders are generally shipped against prepayments or
receipt of an irrevocable letter of credit confirmed by a United States bank or
other secured means, which call for delivery within time periods negotiated
with the customer. North American orders are manufactured to dealer order,
accompanied by a down payment.
RAW MATERIALS AND COMPONENTS
Raw materials used by Lindsay include coil steel, angle steel, plate
steel, zinc, tires, gearboxes, fasteners and electrical components (motors,
switches, cable and stators). Lindsay has, on occasion, faced shortages of
certain such materials. Lindsay believes it currently has ready access to
adequate supplies of raw materials and components.
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CAPITAL EXPENDITURES
Capital expenditures for fiscal 1996, 1995 and 1994, were approximately
$4.0 million, $2.8 million and $1.3 million, respectively. Over half of the
Fiscal 1996 capital expenditures were related to Lindsay's installation of a
robotic manufacturing process for the manufacture of center pivot irrigation
equipment pipeline. The remaining capital expenditures were primarily for the
general upgrading of the manufacturing plant and equipment. Capital
expenditures for fiscal 1997 are expected to be between $3.5 and $4.5 million
and will be used principally to expand our metal fabrication, welding, and
galvanizing capacity and to improve the Company's existing operating
facilities. The Company does not anticipate any needs for substantial capital
expenditures for plant expansion over the next several years.
PATENTS, TRADEMARKS, LICENSES
The "Zimmatic" and other trademarks are registered in most markets in
which Lindsay sells its product. Lindsay follows a policy of applying for
patents on all significant patentable inventions. Although Lindsay believes it
is important to follow a patent protection policy, Lindsay's business is not
dependent, to any material extent, on any single patent or group of patents.
EMPLOYEES
The number of persons employed by Lindsay at fiscal year end 1996, 1995
and 1994 were 542, 491 and 481, respectively. Lindsay currently employs
approximately 600 persons. None of Lindsay's employees are represented by a
union.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
Like other manufacturing concerns, Lindsay is subject to numerous laws
and regulations which govern occupational health and safety and the discharge
and disposal of materials into the environment. Lindsay believes that its
operations are substantially in compliance with all such applicable laws and
regulations. Permits are or may be required for some of the operations at the
Lindsay, Nebraska facility. Although all currently required permits have been
obtained by Lindsay, as with all such permits they are subject to revocation,
modification and renewal. Even where regulations or standards have been
adopted, they are subject to varying and conflicting interpretations and
implementation. In many cases, compliance with environmental regulations or
standards can be achieved only through significant capital and operation
expenditures. See Item 3 Legal Proceedings.
SUBSIDIARIES
Lindsay International Sales Corporation, a subsidiary which conducts
foreign sales operations for Lindsay, has relocated its office to Lindsay,
Nebraska from Houston, Texas during 1996, reducing costs while at the same time
enhancing communication and customer service. Lindsay Transportation, Inc., a
wholly-owned subsidiary, was formed in 1975. It owns approximately 115
trailers and, through lease of tractors, supplies the ground transportation in
the United States and Canada for Lindsay's products and the bulk of incoming
raw materials, and hauls other products on backhauls. Lindsay also has three
non-operational subsidiaries.
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ITEM 2 - PROPERTIES
Lindsay owns and occupies 43 acres in Lindsay, Nebraska. Its
manufacturing operation has eight separate buildings, with approximately
525,000 square feet of manufacturing area under roof. With the Company's
current manufacturing capacity, the Company can increase sales without a major
investment in facilities and capital equipment. In fiscal 1997, the Company
expects to complete a metal fabrication, welding, and galvanizing capacity
project, increasing production capacity to meet the North American peak season
(January through May) demand.
ITEM 3 - LEGAL PROCEEDINGS
Lindsay is a party to a number of lawsuits arising from environmental and
other issues in the ordinary course of its business. Management does not
believe that these lawsuits, either individually or in the aggregate, are
likely to have a material adverse effect on Lindsay's financial condition,
results of operations or cash flows.
Environmental contamination at Lindsay's manufacturing facility occurred
in 1982 when a drill, operated by a sub-contractor installing groundwater
monitoring wells, punctured a silt and sand lens and an underlying clay layer
beneath a clay-lined lagoon. The 1982 puncture of the clay layer caused acid
and solvent leachate to enter the sand and gravel aquifer.
Since 1983, Lindsay has worked actively with the Nebraska Department of
Environmental Control ("NDEC") to remediate this contamination by purging and
treating the aquifer. In October 1989, the Environmental Protection Agency
("EPA") added Lindsay to the list of priority Superfund sites. In 1988, a
sampling which was performed in connection with an investigation of the extent
of aquifer groundwater contamination revealed solvent contamination (volatile
organic compounds) in the soil and shallow groundwater in three locations at
and in the vicinity of the plant. Under a 1988 agreement with the EPA and
NDEC, Lindsay conducted a Remedial Investigation/Feasibility Study ("RI/FS").
This study was completed in June 1990. Lindsay does not believe that there is
any other soil or groundwater contamination at the manufacturing facility.
In September 1990, the EPA issued its Record of Decision ("ROD")
selecting a plan for completing the remediation of both contaminations. The
selected plan implementation was delayed until finalization of the Consent
Decree in April 1992. The final remediation plans were approved in 1993 and
1994 and the remediation plans were fully implemented during fiscal 1995.
The balance sheet reserve for this remediation decreased to $0.3 million
at August 31, 1996 from $1.9 million at fiscal 1995 year end, reflecting an
increase to the reserve of $0.3 million, a reclassification of $1.8 million for
a contra asset of an insurance recovery in other assets and costs of $0.1
million during the first quarter of fiscal 1996 for the continued
implementation of the plans. Additionally, second, third and fourth quarter
costs of $0.6 million were expensed on the consolidated statements of
operations and was not reflected in the reserve.
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Lindsay believes that the current reserve is sufficient to cover the
estimated cost for complete remediation of both the aquifer and soil and
shallow groundwater contaminations under the final plans. Lindsay believes
that its insurer should cover costs associated with the contamination of the
aquifer that was caused by the puncture of the clay layer in 1982. However,
Lindsay and the insurer are in litigation over the extent of the insurance
coverage. In 1987, the insurer agreed to reimburse Lindsay for remediation
costs incurred by Lindsay. The insurer reduced its reimbursement of
remediation costs in early 1990. In late 1990, Lindsay filed suit against the
insurer. The insurer completely stopped reimbursement of remediation costs in
1991 and in 1992 the insurer filed a counterclaim against Lindsay for
previously reimbursed remediation costs. In December 1995, the court dismissed
Lindsay's suit against the insurer and entered a judgment in the amount of $2.4
million in favor of the insurer. Lindsay is in the process of appealing the
dismissal of its case against the insurer and the judgment against Lindsay. If
the EPA or the NDEC require remediation which is in addition to or different
from the current plan and depending on the success of Lindsay's litigation
against the insurer, this reserve could increase or decrease depending on the
nature of the change in events.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of security holders during the
fourth quarter of Fiscal 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages, positions and past
five years experience are set forth below. All officers are elected for one
year terms, which can be annually renewed at a Board of Directors meeting.
This meeting is scheduled for February 7, 1997.
Age Position with the Company
--- -------------------------
Gary D. Parker 51 Chairman, President and Chief Executive
Officer
Eduardo R. Enriquez 56 Vice President - International
Bruce C. Karsk 44 Vice President - Finance, Treasurer and
Secretary
Clifford P. Loseke 58 Vice President - Manufacturing
Charles H. Meis 50 Vice President - Engineering
Robert S. Snoozy 50 Vice President - Sales and Marketing
Mr. Gary D. Parker is Chairman, President and Chief Executive Officer of
Lindsay, and has held such positions since December 1989. Prior to that time
and since 1984, he was President and Chief Executive Officer of Lindsay. He
served as Executive Vice President from 1978 to 1984. Mr. Parker has also been
a Director since 1978.
Mr. Eduardo R. Enriquez is President of Lindsay International Sales
Corporation and has served in that capacity and as Vice President -
International of Lindsay since May of 1986. Prior to that time, and since
1981, he was Vice President - Sales of Lindsay International Sales Corporation.
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Mr. Bruce C. Karsk is Vice President - Finance, Treasurer and Secretary
of Lindsay and has held such positions since 1984. Prior to that time and
since 1981, Mr. Karsk had been the Controller.
Mr. Clifford P. Loseke is Vice President - Manufacturing of Lindsay, a
position he has held since 1975.
Mr. Charles H. Meis is Vice President - Engineering of Lindsay and has
held such position since 1975.
Mr. Robert S. Snoozy is Vice President - Sales and Marketing of Lindsay
and has held such position since 1986. Prior to that time and since 1978, he
had been Vice President of Marketing.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Lindsay Common Stock, began public trading on October 12, 1988. It is
listed on the Nasdaq National Market under the symbol "LINZ". As of November
18, 1996 there were approximately 250 stock holders of record.
The following table sets forth for the periods indicated the range of the
high and low sales price:
FISCAL YEAR 1996 FISCAL YEAR 1995
---------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
First Quarter $24-5/16 $ 21-9/16 $ 21-1/2 $ 18-9/16
Second Quarter 32-3/4 23-11/16 20-13/16 18-13/16
Third Quarter 39-3/4 29-1/4 22 18-13/16
Fourth Quarter 44-1/2 34 23-13/16 20-11/16
Lindsay announced the initiation of a regular cash dividend on its common stock
on February 7, 1996 during Lindsay's second quarter. The 5-cent quarterly
dividend was paid for the second, third and fourth quarters of fiscal 1996,
totaling 15 cents for fiscal Year 1996.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference from the
1996 Annual Report to Stockholders under the heading "Selected Financial Data"
on page 12.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information required by this item is incorporated by reference from the
1996 Annual Report to Stockholders under the heading "Management's Discussion
and Analysis" on pages 13 through 16.
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CONCERNING FORWARD LOOKING STATEMENTS - This Report on Form 10-K,
including the Management's Discussion and Analysis and other sections, contains
forward looking statements that are subject to risks and uncertainties and
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 include the words "future", "position",
"anticipate(s)", "expect", "believe(s)", "see", "plan", "further improve",
"outlook", "should", or similar expressions. For these statements, the Company
claims the protection of the safe harbor for forward looking statements
contained in the Private Securities Litigation Reform Act of 1995. Readers of
this Report should understand that the following important factors, in addition
to those discussed elsewhere in this document, could affect the future results
of the Company and could cause those results to differ materially from those
expressed in these forward looking statements; availability of and price of raw
materials, product pricing, competitive environment and related domestic and
international market conditions, operating efficiencies and actions of domestic
and foreign governments. Any changes in such factors could result in
significantly different results.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and accompanying notes, together with the report
of independent accountants are incorporated by reference from the 1996 Annual
Report to Stockholders on pages 12 through 23.
The information required by Item 302 of Regulation S-K is incorporated by
reference from the 1996 Annual Report to Stockholders under the heading
"Quarterly Data" on page 12.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company will file with the Securities and Exchange Commission a
definitive Proxy Statement not later than 120 days after the close of its
fiscal year ended August 31, 1996. Item 405 of Regulation S-K calls for
disclosure of any known late filing or failure by an insider to file a report
required by Section 16 of the Securities Exchange Act. This disclosure, if
required, will be contained in the Proxy Statement. The information required
by this Item is incorporated by reference from the Proxy Statement.
Information about Executive Officers is shown on page 7 and 8 of this
filing.
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ITEM 11 - EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from
the Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from
the Proxy Statement.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements of Lindsay Manufacturing Co. are
incorporated by reference under Item 8. The 1996 Annual Report to Stockholders
is attached as Exhibit 13.
<TABLE>
<CAPTION>
Reference Page
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Annual Stockholders
Report
<S> <C>
Report of Independent Accountants 16
Consolidated Statements of Operations for the Years
ended August 31, 1996, 1995 and 1994 17
Consolidated Balance Sheets at
August 31, 1996 and 1995 18
Consolidated Statements of Stockholders' Equity
for the years ended August 31, 1996, 1995 and 1994 17
Consolidated Statements of Cash Flows for the Years
ended August 31, 1996, 1995 and 1994 19
Notes to Consolidated Financial Statements 20-23
(a)(2) Financial Statement Schedules
</TABLE>
<TABLE>
<CAPTION>
Reference Page
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Form 10-K
Annual Report
<S> <C>
Report of Independent Accountants 14
Schedules
VIII. Valuation and Qualifying Accounts -
Years ended August 31, 1996, 1995 and 1994 15
</TABLE>
Financial statements and schedules other than those listed are
omitted for the reason that they are not required, are not applicable or that
equivalent information has been included in the financial statements or notes
thereto.
