<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, 1997 OR
__________ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File Number: 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)
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 9,442,336
- ----------------------------- -------------------------------
Title of Class Outstanding as of June 11, 1997
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
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
Consolidated Balance Sheets, May 31, 1997 and 1996
and August 31, 1996 3
Consolidated Statements of Operations for the three
months and nine months ended May 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the nine
months ended May 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Results of Operations
and Financial Position 9-12
Part II - Other Information
Item 1. Legal Proceedings 13-14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index
11 - Statement re Computation of Per Share Earnings 16
</TABLE>
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<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Lindsay Manufacturing Co.
CONSOLIDATED BALANCE SHEETS
May 31, 1997 and 1996 and August 31, 1996
(in thousands, except share amounts)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
May May August
1997 1996 1996
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 3,288 $ 2,869 $ 2,362
Marketable securities......................... 16,564 21,857 23,926
Receivables................................... 20,479 20,583 20,128
Inventories................................... 9,719 7,974 7,800
Deferred income taxes......................... 3,800 3,030 3,369
Other current assets.......................... 639 2,037 270
--------- --------- ---------
Total current assets........................ 54,489 58,350 57,855
Long-term marketable securities................ 37,591 29,158 28,146
Property, plant and equipment, net............. 11,248 9,393 9,691
Other noncurrent assets........................ 1,131 1,221 1,131
--------- --------- ---------
Total assets................................... $ 104,459 $ 98,122 $ 96,823
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade....................... $ 4,662 $ 5,896 $ 5,915
Other current liabilities..................... 13,431 13,392 12,782
--------- --------- ---------
Total current liabilities................... 18,093 19,288 18,697
Other noncurrent liabilities................... 1,273 1,355 1,292
--------- --------- ---------
Total liabilities.............................. 19,366 20,643 19,989
--------- --------- ---------
Contingencies
Stockholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in
May 1997 and 1996 and August 1996)
Common stock, ($1 par value, 25,000,000 shares
authorized, 11,190,866, 7,320,414 and
7,327,961 shares issued in May 1997 and
1996 and August 1996......................... 11,191 7,320 7,328
Capital in excess of stated value............. 20 2,754 2,952
Retained earnings............................. 103,874 85,810 88,002
Less treasury stock, (at cost, 1,753,030,
907,120 and 987,820 shares in May 1997 and
1996 and August 1996)........................ (29,992) (18,405) (21,448)
--------- --------- ---------
Total stockholders' equity..................... 85,093 77,479 76,834
--------- --------- ---------
Total liabilities and stockholders' equity..... $ 104,459 $ 98,122 $ 96,823
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 4
Lindsay Manufacturing Co.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and nine months ended May 31, 1997 and 1996
(in thousands, except per share amounts)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
May May May May
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues...................... $ 41,663 $ 41,139 $126,823 $106,605
Cost of operating revenues.............. 30,370 30,534 94,315 79,775
-------- -------- -------- --------
Gross profit............................ 11,293 10,605 32,508 26,830
-------- -------- -------- --------
Operating expenses:
Selling expense........................ 1,235 1,068 3,534 3,129
General and administrative expense..... 1,574 1,661 5,319 4,966
Engineering and research expense....... 361 364 1,117 1,055
-------- -------- -------- --------
Total operating expenses................ 3,170 3,093 9,970 9,150
-------- -------- -------- --------
Operating income........................ 8,123 7,512 22,538 17,680
Interest income, net.................... 724 615 2,172 1,987
Other income, net....................... 55 43 228 348
-------- -------- -------- --------
Earnings before income taxes............ 8,902 8,170 24,938 20,015
Income tax provision.................... 2,849 2,451 7,980 6,005
-------- -------- -------- --------
Net earnings............................ $ 6,053 $ 5,719 $ 16,958 $ 14,010
======== ======== ======== ========
Net earnings per share:
Primary................................ $ 0.61 $ 0.56 $ 1.69 $ 1.38
======== ======== ======== ========
Fully diluted......................... $ 0.61 $ 0.56 $ 1.69 $ 1.37
======== ======== ======== ========
Cash dividends per share................ $ 0.035 $ 0.033 $ 0.102 $ 0.067
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 5
Lindsay Manufacturing Co.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 1997 and 1996
(in thousands)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May May
