<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, 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, $1.00 par value 13,874,404
- ----------------------------- ------------------------------
Title of Class Outstanding as of June 19,1998
Exhibit index is located on page 2.
Total number of pages 15.
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<PAGE> 2
LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, May 31, 1998 and 1997
and August 31, 1997 3
Consolidated Statements of Operations for the three
months and nine months ended May 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the nine
months ended May 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Position 9-12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 12
Part II - Other Information
Item 1. Legal Proceedings 13-14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index
27 - Financial Data Schedule 16
</TABLE>
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<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Lindsay Manufacturing Co.
CONSOLIDATED BALANCE SHEETS
May 31, 1998 and 1997 and August 31, 1997
($ in thousands, except par values)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
May May August
1998 1997 1997
ASSETS ---------- ---------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 10,869 $ 3,288 $ 4,231
Marketable securities...................................... 15,025 16,564 12,077
Receivables................................................ 25,457 20,479 18,900
Inventories................................................ 8,737 9,719 9,995
Deferred income taxes...................................... 3,837 3,800 4,547
Other current assets....................................... 269 639 77
---------- ---------- ----------
Total current assets..................................... 64,194 54,489 49,827
Long-term marketable securities.............................. 40,459 37,591 45,802
Property, plant and equipment, net........................... 12,571 11,248 11,294
Other noncurrent assets...................................... 1,143 1,131 1,060
---------- ---------- ----------
Total assets................................................. $ 118,367 $ 104,459 $ 107,983
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade.................................... $ 4,654 $ 4,662 $ 4,993
Other current liabilities.................................. 13,859 13,431 14,337
Current portion of capital lease obligation................ 153 0 149
---------- ---------- ----------
Total current liabilities................................ 18,666 18,093 19,479
Other noncurrent liabilities................................. 1,221 1,273 1,274
Obligation under capital lease less current portion.......... 147 0 262
---------- ---------- ----------
Total liabilities............................................ 20,034 19,366 21,015
---------- ---------- ----------
Contingencies
Stockholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in
May 1998 and 1997 and August 1997)
Common stock, ($1 par value, 25,000,000 shares
authorized, 16,982,068, 11,190,866 and 11,203,256 shares
issued in May 1998 and 1997 and August 1997............ 16,982 11,191 11,203
Capital in excess of stated value........................ 0 20 450
Retained earnings........................................ 121,414 103,874 106,639
Less treasury stock, (at cost, 2,994,045, 1,753,030 and
1,794,030 shares in May 1998 and 1997 and August 1997). (40,063) (29,992) (31,324)
---------- ---------- ----------
Total stockholders' equity................................... 98,333 85,093 86,968
---------- ---------- ----------
Total liabilities and stockholders' equity................... $ 118,367 $ 104,459 $ 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 nine months ended May 31, 1998 and 1997
($ in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
--------------------------------- -----------------------------------
May May May May
1998 1997 1998 1997
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Operating revenues.......................... $ 43,904 $ 41,663 $ 131,060 $ 126,823
Cost of operating revenues.................. 31,711 30,370 95,455 94,315
------------- --------------- -------------- ---------------
Gross profit................................ 12,193 11,293 35,605 32,508
------------- --------------- -------------- ---------------
Operating expenses:
Selling expense........................... 1,479 1,235 4,137 3,534
General and administrative expense........ 2,136 1,574 6,209 5,319
Engineering and research expense.......... 435 361 1,304 1,117
------------- --------------- -------------- ---------------
Total operating expenses.................... 4,050 3,170 11,650 9,970
------------- --------------- -------------- ---------------
Operating income............................ 8,143 8,123 23,955 22,538
Interest income, net........................ 784 724 2,342 2,172
Other income, net........................... 4,107 55 4,300 228
------------- --------------- -------------- ---------------
Earnings before income taxes................ 13,034 8,902 30,597 24,938
Income tax provision........................ 4,237 2,849 9,945 7,980
------------- --------------- -------------- ---------------
Net earnings................................ $ 8,797 $ 6,053 $ 20,652 $ 16,958
============= =============== ============== ===============
Average shares outstanding - Basic 13,946,190 14,240,724 13,995,827 14,281,700
Net earnings per share - Basic.............. $ 0.63 $ 0.43 $ 1.48 $ 1.19
============= =============== ============== ===============
Average shares outstanding - Diluted 14,554,704 14,890,404 14,648,595 15,043,146
Net earnings per share - Diluted............ $ 0.60 $ 0.41 $ 1.41 $ 1.13
============= =============== ============== ===============
Cash dividends per share.................... $ 0.033 $ 0.023 $ 0.090 $ 0.068
