<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 November 30, 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)
Common Stock, $1.00 par value New York Stock Exchange, Inc. (Symbol LNN)
- ----------------------------- ------------------------------------------
Title of Class Name of each exchange on which registered
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, $1.00 par value 13,146,657
- ----------------------------- -----------------------------------
Title of Class Outstanding as of December 14, 1998
Exhibit index is located on page 2.
Total number of pages 16.
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<PAGE> 2
LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets, November 30, 1998 and 1997
and August 31, 1998 3
Consolidated Statements of Operations for the three
months ended November 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the three
months ended November 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Position 9-13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
Part II - Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index
27 - Financial Data Schedule 16
</TABLE>
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<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Lindsay Manufacturing Co.
CONSOLIDATED BALANCE SHEETS
November 30, 1998 and 1997 and August 31, 1998
($ in thousands, except par values)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
November November August
1998 1997 1998
---------- ---------- ---------
<S> <C> <C> <C>
ASSETS ...........................................................
Current assets:
Cash and cash equivalents ...................................... $ 1,469 $ 1,989 $ 3,794
Marketable securities .......................................... 16,054 12,389 18,704
Receivables .................................................... 14,925 19,307 14,066
Inventories .................................................... 10,257 9,297 10,198
Deferred income taxes .......................................... 3,563 4,381 3,861
Other current assets ........................................... 646 623 92
--------- --------- ---------
Total current assets ......................................... 46,914 47,986 50,715
Long-term marketable securities .................................. 39,773 49,809 43,164
Property, plant and equipment, net ............................... 13,994 11,283 14,071
Other noncurrent assets .......................................... 1,017 1,123 964
--------- --------- ---------
Total assets ..................................................... $ 101,698 $ 110,201 $ 108,914
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade ........................................ $ 4,663 $ 6,257 $ 4,936
Other current liabilities ...................................... 11,008 14,376 11,723
Current portion of capital lease obligation .................... 156 150 142
--------- --------- ---------
Total current liabilities .................................... 15,827 20,783 16,801
Other noncurrent liabilities ..................................... 887 1,057 1,125
Obligation under capital lease less current portion .............. 68 224 108
--------- --------- ---------
Total liabilities ................................................ 16,782 22,064 18,034
--------- --------- ---------
Contigencies
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in
November 1998 and 1997 and August 1998)
Common stock, ($1 par value, 25,000,000 shares
authorized, 17,031,345, 11,220,586 and 16,993,949
shares issued in November 1998 and 1997 and August 1998 .... 17,031 11,221 16,994
Capital in excess of stated value ............................ 1,381 1,063 855
Retained earnings ............................................ 124,734 111,003 123,764
Less treasury stock, (at cost, 3,884,688, 1,876,730 and
3,399,788 shares in November 1998 and 1997 and August 1998) (58,230) (35,150) (50,733)
--------- --------- ---------
Total shareholders' equity ....................................... 84,916 88,137 90,880
--------- --------- ---------
Total liabilities and shareholders' equity ....................... $ 101,698 $ 110,201 $ 108,914
========= ========= =========
</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 ended November 30, 1998 and 1997
(in thousands, except per share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November November
1998 1997
--------- --------
<S> <C> <C>
Operating revenues ......................... $21,642 $37,448
Cost of operating revenues ................. 16,964 27,891
------- -------
Gross profit ............................... 4,678 9,557
------- -------
Operating expenses:
Selling expense .......................... 1,261 1,272
General and administrative expense ....... 1,822 1,855
Engineering and research expense ......... 395 460
------- -------
Total operating expenses ................... 3,478 3,587
------- -------
Operating income ........................... 1,200 5,970
Interest income, net ....................... 741 791
Other income, net .......................... 162 191
------- -------
Earnings before income taxes ............... 2,103 6,952
Income tax provision ....................... 673 2,260
------- -------
Net earnings ............................... $ 1,430 $ 4,692
======= =======
Basic net earnings per share ............... $ 0.11 $ 0.33
======= =======
Diluted net earnings per share ............. $ 0.10 $ 0.32
======= =======
Average shares outstanding ................. 13,354 14,086
Diluted effect of stock options ............ 401 697
------- -------
Average shares outstanding assuming dilution 13,755 14,783
======= =======
Cash dividends per share ................... $ 0.035 $ 0.023