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................ $ 16,958 $ 14,010
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation...................................... 1,496 1,084
Amortization of marketable securities premiums,
net............................................. 171 247
(Gain) on sale of fixed assets.................... (57) (54)
(Gain) Loss on maturities of marketable
securities held-to-maturity..................... (14) 7
(Gain) on sale of marketable securities
available-for-sale.............................. 0 (8)
Provision for uncollectible accounts receivable... 45 (65)
Deferred income taxes............................. (431) (226)
Changes in assets and liabilities:
Receivable........................................ (396) (10,165)
Inventories....................................... (1,919) (2,590)
Other current assets.............................. (369) (146)
Accounts payable.................................. (1,253) 1,601
Other current liabilities......................... 222 1,946
Current taxes payable............................. 427 (190)
Other noncurrent assets and liabilities........... (19) (97)
-------- --------
Net cash flow provided by operating activities...... 14,861 5,354
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.......... (3,073) (3,338)
Proceeds from sale of property, plant and equipment. 77 79
Purchases of marketable securities held-to maturity. (18,329) (11,744)
Proceeds from maturities of marketable securities
held-to-maturity.................................. 16,089 9,753
Proceeds from sale of marketable securities
available-for-sale................................ 0 3,525
-------- --------
Net cash flow used in investing activities.......... (5,236) (1,725)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issurance of common stock under stock
option plan....................................... 815 821
Three-for-two stock split fractional shares paid
in cash........................................... (2) (2)
Dividends paid...................................... (968) (647)
Purchases of treasury stock......................... (8,544) (5,446)
-------- --------
Net cash flow used in financing activities.......... (8,699) (5,274)
-------- --------
Net increase (decrease) in cash and
cash equivalents.................................. 926 (1,645)
Cash and cash equivalents, beginning of period...... 2,362 4,514
-------- --------
Cash and cash equivalents, end of period............ $ 3,288 $ 2,869
======== ========
Supplemental Cash Flow Information:
Income taxes paid................................... $ 7,942 $ 6,464
Interest paid....................................... $ 1 $ 86
</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, 1996 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,
1997, 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. The carrying amounts
of the securities used in computing unrealized and realized gains and losses
are determined by specific identification. 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.
There are no investments in the available-for-sale category included in
Marketable securities at May 31, 1997. Investments in the held-to-maturity
category are included in Marketable securities ($16.6 million) and Long-term
marketable securities ($37.6 million). The total amortized cost, gross
unrealized holding gains, gross unrealized holding losses, and aggregate fair
value for held-to-maturity securities are $54.2 million, $0.1 million, $0.1
million, and $54.2 million, respectively. There have not been any sales of
held-to-maturity securities for the first nine months of Fiscal 1997. In the
held-to-maturity category, $16.6 million in securities mature within one year
and $37.6 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
1997 1996 1996
------- ------- -------
<S> <C> <C> <C>
Total manufactured goods
First-in, first-out inventory $14,582 $11,539 $12,060
LIFO reserves (4,185) (2,948) (3,570)
Obsolescence reserve (678) (617) (690)
------- ------- -------
Total inventories $ 9,719 $ 7,974 $ 7,800
======= ======= =======
</TABLE>
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
<TABLE>
<CAPTION>
May May August
1997 1996 1996
------ ------ --------
<S> <C> <C> <C>
Raw materials 16% 21% 16%
Work in process 8% 7% 8%
Purchased parts 32% 28% 32%
Finished goods 44% 44% 44%
</TABLE>
4 Property, Plant and Equipment
Property, plant and equipment are stated at cost.
<TABLE>
<CAPTION>
(in thousands)
---------------------------------
May May August
1997 1996 1996
------- ------- -------
<S> <C> <C> <C>
Land $ 70 $ 70 $ 70
Buildings 4,945 4,426 4,756
Equipment 22,782 19,858 22,563
Other 3,301 4,344 1,859
------- ------- -------
31,098 28,698 29,248
Less accumulated depreciation 19,850 19,305 19,557
------- ------- -------
Property, plant and equipment, net $11,248 $ 9,393 $ 9,691
======= ======= =======
</TABLE>
-7-
<PAGE> 8
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. 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 $2.4 million
in favor of the insurer for which the Company has not made a provision.
Lindsay has appealed the dismissal of it's case against the insurer and the
judgment against Lindsay. In the opinion of management, an unfavorable outcome
with respect to any or all of these matters will not result in a material
adverse effect on Lindsay's consolidated financial position, results of
operations or cash flows.