============= =============== ============== ===============
</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 nine months ended May 31, 1998 and 1997
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
May May
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES ---------- ----------
<S> <C> <C>
Net earnings........................................................... $ 20,652 $ 16,958
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization....................................... 1,695 1,496
Amortization of marketable securities premiums, net................. 131 171
(Gain) on sale of fixed assets...................................... (145) (57)
(Gain) on maturities of marketable securities held-to-maturity...... (1) (14)
Provision for uncollectible accounts receivable..................... 0 45
Deferred income taxes............................................... 710 (431)
Changes in assets and liabilities:
Receivables......................................................... (6,557) (396)
Inventories......................................................... 1,258 (1,919)
Other current assets................................................ (192) (369)
Accounts payable.................................................... (339) (1,253)
Other current liabilities........................................... (2,047) 222
Current taxes payable............................................... 1,569 427
Other noncurrent assets and liabilities............................. (136) (19)
---------- ----------
Net cash flow provided by operating activities......................... 16,598 14,861
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment............................. (2,984) (3,073)
Proceeds from sale of property, plant and equipment.................... 157 77
Purchases of marketable securities held-to-maturity.................... (6,675) (18,329)
Proceeds from maturities of marketable securities held-to-maturity..... 8,940 16,089
---------- ----------
Net cash flow used in investing activities............................. (562) (5,236)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation...................... (111) 0
Proceeds from issuance of common stock under stock option plan......... 708 815
Three-for-two stock split fractional shares paid in cash............... 0 (2)
Dividends paid......................................................... (1,256) (968)
Purchases of treasury stock............................................ (8,739) (8,544)
---------- ----------
Net cash flow used in financing activities............................. (9,398) (8,699)
---------- ----------
Net increase in cash and cash equivalents.............................. 6,638 926
Cash and cash equivalents, beginning of period......................... 4,231 2,362
---------- ----------
Cash and cash equivalents, end of period............................... $ 10,869 $ 3,288
========== ==========
Supplemental Cash Flow Information:
Income taxes paid...................................................... $ 7,652 $ 7,942
Interest paid.......................................................... $ 39 $ 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.
(the "Company" or "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 May 31,
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 May 31, 1998. Investments in the held-to-maturity
category are included in marketable securities ($15.0 million) and long-term
marketable securities ($40.5 million). The total amortized cost, gross
unrealized holding gains, gross unrealized holding losses, and aggregate fair
value for held-to-maturity securities are $55.5 million, $0.4 million, $0.0
million, and $55.9 million, respectively. There have not been any sales of
held-to-maturity securities for the first nine months of Fiscal 1998. In the
held-to-maturity category, $15.0 million in securities mature within one year
and $40.5 million have maturities ranging from one to three and one-fourth
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)
------------------------------------
May May August
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Total manufactured goods
First-in, first-out inventory $12,960 $14,582 $14,164
LIFO reserves (3,577) (4,185) (3,500)
Obsolescence reserve (646) (678) (669)
---------- ---------- ----------
Total inventories $ 8,737 $ 9,719 $ 9,995
========== ========== ==========
</TABLE>
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
<TABLE>
<CAPTION>
May May 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)
------------------------------------
May May August
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Plant and equipment:
Land $ 70 $ 70 $ 70
Buildings 5,113 4,945 5,033
Equipment 24,387 22,782 23,769
Other 3,938 3,301 2,135
Capital lease:
Equipment 458 0 458
---------- ---------- ----------
Total plant, equipment & capital lease 33,966 31,098 31,465
Accumulated depreciation & amortization:
Plant and equipment (21,308) (19,850) (20,145)
Capital lease (87) 0 (26)
---------- ---------- ----------
Property, plant and equipment, net $12,571 $11,248 $11,294
========== ========== ==========
</TABLE>
5. 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, an
unfavorable outcome with respect to any existing legal action will not result in
a material adverse effect on Lindsay's consolidated financial position, results
of operations or cash flows. During fiscal 1996,
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<PAGE> 8
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. Contingencies - continued
Lindsay substantially completed certain environmental remediation efforts at its
manufacturing facility. Lindsay believed 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 $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. In May 1998 the Company reached an agreement to
settle this litigation with an insurer for $4.0 million which is included in
other income.