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a(3) EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description Number
- ------- ----------- ----------
<S> <C> <C>
3(a) Restated Certificate of Incorporation of the Company,
incorporated by reference to amended Exhibit 3(a) of Amendment
No. 4 to the Company's Registration Statement on Form S-1
(Registration No. 33-23084), filed October 12, 1988. -
3(b) By-Laws of the Company incorporated by reference to Amended
Exhibit 3(b) of Amendment No. 3 to the Company's Registration
Statement on Form S-1 (Registration No. 33-23084), filed
September 23, 1988. -
4(a) Specimen Form of Common Stock Certificate incorporated by
reference to Exhibit 4 of Amendment No. 3 to the Company's
Registration Statement on Form S-1 (Registration No. 33-23084),
filed September 23, 1988. -
10(a) Tax Sharing Agreement between DEKALB Energy Company and the
Company, dated October 12, 1988, incorporated by reference to
Exhibit 10(a) of the Company's Annual report on Form 10-K for
the fiscal year ended August 31, 1988. -
10(b) Insurance, Liability and Indemnity Agreement between
DEKALB Energy Company and the Company, dated October 19, 1988,
incorporated by reference to Exhibit 10(c) of the Company's
Annual Report on Form 10-K for the fiscal year ended August
31, 1988. -
10(c) Employment Agreement between the Company and Gary D. Parker,
effective September 1, 1989 amended June 6, 1991, incorporated
by reference to Exhibit 10(c) of the Company's Annual Report
on Form 10K for the fiscal year ended August 31, 1991. -
10(d) Indemnification Agreement between the Company and its
directors and officers, dated October 10, 1988, incorporated
by reference to Exhibit 10(f) of the Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 1988. -
10(e) Lindsay Manufacturing Co. Long-Term Incentive Plan,
incorporated by reference to amended Exhibit 10(h) of
Amendment No. 3 to the Company's Registration Statement
on Form S-1 (Registration No. 33-23084), filed September
23, 1988. -
10(f) Lindsay Manufacturing Co. Profit Sharing Plan, incorporated
by reference to Exhibit 10(i) of the Company's Registration
Statement on Form S-1 (Registration No. 33-23084), filed
July 15, 1988. -
</TABLE>
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a(3) EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description Number
- ------ ----------- ----------
<S> <C>
10(g) Lindsay Manufacturing Co. 1991 Long-Term Incentive Plan,
incorporated by reference to Exhibit 10(h) of the Company's
Annual Report on Form 10-K for the fiscal year ended August
31, 1992. -
10(h) Employment Agreement between the Company and Bruce C. Karsk,
Eduardo R. Enriquez, Clifford P. Loseke, Charles H. Meis, and
Robert S. Snoozy, effective September 1, 1993, incorporated by
reference to Exhibit 10(i) of the Company's Annual Report on
Form 10K for the fiscal year ended August 31, 1994. -
10(i) Lindsay Manufacturing Co. Supplemental Retirement Plan,
incorporated by reference to Exhibit 10(j) of the Company's
Annual Report on Form 10K for the fiscal year ended August 31,
1994. -
11 Statement re Computation of Per Share Earnings. 16
13 Lindsay Manufacturing Co. 1996 Annual Report to Stockholders. 17-44
21 Subsidiaries of the Company, incorporated by reference to Exhibit
22 of the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1988. -
23 Consent of Coopers & Lybrand L.L.P. 45
24(a) The Power of Attorney authorizing Gary D. Parker and Bruce C. Karsk
and each of them singly to sign the Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Report by Issuers of Securities
quoted on NASDAQ on Form 10-C, Notification of Late Filing on Form
12b-25 and Amendment to Application or Report on Form 8, on behalf
of each other and certain directors, incorporated by reference to
Exhibit 25 of the Company's Annual Report on Form 10-K for the
fiscal year ended August 31, 1991. -
24(b) The Power of Attorney authorizing Gary D. Parker and Bruce C. Karsk
and each of them singly to sign the Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Report by Issuers of Securities
quoted on NASDAQ on Form 10-C, Notification of Late Filing on Form
12b-25 and Amendment to Application or Report on Form 8, on behalf
of Howard G. Buffett. 46
27 Financial Data Schedule 47
</TABLE>
(b) Reports on Form 8-K
The Registrant has not filed any reports on Form 8-K during the fourth
quarter of fiscal 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
LINDSAY MANUFACTURING CO.
By: Bruce C. Karsk
------------------------------------------------
Name: Bruce C. Karsk
------------------------------------------------
Title: Vice President-Finance, Treasurer and Secretary;
------------------------------------------------
Principal Financial and Accounting Officer
------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on this 21st day of November, 1996.
/s/ Gary D. Parker (1) Chairman, President and Chief Executive
- ------------------------- Officer
Gary D. Parker
/s/ Bruce C. Karsk Vice President - Finance, Treasurer and
- ------------------------- Secretary; Principal Financial and
Bruce C. Karsk Accounting Officer
/s/ Ralph J. Kroenke Controller
- -------------------------
Ralph J. Kroenke
/s/ Howard G. Buffett (1) Director
- -------------------------
Howard G. Buffett
/s/ John W. Croghan (1) Director
- -------------------------
John W. Croghan
/s/ J. David Dunn (1) Director
- -------------------------
J. David Dunn
/s/ George W. Plossl (1) Director
- -------------------------
George W. Plossl
(1) By: Bruce C. Karsk
---------------------------------
Bruce C. Karsk, Attorney-In-Fact.
-13-
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Lindsay Manufacturing Co.
Our report on the consolidated financial statements of Lindsay Manufacturing
Co. is incorporated by reference to this Form 10-K from page 16 of the Fiscal
1996 Annual Report to Stockholders of Lindsay Manufacturing Co. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule listed in the Index to Financial Statement
Schedules on page 10 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
October 9, 1996
-14-
<PAGE> 15
Lindsay Manufacturing Co.
SCHEDULE VIII - VALUATION and QUALIFYING ACCOUNTS
Years ended August 31, 1996, 1995 and 1994
(Dollars in thousands)
----------------------
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- ------------------------------- -------- --------
Additions
-------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
----------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1996:
Deducted in the balance sheet from the
assets to which they apply:
- Allowance for doubtful accounts $ 573 $ 260 $ 0 $ 110 (a) $ 723
=========== =========== =========== =========== =========
- Allowance for inventory obsolescence $ 672 $ 89 $ 0 $ 71 (b) $ 690
========== ========== =========== =========== =========
Year ended August 31, 1995:
Deducted in the balance sheet from the
assets to which they apply:
- Allowance for doubtful accounts $ 513 $ 60 $ 0 $ 0 (a) $ 573
=========== =========== =========== =========== =========
- Allowance for inventory obsolescence $ 760 $ 0 $ 13 $ 101 (b) $ 672
=========== =========== =========== =========== =========
Year ended August 31, 1994:
Deducted in the balance sheet from the
assets to which they apply:
- Allowance for doubtful accounts $ 450 $ 60 $ 0 $ (3)(a) $ 513
=========== =========== =========== =========== =========
- Allowance for inventory obsolescence $ 736 $ 52 $ 0 $ 28 (b) $ 760
=========== =========== =========== =========== =========
- ----------
</TABLE>
Notes:
(a) Deductions consist of uncollectible items written off, less
recoveries of items previously written off.
(b) Deductions consist of obsolete items sold or scrapped.
-15-
<PAGE> 1
EXHIBIT 11
Lindsay Manufacturing Co.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Years ended August 31, 1996, 1995 and 1994
(Dollars in thousands except per share amounts)
--------------------------------
COMPUTATION OF PRIMARY PER SHARE EARNINGS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
1. Weighted average shares outstanding........ 6,442,948 6,844,299 7,041,404
2. Net additional shares outstanding assuming
dilutive stock options exercised and
proceeds used to purchase treasury stock 324,304 237,174 255,355
---------- ---------- ----------
3. Average number of common and common
equivalent shares outstanding........... 6,767,252 7,081,473 7,296,759
========== ========== ==========
4. Net earnings for per share computation..... $ 16,518 $ 11,704 $ 11,892
========== ========== ==========
5. Net earnings per average common and common
equivalent shares outstanding........... $ 2.44 $ 1.65 $ 1.63
========== ========== ==========
</TABLE>
COMPUTATION OF FULLY DILUTED PER SHARE EARNINGS
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
1. Weighted average shares outstanding........ 6,442,948 6,844,299 7,041,404
2. Net additional shares outstanding assuming
dilutive stock options exercised and
proceeds used to purchase treasury stock 366,056 241,904 255,762
---------- ---------- ----------
3. Average number of common and common
equivalent shares outstanding........... 6,809,004 7,086,203 7,297,166
========== ========== ==========
4. Net earnings for per share computation..... $ 16,518 $ 11,704 $ 11,892
========== ========== ==========
5. Net earnings per average common and common
equivalent shares outstanding........... $ 2.43 $ 1.65 $ 1.63
========== ========== ==========
</TABLE>
-16-
<PAGE> 1
EXHIBIT 13
LINDSAY MANUFACTURING CO.
1996 ANNUAL REPORT
Creating
Value
By
Cultivating
Opportunities
photo of Zimmatic center pivot
<PAGE> 2
LINDSAY MANUFACTURING CO.
CREATING VALUE BY CULTIVATING OPPORTUNITY
A leading manufacturer of center pivot and lateral move irrigation systems,
Lindsay Manufacturing Co. has increased revenues and operating performance by
capitalizing on the current strength in the agricultural sector, as well as on
farmers' long-term need to conserve water, energy and labor. Throughout the
past year, Lindsay implemented a number of strategic initiatives that had a
favorable impact on its operating performance. This proactive cultivation of
market opportunities helped the Company to meet or exceed each of its financial
goals and resulted in impressive returns to the Company's shareholders.
<TABLE>
<CAPTION>
Fiscal Fiscal
Year Year 5-year
Goal 1996 1995 Average
<S> <C> <C> <C> <C>
Annual Sales Growth 5-10% 21.8% -0.7% 5.8%
Gross Margin 22-24% 24.0% 23.1% 23.1%
Operating Margin 10-13% 14.2% 12.5% 12.8%
Return on Beginning Equity 20-25% 24.0% 17.2% 22.9%
</TABLE>
In addition to top- and bottom-line growth during fiscal 1996, Lindsay
created shareholder value by initiating a regular 5-cent quarterly cash
dividend, instituting a three-for-two stock split and continuing to buy back
stock under the Company's share repurchase program.
Moreover, Lindsay has demonstrated consistent financial performance.
Since the Company's initial public offering in October 1988, shareholders have
received a return on original investment of more than 1300 percent. During the
same period, the Standard & Poor's 500 index, including dividends, has returned
approximately 225 percent.
The Company expects to continue to benefit from near-term demand drivers
including a strong farm economy, favorable agricultural program legislation,
low prevailing interest rates and generally higher commodity prices. Longer
term performance will be driven by farmers' need to increase productivity
while conserving water, energy and labor. Trends in worldwide demand also bode
well for Lindsay--the number one exporter of irrigation equipment--as a growing
world population combined with a shrinking amount of farmland will push farmers
to achieve ever greater productivity and higher crop yields.
The Company also seeks to harness opportunities in its Diversified
Products segment, through which Lindsay produces large diameter steel tubing
and provides outsource manufacturing production services. Lindsay anticipates
leveraging its long-standing customer relationships, flexible, efficient
manufacturing operations and engineering expertise to continue to expand its
diversified products business, which constituted approximately 15 percent of
the Company's fiscal 1996 revenues.
TABLE OF CONTENTS
Letter to Shareholders ..................... 2
Operations Overview ........................ 6
Selected Financial Data and Analysis ....... 12
Financial Statements ....................... 17
Notes ...................................... 20
Directors and Officers ..................... 24
Investor Information ....................... Inside Back Cover
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
($ in thousands, except per share amounts)
- ------------------------------------------------------------------------------------------------------------
1996 1995 % change
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME DATA
for the fiscal years ended August 31
Operating revenues $ 136,233 $ 111,843 21.8%
Gross profit 32,747 25,857 26.7
Operating expenses 13,363 11,937 12.0
Operating income 19,384 13,920 39.3
Interest and other income, net 4,556 3,166 43.9
Pre-tax earnings 23,940 17,086 40.1
Net earnings $ 16,518 $ 11,704 41.1
Weighted average common and common equivalent shares 6,767,252 7,081,473 (4.4%)
BALANCE SHEET DATA
at August 31
Current assets $ 57,855 $ 43,738 32.3%
Total assets 96,823 86,060 12.5
Current liabilities 18,697 15,931 17.4
Stockholders' equity $ 76,834 $ 68,743 11.8%
PER SHARE DATA
Net earnings $ 2.44 $ 1.65 47.9%
Book value $ 12.12 $ 10.49 15.5%
PERFORMANCE RATIOS
Operating margin 14.2% 12.5%
Net margin 12.1% 10.5%
Return on beginning equity 24.0% 17.2%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Revenues Net Margin Net Earnings Per Share
($ in millions) (Percentage) (Dollars)
------------------ ------------------------- -------------------------
Net Earnings
Year Revenue Year Net Margin Year Per Share
------------------ ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1989 92.6 1989 8.0 1989 1.06
1990 102.7 1990 8.2 1990 1.21
1991 98.7 1991 9.0 1991 1.28
1992 108.9 1992 10.1 1992 1.52
1993 102.1 1993 10.5 1993 1.47
1994 112.7 1994 10.6 1994 1.63
1995 111.8 1995 10.5 1995 1.65
1996 136.2 1996 12.1 1996 2.44
[REVENUES BAR GRAPH] [NET MARGIN BAR GRAPH] [NET EARNINGS PER SHARE BAR GRAPH]
Since 1989, revenues Strong operating efficiencies Earnings per share have
have increased 47.1% have allowed the Company risen 130% from $1.06 in
from $92.6 million to to increase net margin 1989 to $2.44 in 1996.
$136.2 million in 1996. from 8% in 1989 to 12.1%
in 1996.
</TABLE>
LINDSAY MANUFACTURING CO. 1
<PAGE> 4
LETTER TO SHAREHOLDERS
DEAR FELLOW SHAREHOLDERS:
A strong North American farm economy, near record high commodity prices,
low prevailing interest rates and the passage of favorable legislation combined
to make fiscal 1996 a good year to be doing business in the agricultural
sector. Our Company was on target with forecasting the above market factors
and implemented a number of strategic changes and programs to position us for
increased sales in 1996 and in the future. We invested in manufacturing
automation and process improvements to increase productivity, and we
implemented creative marketing programs to maximize dealer performance and to
better utilize Lindsay's manufacturing capacity. In addition to utilizing
marketing programs and expanding manufacturing capacity, we further enhanced
shareholder returns by initiating a regular 5-cent quarterly cash dividend,
instituting a three-for-two stock split and continuing to buy back stock under
our share repurchase program.
The impact of these initiatives and others is evident in our fiscal 1996
top- and bottom-line growth, which allowed us to meet or exceed each of our
performance goals. Moreover, the steps we have taken, coupled with long-term
demand drivers, position Lindsay for continued growth opportunities.
HIGHLIGHTS OF LINDSAY'S FISCAL 1996 ACCOMPLISHMENTS INCLUDE:
- - Substantially exceeding our top-line growth goal of 5% to 10% by raising
revenue 22% over fiscal 1995.
- - Bringing more of that revenue growth to the bottom line by achieving a
gross margin of 24%, the high end of our goal of 22% to 24%.
- - Demonstrating improved manufacturing efficiency by posting an operating
margin of 14.2%, surpassing our 10% to 13% objective.
- - Continuing to employ your money effectively by achieving a return on
beginning equity of 24%, at the upper end of our goal of 20% to 25%.