6. Net Earnings Per Share
Primary net earnings per share are calculated by dividing the earnings by the
weighted average number of common and common equivalent (stock options) shares
outstanding of 9,926,936 for the three months and 10,028,764 for the nine
months ended May 31, 1997 as compared to 10,206,281 for the three months and
10,157,103 for the nine months ended May 31, 1996. The difference between
shares for primary and fully diluted earnings per share was not significant in
any period.
7. Stock Split
On February 7, 1997, the Board of Directors declared a three-for-two split of
Lindsay's common stock effective March 10, 1997, to stockholders of record on
March 3, 1997. Accordingly, the average number of shares outstanding, and per
share information have been adjusted to reflect the stock split.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table provides highlights for the three month and nine month
periods indicated of Fiscal Year 1997 as compared to the same periods of Fiscal
Year 1996.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
Percent Percent
Increase Increase
($ in thousands) 5/31/97 5/31/96 (Decrease) 5/31/97 5/31/96 (Decrease)
- -------------------------------------------------------------------------------------------------------------
Consolidated
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues .....................$41,663 $41,139 1.3% $126,823 $106,605 19.0%
Cost of Operating Revenues .............$30,370 $30,534 (.5) $ 94,315 $ 79,775 18.2
Gross Profit ...........................$11,293 $10,605 6.5 $ 32,508 $ 26,830 21.2
Gross Margin ........................... 27.1% 25.8% 25.6% 25.2%
Selling, Eng. & Research, and
G&A Expense ............................$ 3,170 $ 3,093 2.5 $ 9,970 $ 9,150 9.0
Operating Income .......................$ 8,123 $ 7,512 8.2 $ 22,538 $ 17,680 27.5
Operating Margin ....................... 19.5% 18.3% 17.8% 16.6%
Interest Income, net ...................$ 724 $ 615 17.7 $ 2,172 $ 1,987 9.3
Other Income, net ......................$ 55 $ 43 27.9 $ 228 $ 348 (34.5)
Income Tax Provision ...................$ 2,849 $ 2,451 16.2 $ 7,980 $ 6,005 32.9
Effective Income Tax Rate .............. 32.0% 30.0% 32.0% 30.0%
Net Earnings............................$ 6,053 $ 5,719 5.8% $ 16,958 $ 14,010 21.0%
</TABLE>
As the above table displays, operating revenues for the three month period
ended May 31, 1997 increased slightly, 1.3 percent ($0.5 million) from the
comparable period of the prior year. For the nine month period ended May 31,
1997, operating revenues were up 19.0 percent ($20.2 million). The increase
in third quarter revenue was the net result of a 17 percent ($5.4 million)
decrease in North American irrigation equipment revenues being more than offset
by a 94 percent ($3.2 million) increase in export irrigation equipment revenues
and a 48 percent ($2.7 million) increase in diversified product and other
revenues. For the nine month period, fiscal 1997 North American irrigation
equipment revenues increased 12 percent ($8.9 million) and export irrigation
equipment revenues increased 50 percent ($6.1 million), as compared to the
prior year. Diversified product and other revenues for the nine month period
grew 30 percent ($5.3 million), as compared to the prior year.
North American irrigation equipment revenues for both the three and nine month
periods ending May 31, 1997, continued to be favorably impacted by the long
term demand drivers of continued farmer emphasis on conserving water, energy,
and labor. Third quarter fiscal 1997 North American irrigation equipment
revenues were negatively impacted, however, by the success during our first and
second quarters of our fall and winter marketing programs including our early
order and early shipment (dealer floor plan and customer interest free)
programs. These programs were designed to pull some North American irrigation
equipment sales and shipments forward into the first and second quarters,
freeing up manufacturing and shipping capacity in our third quarter for
incremental late season orders. Due to agricultural commodity prices being
somewhat lower than at this time last year, the incremental late season orders
did not develop to the degree anticipated, resulting in North American
-9-
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
irrigation equipment revenues being lower than the prior year's for the third
quarter of fiscal 1997, but higher than the prior year's for the first nine
months of fiscal 1997.
Export irrigation equipment sales for both the three and nine month periods of
fiscal 1997 were concentrated in our Western European and Latin American
markets, similar to fiscal 1996.
The increase in three month and nine month fiscal 1997 diversified products and
other revenues was the result of higher sales of both large diameter steel
tubing and outsource manufacturing services.