6. Net Earnings Per Share
The Company has adopted the Statement of Financial Accounting 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 Nine Months Ended
---------------------- ----------------------
5/31/98 5/31/97 5/31/98 5/31/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings $ 8,797 $ 6,053 $20,652 $16,958
per share - net earnings ======= ======= ======= =======
Denominator for basic earnings per share -
weighted average number of common shares
outstanding during the period. 13,946 14,241 13,996 14,282
Incremental common shares attributable to
exercise of outstanding options 609 649 653 761
------- ------- ------- -------
Denominator for diluted earnings per share 14,555 14,890 14,649 15,043
======= ======= ======= =======
Basic earnings per share $ 0.63 $ 0.43 $ 1.48 $ 1.19
======= ======= ======= =======
Diluted earnings per share $ 0.60 $ 0.41 $ 1.41 $ 1.13
======= ======= ======= =======
</TABLE>
7. 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 stockholders 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
The following table provides highlights for the three month and nine month
periods indicated of Fiscal Year 1998 as compared to the same periods of Fiscal
Year 1997.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
Percent Percent
Increase Increase
($ in thousands) 5/31/98 5/31/97 (Decrease) 5/31/98 5/31/97 (Decrease)
- --------------------------------------------------------------------------------------------------------
Consolidated
- ------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues .....................$43,904 $41,663 5.4% $131,060 $126,823 3.3%
Cost of Operating Revenues .............$31,711 $30,370 4.4 $ 95,455 $ 94,315 1.2
Gross Profit ...........................$12,193 $11,293 8.0 $ 35,605 $ 32,508 9.5
Gross Margin ........................... 27.8% 27.1% 27.2% 25.6%
Selling, Eng. & Research, and
G&A Expense ..........................$ 4,050 $ 3,170 27.8 $ 11,650 $ 9,970 16.9
Operating Income .......................$ 8,143 $ 8,123 0.2 $ 23,955 $ 22,538 6.3
Operating Margin ....................... 18.6% 19.5% 18.3% 17.8%
Interest Income, net ...................$ 784 $ 724 8.3 $ 2,342 $ 2,172 7.8
Other Income, net ......................$ 4,107 $ 55 N/A $ 4,300 $ 228 N/A
Income Tax Provision ...................$ 4,237 $ 2,849 48.7 $ 9,945 $ 7,980 24.6
Effective Income Tax Rate .............. 32.5% 32.0% 32.5% 32.0%
Net Earnings............................$ 8,797 $ 6,053 45.3% $ 20,652 $ 16,958 21.8%
</TABLE>
As the above table displays, operating revenues for the three month period ended
May 31, 1998, increased 5.4 percent ($2.2 million) from the comparable period of
the prior year. The increase in third quarter revenue was the net result of a
15 percent ($3.7 million) increase in domestic irrigation equipment revenues, a
7 percent ($0.5 million) decrease in export irrigation euqipment revenues and a
11 percent ($0.9 million) decrease in diversified products and other revenues.
For the nine month period ended May 31, 1998, operating revenues were up 3.3
percent ($4.2 million) from the comparable period of the prior year. U.S.
irrigation equipment revenue was up 6 percent ($4.9 million), diversified
products and other revenue was essentially equal to the comparable period of the
prior year and export irrigation equipment revenues for the nine month period
were down 3 percent ($0.6 million).
Domestic irrigation equipment revenues for both the three and nine month periods
of fiscal 1998 continued to be favorably impacted by the long term demand
drivers of farmer emphasis on conserving water, energy, and labor. Generally
low equipment financing interest rates and rising farm land values have been
additional positive factors for ongoing demand for center pivot and lateral move
irrigation equipment in the U.S. We believe that current agricultural commodity
prices and the outlook for continued low agricultural prices for 1998 and early
1999 (particularly for corn, wheat and soybeans) have had a negative influence
on demand.
In export irrigation equipment, revenue increases from the Canadian, South and
Central African, Australian, and Middle Eastern markets during both the three
and nine month periods were more than offset by lower revenues from the Mexican
and Latin American and Western European markets as compared to the prior year's
comparative periods.
-9-
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
The decline in diversified products and other revenues during the third quarter
of fiscal 1998 as compared to the third quarter of fiscal 1997 was due to
reduced activity in both outsource manufacturing and large diameter steel tubing
sales. For the nine month period, an increase in outsource manufacturing
revenues was essentially offset by a reduction in large diameter steel tubing
revenues.
Gross margin for the three months ended May 31, 1998, as a percent of operating
revenues, was 27.8 percent - up from 27.1 percent of the prior year's
comparative period. For the nine months ended May 31, 1998, gross margin as a
percent of operating revenues was 27.2 percent as compared to 25.6 percent for
the nine months ended May 31, 1997. Demand for irrigation equipment in the U.S.
market for both the three and nine months periods resulted in a continued
favorable pricing environment. Additionally, increased automation resulted in
improved productivity during both the three and nine month periods of the
current year. Raw material costs, in total, continued to be relatively stable.