- - Further enhancing shareholder value through our share repurchase program,
stock split and initiation of a quarterly dividend.
In fiscal 1996, Lindsay created shareholder value by achieving our goals
through the cultivation of opportunities provided by a strong North American
farm economy and rising global demand--factors we anticipate continuing to
benefit from in 1997. Near record low grain reserves resulting from
unfavorable weather in key growing regions coupled with all-time high world
demand for grain caused a surge in commodity prices during the summer of 1996.
As crop prices rose so too did farm receipts, pro-
photo of Gary Parker
GARY D. PARKER, Chairman, President and Chief Executive Officer
2 LINDSAY MANUFACTURING CO.
<PAGE> 5
1996 ANNUAL REPORT
viding growers with strong cash reserves. With 1996 total net cash farm
income currently projected at a record $58 billion, North American farmers
are in a good position to make investments in capital equipment-specifically,
capital equipment that will have a positive influence on production, costs and
efficiencies.
The passage of favorable legislation in 1996 provides further opportunity
in the agriculture sector. The Freedom to Farm Act strengthens the U.S. farm
economy by providing farmers with significantly greater planting flexibility,
less government interference and guaranteed subsidies regardless of commodity
prices over the next seven years.
By capitalizing on these and other opportunities, Lindsay worked to
optimize shareholder returns for fiscal 1996 and, more importantly, position
the Company for strong future performance.
MARKET OPPORTUNITIES AND STRATEGIC INITIATIVES COMBINE FOR STRONG FISCAL 1996
PERFORMANCE
In fiscal 1996, net earnings were up 41 percent to $16.5 million, or $2.44
per share, compared with earnings of $11.7 million, or $1.65 per share,
adjusted for Lindsay's three-for-two stock split in February 1996. Revenues
rose by 22 percent to $136.2 million from $111.8 million in the year-ago
period.
North American irrigation equipment sales were driven by a healthy
agriculture sector as well as by farmers' desire to conserve water, labor and
energy while stabilizing or increasing yields. Fiscal 1996 North American
irrigation equipment revenues grew by 25 percent over the prior year.
Global demand for irrigation equipment also grew. Sales of export
irrigation equipment gained 79 percent over fiscal 1995. Western Europe,
Mexico and Latin America, Australia and South Africa were significant
contributors and we expect continued growth in these markets during fiscal
1997.
Lindsay's order backlog for irrigation equipment stood at $25.7 million at
fiscal year end, up almost 77 percent over the $14.5 million posted at fiscal
year end 1995.
Stronger irrigation equipment revenue more than offset the expected
decline in fiscal 1996 diversified products revenue, which composed
approximately 15 percent of Lindsay's total sales. Diversified products
revenues were $20.3 million, a 12 percent reduction from the prior year's $23.0
million. The drop was mostly caused by weaker demand for our large diameter
steel tubing used by grain handling equipment manufacturers, as U.S. grain
reserves hit near-record lows. Outsource manufacturing sales to customers such
as Caterpillar Inc., Deere & Company and New Holland North America, Inc. were
only slightly lower.
Our investments in further production automation and process improvements
resulted in increased manufacturing efficiencies and a higher gross margin for
the full-year period. Gross margin increased to 24.0 percent from 23.1 percent
a year ago. Operating margin was 14.2 percent, up from last year's 12.5
percent.
In addition to Company performance, we enhanced shareholder value through
our share repurchase program, stock split and cash dividend. Lindsay utilized
$8.5 million to repurchase 275,500 shares (split adjusted) in fiscal 1996.
During the second quarter of fiscal 1996, Lindsay declared a three-for-two
stock split and initiated a regular 5-cent quarterly cash dividend. At August
31, 1996, shareholders' equity stood at $76.8 million, up 11.8 percent from the
$68.7 million at the beginning of the year.
REAPING THE REWARDS
OF AUTOMATION
A prime strategic focus during the year was to expand our use of
state-of-the-art robotics to provide increased manufacturing flexibility and
capacity, positioning Lindsay to be more responsive to market demand. These
investments, along with our sales and marketing programs designed to spread
peak demand out over a longer selling season, allowed us to regain market share
lost last year due to capacity constraints.
In fiscal 1996, we invested approximately $4.0 million in capital
improvements, principally to automate pipeline production. The expansion of
robotics allowed us to reallocate two-thirds of our pipeline production work
force while dramatically improving throughput, resulting in a gain of over 200
percent in both pipeline productivity and capacity. In fiscal 1996, Lindsay
boosted overall manufacturing capacity by approximately 20 percent. Automation
and process improvements have also enhanced efficiency. In 1996, it took
approximately 139 man-hours to manufac-
LINDSAY MANUFACTURING CO. 3
<PAGE> 6
ture one center pivot, down from 169 three years ago and a vast improvement
over the 500 man-hours it took to produce substantially the same equipment in
1979.
Through programs to promote employee involvement, we also help ensure that
ideas for improvements come from the plant floor, not just from management. In
the past three years, Lindsay has implemented over 400 employee-sponsored
improvement projects that have increased productivity, enhanced product
quality, raised safety awareness, reduced costs and further strengthened
customer and dealer support.
A MOTIVATED DEALER
NETWORK
Dealer marketing programs were also key to optimizing manufacturing
capacity. Through the use of creative marketing programs and incentives, we
encouraged dealers to take delivery of their orders earlier in the year, giving
us more capacity to meet demand in our peak selling season, which runs January
through May. These programs were very well received; in their inaugural year,
almost one-third of Lindsay's dealers participated, enabling management to meet
our first-year objectives for these programs.
Growers today want to deal with agri-business dealers who are technically
competent sales specialists that provide valuable product support and project a
professional image. Lindsay's Circles of Excellence Program uses dealer
evaluations and Company financial incentives to encourage dealers to take full
advantage of the extensive support we offer our worldwide dealer network to
meet Lindsay's requirements and the growers' expectations. Dealers are
evaluated against a list of 20 criteria by earning points based on sales volume
and ability to capture market share, as well as their participation in
Lindsay-sponsored sales and service training seminars and sales and promotional
programs. In fiscal 1996, approximately one third of our dealers qualified for
top honors in Circles of Excellence.
In fiscal 1997, we are adding Target 20 to our marketing arsenal. This
program entails working with top dealers from our North American network to
target select current Zimmatic owners as well as prospective customers.
Participating farmers are provided with a subscription to a valuable
agricultural marketing and economics report along with other information to use
in their planning decisions and operations management. Dealers personally
invite this select group of farmers to attend a banquet and participate in a
Lindsay-sponsored teleconference. During the teleconference they receive an
update on the state of agriculture and participate in a question-and-answer
session via satellite hook-up along with other growers from all over the
United States. Through efforts to support Lindsay's end users in their
business planning, we create sales opportunities by positioning our dealers as
consultants and a source of value-added services.
LEADERSHIP AND STRENGTH FARMERS CAN DEPEND ON--TODAY & TOMORROW
During the next century there will be a need to feed more people, while,
at the same time maintaining and protecting our environmental resources. The
world population is projected to almost double within the next 40 years. At the
same time we will see fewer producers being asked to meet the increasing global
demand for food.
With the consolidation of America's farms, growers today are aware of the
importance of operating efficiency and are requiring increasingly sophisticated
systems and products to boost output and conserve resources. North American
agricultural production has been a story of ever increasing efficiency. While
the number of farms has decreased by over 40 percent since the early 1960's,
total farm output has increased over 50 percent in just the last ten years.
With fewer farmers feeding a growing number
[BAR GRAPH]
INCREASING PRODUCTIVITY
(MAN HOURS PER UNIT PROCESSED)
<TABLE>
<CAPTION>
Year Hours
- ---- -----
<S> <C>
1979 500
1989 186
1993 169
1995 159
1996 139
</TABLE>
LINDSAY DEMONSTRATED CONTINUED EFFICIENCY IMPROVEMENT DURING THE YEAR. IT
FURTHER REDUCED THE NUMBER OF MAN-HOURS REQUIRED TO MANUFACTURE A CENTER PIVOT
TO 139 FROM 169 THREE YEARS AGO - A STARK CONTRAST TO THE 500 MAN-HOURS IT TOOK
IN 1979.
4 LINDSAY MANUFACTURING CO.
<PAGE> 7
1996 ANNUAL REPORT
of people, productivity is key and today's growers increasingly rely on
technology to raise productivity. Utilizing Lindsay's Remote Monitor Alarm and
Control (R-MAC.) features, growers can use FM radios or cellular phones to
monitor and control Zimmatic pivot systems from almost any remote site.
Through the development of our Zimmatic Automated Irrigation Management System
(AIMS) Telemetry Network, which allows farmers to control and monitor their
center pivots from a single personal computer, we demonstrated--once
again--that we are a leader in irrigation technology. In fiscal 1996,
approximately 30 percent of our center pivot irrigation systems sold were
equipped with our AIMS control panel.
NUMBER ONE IN EXPORTS
In addition to being a leader in technology, Lindsay for years has been
the leading exporter of center pivot and lateral move equipment. Government
programs, weather, world commodity prices, politics and other variables combine
to make the export market a fluid business environment. To take advantage of
global opportunities while limiting our downside, Lindsay sells on letters of
credit or other secured terms and in U.S. dollars. Through an extensive
international dealer network we keep a pulse on opportunities abroad. Lindsay
will continue to focus on export sales and we see additional growth during
fiscal 1997, albeit at a slower growth rate than the 79 percent achieved in
1996.
CULTIVATING OPPORTUNITY, CONTINUING THE MOMENTUM
The farm economy should remain healthy through fiscal 1997, supported by
continued strong commodity pricing and the positive effects of the Freedom to
Farm Act. In fiscal 1997, we expect demand for center pivot and lateral move
irrigation equipment to continue to outpace projected long-term, average annual
market growth of 6 to 8 percent. At Lindsay, we will continue to cultivate
opportunities as we strive to further improve performance and shareholder
value.
Specifically, we plan to invest up to an additional $3.5 to $4.5 million
in plant automation, principally to expand our metal fabrication, welding,
machining and galvanizing capacity. These process improvements and expansions
should further improve capacity, increasing our peak selling season capacity by
10 to 20 percent in fiscal 1997.
While the farm economy is cyclical, long-term demand drivers, including
farmers' need to conserve water, energy and labor while stabilizing yields,
will be a constant. Pressures to protect the environment and conserve water
will continue to mount as governments and consumer groups at the local, state
and national levels increasingly press for policies designed to preserve
resources. With the ability to reduce water usage by 40 to 60 percent over
flood irrigation as well as decrease leaching and runoff of fertilizer and
chemical inputs, center pivot and lateral move irrigation is the clear choice
for efficient, environmentally responsible crop irrigation.
In addition to operational and financial performance, Lindsay will strive
to continue to increase shareholder value through our dividend policy and share
repurchase program. Over the past two years, we have repurchased a total of
829,375 shares (split adjusted) at a total cost of $20.1 million, leaving us
with approximately one million shares authorized for repurchase under the
current plan. Growth through acquisition remains a consideration and, with
cash, cash equivalents and marketable securities of $54.4 million and no
long-term debt at August 31, 1996, we are well positioned to take advantage of
strategic opportunities that represent the right fit for Lindsay.
Lindsay's strong fiscal 1996 performance and, indeed, our future prospects
flow from the dedication of our employees, professionalism of our dealers,
loyalty of our Zimmatic customers and confidence of our shareholders. We thank
each of you for your support and look forward working with you to cultivate the
opportunities that lie ahead.
Sincerely,
Gary D. Parker
Chairman, President and
Chief Executive Officer
LINDSAY MANUFACTURING CO. 5
<PAGE> 8
North American map and
photos of key crops
Farmers derive the benefits of
Lindsay's center pivot and
lateral move irrigation
systems across a wide variety
of environments, soil types,
terrains and crops - including
corn, hay, cotton, potatoes,
wheat, soybeans, vegetables
and speciality crops, and
peanuts.
6 LINDSAY MANUFACTURING CO.
<PAGE> 9
OPERATIONS OVERVIEW
Lindsay Manufacturing is a leading manufacturer and marketer of center pivot
and lateral move irrigation systems. Lindsay's irrigation systems are marketed
- - both in North America and internationally - under the Zimmatic brand name.
The Company also produces large-diameter steel tubing and provides outsource
manufacturing production services for other companies such as Caterpillar Inc.,
Deere & Company and New Holland North America, Inc.
CENTER PIVOTS -- CLEAR ADVANTAGES AND A GROWING MARKET
Seen from the air, fields irrigated by center pivot systems look like a
matrix of large, green circles, with each circle encompassing approximately 135
productive acres. Constructed of modular sections of pipe suspended from
moving towers, center pivots are used not only to irrigate fields, but also for
controlled application of fertilizer and agricultural chemical inputs. When
outfitted with Lindsay's Automated Irrigation Management System (AIMS) and AIMS
Telemetry Network, multiple center pivot systems can be programmed and
monitored from a single personal computer. Alternatively, farmers can use a
cellular phone or FM radio to monitor and control their center pivot systems
when they are equipped with Lindsay's Remote Monitor Alarm and Control (R-MAC)
feature.
The efficient, precise irrigation afforded by center pivot and lateral
move irrigation technology is in stark contrast to the oldest and most common
method of irrigation -- surface, or "flood" irrigation. Using surface
irrigation, fields are graded to a gentle slope and then flooded with water,
only about half of which is used by crops as it runs between the rows.
Center pivot systems offer several advantages over traditional surface
irrigation:
- - Water Conservation--Uniform and timely water application stabilizes or
increases crop yields at the same time it cuts water usage by 40%-60% over
surface methods.
- - Labor Conservation--Center pivot systems use 90% less labor than surface
irrigation and 25%-75% less labor than other methods of sprinkler
irrigation.
- - Environmental Conservation--The precise water application of center pivot
irrigation can significantly reduce the cost of fertilizer and chemical
application as well as leaching and runoff, thereby limiting the risk and
occurrence of environmental contamination.
- - Increased Crop Yields--Sandy soils and uneven fields are no obstacle to
center pivot irrigation, an advantage that opens up millions of acres of
previously unirrigated land to irrigated crop production - and increased
crop yields.