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended November 30, 1998 and 1997
($ in thousands)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November November
1998 1997
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings .......................................................... $ 1,430 $ 4,692
Adjustments to reconcile net earnings to net cash (used in) provided by
operating activities:
Depreciation and amortization ...................................... 637 554
Amortization of marketable securities premiums, net ................ 50 38
(Gain) on sale of fixed assets ..................................... (18) (12)
(Gain) on maturities of marketable securities held-to-maturity ..... (5) 0
Deferred income taxes .............................................. 298 166
Changes in assets and liabilities:
Receivables ........................................................ (859) (407)
Inventories ........................................................ (59) 698
Other current assets ............................................... (554) (546)
Accounts payable ................................................... (273) 1,264
Other current liabilities .......................................... (1,863) (2,533)
Current taxes payable .............................................. 1,148 2,572
Other noncurrent assets and liabilities ............................ (291) (280)
------- -------
Net cash (used in) provided by operating activities ................... (359) 6,206
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment ............................ (582) (543)
Proceeds from sale of property, plant and equipment ................... 40 12
Purchases of marketable securities held-to-maturity ................... 0 (6,572)
Proceeds from maturities of marketable securities held-to-maturity .... 5,996 2,215
------- -------
Net cash provided by (used in) investing activities ................... 5,454 (4,888)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation ..................... (26) (37)
Proceeds from issuance of common stock under stock option plan ........ 563 631
Dividends paid ........................................................ (460) (328)
Purchases of treasury stock ........................................... (7,497) (3,826)
------- -------
Net cash used in financing activities ................................. (7,420) (3,560)
------- -------
Net decrease in cash and cash equivalents ............................. (2,325) (2,242)
Cash and cash equivalents, beginning of period ........................ 3,794 4,231
------- -------
Cash and cash equivalents, end of period .............................. $ 1,469 $ 1,989
======= =======
Supplemental Cash Flow Information:
Income taxes paid ..................................................... $ (1) $ 2
Interest paid ......................................................... $ 2 $ 25
</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, 1998 Annual Report to Shareholders.
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 November
30, 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. Investments in the held-to-maturity category
are carried at amortized cost. 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.
Investments in the held-to-maturity category are included in marketable
securities ($16.0 million) and long-term marketable securities ($39.8 million).
The total amortized cost, gross unrealized holding gains, gross unrealized
holding losses, and aggregate fair value for held-to-maturity securities are
$55.8 million, $0.6 million, $0.0 million, and $56.4 million, respectively.
There have not been any sales of held-to-maturity securities during the first
quarter of fiscal 1999. In the held-to-maturity category, $16.0 million in
securities mature within one year and $39.8 million have maturities ranging from
one to three years.
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<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)
-----------------------------------
November November August
1998 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Total manufactured goods
First-in, first-out inventory $14,565 $13,344 $14,361
LIFO reserves (3,373) (3,380) (3,228)
Obsolescence reserve ( 935) ( 667) ( 935)
---------- ---------- ----------
Total inventories $10,257 $ 9,297 $10,198
========== ========== ==========
</TABLE>
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
<TABLE>
<CAPTION>
November November August
1998 1997 1998
-------- -------- ------
<S> <C> <C> <C>
Raw materials 18% 19% 18%
Work in process 6% 6% 6%
Purchased parts 35% 30% 35%
Finished goods 41% 45% 41%
</TABLE>
4. Property, Plant and Equipment
Property, plant and equipment are stated at cost.
<TABLE>
<CAPTION>
(in thousands)
----------------------------------
November November August
1998 1997 1998
-------- -------- -------
<S> <C> <C> <C>
Plant and equipment:
Land $ 70 $ 70 $ 70
Buildings 5,043 5,033 5,043
Equipment 26,164 23,715 25,023
Other 4,520 2,673 5,280
Capital lease:
Equipment 458 458 458
---------- ---------- ---------
Total plant, equipment & capital lease 36,255 31,949 35,874
Accumulated depreciation & amortization:
Plant and equipment (22,121) (20,631) (21,690)
Capital lease (140) (35) (113)
---------- ---------- ---------
Property, plant and equipment, net $13,994 $11,283 $14,071
========== ========== =========
</TABLE>
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<PAGE> 8
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Credit Arrangements
Lindsay is currently entering discussions for a $10.0 million unsecured
revolving line of credit with a commercial bank to be used for working capital
and general corporate purposes including stock repurchases.