Selling, general and administrative, and engineering and research expenses for
the three month period ended May 31, 1998, were $4.1 million as compared to $3.2
million during the prior year's comparative period. For the nine month period,
fiscal 1998 selling, general and administrative, and engineering and research
expenses totaled $11.7 million as compared to $10.0 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 nine month periods.
Third quarter fiscal year 1998 "Other Income" of $4.1 million includes income of
$4.0 million due to an agreement the Company reached with an insurer to settle
litigation which Lindsay initiated in 1990 concerning coverage issues. Third
quarter fiscal 1998 interest income of $0.8 million versus $0.7 million for the
third quarter of fiscal 1997 and $2.3 million year-to-date fiscal 1998 versus
$2.2 million year-to-date fiscal 1997 is primarily derived from our investments
in short and medium term municipal bonds.
The effective tax rate for both the three month and nine month periods ended May
31, 1998 was 32.5 percent. This compares to an effective tax rate of 32.0
percent for both the comparable three month and nine month periods of the prior
year. Due to the federal income tax exempt status of interest income from its
municipal bond investment, 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 36.8 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 dividends.
Over the years, Lindsay has financed its growth through funds provided by
operations. Cash flows provided by operations of $16.6 million for the first
nine months of fiscal 1998 increased from $14.9 million for the first nine
months of fiscal 1997. The increase in cash flows provided by operating
-10-
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
FINANCIAL POSITION AND LIQUIDITY - Continued
activities in fiscal 1998 was primarily due to net earnings partially offset by
increased receivables. Fiscal 1997 cash flows provided by operating activities
was principally due to net earnings.
Receivables of $25.5 million at May 31, 1998 increased from $18.9 million at
August 31, 1997 and $20.5 million at May 31, 1997 primarily due to a $4.0
million litigation settlement receivable from an insurer. Inventories at May
31, 1998 totaled $8.7 million, lower than their $10.0 million balance at August
31, 1997 and $9.7 million balance at May 31, 1997.
Current liabilities of $18.7 million at May 31, 1998 are lower than their $19.5
million balance at August 31, 1997 and higher than their $18.1 million balance
at May 31, 1997. The decrease from August 31, 1997 is principally due to
decreased trade payables and lower accruals for domestic dealership payments,
marketing, investor relations and international dealer prepayments partially
offset by a higher accrual for taxes payable state and federal. The increase
from May 31, 1997 is primarily due to higher accruals for taxes payable state
and federal and payroll and vaction partially offset by lower accruals for
international dealer prepayments.
Cash flows used in investing activities of $0.6 million for the first nine
months of fiscal 1998 decreased from $5.2 million for the first nine months of
fiscal 1997 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 $25.9 million at May
31, 1998, as compared to $16.3 million at August 31, 1997, and $19.9 million at
May 31, 1997. At May 31, 1998, Lindsay had $40.5 million invested in long-term
marketable securities which represent intermediate term (one to three and
one-fourth year maturities) municipal debt, as compared to $45.8 million at
August 31, 1997 and from $37.6 million at May 31, 1997.
Cash flows used in financing activities of $9.4 million for the first nine
months of fiscal 1998 increased from $8.7 million for the first nine months of
fiscal 1997 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 $98.3 million at May 31, 1998 from $87.0 million
at August 31, 1997, due to its net earnings of $20.7 million, less $8.7 million
used to repurchase 303,000 (split adjusted) shares of common stock per
Lindsay's previously announced stock repurchase plan, plus the proceeds of $0.7
million from the issuance of 118,123 shares of common stock under Lindsay's
employee stock option plan, less dividends paid of $1.3 million. Lindsay's
equity at May 31, 1997 was $85.1 million.
Capital expenditures totaling $3.0 million for the first nine 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.
-11-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
FINANCIAL POSITION AND LIQUIDITY - Continued
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.
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,
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
nine 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 May 31, 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. If the EPA or the NDEC require remediation which is in addition to or
different from the current plan, this reserve could increase or decrease
depending on the nature of the change in events.
Lindsay believed 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. 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. In May 1998 the Company reached an agreement to settle this
litigation with an insurer for $4.0 million which is included in other income.
-13-
<PAGE> 14
OTHER INFORMATION
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 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 May 31, 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: June 23, 1998 Bruce C. Karsk
------------- -------------------------
Bruce C. Karsk
Vice President - Finance, Treasurer and Secretary;
Principal Financial and Accounting Officer
Date: June 23, 1998 Ralph J. Kroenke
------------- -------------------------
Ralph J. Kroenke
Controller
-15-
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