Gross margin for the three months ended May 31, 1997, as a percent of operating
revenues, was 27.1 percent as compared to 25.8 percent of revenues for the
prior year's comparative period. For the nine months ended May 31, 1997, gross
margin as a percent of operating revenues was 25.6 percent as compared to 25.2
percent for the nine months ended May 31, 1996. Ongoing demand for irrigation
equipment in both the North American and export markets for the three and nine
month periods of fiscal 1997 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, 1997, were $3.2 million as compared to
$3.1 million during the prior year's comparative period. For the nine month
period, fiscal 1997 selling, general and administrative, and engineering and
research expenses totaled $10.0 million as compared to $9.2 million for the
first nine months of fiscal 1996. Higher wage & salary expenses and increased
advertising expenditures account for 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, 1997 was 32.0 percent. This compares to an effective tax rate of 30.0
percent for both the comparable three month and nine month periods of the prior
year. Due to the tax exempt status (for federal income tax purposes) of
interest earned on municipal bond investments, State of Nebraska economic
development tax credits, and the Foriegn Sales Corporation federal tax
provisions as they relate to export sales, Lindsay continues to benefit from an
effective tax rate that is lower than the combined federal and state statutory
rates (currently estimated at 37.5 percent).
FINANCIAL POSITION AND LIQUIDITY
The discussion of financial position and liquidity focuses on the balance sheet
and statement of cash flows. Lindsay requires cash for financing its
receivables, inventories, capital expenditures, stock repurchases and
dividends. Over the years, Lindsay has financed its growth through funds
provided by operations. Cash flows provided by operations of $14.8 million for
the first nine months of fiscal 1997 increased from $5.4 million for the first
nine months of fiscal 1996. The increase in cash flows provided by operating
activities in fiscal 1997 was primarily due to net earnings. Fiscal 1996 cash
flows provided by operating activities was principally due to net earnings
partially offset by increased receivables.
-10-
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
FINANCIAL POSITION AND LIQUIDITY - Continued
Receivables of $20.5 million at May 31, 1997 were comparable to $20.1 million
at August 31, 1996 and $20.6 million at May 31, 1996. Inventories at May 31,
1997 totaled $9.7 million, higher than their $7.8 million balance at August 31,
1996 and $8.0 million balance at May 31, 1996. May 1997 North American
irrigation sales did not develop to the degree anticipated, resulting in
increased inventory at May 31, 1997.
Current liabilities of $18.1 million at May 31, 1997 are lower than their $18.7
million balance at August 31, 1996 and $19.3 million balance at May 31, 1996.
The decrease from August 31, 1996 is principally due to decreased trade
payables. The decrease from May 31, 1996 is primarily due to decreased trade
payables and lower accruals for environmental remediation costs partially
offset by higher accruals for payroll and vacation pay and insurance.
Cash flows used in investing activities of $5.2 million for the first nine
months of fiscal 1997 increased from $1.7 million for the first nine months of
fiscal 1996 and for both periods was primarily attributable to purchases of
marketable securities and capital expenditures, partially offset by proceeds
from marketable securities.
Lindsay's cash and short-term marketable securities totaled $19.9 million at
May 31, 1997, as compared to $26.3 million at August 31, 1996, and $24.7
million at May 31, 1996. At May 31, 1997, Lindsay had $37.6 million invested
in long-term marketable securities which represent intermediate term (one to
four and one-half year maturities) municipal debt, as compared to $28.1 million
at August 31, 1996 and from $29.2 million at May 31, 1996.
Cash flows used in financing activities of $8.7 million for the first nine
months of fiscal 1997 increased from $5.3 million for the first nine months of
fiscal 1996 and for both periods was primarily attributable to dividends paid
and to purchases of treasury stock partially offset by proceeds from the
issuance of common stock under the company's stock option plan.
Lindsay's equity increased to $85.1 million at May 31, 1997 from $76.8 million
at August 31, 1996, due to its net earnings of $17.0 million, less $8.5 million
used to repurchase 271,300 (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 135,400 shares of common stock under Lindsay's
employee stock option plan, less dividends paid of $1.0 million. Lindsay's
equity at May 31, 1996 was $77.5 million.
Capital expenditures totaling $3.1 million for the first nine months of 1997
were used primarily for upgrading manufacturing plant equipment. Lindsay
expects its fiscal 1997 capital expenditures to be approximately $3.5 to $4.5
million which will be used principally to improve Lindsay's existing facilities
and expand its manufacturing capabilities.
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, dividends and repurchases of
common stock.
