<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ---- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996 OR
- ---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-17116
Lindsay Manufacturing Co.
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(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)
402-428-2131
-------------------------------
(Registrant's telephone number,
including area code)
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
--- ---
Common Stock, $1.00 par value 6,416,844
- ----------------------------- -------------------------------
Title of Class Outstanding as of June 19, 1996
Exhibit index is located on page 2.
Total number of pages 15.
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<PAGE> 2
LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
--------
Part I - Financial Information
Consolidated Balance Sheets, May 31, 1996 and 1995 3
and August 31, 1995
Consolidated Statements of Operations for the three 4
months and nine months ended May 31, 1996 and 1995
Consolidated Statements of Cash Flows for the nine 5
months ended May 31, 1996 and 1995
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Results of Operations 9-12
and Financial Position
Part II - Other Information
Item 1. Legal Proceedings 12-13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index
11 - Statement re Computation of Per Share Earnings 15
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<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Lindsay Manufacturing Co.
CONSOLIDATED BALANCE SHEETS
May 31, 1996 and 1995 and August 31, 1995
(in thousands, except share amounts)
------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
May May August
1996 1995 1995
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 2,869 $ 6,390 $ 4,514
Marketable securities...................................... 21,857 11,005 18,792
Receivables................................................ 20,583 14,139 10,353
Inventories................................................ 7,974 6,220 5,384
Deferred income taxes...................................... 3,030 2,876 2,804
Other current assets....................................... 2,037 2,038 1,891
---------- ---------- ----------
Total current assets..................................... 58,350 42,668 43,738
Long-term marketable securities.............................. 29,158 40,878 34,003
Property, plant and equipment, net........................... 9,393 6,382 7,164
Other noncurrent assets...................................... 1,221 1,151 1,155
---------- ---------- ----------
Total assets................................................. $ 98,122 $ 91,079 $ 86,060
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade.................................... $ 5,896 $ 4,624 $ 4,295
Other current liabilities.................................. 13,392 12,910 11,636
---------- ---------- ----------
Total current liabilities................................ 19,288 17,534 15,931
Other noncurrent liabilities................................. 1,355 1,342 1,386
---------- ---------- ----------
Total liabilities............................................ 20,643 18,876 17,317
---------- ---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in
May 1996 and 1995 and August 1995)
Common stock, ($1 par value, 10,000,000 shares
authorized, 7,320,414, 4,840,638 and 4,842,805 shares
issued in May 1996 and 1995 and August 1995............ 7,320 4,841 4,843
Capital in excess of stated value........................ 2,754 4,394 4,412
Retained earnings........................................ 85,810 70,584 72,447
Net unrealized holding gains............................. 0 1 0
Less treasury stock, (at cost, 907,120, 318,330 and
474,880 shares in May 1996 and 1995 and August 1995)... (18,405) (7,617) (12,959)
---------- ---------- ----------
Total stockholders' equity................................... 77,479 72,203 68,743
---------- ---------- ----------
Total liabilities and stockholders' equity................... $ 98,122 $ 91,079 $ 86,060
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 4
<TABLE>
<CAPTION>
Lindsay Manufacturing Co.