6. Contingencies
The Company and its subsidiaries are defendants in various legal actions arising
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.
7. Net Earnings Per Share
Basic net earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding. Diluted net earnings per share
includes the dilutive effect of stock options.
Options to purchase 155,438 shares of common stock at a weighted average price
of $25.51 per share were outstanding during the first quarter of fiscal 1999,
but were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
The options expire on September 3, 2006, through September 3, 2008.
8. Stock Split
On May 6, 1998, the Board of Directors declared a three-for-two split of
Lindsay's common stock effective June 15, 1998, to shareholders of record on
June 5, 1998. Accordingly, the average number of shares outstanding and per
share information have been adjusted to reflect the stock split.
-8-
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table provides highlights for the first quarter of fiscal year
1999 compared with the first quarter of fiscal year 1998.
<TABLE>
<CAPTION>
For The Three Months Ended
----------------------------
Percent
------------------ Increase
($ in thousands) 11/30/98 11/30/97 (Decrease)
- --------------------------------------------------------------------------------
Consolidated
- ------------
<S> <C> <C> <C>
Operating Revenues................................$21,642 $37,448 (42.2)%
Cost of Operating Revenues........................$16,964 $27,891 (39.2)
Gross Profit......................................$ 4,678 $ 9,557 (51.1)
Gross Margin...................................... 21.6% 25.5%
Selling, Eng. & Research, and
G&A Expense.....................................$ 3,478 $ 3,587 (3.0)
Operating Income..................................$ 1,200 $ 5,970 (79.9)
Operating Margin.................................. 5.5% 15.9%
Interest Income, net..............................$ 741 $ 791 (6.3)
Other Income, net.................................$ 162 $ 191 (15.2)
Income Tax Provision..............................$ 673 $ 2,260 (70.2)
Effective Income Tax Rate......................... 32.0% 32.5%
Net Earnings......................................$ 1,430 $ 4,692 (69.5)%
</TABLE>
As the above table displays, operating revenues for the three month period ended
November 30, 1998, were 42.2 percent ($15.8 million) lower than the first
quarter of fiscal 1998. This decrease was the result of 46 percent ($9.9
million) reduction in U.S. irrigation equipment revenues, a 39 percent ($3.1
million) reduction in export irrigation equipment revenues and a 37 percent
($2.8 million) reduction in diversified products and other revenues.
Lindsay believes that the long-term demand drivers for irrigation equipment
consisting of the need for farmers to conserve water, energy and labor while at
the same time improving crop yields and increasing crop production remain in
place in its U.S. market and in its markets outside the U.S. However, these
long-term demand drivers are currently being more than offset in the U.S. by the
expectation of lower farm income in calendar 1999. This expectation of lower
farm income in the U.S. is the result of low crop and other agricultural
commodity prices due to near record production in the U.S. (increased supply)
occuring concurrent with economic turmoil in Asia and other developing economic
regions leading to a reduced ability for the purchase and importation of grain
and meat commodities (reduced demand).
Consistent with the Company's expectation of lower full year demand for
irrigation equipment in the U.S. market, Lindsay reduced, on a prorata basis,
the use of its "floor plan" marketing program with its dealers during the first
quarter of fiscal 1999. Approximately six to seven percent of Lindsay's U.S.
pivot sales in both the first quarter of fiscal 1999 and the first quarter of
fiscal 1998 were "floor plan" unit sales. Lindsay's "floor plan" uses price
incentives to encourage dealers to take delivery of equipment prior to the
company's peak domestic selling season, which runs January through May. First
quarter fiscal 1999 irrigation equipment pricing (net of discounts and
promotional program allowances) was at levels similar to the first quarter of
fiscal 1998.
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<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
Export irrigation equipment revenues during the first quarter of fiscal 1999
were lower primarily due to the reduced whole unit sales to our irrigation
equipment dealers or their customers in Canada, Western Europe and Central and
South Africa and by lower repair and replacement parts sales to our irrigation
equipment dealers in our Middle Eastern market. Revenues from sales to our Latin
American and Australian markets were only modestly lower during the quarter as
compared to the first quarter of fiscal 1998.
