<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 February 28, 1998 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, $1.00 par value 9,269,220
- ----------------------------- --------------------------------
Title of Class Outstanding as of March 19, 1998
Exhibit index is located on page 2.
Total number of pages 21.
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<PAGE> 2
LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, February 28, 1998 and 1997
and August 31, 1997 3
Consolidated Statements of Operations for the three
months and six months ended February 28, 1998 and 1997 4
Consolidated Statements of Cash Flows for the six
months ended February 28, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Position 9-12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 12
Part II - Other Information
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index
10 (a) - Lindsay Manufacturing Co., Executive Compensation 16-20
Plan
27 - Financial Data Schedule 21
</TABLE>
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<PAGE> 3
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
Lindsay Manufacturing Co.
CONSOLIDATED BALANCE SHEETS
February 28, 1998 and 1997 and August 31, 1997
($ in thousands, except par values)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
February February August
1998 1997 1997
ASSETS ---------- ---------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 67 $ 2,141 $ 4,231
Marketable securities........................................... 11,197 15,060 12,077
Receivables..................................................... 30,421 33,671 18,900
Inventories..................................................... 10,779 9,882 9,995
Deferred income taxes........................................... 4,281 3,426 4,547
Other current assets............................................ 471 659 77
---------- ---------- ----------
Total current assets.......................................... 57,216 64,839 49,827
Long-term marketable securities................................... 45,667 29,341 45,802
Property, plant and equipment, net................................ 11,757 10,739 11,294
Other noncurrent assets........................................... 1,140 1,131 1,060
---------- ---------- ----------
Total assets...................................................... $ 115,780 $ 106,050 $ 107,983
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade......................................... $ 11,531 $ 7,453 $ 4,993
Other current liabilities....................................... 12,789 12,529 14,337
Current portion of capital lease obligation..................... 151 0 149
---------- ---------- ----------
Total current liabilities..................................... 24,471 19,982 19,479
Other noncurrent liabilities...................................... 1,139 1,198 1,274
Obligation under capital lease less current portion............... 186 0 262
---------- ---------- ----------
Total liabilities................................................. 25,796 21,180 21,015
---------- ---------- ----------
Contingencies
Stockholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in
February 1998 and 1997 and August 1997).....................
Common stock, ($1 par value, 25,000,000 shares
authorized, 11,265,250, 11,182,625 and 11,203,256 shares
issued in February 1998 and 1997 and August 1997)........... 11,265 11,183 11,203
Capital in excess of stated value............................. 1,079 0 450
Retained earnings............................................. 117,703 98,151 106,639
Less treasury stock, (at cost, 1,996,030, 1,578,630 and
1,794,030 shares in February 1998 and 1997 and August 1997). (40,063) (24,464) (31,324)
---------- ---------- ----------
Total stockholders' equity........................................ 89,984 84,870 86,968
---------- ---------- ----------
Total liabilities and stockholders' equity........................ $ 115,780 $ 106,050 $ 107,983
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 4
Lindsay Manufacturing Co.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and six months ended February 28, 1998 and 1997
($ in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
---------------------------- ------------------------------
February February February February
1998 1997 1998 1997
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Operating revenues.......................... $ 49,708 $ 45,693 $ 87,156 $ 85,160
Cost of operating revenues.................. 35,853 33,942 63,744 63,945
----------- ----------- ------------ -----------
Gross profit................................ 13,855 11,751 23,412 21,215
----------- ----------- ------------ -----------
Operating expenses:
Selling expense........................... 1,386 1,266 2,658 2,299
General and administrative expense........ 2,218 1,989 4,073 3,745
Engineering and research expense.......... 409 373 869 756
----------- ----------- ------------ -----------
Total operating expenses.................... 4,013 3,628 7,600 6,800
----------- ----------- ------------ -----------
Operating income............................ 9,842 8,123 15,812 14,415
Interest income, net........................ 767 674 1,558 1,448
Other income, net........................... 2 166 193 173
----------- ----------- ------------ -----------
Earnings before income taxes................ 10,611 8,963 17,563 16,036
Income tax provision........................ 3,448 2,867 5,708 5,131