CONSOLDATED STATEMENTS OF OPERATIONS
For the three months and nine months ended May 31, 1996 and 1995
(in thousands, except per share amounts)
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------- --------------------------
May May May May
1996 1995 1996 1995
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Operating revenues................................. $ 41,139 $ 37,451 $ 106,605 $ 89,943
Cost of operating revenues......................... 30,534 28,040 79,775 68,973
---------- ---------- ---------- ----------
Gross Profit....................................... 10,605 9,411 26,830 20,970
---------- ---------- ---------- ----------
Operating expenses:
Selling expenses........................... 1,068 979 3,129 3,064
General and administrative expense......... 1,661 1,701 4,966 4,615
Engineering and research expense........... 364 354 1,055 979
---------- ---------- ---------- ----------
Total operating expenses............................ 3,093 3,034 9,150 8,658
---------- ---------- ---------- ----------
Operating income.................................... 7,512 6,377 17,680 12,312
Interest income, net................................ 615 674 1,987 2,028
Other income, net................................... 43 65 348 132
---------- ---------- ---------- ----------
Earnings before income taxes........................ 8,170 7,116 20,015 14,472
Income tax provision................................ 2,451 2,277 6,005 4,631
---------- ---------- ---------- ----------
Net earnings........................................ 5,719 4,839 14,010 9,841
========== ========== ========== ==========
Net earnings per share:
Primary.......................................... $ 0.84 $ 0.69 $ 2.07 $ 1.38
========== ========== ========== ==========
Fully diluted................................... $ 0.84 $ 0.69 $ 2.05 $ 1.38
========== ========== ========== ==========
Cash dividends per share............................ $ 0.05 $ 0.00 $ 0.10 $ 0.00
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 5
<TABLE>
<CAPTION>
Lindsay Manufacturing Co.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 1996 and 1995
(in thousands)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
May May
1996 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,010 $ 9,841
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,084 920
Amortization of marketable securities premiums, net . . . . . . . . . . . . . . . . . . . . 247 269
Gain on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54) (59)
Loss on sale of marketable securities held-to-maturity . . . . . . . . . . . . . . . . . . 0 2
Loss on maturities of marketable securities held-to-maturity . . . . . . . . . . . . . . . 7 0
Gain on sale of marketable securities available-for-sale . . . . . . . . . . . . . . . . . (8) (1)
Provision for uncollectible accounts receivable . . . . . . . . . . . . . . . . . . . . . . (65) 45
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (226) 667
Changes in assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,165) (3,104)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,590) 28
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (146) (167)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,601 336
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,946 (2,506)
Current taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (190) 719
Other noncurrent assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (97) (95)
--------- ---------
Net cash flow provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . 5,354 6,895
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . (3,338) (1,715)
Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . 79 68
Purchases of marketable securities held-to-maturity . . . . . . . . . . . . . . . . . . . . (11,744) (6,361)
Proceeds from sale of marketable securities held-to-maturity . . . . . . . . . . . . . . . 0 2,998
Proceeds from maturities of marketable securities held-to-maturity . . . . . . . . . . . . 9,753 7,515
Proceeds from sale of marketable securities available-for-sale . . . . . . . . . . . . . . 3,525 1,001
--------- --------
Net cash flow provided (used in ) investing activities . . . . . . . . . . . . . . . . . . (1,725) 3,506
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock under stock option plan . . . . . . . . . . . . . . 821 575
Three-for-two stock split fractional shares paid in cash . . . . . . . . . . . . . . . . . (2) 0
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (647) 0
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,446) (6,298)
---------- --------
Net cash flow used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . (5,274) (5,723)
--------- --------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . (1,645) 4,678
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . 4,514 1,712
--------- ---------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,869 $ 6,390
========= =========
Supplemental Cash Flow Information:
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,464 $ 3,323
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86 $ 8
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE> 6
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
The consolidated financial statements included herein are presented
in accordance with the requirements of Form 10-Q and consequently
do not include all of the disclosures normally required by
generally accepted accounting principles or those normally made in
the registrant's annual Form 10-K filing. These consolidated
financial statements should be read in conjunction with the
financial statements and notes thereto included in the Lindsay
Manufacturing Co. (Lindsay) August 31, 1995 Annual Report to
Stockholders.
In the opinion of management the unaudited consolidated financial
statements of Lindsay reflect all adjustments of a normal
recurring nature necessary to present a fair statement of the
results of operations for the respective interim periods. The
results for interim periods are not necessarily indicative of
trends or results expected for a full year.
2. Cash Equivalents, Marketable Securities and Long-Term
Marketable Securities
Cash equivalents are included at cost, which approximates market.
At May 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 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.
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 December 20, 1996. 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 May 31, 1996. Investments in
the held-to-maturity category are included in Marketable securities
($21.8 million) and Long-term marketable securities ($29.2
million). The total amortized cost, gross unrealized holding
gains, gross unrealized holding losses, and aggregate fair value
for held-to-maturity securities are $51.0 million, $0.2 million,
$0.0 million, and $51.2 million, respectively. There have not been
any sales of held-to-maturity securities for the first nine months
of Fiscal 1996. In the held-to-maturity category, $21.8 million in
securities mature within one year and $29.2 million have maturities
ranging from one to four and one-half years.