- - Cost Effectiveness--At an estimated cost of approximately $200 per acre,
a center pivot system can pay for itself in approximately four to six
years.
Approximately 50 percent of Lindsay's new system sales are to farmers
converting from surface irrigation to center pivot irrigation; 25 percent of
Lindsay's systems are sold to farmers converting from dry land farming to
irrigated farming using center pivots; and 25 percent of Lindsay's new system
sales comes from farmers replacing an old center pivot with a new center pivot.
Because an estimated 50 percent of the almost 120,000 center pivot and lateral
move systems in North America are more than ten years old, Lindsay anticipates
an expansion in replacement sales over the next five years.
The market for center pivot systems continues to be unsaturated. In the
United States, only 15 percent of the 400 million cultivated acres of farmland
are irrigated by any means. Of those 60 million irrigated acres, only 25
percent, or 15 million acres, are irrigated by center pivots. Converting an
additional 25 percent to center pivot irrigation would--over the years--require
approximately 120,000 additional systems. At an average selling price of
$24,000 to $26,000 per system, that represents a potential U.S. market of $3.0
billion.
[NORTH AMERICAN MARKET POTENTIAL PIE CHART]
400 Million Total 60 Million Total 15 Million Center Pivot
Cultivated Acres Irrigated Acres 15% Irrigated Acres 3.75%
THE POTENTIAL U.S. MARKET FOR CENTER PIVOTS IS UNSATURATED, WITH LESS THAN 4%
OF THE 400 MILLION TOTAL CULTIVATED ACRES CURRENTLY IRRIGATED BY CENTER PIVOTS.
LINDSAY MANUFACTURING CO. 7
<PAGE> 10
photo of manufacturing robotics
8 LINDSAY MANUFACTURING CO.
<PAGE> 11
1996 ANNUAL REPORT
The consolidation of U.S. farms provides further sales momentum as an
increasing number of larger, more sophisticated operations are more likely to
be attracted by the efficiency and control afforded by center pivots. On a
global scale, population growth and the need to increase food production while
conserving water are converging to create ongoing export opportunities for
Lindsay's irrigation systems.
Lindsay began tapping waste-water treatment operations as an ancillary
market for its center pivot equipment over a decade ago. Prospective customers
include municipalities, food processors and other entities that use center
pivot irrigation systems for land application of effluent--converting waste
water from a liability to an asset by using it for crop irrigation and
fertilization. To date, Zimmatic systems have been installed at more than 100
waste-water treatment sites in the United States.
KEYS TO PERFORMANCE -- QUALITY DEALERS AND EFFICIENT PRODUCTION
Lindsay has a worldwide market with its irrigation systems operating in
more than 75 countries irrigating an estimated 11 million acres. Lindsay's
dealer organization--consisting of approximately 350 independent dealer
outlets--sell, install and service the Company's irrigation systems. Lindsay
provides its dealers with sales and service training, advertising materials and
cooperative advertising programs. Through creative sales and marketing
programs, including its Circles of Excellence and Target 20 programs, Lindsay
works to optimize the quality and effectiveness of its dealer network.
During the past year, Lindsay also began using marketing programs to help
smooth the demand spikes experienced during the Company's peak selling season,
which runs from January through May. By encouraging dealers to accept
shipments early, Lindsay was able to increase full-year capacity to meet
peak-season demand. Automation has also been key to increasing capacity. In
fiscal 1996, Lindsay invested approximately $4.0 million in robotics, equipment
upgrades and process improvements. These investments, when coupled with
Lindsay's just-in-time inventory management, statistical process control
techniques, cellular manufacturing and employee education and involvement
programs, reduced the amount of manufacturing labor input in an average center
pivot by 12 percent during the year.
STRONG DEMAND TODAY AND TOMORROW
Lindsay's long-term growth prospects are the result of one simple equation
- -- rising global demand for food plus an ever constricting amount of arable
land equals the critical need to improve per acre crop yields. Inherent in
this equation is the need to conserve water, energy and labor used in
agricultural production. Nearer term, and closer to home, Lindsay is
benefiting from a strong North American farm economy, low prevailing interest
rates and favorable agricultural program legislation.
THROUGH A COMBINATION OF AUTOMATION AND PROCESS IMPROVEMENTS, LINDSAY BOOSTED
OVERALL MANUFACTURING CAPACITY BY APPROXIMATELY 20 PERCENT IN FISCAL 1996. ITS
RETURN ON INVESTMENT IN ROBOTICS WAS HIGHLIGHTED BY A GAIN OF OVER 200 PERCENT
IN BOTH PIPELINE PRODUCTIVITY AND CAPACITY.
CROP CIRCLES - EACH CENTER PIVOT COVERS APPROXIMATELY 135 PRODUCTIVE ACRES. IN
MANY AREAS, CENTER PIVOT IRRIGATION IMPROVES CROP YIELDS BY UP TO 100% OVER DRY
LAND FARMING.
[PHOTO OF CROP CIRCLES]
LINDSAY MANUFACTURING CO. 9
<PAGE> 12
[PHOTO OF COMPUTER SCREEN]
[PHOTO OF COMPUTER SCREEN]
LINDSAY'S AIMS TECHNOLOGY NETWORK--MORE EFFICIENT FARMING THROUGH THE POWER OF
TECHNOLOGY
[PHOTO OF COMPUTER SCREEN]
Farming is both an art and a science. Using Lindsay's AIMS Telemetry Network,
farmers are able to replace some of the art of agriculture with the scientific
precision of a computerized irrigation control and information system. As with
any computer-based operation, the key to unlocking its power lies in the
software. Lindsay's Windows(R)-based AIMS Telemetry software program combines
a user-friendly interface with sophisticated monitoring, control and reporting
capabilities.
Using easy-to-follow commands, farmers can customize a field map display
which shows individual pivots, color coded for at-a-glance status checks.
Roads, buildings and other objects in the fields can be added to complete the
picture. Remote control of each pivot is provided through a computer-generated
image of the AIMS pivot-based control panel. The tremendous savings in time
and labor are obvious. Instead of traveling to each pivot, growers can change
water application rates, turn on a chemigation pump as well as manipulate any
other Zimmatic function from their desk --or even their cellular phone or FM
radio when the Network is also equipped with Lindsay's Remote Monitoring and
Control feature.
In addition to pivot control, the Network can collect, store and
manipulate valuable irrigation and environmental data, such as wind speed,
water flow, temperature, voltage and rainfall. Farmers use this information to
calculate cost and resource usage, which can be detailed in reports on
individual pivots or the entire farming operation. This complete, accurate
information makes for better decisions and more profitable farm management,
leaving the art of farming for that which cannot be controlled -- Mother Nature.
10 LINDSAY MANUFACTURING CO.
<PAGE> 13
1996 ANNUAL REPORT
SNAPSHOT OF NEAR-TERM DEMAND
U.S. grain reserves were at the lowest levels in over 20 years this past
summer due to unfavorable weather conditions in key growing regions compounded
by rising global demand. Reduced reserves have driven commodity prices sharply
higher over the past two years and average prices are expected to remain strong
in 1997. Higher commodity prices, combined with increasing farm real estate
values, low prevailing interest rates and farm consolidation, translates into
more growers being in a position to consider capital investment; and--with the
ability to reduce irrigation-related variable production costs by as much as 25
percent--Lindsay believes that center pivot irrigation equipment should be high
on many farmers' priority lists.
North American farm receipts will also be strengthened as farmers, drawn
by the lure of stronger commodity prices and encouraged by the passage of the
Agricultural Reconciliation Act (ARA or so-called Freedom to Farm Act) increase
planted acreage. The Freedom to Farm Act changes the equations under which
farm subsidies are determined with the net effect being near complete planting
flexibility, including a decrease in idled crop land and reduction of direct
government payments over the next seven years. More acres put into production
should increase an already growing market for irrigation equipment.
THE BIG PICTURE -- GLOBAL DEMAND FOR FOOD
The growth in world population is increasing demand for food in general.
Rapid economic growth, particularly in Southeast Asia, India and Latin America,
is causing an increase in demand for grain commodities, specifically. The
correlation between economic growth and demand for grain commodities is due to
the fact that as economies develop, average per capita income rises and one of
the first areas consumers tend to exert their new found earning power is in
upgrading their diet. The inclusion of more poultry, pork, beef and dairy
products drives demand for more feed grain.
At the same time global demand for food is growing, the world is
sacrificing farmland for industrial and residental use at a rate of 1 to 2
percent annually. The squeeze caused by these opposing forces heightens the
need for maximizing per acre crop yields. Water, energy and labor conservation
are each critical elements of increasing agricultural efficiency and
productivity as well as primary benefits of center pivot and lateral move
irrigation.
Higher global demand for food drove up world commodity prices in 1996,
which provides additional incentive for U.S. farmers to increase production for
export. This dynamic also increases demand for center pivot irrigation
equipment -- domestically as well as abroad. As the leading exporter of
irrigation equipment, Lindsay has established a track record of successful
export operations. The Company's approach is to work through its network of
international dealers to keep a pulse on overseas opportunities. Lindsay is
particularly adept at identifying agricultural initiatives by foreign
governments seeking to modernize their farm economies. By working with
government agencies as well as private groups, Lindsay seeks to actively
participate in the early stages of all major center pivot irrigation projects.
DIVERSIFIED OPERATIONS -- OUTSOURCE MANUFACTURING AND INCREMENTAL TUBING SALES
In 1987, Lindsay began targeting manufacturers that were streamlining
their operations as an alternative source of business in an effort to more
fully utilize capacity during the Company's off season. That foray into
outsource manufacturing, coupled with incremental sales of large-diameter
tubing, has grown into a $20 million business, composing almost 15 percent of
Lindsay's total revenues in fiscal 1996. Lindsay's outsource manufacturing
operations provide sophisticated design and engineering capabilities and a full
spectrum of manufacturing services including welding, machining, painting,
punching, forming, galvanizing and hydraulic, electrical and mechanical
assembly. Lindsay maintains Certified Supplier Status with some of the
country's most demanding industrial customers, including Caterpillar Inc.,
Deere & Company and New Holland North America, Inc.
Lindsay also operates advanced large-diameter tubing mills, which it uses
to meet its own needs for tubing as well as to generate additional revenue
through external sales. Lindsay's tubing is used in the manufacture of grain
handling equipment, combine reels, conveyor rolls, pneumatic tubes and hay
conditioner roll cores.
LINDSAY MANUFACTURING CO. 11
<PAGE> 14
Lindsay Manufacturing Co.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
($ in millions, except per share amounts) For the years ended August 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $136.2 $111.8 $112.7 $102.1 $108.9 $98.7 $102.7 $92.6 $76.1 $54.1 $45.6
Gross profit 32.7 25.9 25.7 23.8 23.8 21.5 20.0 18.6 11.8 8.9 6.4
Selling, general and administrative,
and engineering and research
expenses 13.4 11.9 11.6 10.7 10.9 10.5 9.6 8.2 7.0 6.7 7.1
Earnings before cumulative effect
of accounting change 16.5 11.7 11.2 10.7 11.0 8.9 8.4 7.4 3.8 1.6 0.3
Net earnings 16.5 11.7 11.9 10.7 11.0 8.9 8.4 7.4 3.8 1.6 0.3
Earnings before cumulative effect
of accounting change per share(1) 2.44 1.65 1.54 1.47 1.52 1.28 1.21 1.06 0.54 0.22 0.05
Net earnings per share(1) 2.44 1.65 1.63 1.47 1.52 1.28 1.21 1.06 0.54 0.22 0.05
Property, plant and equipment, net 9.7 7.2 5.6 5.6 6.0 5.4 4.7 4.4 4.6 3.4 4.2
Total assets 96.8 86.1 88.4 79.9 71.4 60.4 46.9 31.7 24.0 19.0 23.4
Long-term debt $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0.2
Return on sales 12.1% 10.5% 10.6% 10.5% 10.1% 9.0% 8.2% 8.0% 5.0% 2.9% 0.7%
Return on beginning assets 19.2% 13.2% 14.9% 15.0% 18.2% 19.0% 26.4% 30.8% 19.9% 6.7% 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For 1996, 1995, 1994, 1993 and 1992 per share amounts are calculated by
dividing the earnings by the weighted average number of common and common
equivalent (stock options) shares outstanding of 6,767,252, 7,081,473,
7,296,759, 7,270,352 and 7,248,687. For 1991, 1990 and 1989, per share amounts
are calculated on Lindsay's 6,973,205, 6,947,438 and 6,986,406 weighted average
outstanding shares, respectively. For 1988 and prior, per share amounts are
calculated based on Lindsay's 6,986,250 outstanding shares as of October 12,
1988, the date of the initial public offering, since at that time all of the
outstanding shares of Lindsay were owned by DEKALB Energy Company. Per share
amounts and number of shares reflect the three-for-two stock split in February
1996.
<TABLE>
<CAPTION>
QUARTERLY DATA
($ in thousands, except per share amounts) For the three months ended the last day of
- ----------------------------------------------------------------------------------------------------
November February May August
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal 1996
Operating revenues $27,326 $38,140 $41,139 $29,628
Cost of operating revenues 20,905 28,336 30,534 23,711
Earnings before income taxes 4,322 7,523 8,170 3,925
Net earnings 3,026 5,265 5,719 2,508
Net earnings per share 0.45 0.78 0.84 0.37
Market price (Nasdaq National Market)
High $ 24 5/16 $ 32 3/4 $ 39 3/4 $ 44 1/2
Low 21 9/16 23 11/16 29 1/4 34
Fiscal 1995
Operating revenues $22,142 $30,350 $37,451 $21,900
Cost of operating revenues 17,143 23,790 28,040 17,013
Earnings before Income taxes 2,940 4,416 7,116 2,614
Net earnings 1,999 3,003 4,839 1,863
Net earnings per share 0.27 0.42 0.69 0.27
Market price (Nasdaq National Market)
High $ 21 1/2 $ 20 13/16 $ 22 $ 23 13/16
Low 18 9/16 18 13/16 18 13/16 20 11/16
- ----------------------------------------------------------------------------------------------------
</TABLE>
1996: Fourth-quarter adjustments resulting in a net decrease in pre-tax
earnings of $1,229,000 were made to inventory accounts (due to physical
inventory), the LIFO inventory reserve and the obsolete inventory reserve.