----------- ----------- ------------ -----------
Net earnings................................ $ 7,163 $ 6,096 $ 11,855 $ 10,905
=========== =========== ============ ===========
Average shares outstanding - Basic 9,303,734 9,545,840 9,347,097 9,534,792
Net earnings per share - Basic.............. $ 0.77 $ 0.64 $ 1.27 $ 1.14
============ =========== ============ ===========
Average shares outstanding - Diluted 9,738,910 10,068,263 9,797,027 10,079,679
Net earnings per share - Diluted............ $ 0.74 $ 0.61 $ 1.21 $ 1.08
============ =========== ============ ===========
Cash dividends per share.................... $ 0.050 $ 0.033 $ 0.085 $ 0.067
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
Lindsay Manufacturing Co.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended February 28, 1998 and 1997
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
February February
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES ---------- ----------
<S> <C> <C>
Net earnings........................................................... $ 11,855 $ 10,905
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization....................................... 1,113 990
Amortization of marketable securities premiums, net................. 85 123
Gain on sale of fixed assets........................................ (56) (10)
(Gain) on sale of marketable securities held-to-maturity............ 0 (14)
Provision for uncollectible accounts receivable..................... 0 30
Deferred income taxes............................................... 266 (57)
Changes in assets and liabilities:
Receivables......................................................... (11,521) (13,573)
Inventories......................................................... (784) (2,082)
Other current assets................................................ (394) (389)
Accounts payable.................................................... 6,538 1,538
Other current liabilities........................................... (2,573) (1,085)
Current taxes payable............................................... 1,025 832
Other noncurrent assets and liabilities............................. (215) (94)
---------- ----------
Net cash flows provided by (used in) operating activities.............. 5,339 (2,886)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment............................. (1,576) (2,057)
Proceeds from sale of property, plant and equipment.................... 56 29
Purchases of marketable securities held-to-maturity.................... (6,675) (8,527)
Proceeds from maturities of marketable securities held-to-maturity..... 7,605 16,089
---------- ----------
Net cash flows (used in) provided by investing activities.............. (590) 5,534
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation ..................... (74) 0
Proceeds from issuance of common stock under stock option plan......... 691 787
Three-for-two stock split fractional shares paid in cash............... 0 (2)
Dividends paid......................................................... (791) (638)
Purchases of treasury stock............................................ (8,739) (3,016)
---------- ----------
Net cash flows used in financing activities............................ (8,913) (2,869)
---------- ----------
Net decrease in cash and cash equivalents.............................. (4,164) (221)
Cash and cash equivalents, beginning of period......................... 4,231 2,362
---------- ----------
Cash and cash equivalents, end of period............................... $ 67 $ 2,141
========== ==========
Supplemental Cash Flow Information:
Income taxes paid...................................................... $ 4,389 $ 4,391
Interest paid.......................................................... $ 29 $ 1
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<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, 1997 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 February
28, 1998, 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 February 28, 1998. Investments in the
held-to-maturity category are included in marketable securities ($11.2 million)
and long-term marketable securities ($45.7 million). The total amortized cost,
gross unrealized holding gains, gross unrealized holding losses, and aggregate
fair value for held-to-maturity securities are $56.9 million, $0.0 million,
$0.5 million, and $57.4 million, respectively. There have not been any sales
of held-to-maturity securities for the first six months of Fiscal 1997. In the
held-to-maturity category, $11.2 million in securities mature within one year
and $45.7 million have maturities ranging from one to three 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)
------------------------------------
February February August
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Total manufactured goods
First-in, first-out inventory $14,940 $14,774 $14,164
LIFO reserves (3,499) (4,211) (3,500)
Obsolescence reserve ( 662) ( 681) ( 669)
---------- ---------- ----------
Total inventories $10,779 $ 9,882 $ 9,995
========== ========== ==========
</TABLE>
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
<TABLE>
<CAPTION>
February February August
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Raw materials 19% 16% 19%
Work in process 6% 8% 6%
Purchased parts 30% 32% 30%
Finished goods 45% 44% 45%
</TABLE>
4. Property, Plant and Equipment
Property, plant and equipment are stated at cost.