-6-
<PAGE> 7
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. 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.
<TABLE>
<CAPTION>
(in thousands)
----------------------------------
May May August
1996 1995 1995
------- -------- --------
<S> <C> <C> <C>
Total manufactured goods
First-in, first-out inventory $11,539 $10,345 $ 9,626
LIFO reserves (2,948) (3,459) (3,570)
Obsolescence reserve (617) (666) (672)
-------- --------- ---------
Total inventories $ 7,974 $ 6,220 $ 5,384
======== ======== ========
The estimated percentage distribution between major classes of
inventory before reserves is as follows:
May May August
1996 1995 1995
-------- -------- --------
Raw materials 21% 21% 21%
Work in process 7% 6% 7%
Purchased parts 28% 20% 28%
Finished goods 44% 53% 44%
</TABLE>
4 Property, Plant and Equipment
Property, plant and equipment are stated at cost.
<TABLE>
<CAPTION>
(in thousands)
------------------------------------
May May August
1996 1995 1995
------- ------- ---------
<S> <C> <C> <C>
Land $ 70 $ 66 $ 66
Buildings 4,426 4,248 4,345
Equipment 19,858 17,879 18,944
Other 4,344 2,532 2,337
------- ------- -------
28,698 24,725 25,692
Less accumulated depreciation 19,305 18,343 18,528
------- ------- -------
Property, plant and equipment, net $ 9,393 $ 6,382 $ 7,164
======= ======= =======
</TABLE>
5. Commitments and Contingent Liabilities
The consolidated balance sheet reflects a reserve of $2.1 million
at May 31, 1996, compared to $1.9 million at August 31, 1995,
reflecting an increase to the reserve of $0.3 million and costs of
$0.1 million during the first quarter of Fiscal 1996 for continued
implementation of environmental remediation plans for aquifer and
soil and shallow groundwater contaminations. Additionally, second
and third quarter costs of $0.5 million were expensed on the
consolidated statements of operations and were not reflected in the
reserve on
-7-
<PAGE> 8
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Commitments and Contingent Liabilities - Continued
the consolidated balance sheet. 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
judgement in the amount of $2.4 million in favor of the insurer.
Lindsay is in the process of appealing the dismissal of it's case
against the insurer and the judgement against Lindsay. The Company
has recorded a probable insurance recovery in other current assets.
In the opinion of management, resolution of these matters, for
which provision has not been made, will not have a material adverse
affect on Lindsay's consolidated financial condition, however, an
adverse outcome of these matters could have a material effect on
quarterly or annual operating results or cash flows when resolved
in a future period.
The Company and its subsidiaries are defendants in various legal
actions arising from other issues in the course of their business
activities. In the opinion of management, resolution of these
actions will not result in a material adverse effect on Lindsay's
consolidated financial position, results of operations or cash
flows.
Lindsay carries property insurance, with a $10,000 deductible, for
replacement value of all of its buildings and non-auto equipment.
6. Net Earnings Per Share
Primary net earnings per share are calculated by dividing the
earnings by the weighted average number of common and common
equivalent (stock options) shares outstanding of 6,804,187 for the
three months and 6,771,402 for the nine months ended May 31, 1996
as compared to 7,027,971 for the three months and 7,134,918 for the
nine months ended May 31, 1995. The difference between shares for
primary and fully diluted earnings per share was not significant in
any period. On January 29, 1996, the Board of Directors declared a
three-for-two split of Lindsay's common stock effective February
22, 1996, to stockholders of record on February 7, 1996.
Accordingly, the average number of shares outstanding, per share
information and stock option data have been adjusted to reflect the
stock split.