Additional fourth-quarter accrual adjustments decreased pre-tax earnings
$581,000 for compensation costs including bonus earnouts, vacation pay, and
retirement and $200,000 for bad debt allowance. Partially offsetting this, a
$278,000 accrual reduction was made for dealer related items and a $138,000
accrual reduction for insurance. During the fourth-quarter refunds received
with interest resulting from state economic development tax credits increased
pre-tax earnings $1,223,000 for other income and $185,000 for interest income.
1995: Fourth-quarter adjustments resulting in a net increase in pre-tax
earnings of $38,000 were made to inventory accounts (due to physical
inventory), the LIFO inventory reserve and the obsolete inventory reserve.
Per share and market price amounts reflect the three-for-two stock split in
February 1996.
12 LINDSAY MANUFACTURING CO.
<PAGE> 15
Lindsay Manufacturing Co.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Sales growth in both the North American and export center pivot and lateral
move irrigation equipment markets, partially offset by lower diversified
products sales, lead to higher revenues and earnings for Lindsay in fiscal
1996.
During the year, Lindsay initiated a 5-cent quarterly cash dividend,
instituted a three-for-two stock split, and continued its share repurchase
program -- repurchasing 275,000 shares for $8.5 million during the year. The
Company continues to have a solid balance sheet with no debt and strong
financial ratios.
RESULTS OF OPERATIONS
FISCAL YEAR 1996 COMPARED TO 1995
The following table provides highlights for fiscal 1996 compared with
fiscal 1995.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
For the Years Ended Percent Increase
August 31, (Decrease)
------------------------------------
($ in thousands) 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated
Operating Revenues $136,233 $111,843 21.8%
Cost of Operating Revenues $103,486 $ 85,986 20.4
Gross Profit $ 32,747 $ 25,857 26.7
Gross Margin 24.0% 23.1%
Selling, Eng. & Research, and
G&A Expense $ 13,363 $ 11,937 12.0
Operating Income $ 19,384 $ 13,920 39.3
Operating Margin 14.2% 12.5%
Interest Income, net $ 2,936 $ 2,728 7.6
Other Income, net $ 1,620 $ 438 269.9
Income Tax Provision $ 7,422 $ 5,382 37.9
Effective Income Tax Rate 31.0% 31.5%
Net Earnings $ 16,518 $ 11,704 41.1
Irrigation Equipment Segment (See Note K)
Operating Revenues $115,908 $ 88,837 30.5
Operating Income $ 24,013 $ 16,386 46.6
Operating Margin 20.7% 18.4%
Diversified Products Segment (See Note K)
Operating Revenues $ 20,325 $ 23,006 (11.7)
Operating Income $ 4,181 $ 5,181 (19.3)%
Operating Margin 20.6% 22.5%
</TABLE>
REVENUES
Operating revenues grew 22% to $136.2 million in fiscal 1996, compared to
$111.8 million in fiscal 1995. Fiscal 1996 North American irrigation equipment
revenues totaled $93.3 million, a 25% increase from $74.8 million in fiscal
1995. Fiscal 1996 export irrigation equipment revenues were also up, totaling
$19.8 million as compared to $11.1 million in fiscal 1995. Revenues from
diversified products were off 12% in fiscal 1996, totaling $20.3 million
compared to $23.0 million in fiscal 1995.
Total demand for irrigation equipment grew in the North American market in
fiscal 1996. Lindsay was able to capitalize on this growth and increase both
revenues and gross margin by using creative sales and marketing programs to
encourage dealers and growers to order equipment early and by further improving
the Company's manufacturing productivity through automation and process
improvements.
Fiscal 1996 export irrigation equipment revenues grew by 79% over fiscal
1995. The Western European, Mexican and Latin American, Australian, and South
African markets each grew during the year. Lindsay expects these same markets
to continue to grow during fiscal 1997.
At the year end fiscal 1996, Lindsay had a $16.6 million order backlog for
irrigation equipment, an increase of almost 125% from fiscal 1995's year end
irrigation equipment order backlog of $7.4 million. Lindsay believes that the
farmers' confidence level during July and August of 1996 was higher than in
1995 -- due to stronger agricultural commodity prices -- resulting in the
increase in order backlog.
Diversified product revenues contracted during fiscal 1996, primarily due
to a reduction in demand for and sales of large diameter steel tubing, but also
due to a slight decrease (less then 5%) in Lindsay's outsource manufacturing
sales. Caterpillar Inc., Deere & Company, and New Holland North American, Inc.
continue to be Lindsay's major outsource manufacturing customers. At year end
fiscal 1996, Lindsay's order backlog for diversified products totaled $9.1
million, up 28% from $7.1 million at the end of fiscal 1995.
GROSS MARGIN
Fiscal 1996 gross margin of 24.0% was up from 23.1% in fiscal 1995 and 22.9% in
fiscal 1994. 1996 gross margin was favorably impacted by continued improvements
made in manufacturing productivity and efficiencies and by a strong pricing
environment in both the North American and export markets for irrigation
equipment.
OPERATING EXPENSES
Selling, engineering and research, and general and administrative expenses
increased 12% in fiscal 1996 to $13.4 million as compared to $11.9 million in
fiscal 1995. The increase is primarily due to increases in advertising and
salaries and benefit costs partially offset by lower office rental,
professional and legal, and insurance costs.
INTEREST INCOME, OTHER INCOME AND TAXES
Lindsay's interest income is primarily from interest earned on its investments
in short (0-12 months) and intermediate (12-36 months) investment-grade
municipal bonds, on which interest earnings are exempt from federal income
taxes, and short-term investment grade commercial paper. Fiscal 1996 interest
income of $2.9 million is up slightly from $2.7 million in fiscal 1995. Fiscal
1996 other income of $1.6 million is up significantly from $0.4 million in
fiscal 1995, primarily due to the Company's receipt of $1.4 million in benefits
during fiscal 1996 from the State of Nebraska for the growth of jobs and
investment at Lindsay's manufacturing plant during the years 1989 through 1994.
Lindsay's effective tax rate of 31% for fiscal 1996 compares to an
effective tax rate of 31.5% for fiscal 1995. The Company currently benefits,
and expects to continue to benefit, from the foreign sales corporation federal
tax provisions as they relate to export sales, the federal tax free status of
interest income from its municipal bond investments and state economic
development tax credits.
LINDSAY MANUFACTURING CO. 13
<PAGE> 16
RESULTS OF OPERATIONS
FISCAL YEAR 1995 COMPARED TO 1994
The following table provides highlights for fiscal 1995 compared with
fiscal 1994.
<TABLE>
<CAPTION>
For the Years Ended Percent Increase
August 31, (Decrease)
---------------------------------------
($ in thousands) 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated
Operating Revenues ...................... $111,843 $112,684 (0.7)%
Cost of Operating Revenues .............. $ 85,986 $ 86,936 (1.1)
Gross Profit ............................ $ 25,857 $ 25,748 0.4
Gross Margin ............................ 23.1% 22.9%
Selling, Eng. & Research, and
G&A Expense ........................... $ 11,937 $ 11,610 2.8
Operating Income ........................ $ 13,920 $ 14,138 (1.5)
Operating Margin ........................ 12.5% 12.6%
Interest Income, net .................... $ 2,728 $ 2,317 17.7
Other Income, net ....................... $ 438 $ 311 40.8
Income Tax Provision .................... $ 5,382 $ 5,533 (2.7)
Effective Income Tax Rate ............... 31.5% 33.0%
Earnings Before Accounting Change ....... $ 11,704 $ 11,233 4.2
Cumulative Effect of Accounting Change... $ 0 $ 659 N/A
Net Earnings $ 11,704 $ 11,892 (1.6)
Irrigation Equipment Segment (See Note K)
Operating Revenues ...................... $ 88,837 $94,288 (5.8)
Operating Income ........................ $ 16,386 $17,161 (4.5)
Operating Margin ........................ 18.4% 18.2%
Diversified Products Segment (See Note K)..
Operating Revenues ...................... $ 23,006 $18,396 25.1
Operating Income ........................ $ 5,181 $ 4,253 21.8%
Operating Margin ........................ 22.5% 23.1%
</TABLE>
REVENUES
Operating revenues totaled $111.8 million in fiscal 1995, compared to $112.7
million in fiscal 1994. Fiscal 1995's revenue from North American irrigation
equipment totaled $74.8 million, down 2% from $76.4 million in fiscal 1994.
Fiscal 1995's export irrigation equipment revenues were $11.1 million, 28%
lower than fiscal 1994's $15.5 million for export irrigation equipment.
Diversified products revenues in fiscal 1995 were $23.0 million, 25% higher
than 1994's $18.4 million.
Although Lindsay's fiscal 1995 North American irrigation equipment
revenues were lower than in fiscal 1994 (when the Company experienced a 52.5%
growth rate), the market continued strong in fiscal 1995. Lindsay's North
American irrigation equipment revenues were negatively impacted by production
and delivery constraints during the peak demand period of January through May.
Fiscal 1995's export sales of irrigation equipment were lower than the
prior year's due to a downturn in the market in Saudi Arabia. However, fiscal
1995's export irrigation equipment sales to markets other than Saudi increased
approximately 35% as compared to fiscal 1994.
At year end fiscal 1995, Lindsay had a $7.4 million order backlog for
irrigation equipment. This was down from year end fiscal 1994's irrigation
equipment order backlog of $8.3 million. Lindsay believes that uncertainty in
the North American market during late July and August 1995 about the fall crop
delayed order activity.
Diversified product revenues continued to expand in fiscal 1995, rising
25% to $23.0 million from $18.4 million in fiscal 1994. Revenues from both
outsource manufacturing and large diameter steel tubing rose during the year
due to an expansion of the components, subassemblies and finished products
supplied to Caterpillar Inc., Deere & Company and New Holland North America,
Inc. and to the broadening of Lindsay's large diameter steel tubing customer
base. At year end fiscal 1995, Lindsay's order backlog for diversified products
totaled $7.1 million, up 15% from $6.2 million at the end of fiscal 1994.
GROSS MARGIN
Fiscal 1995's gross margin of 23.1% was up from 22.9% in fiscal 1994. 1995's
gross margin, was favorably impacted by product mix and the ability to pass on,
through pricing, cost increases Lindsay incurred on selected raw materials.
OPERATING EXPENSES
Fiscal 1995's selling, engineering and research, and general and administrative
expenses increased 2.8% to $11.9 million from $11.6 million in fiscal 1994. The
increase is the net result of higher engineering and research expenses, due to
increased personnel; higher general and administrative expenses, due to
increases in wage, insurance and employee retirement plan expenses; and lower
sales expenses.
INTEREST INCOME, OTHER INCOME AND TAXES
Fiscal 1995's interest income of $2.7 million is up from fiscal 1994's $2.3
million as the result of an increase in the average amount of funds invested
during the year. Fiscal 1995's other income of $0.4 million is up slightly from
$0.3 million in fiscal 1994.
Fiscal 1995's effective tax rate of 31.5% compares to an effective tax
rate of 33.0% for fiscal 1994.
FINANCIAL CONDITION
Lindsay's cash and short- and long-term marketable securities decreased to
$54.4 million at August 31, 1996, from $57.3 million at August 31, 1995.
Receivables at August 31, 1996, increased $9.7 million to $20.1 million from
$10.4 million. Approximately $3.0 million of this increase was due to increased
sales activity during the last month of the fiscal year and approximately $6.0
million was due to short-term interest free financing offered by Lindsay to end
users. August 31, 1996, inventories increased $2.4 million to $7.8 million from
$5.4 million at August 31, 1995. Inventory was increased to adequately service
the higher level of first quarter fiscal 1997 sales activity that the Company
was projecting. August 31, 1996, current liabilities increased $2.8 million to
$18.7 million from $15.9 million at August 31, 1995, primarily due to increased
trade payables and higher accruals for international dealer prepayments and
commissions, warranty, and payroll and vacation, partially offset by lower
accruals for environmental remediation costs and current state and federal
income taxes.
Capital expenditures totaled $4.0 million during fiscal 1996, a
significant increase from fiscal 1995's $2.8 million. Over half of the fiscal
1996 capital expenditures were related to Lindsay's installation of a robotic
manufacturing process for the manufacture of center pivot irrigation equipment
pipeline. The remaining capital expenditures were primarily for the general
upgrading of the manufacturing plant and equipment. Lindsay expects its fiscal
1997 capital expenditures to
14 LINDSAY MANUFACTURING CO.
<PAGE> 17
be in the $3.5 to $4.5 million range. Depreciation totaled $1.5 million in
fiscal 1996 and is expected to increase to the $2.0 million range in fiscal
1997.
Lindsay expended $8.5 million in fiscal 1996 to repurchase 275,500 shares
of its common stock. In fiscal 1995, Lindsay repurchased 553,875 shares of its
common stock using $11.6 million.
Lindsay believes its capitalization (including cash and marketable
securities balances) and operating cash flows are sufficient to cover expected
working capital needs, planned capital expenditures and continued repurchases
of common stock.
FISCAL 1997 OUTLOOK
IRRIGATION EQUIPMENT
The North American Market for irrigation equipment resumed its growth in
fiscal 1996 after declining slightly in fiscal 1995. Lindsay believes that the
desire of North American farmers to reduce variable input costs, increase or
stabilize crop yields, reduce labor input and conserve water and energy will
continue to drive demand for center pivot and lateral move irrigation
equipment. The Company believes that these demand drivers will result in
long-term growth in North American demand for center pivot and lateral move
irrigation equipment to average in the 6% to 8% per annum range.
Our current outlook for the fiscal 1997 North American center pivot and
lateral move irrigation equipment market is for somewhat faster growth than the
6% to 8% average. Grain prices, after reaching new highs earlier this year,
have weakened this fall as a better than expected harvest in North America
replenished a record low grain inventory. However, grain prices remain at
levels which still generate profits for farmers. As a result, net cash farm
income for 1996 is forecasted to reach a record $58 billion as compared to $49
billion in 1995. And, North American net cash farm income is projected to be
strong again in 1997. Lindsay believes that this stronger net cash farm income
will lead to growth in North American demand during fiscal 1997 exceeding the
6% to 8% average growth rate.