<TABLE>
<CAPTION>
(in thousands)
------------------------------------
February February August
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Plant and equipment:
Land $ 70 $ 70 $ 70
Buildings 5,118 4,825 5,033
Equipment 24,008 22,553 23,769
Other 3,237 3,175 2,135
Capital lease:
Equipment 458 0 458
---------- ---------- ----------
Total plant, equipment & capital lease 32,891 30,623 31,465
Accumulated depreciation & amortization:
Plant and equipment (21,073) (19,884) (20,145)
Capital lease (61) 0 (26)
---------- ---------- ----------
Property, plant and equipment, net $ 11,757 $10,739 $11,294
========== ========== ==========
</TABLE>
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 certain remediation costs. 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
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<PAGE> 8
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Contingencies - Continued
$2.4 million in favor of the insurer. In July 1997, the United States Court of
Appeals reversed the judgment of $2.4 million and remanded the case to the
district court for further proceedings. The Company has not made a provision
for the previously reimbursed remediation costs. 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
The Company has adopted the Statement of Financial Accounts Standards ("SFAS")
No. 128, "Earnings per Share" (SFAS No. 128). Primary and fully diluted
earnings per share has been replaced with basic and diluted earnings per share.
Diluted earnings per share takes into consideration outstanding shares plus the
effect of common shares from options. All earnings per share amounts have been
restated to conform to the SFAS No. 128 requirements.
The following table illustrates the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
(in thousands)
----------------------------------------------------
Three Months Ended Six Months Ended
----------------------- ----------------------
2/28/98 2/28/97 2/28/98 2/28/97
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings $ 7,163 $ 6,096 $11,855 $10,905
per share - net earnings ======= ======= ======= =======
Denominator for basic earnings per share -
weighted average number of common shares
outstanding during the period. 9,304 9,546 9,347 9,535
Incremental common shares attributable to
exercise of outstanding options 435 522 450 545
------ ------ ------ ------
Denominator for diluted earnings per share 9,739 10,068 9,797 10,080
======= ======= ======= =======
Basic earnings per share $ 0.77 $ 0.64 $ 1.27 $ 1.14
======= ======= ======= =======
Diluted earnings per share $ 0.74 $ 0.61 $ 1.21 $ 1.08
======= ======= ======= =======
</TABLE>
Options to purchase 53,000 shares of common stock at $42.25 per share were
outstanding during the second quarter of fiscal year 1998, but were not
included in the computation of diluted EPS because the options' exercise price
was greater than the average market price of the common shares. The options
expire on November 6, 2007.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table provides highlights for the three month and six month
periods indicated of Fiscal Year 1998 as compared to the same periods of Fiscal
Year 1997.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ----------------------------
Percent Percent
Increase Increase
($ in thousands) 2/28/98 2/28/97 (Decrease) 2/28/98 2/28/97 (Decrease)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated
- ------------
Operating Revenues ....................$49,708 $45,693 8.8% $87,156 $85,160 2.3%
Cost of Operating Revenues ............$35,853 $33,942 5.6 $63,744 $63,945 (0.3)
Gross Profit ..........................$13,855 $11,751 17.9 $23,412 $21,215 10.4
Gross Margin ........................... 27.9% 25.7% 26.9% 24.9%
Selling, Eng. & Research, and
G&A Expense .........................$ 4,013 $ 3,628 10.6 $ 7,600 $ 6,800 11.8
Operating Income ......................$ 9,842 $ 8,123 21.2 $15,812 $14,415 9.7
Operating Margin ...................... 19.8% 17.8% 18.2% 16.9%
Interest Income, net ..................$ 767 $ 674 13.8 $ 1,558 $ 1,448 7.6
Other Income, net .....................$ 2 $ 166 (98.8) $ 193 $ 173 11.6
Income Tax Provision ..................$ 3,448 $ 2,867 20.3 $ 5,708 $ 5,131 11.2
Effective Income Tax Rate ............. 32.5% 32.0% 32.5% 32.0%
Net Earnings...........................$ 7,163 $ 6,096 17.5% $11,855 $10,905 8.7%
</TABLE>
As the above table displays, operating revenues for the three month period
ended February 28, 1998 increased 8.8 percent ($4.0 million) from the
comparable period of the prior year. The increase in second quarter revenue
was the net result of a 5 percent ($1.8 million) increase in domestic
irrigation equipment revenues, a 47 percent ($2.0 million) increase in export
irrigation equipment revenues and a 3 percent ($0.2 million) increase in
diversified products and other revenues.