-8-
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table provides highlights for the three month and
nine month periods indicated of Fiscal Year 1996 as compared to the
same periods of Fiscal Year 1995.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- -------------------------------------
Percent Percent
Increase Increase
($ in thousands) 5/31/96 5/31/95 (Decrease) 5/31/96 5/31/95 (Decrease)
- --------------------------------------------------------------------------------------------------------------------------
<S>> <C> <C> <C> <C> <C> <C>
Consolidated
Operating Revenues .....................$41,139 $37,451 9.8 % $106,605 $89,943 18.5%
Cost of Operating Revenues .............$30,534 $28,040 8.9 $ 79,775 $68,973 15.7
Gross Profit ...........................$10,605 $ 9,411 12.7 $ 26,830 $20,970 27.9
Gross Margin ........................... 25.8% 25.1% 25.2% 23.3%
Selling, Eng. & Research, and
G&A Expense ..........................$ 3,093 $ 3,034 1.9 $ 9,150 $ 8,658 5.7
Operating Income .......................$ 7,512 $ 6,377 17.8 $ 17,680 $12,312 43.6
Operating Margin ....................... 18.3% 17.0% 16.6% 13.7%
Interest Income, net ...................$ 615 $ 674 (8.8) $ 1,987 $ 2,028 (2.0)
Other Income, net ......................$ 43 $ 65 (33.8) $ 348 $ 132 163.6
Income Tax Provision ...................$ 2,451 $ 2,277 7.6 $ 6,005 $ 4,631 29.7
Effective Income Tax Rate .............. 30.0% 32.0% 30.0% 32.0%
Net Earnings............................$ 5,719 $ 4,839 18.2% $ 14,010 $ 9,841 42.4%
</TABLE>
As the above table displays, operating revenues for the three month
period ended May 31, 1996 increased 9.8 percent ($3.7 million) from
the comparable period of the prior year. For the nine month period
ended May 31, 1996, operating revenues were up 18.5 percent ($16.7
million). The increase in third quarter revenue was the net result
of an 18 percent ($4.8 million) increase in North American
irrigation equipment revenues, no change in export irrigation
equipment revenues and a 17 percent ($1.1 million) decrease in
diversified products and other revenues. For the nine month
period, fiscal 1996 North American irrigation equipment and export
irrigation equipment revenues were up 21 percent ($13.6 million)
and 75 percent ($5.2 million), respectively, as compared to the
prior year. Diversified products and other revenues for the nine
month period were down 11 percent ($2.1 million).
North American irrigation equipment revenues for both the three and
nine month periods of fiscal 1996 were favorably impacted by the
long term demand drivers of continued farmer emphasis on conserving
water, energy, and labor. Additionally, strong farm commodity
prices favorably impacted North American activity for the three and
nine month periods.
As indicated above, export irrigation equipment revenues for the
third quarter of fiscal 1996 were equal to those of the third
quarter of the prior year. The increase in export irrigation
equipment revenues for the nine month period of fiscal 1996 was due
to stronger sales activity in our Western European and Latin
American markets.
-9-
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
The reduction in year-to-date fiscal 1996 diversified products and
other revenues was due primarily to lower sales of large diameter
steel tubing. For the third quarter of fiscal 1996, the reduction
in diversified products and other revenue was caused by lower sales
to both our outsource manufacturing and our large diameter steel
tubing customers.
Gross margin for the three months ended May 31, 1996, as a percent
of operating revenues, was 25.8 percent as compared to 25.1 percent
of the prior year's comparative period. For the nine months ended
May 31, 1996, gross margin as a percent of operating revenues was
25.2 percent as compared to 23.3 percent for the nine months ended
May 31, 1995. Strong demand for irrigation equipment in the North
American market for both the three and nine month periods resulted
in a continued favorable pricing environment. Additionally, raw
material costs, in total, increased only slightly during both the
three and nine month periods of the current year.
Selling, general and administrative, and engineering and research
expenses for the three month period ended May 31, 1996, were $3.1
million as compared to $3.0 million during the prior year's
comparative period. For the nine month period, fiscal 1996
selling, general and administrative, and engineering and research
expenses totaled $9.2 million as compared to $8.7 million for the
first nine months of fiscal 1995. Higher wage & salary and
advertising expenditures offset partially by lower insurance and
legal fee expenditures comprise the majority of the increased
expenses for both the three and nine month periods.