Export sales of center pivot and lateral move irrigation equipment are
expected to increase again in fiscal 1997, but at a rate less than the 79%
increase experienced in fiscal 1996. Sales activity and revenue from Mexico and
Latin America, Western Europe, Australia and South Africa should expand during
the year.
Lindsay's domestic and international irrigation equipment
sales are highly dependent upon the need for irrigated agricultural production
which, in turn, depends upon many factors including total worldwide crop
production, the profitability of agricultural production, commodity prices,
aggregate net farm income, governmental policies regarding the agricultural
sector, water and energy conservation policies and the regularity of rainfall.
Approximately 15%, 10% and 14% of Lindsay's revenues were generated from
export sales in fiscal 1996, 1995 and 1994, respectively. Lindsay does not
believe it has significant exposure to foreign currency translation risks
because its export sales are all in U.S. dollars and are generally all shipped
against prepayments or irrevocable letters of credit which are confirmed by a
U.S. bank or other secured means.
DIVERSIFIED PRODUCTS
Lindsay's diversified products segment consists of two major products:
large-diameter thin-wall round steel tubing and outsource manufacturing
services.Diversified products customers for both products primarily consist of
agricultural and industrial capital goods manufacturers. The Company expects
fiscal 1997 diversified products revenue to grow to the $21 to $23 million
range. Lindsay's long-term goal has been, and continues to be to build its
diversified products segment to total 25% of total annual revenues.
SEASONALITY
Irrigation equipment sales are seasonal by nature. Farmers generally order
systems to be delivered and installed before the growing season. Shipments to
North American customers usually peak during Lindsay's second and third
quarters for the spring planting period. Lindsay's expansion into diversified
products complements its irrigation operations by using available capacity and
reducing seasonality.
OTHER FACTORS
Environmental contamination at Lindsay's manufacturing facility occurred in
1982 when a drill, operated by a sub-contractor installing groundwater
monitoring wells, punctured a silt and sand lens and an underlying clay layer
beneath a clay-lined waste lagoon. The 1982 puncture of the clay layer caused
acid and solvent leachate to enter the sand and gravel aquifer.
Since 1983, Lindsay has worked actively with the Nebraska Department of
Environmental Control (NDEC) to remediate this contamination by purging and
treating the aquifer. In October 1989, the Environmental Protection Agency
(EPA) added Lindsay to the list of priority Superfund sites. In 1988, a
sampling which was performed in connection with an investigation of the extent
of aquifer contamination, revealed solvent contamination (volatile organic
compounds) in the soil and shallow groundwater in three locations at and in the
vicinity of the plant. Under a 1988 agreement with the EPA and NDEC, Lindsay
conducted a Remedial Investigation/ Feasibility Study (RI/FS). This study was
completed in June 1990. Lindsay does not believe that there is any other soil
or groundwater contamination at the manufacturing facility.
In September 1990, the EPA issued its Record of Decision (ROD) selecting a
plan for completing the remediation of both contaminations. The selected plan
implementation was delayed until finalization of the Consent Decree in April
1992. The final remediation plans were approved in 1993 and 1994 and the
remediation plans were fully implemented during fiscal 1995.
The balance sheet reserve for this remediation decreased to $0.3 million
at August 31, 1996 from $1.9 million at fiscal 1995 year end, reflecting an
increase to the reserve of $0.3 million, a reclassification of $1.8 million for
a contra asset of an insurance recovery in other assets and costs of $0.1
million during the first quarter of fiscal 1996 for the continued
implementation of the plans. Additionally, second, third and fourth quarter
costs of $0.6 million were expensed on the consolidated statements of
operations and was not reflected in the reserve.
Lindsay believes that the current reserve is sufficient to cover the
estimated cost for complete remediation of both the aquifer and soil and
shallow groundwater contaminations under the final plans. Lindsay believes that
its insurer should cover costs associated with the contamination of the aquifer
that was caused by the puncture of the clay layer in 1982. However, Lindsay and
the insurer are in litigation over the extent of the insurance coverage. In
1987, the insurer agreed to reimburse Lindsay for remediation costs incurred by
LINDSAY MANUFACTURING CO. 15
<PAGE> 18
Lindsay. The insurer reduced its reimbursement of remediation costs in early
1990. In late 1990, Lindsay filed suit against the insurer. The insurer
completely stopped reimbursement of remediation costs in 1991 and in 1992 the
insurer filed a counterclaim against Lindsay for previously reimbursed
remediation costs. In December 1995, the court dismissed Lindsay's suit against
the insurer and entered a judgment in the amount of $2.4 million in favor of
the insurer. Lindsay is in the process of appealing the dismissal of its case
against the insurer and the judgment against Lindsay. If the EPA or NDEC
require remediation which is in addition to or different from the current plan
and depending on the success of Lindsay's litigation against the insurer, this
reserve could increase or decrease, depending on the nature of the change in
events.
RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
In October 1995, FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123
establishes financial accounting and reporting standards for stock-based
employee compensation plans and transactions in which goods or services are the
consideration received for the issuance of equity instruments. This statement
requires that an employer's financial statements include certain disclosures
about stock-based employee compensation regardless of the method used to
account for them. Adoption is required for fiscal years, beginning after
December 15, 1995, Lindsay's fiscal 1997. Lindsay expects to continue its
accounting in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees".
STATEMENT OF
MANAGEMENT
RESPONSIBILITY
The consolidated financial statements and notes to the consolidated financial
statements of Lindsay Manufacturing Co. have been prepared by management, which
has the responsibility for their integrity and objectivity. The statements have
been prepared in accordance with generally accepted accounting principles to
reflect, in all material aspects, the substance of financial events and
transactions occurring during the respective periods.
Gary D. Parker Bruce C. Karsk
Chairman, President and Vice President-Finance,
Chief Executive Officer Treasurer and Secretary
REPORT OF INDEPENDENT
ACCOUNTANTS
To the Stockholders and Board of Directors of
Lindsay Manufacturing Co.:
We have audited the accompanying consolidated balance sheets of Lindsay
Manufacturing Co. as of August 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended August 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Lindsay Manufacturing Co. as of August 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended August 31, 1996 in conformity with generally accepted
accounting principles.
As described in Note A, the Company changed its method of accounting for
income taxes in fiscal 1994.
Omaha, Nebraska Coopers & Lybrand L.L.P.
October 9, 1996
16 LINDSAY MANUFACTURING CO.
<PAGE> 19
Lindsay Manufacturing Co.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
($ in thousands, except per share amounts) Years ended August 31,
- --------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues ......................... $136,233 $111,843 $112,684
Cost of operating revenues ................. 103,486 85,986 86,936
-------- -------- --------
Gross profit ............................... 32,747 25,857 25,748
-------- -------- --------
Operating expenses:
Selling expense ........................... 4,553 4,290 4,334
General and administrative expense ........ 7,380 6,264 6,034
Engineering and research expense .......... 1,430 1,383 1,242
-------- -------- --------
Total operating expenses ................... 13,363 11,937 11,610
-------- -------- --------
Operating income ........................... 19,384 13,920 14,138
Interest income, net ....................... 2,936 2,728 2,317
Other income, net .......................... 1,620 438 311
-------- -------- --------
Earnings before income taxes and cumulative
effect of accounting change ............... 23,940 17,086 16,766
Income tax provision ....................... 7,422 5,382 5,533
-------- -------- --------
Earnings before cumulative effect of
accounting change ......................... 16,518 11,704 11,233
Cumulative effect of change in accounting
for income taxes .......................... 0 0 659
-------- -------- --------
Net earnings ............................... $16,518 $11,704 $11,892
======== ======== ========
Earnings before cumulative effect of
accounting change per share ............... $2.44 $1.65 $1.54
Cumulative effect of change in accounting
for income taxes per share ................ 0.00 0.00 0.09
-------- -------- --------
Primary, net earnings per share ............ $2.44 $1.65 $1.63
======== ======== ========
Earnings before cumulative effect of
accounting change per share ............... $2.43 $1.65 $1.54
Cumulative effect of change in accounting
for income taxes per share ................ 0.00 0.00 0.09
-------- -------- --------
Fully diluted, net earnings per share ...... $2.43 $1.65 $1.63
======== ======== ========
Cash dividends per share ................... $0.15 $0.00 $0.00
======== ======== ========
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
($ in thousands)
Shares of Capital
---------------------- in excess Total
Common Treasury Common of stated Retained Treasury stockholders'
stock stock stock value earnings stock equity
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1993 ................. 4,783,168 105,630 $4,783 $3,169 $48,851 $(1,319) $55,484
Net earnings ............................... -- -- -- -- 11,892 -- 11,892
Net shares issued under stock option plan .. 36,190 -- 36 593 -- -- 629
Stock option tax benefits .................. -- -- -- 79 -- -- 79
--------- ------- ------ ------ ------- ------- --------
BALANCE AT aUGUST 31, 1994 ................. 4,819,358 105,630 4,819 3,841 60,743 (1,319) 68,084
Net earnings ............................... -- -- -- -- 11,704 -- 11,704
Net shares issued under stock option plan .. 23,447 -- 24 550 -- -- 574
Stock option tax benefits .................. -- -- -- 21 -- -- 21
Acquisitions of common stock ............... -- 369,250 -- -- -- (11,640) (11,640)
--------- ------- ------ ------ ------- ------- --------
BALANCE AT AUGUST 31, 1995 ................. 4,842,805 474,880 4,843 4,412 72,447 (12,959) 68,743
NET EARNINGS ............................... -- -- -- -- 16,518 -- 16,518
CASH DIVIDENDS ($.15 PER SHARE) ............ -- -- -- -- (963) -- (963)
NET SHARES ISSUED UNDER STOCK
OPTION PLAN ............................... 58,170 -- 58 934 -- -- 992
STOCK OPTION TAX BENEFITS .................. -- -- -- 35 -- -- 35
ACQUISITIONS OF COMMON STOCK ............... -- 230,200 -- -- -- (8,489) (8,489)
THREE-FOR-TWO STOCK SPLIT .................. 2,427,038 282,740 2,427 (2,427) -- -- --
FRACTIONAL SHARES PAID IN CASH IN
CONJUNCTION WITH THE THREE-FOR-TWO
STOCK SPLIT ............................... (52) -- -- (2) -- -- (2)
--------- ------- ------ ------ ------- ------- --------
BALANCE AT AUGUST 31, 1996 ................. 7,327,961 987,820 $7,328 $2,952 $88,002 $(21,448) $76,834
========= ======= ====== ====== ======= ======== =======
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
LINDSAY MANUFACTURING CO. 17
<PAGE> 20
Lindsay Manufacturing Co.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
($ in thousands, except par values) At August 31,
- ----------------------------------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................ $ 2,362 $ 4,514
Marketable securities ................................................ 23,926 18,792
Receivables .......................................................... 20,128 10,353
Inventories .......................................................... 7,800 5,384
Deferred income taxes ................................................ 3,369 2,804
Other current assets ................................................. 270 1,891
------- -------
Total current assets ............................................... 57,855 43,738
Long-term marketable securities ........................................ 28,146 34,003
Property, plant and equipment, net ..................................... 9,691 7,164
Other noncurrent assets ................................................ 1,131 1,155
------- -------
Total assets ........................................................... $96,823 $86,060
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade .............................................. $ 5,915 $ 4,295
Other current liabilities ............................................ 12,782 11,636
------- -------
Total current liabilities .......................................... 18,697 15,931
Other noncurrent liabilities ........................................... 1,292 1,386
------- -------
Total liabilities ...................................................... 19,989 17,317
------- -------
Contingencies
Stockholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares authorized, no
shares issued and outstanding in 1996 and 1995)
Common stock, ($1 par value, 10,000,000 shares authorized, 7,327,961
and 4,842,805 shares issued in 1996 and 1995) ...................... 7,328 4,843
Capital in excess of stated value .................................... 2,952 4,412
Retained earnings .................................................... 88,002 72,447
Less treasury stock, (at cost, 987,820 shares in 1996 and
474,880 shares in 1995) ............................................ (21,448) (12,959)
------- -------
Total stockholders' equity ............................................. 76,834 68,743
------- -------
Total liabilities and stockholders' equity ............................. $96,823 $86,060
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 LINDSAY MANUFACTURING CO.
<PAGE> 21
Lindsay Manufacturing Co.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
($ in thousands) Years ended August 31,
- -----------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ......................................................... $16,518 $11,704 $11,892
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation ......................................................... 1,486 1,254 1,234
Amortization of marketable securities premiums, net .................. 325 390 300
(Gain) loss on sale of fixed assets .................................. (83) (101) 4
Loss on sale of marketable securities held-to-maturity ............... 0 2 0
Gain on maturities of marketable securities held-to-maturity ......... (14) 0 0
Gain on sale of marketable securities available-for-sale ............. (8) 0 0
Provision for uncollectible accounts receivable ...................... 150 60 60
Deferred income taxes ................................................ (565) 739 (128)
Cumulative effect of change in accounting for income taxes ........... 0 0 (659)
Stock option tax benefits ............................................ 35 21 79
Changes in assets and liabilities:
Receivables .......................................................... (9,925) 667 3,550
Inventories .......................................................... (2,416) 864 (1,621)
Other current assets ................................................. 1,621 (20) 4
Accounts payable ..................................................... 1,620 7 (3,444)
Other current liabilities ............................................ 1,808 (3,192) (1,229)
Current taxes payable ................................................ (662) 131 (13)
Other noncurrent assets and liabilities .............................. (70) (55) (50)
------- -------- --------
Net cash flows provided by operating activities ........................ 9,820 12,471 9,979
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment ........................... (4,038) (2,840) (1,309)
Proceeds from sale of property, plant and equipment .................. 108 119 55
Purchases of marketable securities ................................... 0 0 (23,450)
Proceeds from sale and maturities of marketable securities ........... 0 0 13,807
Purchases of marketable securities held-to-maturity .................. (19,880) (10,260) 0
Proceeds from sale of marketable securities held-to-maturity ......... 0 2,998 0
Proceeds from maturities of marketable securities held-to-maturity ... 16,775 7,630 0
Purchases of marketable securities available-for-sale ................ 0 (2,500) 0
Proceeds from sale of marketable securities available-for-sale ....... 3,525 3,500 0
Proceeds from maturities of marketable securities available-for-sale.. 0 2,750 0
------- -------- --------
Net cash flows provided by (used in) investing activities ............ (3,510) 1,397 (10,897)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock under stock option plan ....... 992 574 629
Three-for-two stock split fractional shares paid in cash ............. (2) 0 0
Dividends paid ....................................................... (963) 0 0
Purchases of treasury stock .......................................... (8,489) (11,640) 0
------- -------- --------
Net cash flows provided by (used in) financing activities ............ (8,462) (11,066) 629
------- -------- --------
Net increase (decrease) in cash and cash equivalents ................. (2,152) 2,802 (289)
Cash and cash equivalents, prior year ................................ 4,514 1,712 2,001
------- -------- --------
Cash and cash equivalents, current year .............................. $ 2,362 $ 4,514 $ 1,712
======= ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid .................................................... $ 8,649 $ 4,608 $ 5,647
Interest paid ........................................................ $ 91 $ 8 $ 1
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
LINDSAY MANUFACTURING CO. 19
<PAGE> 22
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
Lindsay Manufacturing Co. (the "Company" or "Lindsay") manufactures and
distributes irrigation systems and manufactures other special metal products
serving both domestic and international markets. Principal facilities are
located within the United States. The principal accounting policies of the
Company are as follows:
(1) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany balances and transactions are
eliminated in consolidation.