For the six month period ended February 28, 1998, operating revenues were up
2.3 percent ($2.0 million) from the comparable period of the prior year. U.S.
irrigation equipment revenue was up 2 percent ($1.2 million), export irrigation
equipment revenue was essentially equal to the comparable period of the prior
year and diversified products and other revenues for the six month period were
up 6 percent ($0.9 million).
Domestic irrigation equipment revenues for both the three and six month periods
of fiscal 1998 continued to be favorably impacted by the long term demand
drivers of continued farmer emphasis on conserving water, energy, and labor.
Additionally, creative fall and winter sales and marketing programs and mild
winter weather favorably impacted U.S. activity for the three and six month
periods. Export irrigation equipment revenues for both the three and six month
periods of fiscal 1998 benefited from increases in the Canadian, Australian,
Western European and African markets partially offset by a slower Latin
American market.
Diversified products and other revenues grew during both the three and six
month periods of fiscal 1998 due to increased outsource manufacturing revenues
partially offset by reduced revenues from sales of large diameter tubing.
-9-
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
Gross margin for the three months ended February 28, 1998, as a percent of
operating revenues, was 27.9 percent - up from 25.7 percent of the prior year's
comparative period. For the six months ended February 28, 1998, gross margin
as a percent of operating revenues was 26.9 percent as compared to 24.9 percent
for the six months ended February 29, 1997. Strong demand for irrigation
equipment in the U.S. market for both the three and six month periods resulted
in a continued favorable pricing environment. Additionally, production
efficiency increased during both the three and six month period of the current
year and raw material costs were, in total, relatively stable.
Selling, general and administrative, and engineering and research expenses for
the three month period ended February 28, 1998, were $4.0 million as compared
to $3.6 million during the prior year's comparative period. For the six month
period, fiscal 1998 selling, general and administrative, and engineering and
research expenses totaled $7.6 million as compared to $6.8 million in fiscal
1997. Increased wage, salary and benefit costs (including group health
insurance) and increased advertising and dealer promotion expenditures
comprise the majority of the increased expenses for both the three and six
month periods.
The effective tax rate for both the three month and six month periods ended
February 28, 1998 was 32.5 perent. This compares to an effective tax rate of
32.0 percent for both the comparable three month and six month periods of the
prior year. Due to the federal income tax exempt status of interest income
from its municipal bond investments, the state economic development tax
credits, and the foreign sales corporation federal tax provisions as they
relate to export sales, Lindsay benefits from an effective tax rate that is
lower than the combined federal and state statutory rates, currently estimated
at 36.7 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 $5.3 million for
the first six months of fiscal 1998 compared to cash flows used in operations
of $2.9 million for the first six months of fiscal 1997. The cash flows
provided by operating activities in fiscal 1998 was primarily due to an
increase in accounts payable and net earnings partially offset by increased
receivables. Fiscal 1997 cash flows used in operating activities was
principally due to an increase in receivables and inventories partially offset
by net earnings and increased accounts payable.