First quarter fiscal 1999 diversified products and other revenues were lower
primarily due to reduced sales of agricultural related outsource manufacturing
products to Deere & Company and New Holland North America, Inc. Large diameter
tubing revenues during the first quarter of fiscal 1999 were essentially equal
to the prior year's first quarter.
Gross margin for the three months ended November 30, 1998, was 21.6 percent as
compared to 25.5 percent for the first quarter of the prior year. Gross margin
for the quarter was negatively impacted by unfavorable overhead rate variances
as the result of a reduced level of manufacturing as compared to the first
quarter of fiscal 1998. Raw material prices were largely stable or slightly
lower (i.e., steel and zinc) during the quarter.
First quarter fiscal 1999's selling, general and administrative and engineering
and research expenses in total decreased 3.0 percent from the prior year's
comparative period. Lower salary and wage costs, (due primarily to lower bonus
earnout accruals) more than offset increases in product advertising, legal and
professional fees, and group insurance costs during the quarter as compared to
the prior year's first quarter.
The effective tax rate for the first quarter of fiscal 1999 was 32.0 percent as
compared to 32.5 percent for the comparative period of fiscal 1998. 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 which is lower than the combined federal and
state statutory rates, currently estimated at 35.8 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 cash
dividends. Over the years, Lindsay has financed its growth through funds
provided by operations. Cash flows used in operations of $0.4 million for the
first three months of fiscal 1999 compared to cash flows provided by operations
of $6.2 million for the first three months of fiscal 1998. The use of cash flows
in operating activities for fiscal 1999 as compared to cash flow being provided
by operations during the first quarter of 1998 was primarily due to a reduction
in fiscal 1999 net earnings and a reduction in accounts payable and current
taxes payable.
Receivables of $14.9 million at November 30, 1998 increased from $14.1 million
at August 31, 1998 and decreased $4.4 million from $19.3 million at November 30,
1997, primarily due to the lower level of business activity during the first
three months of fiscal 1999. Inventories at November 30, 1998 totaled $10.3
million, comparable to their $10.2 million balance at August 31, 1998 and higher
than their $9.2 million balance at November 30, 1997.
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<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
FINANCIAL POSITION AND LIQUIDITY - Continued
Current liabilities of $15.8 million at November 30, 1998 are lower than their
$16.8 million balance at August 31, 1998 and $20.8 million balance at November
30, 1997. The decrease from August 31, 1998 is principally due to lower accruals
for payroll and vacation pay partially offset by higher accruals for taxes
payable. The decrease from November 30, 1997 is primarily due to decreased trade
payables and lower accruals for taxes payable and payroll and vacation pay.
Cash flows provided by investing activities of $5.5 million for the first three
months of fiscal 1999 compared to cash flows used in investing activities of
$4.9 million for the first three months of fiscal 1998. The cash flows provided
by investing activities in fiscal 1999 was attributable to maturities of
marketable securities partially offset by capital expenditures. Fiscal 1998 cash
flows used in investing activities was primarily due to purchases of marketable
securities and capital expenditures partially offset by proceeds from marketable
securities.
Lindsay's cash and short-term marketable securities totaled $17.5 million at
November 30, 1998, as compared to $22.5 million at August 31, 1998, and $14.4
million at November 30, 1997. At November 30, 1998, Lindsay had $39.8 million
invested in long-term marketable securities which represent intermediate term
(one to three year maturities) municipal debt, as compared to $43.2 million at
August 31, 1998 and $49.8 million at November 30, 1997.
Cash flows used in financing activities of $7.4 million for the first three
months of fiscal 1999 increased from $3.6 million for the first three months of
fiscal 1998 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 decreased to $84.9 million at November 30, 1998 from $90.9
million at August 31, 1998, due to its net earnings of $1.4 million, less $7.5
million used to repurchase 484,900 shares of common stock per Lindsay's
previously announced stock repurchase plan, plus the proceeds of $0.6 million
from the net issuance of 37,396 shares of common stock under Lindsay's employee
stock option plan, less dividends paid of $0.5 million. Lindsay's equity at
November 30, 1997 was $88.1 million.