The effective tax rate for both the three month and nine month
periods ended May 31, 1996 was 30.0 percent. This compares to
effective tax rate of 32.0 percent for both the comparable three
month and nine month periods of the prior year. Due to the tax
free status of interest earned on municipal bonds (for federal
income tax purposes) and state economic development tax credits,
Lindsay continues to benefit from an effective tax rate that is
lower than the combined federal and state statutory rates
(currently estimated at 38.5 percent).
FINANCIAL CONDITION
Lindsay's equity increased to $77.5 million at May 31, 1996 from
$68.7 million at August 31, 1995, due to its net earnings of $14.0
million, less $5.4 million used to repurchase 194,800 (split
adjusted) shares of common stock per Lindsay's previously announced
stock repurchase plan, plus the proceeds of $0.8 million from the
issuance of 57,051 shares of common stock under Lindsay's employee
stock option plan, less dividends paid of $0.6 million. Lindsay
announced the initiation of a regular cash dividend on February 7,
1996. A 5-cent dividend was paid March 15, 1996 and May 31, 1996.
Lindsay's equity at May 31, 1995 was $72.2 million.
Lindsay's cash and short-term marketable securities totaled $24.7
million at May 31, 1996, as compared to $23.3 million at August 31,
1995, and $17.4 million at May 31, 1995. Receivables of $20.6
million at May 31, 1996 increased $10.2 million from $10.4 million
at August 31, 1995 and $6.5 million from $14.1 million at May 31,
1995 due to a deferred payment program which was part of Lindsay's
1996 marketing plan. Inventories at May 31, 1996 totaled
-10-
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
$8.0 million, higher than their $5.4 million balance at August 31, 1995
and their $6.2 million balance at May 31, 1995, but continuing in an acceptable
range. At May 31, 1996, Lindsay had $29.2 million invested in long-term
marketable securities which represent intermediate term (one to four and one-
half year maturities) municipal debt. This is down from $34.0 million at
August 31, 1995 and $40.9 million at May 31, 1995.
Current liabilities of $19.3 million at May 31, 1996 are higher
than their $15.9 million balance at August 31, 1995 and their $17.5
million balance at May 31, 1995. The increase from August 31, 1995
is principally due to increased trade payables and higher accruals
for warranty and international dealer prepayments. The increase
from May 31, 1995 is primarily due to increased trade payables and
a higher accrual for warranty, partially offset by lower accruals
for taxes payable and legal settlement.
Capital expenditures totaling $3.3 million for the first nine
months of 1996 were used primarily for upgrading manufacturing
plant equipment. Lindsay expects its fiscal 1996 capital
expenditures to be approximately $3.5 million.
Lindsay believes its capitalization (including cash and marketable
securities balances) and operating cash flow are sufficient to
cover expected working capital needs, planned capital expenditures
and repurchase of common stock.
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 March and April for the spring planting period. Lindsay's
expansion into diversified products complements its irrigation
operations by using available capacity and reducing seasonality.
OTHER FACTORS
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, profitability of agricultural
production, commodity prices, aggregate net farm income,
governmental policies regarding the agricultural sector, water and
energy conservation policies, and regularity of rainfall.
Approximately 11 and 8 percent of Lindsay's operating revenues for
the first nine months of 1996 and 1995 respectively, were generated
from export sales. For the full year of 1995, approximately 10
percent of Lindsay's operating revenues were generated from export
sales. 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 backed by irrevocable letters of credit which are confirmed by a
U.S. bank.
-11-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
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".
Part II
OTHER INFORMATION
Item 1. 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 plan selected for aquifer remediation was in
line with Lindsay's expectations. However, the plan for
remediation of the soil and shallow groundwater contamination
proposed a higher degree of remediation than the company had
previously expected. Therefore, Lindsay recognized an additional
$2.9 million accrual in the fourth quarter of Fiscal 1990. The
selected plan implementation was delayed until finalization of the
Consent Decree in April 1992. Due to this delay, Lindsay
-12-
<PAGE> 13
OTHER INFORMATION
(Continued)
recognized an additional accrual of $0.6 million in the fourth
quarter of fiscal 1991 and $0.8 million in the fourth quarter of
fiscal 1992. The final remediation plans were approved in 1993 and
1994 and the remediation plans were fully implemented during fiscal
1995.