Receivables of $30.4 million at February 28, 1998 increased $11.5 million from
$18.9 million at August 31, 1997 and decreased $3.3 million from $33.7 million
at February 28, 1997. The increase from August 31, 1997, was principally due
to the higher level of North American irrigation equipment sales activity
during February 1998 as compared to August 1997 and marketing programs that
offered extended payment terms to our dealers and customers during the first
and second quarters of fiscal 1998. The decrease from February 28, 1997, was
primarily due to the lower level of sales and deliveries under a marketing
program that offered deferred payment terms to our dealers. Inventories at
-10-
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
February 28, 1998 totaled $10.8 million, higher than their $10.0 million
balance at August 31, 1997 and $9.9 million balance at February 28, 1997.
Inventory was increased to adequately service the higher level of sales
activity the Company was projecting.
Current liabilities of $24.5 million at February 28, 1998 are higher than their
$19.5 million balance at August 31, 1997 and their $20.0 million balance at
February 28, 1997. The increase from August 31, 1997 is principally due to
increased trade payables and a higher accrual for taxes payable partially
offset by lower accruals for international dealer prepayments and payroll and
vacation pay. The increase from February 28, 1997 is primarily due to
increased trade payables and a higher accrual for payroll and vacation pay
partially offset by a lower accrual for international dealer prepayments.
Cash flows used in investing activities of $0.6 million for the first six
months of fiscal 1998 compared to $5.5 million provided by investing activities
for the first six months of fiscal 1997 and for both periods was primarily
attributable to proceeds from the maturity of marketable securities, partially
offset by purchases of marketable securities and capital expenditures. Fiscal
1997 proceeds from the maturity of marketable securities was at a higher level
than fiscal 1998.
Lindsay's cash and short-term marketable securities totaled $11.3 million at
February 28, 1998, as compared to $16.3 million at August 31, 1997, and $17.2
million at February 28, 1997. At February 28, 1998, Lindsay had $45.7 million
invested in long-term marketable securities which represent intermediate term
(one to three and one-half year maturities) municipal debt. This is comparable
to $45.8 million at August 31, 1997 and an increase from $29.3 million at
February 28, 1997.
Cash flows used in financing activities of $8.9 million for the first six
months of fiscal 1998 increased from $2.9 million for the first six months of
fiscal 1997 and for both periods was primarily attributable to purchases of
treasury stock and dividends paid partially offset by proceeds from the
issuance of common stock under Lindsay's employee stock option plan.
Lindsay's equity increased to $90.0 million at February 28, 1998 from $87.0
million at August 31, 1997, due to its net earnings of $11.8 million, less $8.7
million used to repurchase 202,000 shares of common stock per Lindsay's
previously announced stock repurchase plan, plus the proceeds of $0.7 million
from the issuance of 61,994 shares of common stock under Lindsay's employee
stock option plan, less dividends paid of $0.8 million. Lindsay's equity at
February 28, 1997 was $84.9 million.
Capital expenditures totaling $1.6 million for the first six months of 1998
were used primarily for upgrading manufacturing plant equipment. Lindsay
expects its Fiscal 1998 capital expenditures to be approximately $3.5 to $4.0
million which will be used primarily 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 repurchase of common
stock.
-11-
<PAGE> 12
ITEM 2. 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. 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
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 regularity of rainfall.
Approximately 16 and 17 percent of Lindsay's operating revenues for the first
six months of 1998 and 1997 respectively, were generated from export sales. For
the full year of 1997, approximately 20 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 June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 131 "Disclosures about Segments of
an Enterprise and Related Information" (SFAS No. 131). SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997. Financial
statement disclosures for prior periods are required to be restated. Lindsay
is in the process of evaluating the disclosure requirements. The adoption of
SFAS No. 131 will have no impact on Lindsay's consolidated results of
operations, financial position or cash flows.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
-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 $0.2 million at February 28, 1998 and $0.3
million at August 31, 1997.