Capital expenditures totaling $582,000 for the first quarter of 1999 were used
primarily for converting a major fabrication process started in fiscal year 1998
to further automate Lindsay's facility, and a new employee breakroom and office
renovation and expansion. Lindsay expects its fiscal 1999 capital expenditures
to total approximately $4.0 to $5.0 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), operating cash flow and potential line of credit are sufficient to
cover expected working capital needs, planned capital expenditures, dividends
and continued repurchases of common stock.
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<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. Shipments to
U.S. 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 23 and 22 percent of Lindsay's operating revenues for the first
quarter of 1999 and 1998 respectively, were generated from export sales. For the
full year of 1998, approximately 18 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.
YEAR 2000 ISSUES
The Company, in late fiscal 1996, began to informally address Year 2000 issues
with its Information Technology ("IT") systems with a decision to replace its
in-house-developed manufacturing and financial software with Year 2000 compliant
standardized Enterprise Resource Planning ("ERP") software. Management selected
Software Systems Associates, Inc.'s ("BPCS") ERP software in early 1997.
Hardware procurement and BPCS ERP software implementation progressed during
fiscal 1997 and fiscal 1998. Implementation of this BPCS ERP software is
estimated to be 70 to 80% complete as of November 30, 1998.
Additionally, the Company, in March 1998, commenced a more comprehensive review
of its Year 2000 issues with the formation of a Year 2000 Task Force. This task
force has inventoried and assessed both its IT and non-IT systems (embedded
technology such as micro-controllers or programmable logic controllers in
manufacturing equipment or in the products Lindsay sells). The task force is in
the process of inventorying, assessing and confirming the Year 2000 compliance
status of the Company's critical suppliers and third-party providers.
The Company believes that 75 to 85% of the remediation work to become Year 2000
compliant has been completed, however little final testing has been performed.
Lindsay believes that it will be fully Year 2000 compliant in the June 1999,
through October 1999, timeframe.
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<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
Lindsay believes that its costs for becoming Year 2000 compliant are expected to
total approximately $2.5 million of which 75% has been incurred to date
(approximately $0.9 million in both fiscal 1997 and 1998). These costs include
hardware costs, software costs and outside consulting costs but do not include
the costs for time that its employees have or are expected to spend on Year 2000
issues.
The Company believes that its most reasonable likely worst case Year 2000
scenario includes a short-term interruption in its ability to manufacture and
ship product because: (1) one or more of the company's suppliers or third-party
providers are unable to provide the material or services expected, and (2) one
or more parts of the Company's IT system software or non-IT systems operate
incorrectly.
Because of the progress which has been made toward achieving Year 2000
compliance, the Company has not made specific formal contingency plans. However,
informal contingency plans have been made. If knowledge of outside providers'
noncompliance becomes evident or events occur that are adverse to the Company's
plan for compliance, the Company will develop and implement specific formal
contingency plans as required. Despite the Company's efforts to address its Year
2000 issues, there can be no assurances that Year 2000 related failures of the
Company's IT systems software or non-IT systems, or that Year 2000 related IT
systems software or non-IT systems, or that Year 2000 related failures by
suppliers or third parties with which the Company interacts, will not have a
material effect on the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board Issued Statement of Financial
Accounting standards ("SFAS") No. 130, "Reporting Comprehensive Income," and
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information." These statements, which are effective for fiscal years beginning
after December 15, 1997, (Lindsay's fiscal year 1999) expand or modify
disclosures and resulted in no impact on the Company's consolidated financial
position, results of operations or cash flows.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not subject to material market risks with respect to its
marketable securities.
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
Lindsay is a party to a number of lawsuits 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
consolidated financial position, results of operations or cash flows.
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<PAGE> 14
OTHER INFORMATION
(Continued)
Concerning Forward-Looking Statements - This Report on Form 10-Q, including the
Management's Discussion and Analysis, Year 2000 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 to the Company's report on Form 10-Q for
the fiscal quarter ended November 30, 1997.
27 - Financial Data Schedule.
(b) Reports on Form 8-K -
No Form 8-K was filed during the quarter ended November 30, 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: December 16, 1998 Bruce C. Karsk
----------------- ------------------------
Bruce C. Karsk
Vice President - Finance, Treasurer and Secretary;
Principal Financial and Accounting Officer
Date: December 16, 1998 Ralph J. Kroenke
----------------- ------------------------
Ralph J. Kroenke
Controller
-15-
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