The total balance sheet reserve for this remediation was $2.1 million
at May 31, 1996 compared to $1.9 million at fiscal 1995 year end, reflecting an
increase to the reserve of $0.3 million and costs of $0.1 million during the
first quarter of fiscal 1996 for the continued implementation of the plans.
Additionally, second and third quarter costs of $0.5 million were expensed on
the consolidated statements of operations and was not reflected in the reserve
on the consolidated balance sheet.
Lindsay believes that the current reserve is sufficient to cover
the estimated total 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 judgement in the
amount of $2.4 million in favor of the insurer. Lindsay is in the
process of appealing the dismissal of it's case against the insurer
and the judgement 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
4 - 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.
11 - Statement re Computation of Per Share Earnings.
(b) Reports on Form 8-K -
No Form 8-K was filed during the quarter ended May 31, 1996.
-13-
<PAGE> 14
SIGNATURES
Pursuant to the requirements 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.
Date: July 1, 1996 Bruce C. Karsk
-----------------
Bruce C. Karsk
Vice President - Finance, Treasurer and Secretary;
Principal Financial and Accounting Officer
Date: July 1, 1996 Ralph J. Kroenke
--------------------
Ralph J. Kroenke
Controller
-14-
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT II
Lindsay Manufacturing Co.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
For the three months and nine months ended May 31, 1996 and 1995
(Dollars in thousands except per share amounts)
(Unaudited)
---------------------------------------
COMPUTATION OF PRIMARY PER SHARE EARNINGS
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
May May May May
1996 1995 1996 1995
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
1. Weighted average shares outstanding . . 6,453,147 6,789,681 6,450,570 6,905,961
2. Net additional shares outstanding
assuming dilutive stock options
exercised and proceeds used to
purchase treasury stock. . . . . . . 351,040 238,290 310,832 228,957
---------- ------------ ----------- -----------
3. Average number of common and common
equivalent shares outstanding . . . . 6,804,187 7,027,971 6,771,402 7,134,918
============ ============ =========== ===========
4. Net earnings for per share computation $ 5,719 $ 4,839 $ 14,010 $ 9,841
============ ============ =========== ===========
5. Net earnings per average common and
common equivalent shares outstanding $ 0.84 $ 0.69 $ 2.05 $ 1.38
============ ============ =========== ===========
COMPUTATION OF FULLY DILUTED PER SHARE EARNINGS
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
May May May May
1996 1995 1996 1995
----------- ------------ ----------- ------------
1. Weighted average shares outstanding . . 6,453,147 6,789,681 6,460,570 6,905,961
2. Net additional shares outstanding
assuming dilutive stock options
exercised and proceeds used to
purchase treasury stock. . . . . . . 368,002 244,334 368,002 231,783
---------- ------------ ----------- -----------
3. Average number of common and common
equivalent shares outstanding . . . . 6,821,149 7,034,015 6,828,572 7,137,744
============ ============ =========== ===========
4. Net earnings for per share computation $ 5,719 $ 4,839 $ 14,010 $ 9,841
============ ============ =========== ===========
5. Net earnings per average common and
common equivalent shares outstanding $ 0.84 $ 0.69 $ 2.05 $ 1.38
============ ============ =========== ===========
</TABLE>
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 2,869
<SECURITIES> 21,857
<RECEIVABLES> 20,583
<ALLOWANCES> 0
<INVENTORY> 7,974
<CURRENT-ASSETS> 58,350
<PP&E> 28,698
<DEPRECIATION> 19,305
<TOTAL-ASSETS> 98,122
<CURRENT-LIABILITIES> 19,288
<BONDS> 0
<COMMON> 7,320
0
0
<OTHER-SE> 70,159
<TOTAL-LIABILITY-AND-EQUITY> 98,122
<SALES> 106,605
<TOTAL-REVENUES> 106,605
<CGS> 79,755
<TOTAL-COSTS> 79,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,015
<INCOME-TAX> 6,005
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,010
<EPS-PRIMARY> 2.07
<EPS-DILUTED> 2.05
</TABLE>