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. In July 1997, the United States Court of Appeals
reversed the judgment of $2.4 million and remanded the case to the District
Court for further proceedings. The Company has not made a provision for the
previously reimbursed remediation costs. 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 4. Submission of Matters to a Vote of Security Holders
Lindsay's annual shareholder's meeting was held on January 23, 1998. The
shareholders voted to elect two directors, to adopt the Company's executive
compensation plan for certain awards to qualify as "performance-based
compensation" not subject to the limitations on deductibility of executive
compensation provided for in Section 162(m) of the Internal Revenue Code of
1986, and to ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants for the fiscal year ending August 31, 1998. There were 9,346,356
shares of common stock entitled to vote at the meeting and a total of 8,891,065
shares (95.13%) were represented at the meeting.
1. ELECTION OF DIRECTORS: FOR WITHHOLD
Howard G. Buffett 8,843,713 47,352
George W. Plossl 8,749,319 141,746
2. EXECUTIVE COMPENSATION PLAN. Approval of the adoption of the Company's
Executive Compensation Plan.
FOR - 8,727,686 AGAINST - 119,167 ABSTAIN - 44,212 BROKER NON-VOTE - 0
3. AUDITORS. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent auditors for the fiscal year ended August 31, 1998
FOR - 8,860,346 AGAINST - 7,178 ABSTAIN - 23,541 BROKER NON-VOTE - 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
4 - Specimen Form of Common Stock Certificate incorporated by
reference to Exhibit 4 to the Company's Report on Form 10-Q
for the fiscal quarter ended November 30, 1997.
10(a) - Lindsay Manufacturing Co. Executive Compensation Plan
27 - Financial Data Schedule
(b) Reports on Form 8-K -
No Form 8-K was filed during the quarter ended February 28, 1998
-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: March 19, 1998 Bruce C. Karsk
--------------------------------
Bruce C. Karsk
Vice President - Finance, Treasurer and Secretary;
Principal Financial and Accounting Officer
Date: March 19, 1998 Ralph J. Kroenke
--------------------------------
Ralph J. Kroenke
Controller
-15-
<PAGE> 1
Exhibit 10(a)
EXHIBIT 10(a) Lindsay Manufacturing Co., Executive Compensation Plan
THE LINDSAY MANUFACTURING CO.
EXECUTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
1.1 The Lindsay Manufacturing Co. Executive Compensation Plan
is intended to advance the interests of Lindsay Manufacturing Co. and its
shareholders by attracting, retaining and providing appropriate incentives to
key employees upon whose judgment, initiative and effort Lindsay Manufacturing
Co., is largely dependent for the successful conduct of its business and to
encourage and enable such key employees to acquire and retain a proprietary
interest in Lindsay Manufacturing Co., by ownership of its common stock. In
addition, the Plan is intended to assure that certain awards qualify as
"performance-based compensation" not subject to the limitations on
deductibility of executive compensation per Section 162(m) of the Code. The
Plan is similar to the company's past executive compensation arrangements.
ARTICLE II
DEFINITIONS
2.1 "Board" means the Board of Directors of the Company.
2.2 "Committee" means the Compensation Committee of the Board
which consists solely of two or more Outside Directors of the Board.
2.3 "Company" means Lindsay Manufacturing Co.
2.4 "Plan" means Lindsay Manufacturing Co's. Executive
Compensation Plan.
2.5 "Participant" means a key employee specifically designated
by the Committee to whom an Award, Restricted Stock or an Option, each of which
is performance based, has been granted under the Plan.
2.6 "Common Stock" means the Company's $1.00 par value common
stock.