(2) REVENUE RECOGNITION
Revenues and related cost of revenues for all irrigation and diversified
products are recognized when title passes. Generally this occurs at the time of
shipment of product to dealers or customers.
(3) INCOME TAXES
The Company changed its method of accounting for income taxes from the deferred
method to the liability method required by SFAS 109. This new standard requires
that a deferred tax be recorded to reflect the tax expense (benefit) resulting
from the recognition of temporary differences. Temporary differences are
differences between the tax basis of assets and liabilities and their reported
amounts in the financial statements that will result in differences between
income for tax purposes and income for financial statement purposes in future
years. As permitted under the new rules, prior years' financial statements have
not been restated. This standard was adopted September 1, 1993, using the
cumulative catch-up method and increased the first quarter ended November 30,
1993 earnings by $659,000 or $0.09 per share. Management does not believe there
are uncertainties surrounding realization of the net deferred tax asset.
(4) WARRANTY COSTS
Cost of operating revenues included warranty costs of $1,073,000, $538,000 and
$344,000 for the years ended August 31, 1996, 1995 and 1994, respectively.
Provision for the estimated warranty costs is made in the period in which such
costs become probable and is periodically adjusted to reflect actual
experience.
(5) CASH EQUIVALENTS, MARKETABLE SECURITIES AND
LONG-TERM MARKETABLE SECURITIES
Cash equivalents are included at cost, which approximates market. At August 31,
1996, Lindsay's cash equivalents were held primarily by one financial
institution. Marketable securities and long-term marketable securities are
categorized as held-to-maturity or available-for-sale. Investments in the
held-to-maturity category are carried at amortized cost. Investments in the
available-for-sale category are carried at fair value with unrealized gains and
losses as a separate component of stockholders' equity. Lindsay considers all
highly liquid investments with original maturities of three months or less to
be cash equivalents, while those having maturities in excess of three months
are classified as marketable securities or as long-term marketable securities
when maturities are in excess of one year. Marketable securities and long-term
marketable securities consist of investment-grade municipal bonds.
Lindsay adopted Statement of Financial Accounting Standards (SFAS) 115
"Accounting For Certain Investments in Debt and Equity Securities" September 1,
1994. The carrying amounts of the securities used in computing unrealized and
realized gains and losses are determined by specific identification. At
September 1, 1994 and the quarter ended November 30, 1994, all investments in
debt securities were classified as held-to-maturity and carried at amortized
cost. The impact of adopting SFAS 115 resulted in no effect to stockholders'
equity or earnings.
During the quarter ended February 28, 1995, Lindsay's board authorized the
repurchase of an additional 750,000 shares of its common stock. Large blocks of
shares became available in the second quarter and were repurchased partially
with the proceeds of the sale of securities maturing June 15, 1995 and
September 1, 1995 from the held-to-maturity portfolio. The total amortized
cost, realized gain and realized loss for sales from securities classified as
held-to-maturity were $3,000,000, $1,500 and $3,750. In order to provide
flexibility for future repurchases of its common stock, Lindsay transferred
securities maturing July 1, 1995 from the held-to-maturity classification to
the available-for-sale classification. The total amortized cost, gross
unrealized holding gains, gross unrealized holding losses and the aggregate
fair value for the transfer were $3,749,000, $4,000, $2,000 and $3,751,000
respectively. Lindsay anticipates that future purchases of its common stock
will be funded out of cash equivalents, available-for-sale securities and cash
flow from operations.
On November 15, 1995 the Financial Accounting Standards Board Staff issued
a special report on statement 115 "Accounting for Certain Investments in Debt
and Equity Securities" that includes special transition provisions for the
one-time reassessment and reclassification of securities from the
held-to-maturity category during the period November 15, 1995 to December 31,
1995. Lindsay transferred securities maturing July 1, 1996 and August 1, 1996
from the held-to-maturity classification to the available-for-sale
classification on December 20, 1995. The total amortized cost, gross unrealized
holding gains, gross unrealized holding losses and the aggregate fair value for
the securities transferred are $3,518,687, $8,233, $0.0 and $3,526,920,
respectively.
There are no investments in the available-for-sale category included in
Marketable securities at August 31, 1996.
Investments in the held-to-maturity category are included in Marketable
securities ($23,926,000) and Long-term marketable securities ($28,146,000). The
total amortized cost, gross unrealized holding gains, gross unrealized holding
losses, and aggregate fair value for held-to-maturity securities are
$52,072,000, $198,000, $39,000 and $52,231,000, respectively. In the
held-to-maturity category, $23,926,000 in securities mature within one year and
$28,146,000 have maturities ranging from one to four and one-fourth years.
(6) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method for all inventories.
(7) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company's policy is to
capitalize expenditures for major renewals and betterments and to charge to
operating expenses the cost of current maintenance and
20 LINDSAY MANUFACTURING CO.
<PAGE> 23
repairs. Provisions for depreciation have been computed principally on the
straight-line method for buildings and equipment. Rates used for depreciation
are based principally on the following expected lives: buildings - 20 to 30
years; equipment - three to 10 years; other - two to 20 years; and leasehold
improvements - term of lease.
The cost and accumulated depreciation relating to assets retired or
otherwise disposed of are eliminated from the respective accounts at the time
of disposition. The resultant gain or loss is included in current operating
results.
(8) EXPORT SALES
Revenues included export sales of $19,736,000, $11,098,000 and $15,438,000 for
the years ended August 31, 1996, 1995 and 1994, respectively. Sales to Saudi
Arabia approximated 0%, 10% and 52% of export sales for the years ended August
31, 1996, 1995 and 1994, respectively. Lindsay's export sales are all in U.S.
dollars and are essentially all shipped against prepayments or backed by
irrevocable letters of credit which are confirmed by U.S. banks or other
secured means.
(9) EARNINGS PER SHARE
Primary earnings per share are calculated by dividing the earnings by the
weighted average number of common and common equivalent (stock options) shares
outstanding of 6,767,252, 7,081,473 and 7,296,759 for the years ended August
31, 1996, 1995 and 1994. The difference between shares for primary and fully
diluted earnings per share was not significant in any period.
(10) STOCK SPLIT
On January 29, 1996, the Board of Directors declared a three-for-two split of
Lindsay's common stock effective February 22, 1996, to stockholders of record
on February 7, 1996. Accordingly, the average number of shares outstanding, per
share information and stock option data have been adjusted to reflect the stock
split.
(11) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
B. NON-OPERATING ITEMS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
For the years ended August 31,
------------------------------
$ in thousands 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Other income, net:
Royalty income ....................... $ 0 $272 $132
Gain (loss) on sales of fixed assets.. 83 101 (4)
State economic development
tax credits ........................ 1,433 0 0
Finance charges ...................... 77 45 137
All other, net ....................... 27 20 46
- ----------------------------------------------------------------------------
Total other income, net .............. $1,620 $438 $311
============================================================================
</TABLE>
C. INCOME TAX PROVISION
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
For the years ended August 31,
----------------------------------
$ in thousands 1996 1995 1994
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Current taxes ............... $7,987 $4,643 $5,661
Deferred taxes .............. (565) 739 (128)
- ---------------------------------------------------------------------
Total income tax provision .. $7,422 $5,382 $5,533
=====================================================================
</TABLE>
Total tax provisions resulted in effective tax rates differing from that of the
statutory federal income tax rates. The reasons for these differences are:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
For the years ended August 31,
-----------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
$ in thousands Amount % Amount % Amount %
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory rate ........ $8,379 35.0 $5,860 34.3 $5,734 34.2
State and local taxes ...... 157 0.7 594 3.5 619 3.7
Qualified export activity .. (195) (0.8) (86) (0.5) (81) (0.5)
Municipal bonds ............ (793) (3.3) (822) (4.8) (740) (4.4)
Other ...................... (126) (0.6) (164) (1.0) 1 0.0
- -----------------------------------------------------------------------------
Total ...................... $7,422 31.0 $5,382 31.5 $5,533 33.0
=============================================================================
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
For the years ended August 31,
----------------------------------
$ in thousands 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Book depreciation in excess of tax ......... $ 89 $ 79
Employee benefits .......................... 1,412 1,159
Inventory adjustments ...................... 158 137
Changes in accruals not currently deductible
for taxes ................................ 1,710 1,429
- -------------------------------------------------------------------------------
Net deferred tax assets .................... $3,369 $2,804
===============================================================================
</TABLE>
D. RECEIVABLES
<TABLE>
<CAPTION>
- ---------------------------------------------------------
August 31,
----------------
$ in thousands 1996 1995
- ---------------------------------------------------------
<S> <C> <C>
Trade accounts and notes .............. $20,851 $10,926
Less allowance for doubtful accounts .. 723 573
- ---------------------------------------------------------
Net receivables ....................... $20,128 $10,353
=========================================================
</TABLE>
E. INVENTORIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------
August 31,
---------------------
$ in thousands 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
First-in, first-out (FIFO) inventory .. $12,060 $9,626
LIFO reserves ......................... (3,570) (3,570)
Obsolescence reserve .................. (690) (672)
- --------------------------------------------------------------
Total Inventories ..................... $7,800 $5,384
==============================================================
</TABLE>
LINDSAY MANUFACTURING CO. 21
<PAGE> 24
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------
August 31,
-------------
1996 1995
- -------------------------------------------
<S> <C> <C>
Raw materials .............. 16% 21%
Work in process ............ 8% 7%
Purchased parts ............ 32% 28%
Finished goods ............. 44% 44%
===========================================
</TABLE>
F. PROPERTY, PLANT & EQUIPMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------
August 31,
------------------
$ in thousands 1996 1995
- --------------------------------------------------------
<S> <C> <C>
Land ................................ $ 70 $ 66
Buildings ........................... 4,756 4,345
Equipment ........................... 22,563 18,944
Other ............................... 1,859 2,337
- --------------------------------------------------------
29,248 25,692
Less accumulated depreciation ....... 19,557 18,528
- --------------------------------------------------------
Property, plant and equipment, net .. $ 9,691 $ 7,164
========================================================
</TABLE>
G. OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
August 31,
------------------
$ in thousands 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Current state and federal income taxes ..... $ 707 $ 1,369
Payroll and vacation ....................... 3,150 2,633
Retirement plans ........................... 1,442 1,203
Taxes, other than income ................... 209 209
Insurance .................................. 1,557 1,632
Dealer service, commission and related items 2,913 977
Export freight ............................. 237 153
Warranty ................................... 580 122
Legal settlements .......................... 300 300
Environmental .............................. 322 1,914
Other ...................................... 1,365 1,124
- ---------------------------------------------------------------
Total other current liabilities ............ $12,782 $11,636
===============================================================
</TABLE>
Environmental liabilities at August 31, 1996, reflect a $1.8 million
reclassification of a contra asset of an insurance recovery included in other
current assets.
H. CONTINGENCIES
The Company and its subsidiaries are defendants in various legal actions
arising in the course of their business activities. During fiscal 1996, Lindsay
substantially completed certain environmental remediation efforts at its
manufacturing facility. Lindsay believes that its insurer should cover the
costs of remediation. The insurer reduced its reimbursement of remediation
costs in early 1990. In late 1990, Lindsay filed suit against the insurer. The
insurer completely stopped reimbursement of remediation costs in 1991 and in
1992, the insurer filed a counterclaim against Lindsay for previously
reimbursed remediation costs. In December 1995, the court dismissed Lindsay's
suit against the insurer and entered a judgment in the amount of $2.4 million
in favor of the insurer for which the Company has not made a provision.Lindsay
is in the process of appealing the dismissal of its case against the insurer
and the judgment against Lindsay. In the opinion of management, an unfavorable
outcome with respect to any or all of these matters will not result in a
material adverse effect on Lindsay's consolidated finanical position, results
of operations or cash flows.
I. RETIREMENT PLANS
During 1996, Lindsay adopted an amended and restated defined contribution
profit-sharing plan to include a 401(k) provision covering all employees.
Participants may voluntarily contribute a percentage of compensation, but not
in excess of the maximum allowed under the Internal Revenue Code. The plan
provides for a matching contribution by Lindsay. Additionally the plan provides
for Lindsay to contribute a discretionary amount when warranted by results of
operations. The contribution is allocated to participants based upon their
respective percentage of wages to total wages of all participants in the plan.
Lindsay's total contributions charged to expense under this plan was $750,000
for each of the years ended August 1996, 1995 and 1994.
A supplementary non-qualified, non-funded retirement plan for certain key
executives is also maintained. Plan benefits are based on the executive's
average total compensation during the three highest compensation years of
employment. This unfunded supplemental retirement plan is not subject to the
minimum funding requirements of ERISA.