-11-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
SEASONALITY
Irrigation equipment sales are seasonal by nature. Farmers generally order
systems to be delivered and installed before the growing season. In North
America shipments to customers usually peak during March and April for the
spring planting period. North American irrigation equipment sales activity is
typically at its lowest level in the company's fourth quarter which can vary
significantly from year to year depending on weather patterns during the
quarter. 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 14 and 11 percent of Lindsay's operating revenues for the first
nine months of 1997 and 1996 respectively, were generated from export sales.
For the full year of 1996, approximately 15 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 irrevocable letters of credit which are confirmed by a U.S. bank or other
secured means.
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. Lindsay will continue its accounting in accordance with
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees".
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" which,
when adopted, will replace the current methodology for calculating and
presenting earnings per share. Under SFAS No. 128, primary earnings per share
will be replaced with a presentation of basic earnings per share and fully
diluted earnings per share will be replaced with diluted earnings per share.
The statement will be effective beginning in the Company's first quarter ended
November 30, 1997, and accordingly, the financial statements for such quarter
will include a restatement of historical earnings per share to conform to the
requirements of SFAS No.128. The Company has not yet determined the impact of
implementation of SFAS No. 128.
-12-
<PAGE> 13
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 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 was $0.3 million at May 31, 1997 and August 31,
1996.
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 judgment in the amount of $2.4 million in
favor of the insurer. Lindsay has appealed the dismissal of it's 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.
-13-
<PAGE> 14
OTHER INFORMATION
(Continued)
Concerning Forward Looking Statements - This Report on Form 10-Q, 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 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.
27 - Financial Data Schedule
(b) Reports on Form 8-K -
No Form 8-K was filed during the quarter ended May 31, 1997.
-14-
<PAGE> 15
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: June 13, 1997 Bruce C. Karsk
------------- ------------------------
Bruce C. Karsk
Vice President - Finance, Treasurer and Secretary;
Principal Financial and Accounting Officer
Date: June 13, 1997 Ralph J. Kroenke
------------- ------------------------
Ralph J. Kroenke
Controller
-15-
<PAGE> 1
EXHIBIT 11
Lindsay Manufacturing Co.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
For the three months and nine months ended May 31, 1997 and 1996
(Dollars in thousands except per share amounts)
(Unaudited)
---------------------------------------------
COMPUTATION OF PRIMARY PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
May May May May
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1. Weighted average shares outstanding........ 9,493,816 9,679,721 9,521,133 9,690,855
2. Net additional shares outstanding assuming
dilutive stock options exercised and
proceeds used to purchase treasury stock 433,120 526,560 507,631 466,248
------------ ------------ ------------ ------------
3. Average number of common and common
equivalent shares outstanding........... 9,926,936 10,206,281 10,028,764 10,157,103
============ ============ ============ ============
4. Net earnings for per share computation..... $ 6,053 $ 5,719 $ 16,958 $ 14,010
============ ============ ============ ============
5. Net earnings per average common and common
equivalent shares outstanding........... $ 0.61 $ 0.56 $ 1.69 $ 1.38
============ ============ ============ ============
</TABLE>
COMPUTATION OF FULLY DILUTED PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
May May May May
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1. Weighted average shares outstanding........ 9,493,816 9,679,721 9,521,133 9,690,855
2. Net additional shares outstanding assuming
dilutive stock options exercised and
proceeds used to purchase treasury stock 452,545 552,003 514,106 552,003
------------ ------------ ------------ ------------
3. Average number of common and common
equivalent shares outstanding........... 9,946,361 10,231,724 10,035,239 10,242,858
============ ============ ============ ============
4. Net earnings for per share computation..... $ 6,053 $ 5,719 $ 16,958 $ 14,010
============ ============ ============ ============
5. Net earnings per average common and common
equivalent shares outstanding........... $ 0.61 $ 0.56 $ 1.69 $ 1.37
============ ============ ============ ============
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 3,288
<SECURITIES> 16,564
<RECEIVABLES> 20,479
<ALLOWANCES> 0
<INVENTORY> 9,719
<CURRENT-ASSETS> 54,489
<PP&E> 31,098
<DEPRECIATION> 19,850
<TOTAL-ASSETS> 104,459
<CURRENT-LIABILITIES> 18,093
<BONDS> 0
0
0
<COMMON> 11,191
<OTHER-SE> 73,902
<TOTAL-LIABILITY-AND-EQUITY> 104,459
<SALES> 126,823
<TOTAL-REVENUES> 126,823
<CGS> 94,315
<TOTAL-COSTS> 94,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,938
<INCOME-TAX> 7,980
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,958
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.69
</TABLE>