2.7 "Stock Option" means a non-qualified stock option, an
Incentive Stock Option or a Stock Appreciation Right (whether granted with
respect to another Option or alone) granted to Employee Participant under the
Plan. An Incentive Stock Option granted to an Employee Participant under the
Plan is intended to meet the requirements of Section 422A of the Internal
Revenue Code of 1986.
2.8 "Other Awards" means other forms of awards payable in cash
or Company Common Stock (including Restricted Stock).
-16-
<PAGE> 2
2.9 "Performance Based Award" means any award of cash (bonus),
Restricted Stock or Stock Options which is based on pre-established, objective
performance criteria. Additionally the general performance criteria for such
Performance Based Award must have been approved by the shareholders.
Accordingly, the Plan authorizes Performance Based Awards to be based on one or
more of the following criteria: earnings per share, operating income, profit
margins, return on net assets, increased inventory and/or receivable turns,
cash flow, stock price, total shareholder return, and any other objective
measure specified by written agreement with the Participant and approved by the
Committee.
Performance Based Awards will be based on the extent to which performance
criteria have been satisfied, and will not become payable to Participants (or
vested, in the case of restricted stock) until the Committee certifies that the
applicable performance targets have been met.
2.10 "Date of Award" means the date on which an Award, an Option
or Restricted Stock is granted under the Plan to a Participant.
2.11 "1991 Long-Term Incentive Plan" means The Lindsay
Manufacturing Co. 1991 Long-Term Incentive Plan approved by the Shareholders on
February 11, 1992.
ARTICLE III
ADMINISTRATION
3.1 Committee. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan, the Committee shall
have sole discretion and authority to determine, from among key employees,
those to whom the time or times at which a Performance Based Award shall be
granted. Key employees are eligible to participate in the Plan subject to
selection by the Committee based upon an employee's past or anticipated
contributions to the Company's growth and success. Subject to the express
provisions of the Plan, the Committee shall also have complete authority to
intepret the Plan, to prescribe, and rescind rules and regulations relating to
it, to determine the details and provisions of each Performance Based Award, to
make all the determinations necessary or advisable in the administration of the
Plan as it relates to Participants and to amend or terminate the Plan at
anytime, but no amendment shall be made without shareholder approval to the
extent such approval is required by law, agreement or the rules of any exchange
upon which the Company stock is listed. In addition, no amendment shall impair
the rights of holders of any agreement theretofore in place or of any award
theretofore granted without their consent. All such actions and determinations
by the Committee shall be conclusively binding for all purposes and upon all
persons.
3.2 Majority Rules. A majority of the members of the Committee
shall constitute a quorum, and any action taken by a majority present at a
meeting at which a quorum is present or any action taken without a meeting
evidenced by a writing executed by a majority of the whole Committee shall
constitute the action of the Committee.
-17-
<PAGE> 3
3.3 Company Assistance. The Company shall supply full and
timely information to the Committee on all matters relating to eligible
employees, their employment, death, retirement, disability or other termination
of employment, and such other pertinent facts as the Committee may require.
The Company shall furnish the Committee with such clerical and other assistance
as is necessary in the performance of its duties
3.4 Annual Maximum Award. Options and other stock (restricted
stock) awards may not be granted to any Participant in any fiscal year covering
more than a cumulative 50,000 shares of Company common stock. The 50,000 share
limitation is to be automatically adjusted pro rata for any future stock splits
or other changes in capitalization. All options or other stock award grants
under the Plan will be made under the Company's 1991 Long-Term Incentive Plan
approved by the shareholders on February 11, 1992.
3.5 Option Grants. All options to be granted under the Plan,
which may include incentive stock options satisfying certain Code requirements,
must have an exercise price of not less than the fair market value of Company
common stock on the date of grant.