Cost and the assumptions for the Company's supplemental retirement plan
includes the following components:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the years ended August 31,
------------------------------
$ in thousands 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost ............................ $ 69 $ 66 $ 61
Interest cost ........................... 101 100 88
Net amortization and deferral ........... 69 69 69
- ---------------------------------------------------------------------------
Net cost ................................ $ 239 $ 235 $ 218
- ---------------------------------------------------------------------------
Discount rate ........................... 7.00% 7.00% 7.75%
Assumed rates of compensation increases 3.50% 3.50% 3.50%
===========================================================================
</TABLE>
The funded status and the amounts recognized in the Company's
consolidated balance sheet are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
August 31,
-----------------------------
$ in thousands 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation ................... $1,021 $ 950 $ 701
Non-vested benefit obligation ............... 123 108 119
Accumulated benefit obligation .............. 1,144 1,058 820
Projected benefit obligation ................. 1,612 1,438 1,282
Fair value of plan assets .................... 0 0 0
Unrecognized net gain (loss) ................. 6 10 0
Unrecognized prior year service cost ......... 0 0 0
Unrecognized net obligation/(asset) at
transition .................................. 926 995 1,064
Adjustment to recognize minimum liability .... 452 605 602
Liability recognized in the consolidated
balance sheet ............................... $1,144 $1,058 $ 820
===============================================================================
</TABLE>
22 LINDSAY MANUFACTURING CO.
<PAGE> 25
J. STOCK OPTIONS
The Company adopted a Long-Term Incentive Plan in October 1988, (1988 Plan)
which provides for awards of stock options, stock appreciation rights, stock
indemnification rights and restricted stock to officers and key employees.
Options may be granted at, above or below the fair market value of the stock at
the date of the grant and are exercisable within periods specified by the
Company's Compensation Committee.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1988 Plan: Number of Shares Average Price
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at August 31, 1993 .......... 369,975 $6.60
Exercised ............................ (31,924) 6.07
Outstanding at August 31, 1994 .......... 338,051 6.65
Exercisable at August 31, 1994 .......... 236,801 6.69
Available for grant at August 31, 1994 .. 103,599
Outstanding at August 31, 1994 .......... 338,051 6.65
Exercised ............................ (9,210) 7.44
Outstanding at August 31, 1995 .......... 328,841 6.63
Exercisable at August 31, 1995 .......... 278,216 6.64
Available for grant at August 31, 1995 .. 56,915
Outstanding at August 31, 1995 .......... 328,841 6.63
Exercised ............................ (25,485) 6.44
Cancelled ............................ (1,125) 6.56
Outstanding at August 31, 1996 .......... 302,231 6.65
Exercisable at August 31, 1996 .......... 302,231 $6.65
Available for grant at August 31, 1996 .. 37,858
================================================================================
</TABLE>
In February 1992, the shareholders approved the 1991 Long-Term Incentive Plan
(1991 Plan) which is similar in most material respects to the 1988 Plan.
Additionally, the 1991 Plan provides for non-qualified stock options to
directors who are not officers or employees of the Company or its subsidiaries.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1991 Plan: Number of Shares Average Price
- --------------------------------------------------------------------------------
<S> <C> <C>
Officers, Directors and Key Employees:
Outstanding at August 31, 1993 .......... 168,000 $19.85
Granted .............................. 46,500 20.70
Exercised ............................ (28,800) 20.48
Outstanding at August 31, 1994 .......... 185,700 19.97
Exercisable at August 31, 1994 .......... 62,250 19.33
Available for grant at August 31, 1994 .. 384,355
Outstanding at August 31, 1994 .......... 185,700 19.97
Granted .............................. 93,000 19.08
Exercised ............................ (28,500) 19.66
Outstanding at August 31, 1995 .......... 250,200 19.67
Exercisable at August 31, 1995 .......... 100,050 19.55
Available for grant at August 31, 1995 .. 277,500
Outstanding at August 31, 1995 .......... 250,200 19.67
Granted .............................. 48,750 24.88
Exercised ............................ (49,613) 23.77
Cancelled ............................ (15,000) 21.17
Outstanding at August 31, 1996 .......... 234,337 19.79
Exercisable at August 31, 1996 .......... 132,037 $19.52
Available for grant at August 31, 1996 .. 228,750
================================================================================
</TABLE>
In October 1995, FASB issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123), SFAS 123 establishes
financial accounting and reporting standards for stock-based employee
compensation plans and transactions in which goods or services are the
consideration received for the issuance of equity instruments. This statement
requires that an employer's financial statements include certain disclosures
about stock-based employee compensation regardless of the method used to
account for them. Adoption is required for fiscal years, beginning after
December 15, 1995, Lindsay's fiscal 1997. Lindsay expects to continue its
accounting in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees".
K. INDUSTRY SEGMENT INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the years ended August 31,
------------------------------------
$ in millions 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues:
Irrigation ............................ $115.9 $ 88.8 $ 94.3
Diversified products .................. 20.3 23.0 18.4
- ------------------------------------------------------------------------------
Total operating revenues ............... $136.2 $111.8 $112.7
- ------------------------------------------------------------------------------
Operating earnings:
Irrigation ............................ $ 24.0 $ 16.4 $ 17.2
Diversified products .................. 4.2 5.2 4.2
- ------------------------------------------------------------------------------
Segment operating earnings ............. 28.2 21.6 21.4
Unallocated general & administrative and
engineering & research expenses ....... (8.8) (7.7) (7.2)
Interest and other income, net ......... 4.5 3.2 2.6
- ------------------------------------------------------------------------------
Earnings before income taxes ........... $ 23.9 $ 17.1 $ 16.8
- ------------------------------------------------------------------------------
Identifiable assets:
Irrigation ............................ $ 32.1 $ 18.8 $ 19.6
Diversified products .................. 4.9 5.2 4.2
Corporate ............................. 59.8 62.1 64.6
- ------------------------------------------------------------------------------
Total identifiable assets .............. $ 96.8 $ 86.1 $ 88.4
==============================================================================
</TABLE>
Segment operating earnings are based on net sales less identifiable
operating expenses. Identifiable operating expenses do not include general and
administrative expenses (which include corporate expenses) or engineering and
research expenses. Corporate assets are principally cash and cash equivalents,
short- and long-term marketable securities, deferred income taxes and certain
property, plant and equipment.
Capital expenditures and depreciation have not been allocated to industry
segments due to the arbitrary and inexact nature of the allocation process for
Lindsay which operates out of a single manufacturing facility. For the same
reasons, general and administrative and engineering and research expenses, and
interest and other income, net have not been allocated.
LINDSAY MANUFACTURING CO. 23
<PAGE> 26
DIRECTORS
HOWARD G. BUFFETT
Director since 1995
Chairman of the Board, The GSI Group;
Director: The GSI Group; Berkshire Hathaway, Inc.;
Coca-Cola Enterprises, Inc.
JOHN W. CROGHAN
Director since 1989
Chairman, Lincoln Capital Management Company;
Director: St. Paul Federal Bancorp for Savings Inc.
J. DAVID DUNN
Director since 1988
President, The Dunn Group, LLC
GARY D. PARKER
Director since 1978
President, Chief Executive Officer and
Chairman of the Board
Joined Lindsay in 1971; Vice President-Marketing 1975;
Executive Vice President 1978; President & CEO 1984;
Chairman of the Board 1989.
GEORGE W. PLOSSL
Director since 1989
President, G.W. Plossl & Co., Inc.
OFFICERS
EDUARDO R. ENRIQUEZ
Vice President-International
Joined Lindsay in 1981; Vice President-International 1986.
BRUCE C. KARSK
Vice President-Finance, Treasurer and Secretary
Joined Lindsay in 1979 as Corporate Accounting Manager;
Controller 1981; Vice President-Finance,
Treasurer and Secretary 1984.
CLIFFORD P. LOSEKE
Vice President-Manufacturing
Joined Lindsay in 1971 as Plant Manager;
Vice President-Manufacturing 1975
CHARLES H. MEIS
Vice President-Engineering
Joined Lindsay in 1971 as a Product Engineer;
Director of Engineering 1972;
Vice President-Engineering 1975
ROBERT S. SNOOZY
Vice President-Sales and Marketing
Joined Lindsay in 1973 as a Research Engineer;
Vice President-Marketing 1978;
Vice President-Sales and Marketing 1986.
24 LINDSAY MANUFACTURING CO.
<PAGE> 27
INVESTOR INFORMATION
ANNUAL MEETING
All shareholders are invited to attend our annual meeting, which will be held
on February 7, 1997 at 1:30 p.m. at The Cornhusker Hotel 333 South 13th Street,
Lincoln, Nebraska. We look forward to meeting shareholders and answering
questions at the meeting. Any shareholder who will be unable to attend is
encouraged to send questions and comments, in writing, to Gary D. Parker,
President, Chief Executive Officer and Chairman of the Board, at Lindsay's
corporate offices.
QUARTERLY CALENDAR
The Company operates on a fiscal year ending August 31. Fiscal 1997 quarter-end
dates are November 30, 1996, February 28, 1997, May 31, 1997 and August 31,
1997. Quarterly earnings are announced approximately three to five weeks after
the end of each quarter and audited results are announced four to six weeks
after year end.
FORM 10-K
Shareholders who wish to obtain, free of charge, a copy of Lindsay
Manufacturing Co.'s annual report on Form 10-K for the year ended August 31,
1996, as filed with the Securities and Exchange Commission, may do so by
writing Bruce C. Karsk, Vice President-Finance, Treasurer and Secretary, at
Lindsay's corporate offices.
TRANSFER AGENT AND REGISTRAR
First National Bank of Omaha
One First National Center
Omaha, NE 68102-1596
(402) 341-0500
RESEARCH REPORTS ISSUED BY
Robert W. Baird & Co. Inc.
Barrington Research Associates
George K. Baum & Company
Dain Bosworth Incorporated
Fahnestock & Co. Inc.
Mesirow Financial, Inc.
Select Equity Group Research
Standard and Poors
Value Line Investment Survey
STOCK MARKET INFORMATION
Lindsay common stock is traded on the Nasdaq National Market under the ticker
symbol LINZ. Stock price quotations are printed daily in major newspapers.
As of August 31, 1996, there were 6,340,141 shares of common stock
outstanding, held by approximately 250 shareholders of record and an estimated
2,500 shareholders for whom securities firms acted as nominees.
As of August 31, 1996, the following securities firms indicated they were
maintaining an inventory of Lindsay common stock and acting as market makers:
Robert W. Baird & Co. Inc.
George K. Baum & Company
Herzog, Heine, Geduld, Inc.
Jefferies & Company, Inc.
Merrill Lynch, Pierce, Fenner & Smith Inc.
Mayer & Schweitzer Inc.
CONCERNING FORWARD LOOKING STATEMENTS
This Annual Report, including the President's letter, Management's Discussion
and Analysis and other sections, contains forward looking statements that are
subject to risks and uncertainties and 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
our Company and those statements preceded by, followed by or include the words
"future", "position", "anticipate(s)", "expect", "believe(s)", "see", "plan",
"further improve", "outlook", "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.
You should understand that the following important factors, in addition to
those discussed elsewhere in this document, could affect the future results of
the Company and could cause those results to differ materially from those
expressed in our forward looking statements; availability of and price of raw
materials, product pricing, competitive environment and related domestic and
international market conditions, operating efficiencies and actions of domestic
and foreign governments. Any changes in such factors could result in
significantly different results.
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
Omaha, Nebraska
FOR FURTHER INFORMATION
Shareholders and prospective investors are welcome to call or write Lindsay
Manufacturing Co. with questions or requests for additional information. Please
direct inquiries to:
Bruce C. Karsk
Vice President-Finance, Treasurer and Secretary
Lindsay Manufacturing Co.
East Highway 91
P.O. Box 156
Lindsay, Nebraska 68644
(402) 428-2131
<PAGE> 28
[LINDSAY LOGO]
LINDSAY MANUFACTURING CO.
East Highway 91
Lindsay, Nebraska 68644
(402) 428-2131
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Lindsay Manufacturing Co. on Form S-8 (File No. 333-00769) of our report dated
October 9, 1996 on our audits of the consolidated financial statements and
financial statement schedule of Lindsay Manufacturing Co., as of August 31,
1996 and 1995 and for each of the three years in the period ended August 31,
1996, which report is incorporated by reference in the Company's Annual Report
on Form 10-K for the year ended August 31, 1996.
COOPERS & LYBRAND L.L.P.
Omaha, Nebraska
November 27, 1996
-45-
<PAGE> 1
EXHIBIT 24(b)
POWER OF ATTORNEY
Howard G. Buffett, whose signature appears below, hereby constitutes Gary
D. Parker and Bruce C. Karsk, and each of them singly, as my true and lawful
attorney-in-fact, with full power to them and each of them to sign for me and
in my name and capacity indicated below any and all instruments, reports and
amendments which said attorney-in-fact may deem necessary or advisable to
enable Lindsay Manufacturing Co., (the "Company") to comply with the Securities
Exchange Commission under the 1934 Act, including specifically, but without
limitation, power and authority to sign for me in my name and capacity
indicated below, any and all of the Company's Annual Report on Form 10-K,
Quarterly Report on Form 10-Q, Report by Issuers of Securities Quoted on NASDAQ
on Form 10-C, Notification of late Filing on Form 12b-25 and Amendment to
Application or Report on Form 8; and I do hereby ratify and confirm all that
the said attorneys-in-fact shall do or cause to be done by virtue of this Power
of Attorney.
Executed below by me in the capacity and on the date indicated.
Signature Capacity Date
- --------- -------- ----
Howard G. Buffett Director 2/7/96
- ----------------------- ------------ ------
Howard G. Buffett
mam
-46-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 2,362
<SECURITIES> 23,926
<RECEIVABLES> 20,128
<ALLOWANCES> 0
<INVENTORY> 7,800
<CURRENT-ASSETS> 57,855
<PP&E> 29,248
<DEPRECIATION> 19,557
<TOTAL-ASSETS> 96,823
<CURRENT-LIABILITIES> 18,697
<BONDS> 0
0
0
<COMMON> 7,328
<OTHER-SE> 69,506
<TOTAL-LIABILITY-AND-EQUITY> 96,823
<SALES> 136,233
<TOTAL-REVENUES> 136,233
<CGS> 103,486
<TOTAL-COSTS> 103,486
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23,940
<INCOME-TAX> 7,422
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,518
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.43
</TABLE>