A participant will be required to complete a specified period of
employment following the grant date before an option becomes exercisable. The
exercise price of an option may be paid in cash, through the surrender of
shares of Company common stock having a fair market value equal to the exercise
price, or through a combination of the foregoing as provided in the Company's
1991 Long-Term Incentive Plan.
3.6 Restricted Stock and Other Awards. Awards of common stock
(restricted common stock) may be made on terms and conditions fixed by the
Compensation Committee, including restrictions as to vesting or transferability
of the award. If the Committee intends a restricted stock award to qualify as
performance based compensation under Section 162(m) of the Code, such shares
will vest only upon the attainment of specific performance goals, as discussed
below.
Awards, payable in cash or Company common stock, may be granted under the
Plan. Pursuant to Code Section 162(m), awards in excess of the per year limit
paid to the Chief Executive Officer or any of the four other highest paid
executive officers are not deductible by the Company unless such compensation
is based on pre-established, objective performance criteria. Additionally,
shareholders must have approved the general performance criteria for such
compensation. Accordingly, the Plan authorizes Performance Based Awards to be
based on one or more of the following cirtiera: earnings per share, operating
income, profit margins, return on net assets, increased inventory and/or
receivable turns, cash flow, stock price, total shareholder return, and any
other objective measure specified by written agreement with the Participant and
approved by the Committee.
Such awards will be based on the exent to which performance criteria have
been satisfied, and will not become payable to Participants (or vested, in the
case of restricted stock) until the Committee certifies that the applicable
performance targets have been met.
-18-
<PAGE> 4
3.7 Term, Exercise Period and Transferability of Stock Awards.
Stock awards may be granted for such terms as the Committee may determine.
Options are exercisable only during the participant's employment by the Company
(or within 60 days after the participanats termination of employment by the
Company) and unearned portions of restricted stock and other awards will be
forfeited upon termination of the participant's employment prior to the end of
the restriction or performance period, subject to exceptions in the case of
death, termination without cause, or termination following a change in control
of the Company as provided in the Company's 1991 Long-Term Incentive Plan.
3.8 Event of Reorganization, Recapitalization, Spin-off, Stock
Dividend or Stock Split. In the event of a reorganization, recapitalization,
spin-off, stock dividend or stock split, or a combination or other increase or
reduction in the number of issued shares of the Company's common stock,
adjustments shall be made in the number of shares covered by each outstanding
restricted stock, stock option or other stock award, and the price thereof as
may be determined to be appropriate and equitable in order to prevent dilution
or enlargement of rights under awards.
Where dissolution or liquidation of the Company or any merger or
combination in which the Company is not a surviving corporation is involved,
each outstanding Restricted Stock award and Option granted hereunder shall
terminate, but the Participant shall have the right, immediately prior to such
dissolution, liquidation, merger, or combination, to receive the Common Stock
or to exercise any Option or right to Option in whole or in part, to the extent
that it shall not have been exercised, without regard to any vesting
restriction or installment exercise provisions.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined solely by the Committee, and any such adjustment
may provide for the elimination of fractional share interests all as provided
in the Company's 1991 Long-Term Incentive Plan.
ARTICLE IV
MISCELLANEOUS
4.1 Employment. Nothing in the Plan shall confer upon any
employee the right to continue in the employ of the Company.
4.2 Other Compensation Plans. Except as provided herein the
adoption of the Plan shall not affect any other Plan, employment agreement,
stock option or incentive or other compensation plans in effect for the Company
nor shall the Plan preclude the Company from establishing any other forms of
incentive or other compensation for employees of the Company.
4.3 Singular, Plural; Gender. Whenever used herein, nouns in
the singular shall include the plural, and the masculine pronoun shall include
the feminine gender.
-19-
<PAGE> 5
4.4 Headings, etc., No Part of Plan. Headings of Articles and
Sections hereof are inserted for convenience and reference; they constitute no
part of the Plan.
4.5 Effective Date. On November 28, 1997, this Plan was
adopted and authorized by the Committee for submission to the stockholders of
the Company. Subject to the approval by the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock voting in person or by
proxy at a duly held stockholders' meeting. If such approval is obtained this
Plan shall be deemed to have become effective on November 28, 1997.
-20-
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