<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, 1999 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, $1.00 par value 12,788,870
- ----------------------------- --------------------------------
Title of Class Outstanding as of March 16, 1999
Exhibit index is located on page 2.
Total number of pages 16.
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<PAGE> 2
LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
--------
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, February 28, 1999 and 1998
and August 31, 1998 3
Consolidated Statements of Operations for the three
months and six months ended February 28, 1999 and 1998 4
Consolidated Statements of Cash Flows for the six
months ended February 28, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Position 8-13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
Part II - Other Information
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index
27 - Financial Data Schedule 16
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<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Lindsay Manufacturing Co.
CONSOLIDATED BALANCE SHEETS
February 28, 1999 and 1998 and August 31, 1998
($ in thousands, except par values)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> (Unaudited) (Unaudited)
February February August
1999 1998 1998
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 647 $ 67 $ 3,794
Marketable securities........................................... 21,260 11,197 18,704
Receivables..................................................... 17,625 30,421 14,066
Inventories..................................................... 9,677 10,779 10,198
Deferred income taxes........................................... 3,523 4,281 3,861
Other current assets............................................ 511 471 92
---------- ----------- -----------
Total current assets.......................................... 53,243 57,216 50,715
Long-term marketable securities................................... 31,616 45,667 43,164
Property, plant and equipment, net................................ 14,365 11,757 14,071
Other noncurrent assets........................................... 1,017 1,140 964
---------- ----------- -----------
Total assets...................................................... $ 100,241 $ 115,780 $ 108,914
========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade......................................... $ 6,186 $ 11,531 $ 4,936
Other current liabilities....................................... 10,756 12,789 11,723
Current portion of capital lease obligation..................... 157 151 142
---------- ----------- -----------
Total current liabilities..................................... 17,099 24,471 16,801
Other noncurrent liabilities...................................... 970 1,139 1,125
Obligation under capital lease less current portion............... 28 186 108
---------- ----------- -----------
Total liabilities................................................. 18,097 25,796 18,034
---------- ----------- -----------
Contingencies
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in
February 1999 and 1998 and August 1998).....................
Common stock, ($1 par value, 25,000,000 shares
authorized, 17,055,920, 11,265,250 and 16,993,949 shares
issued in February 1999 and 1998 and August 1998)........... 17,056 11,265 16,994
Capital in excess of stated value............................. 1,441 1,079 855
Retained earnings............................................. 127,629 117,703 123,764
Less treasury stock, (at cost, 4,267,050, 1,996,030 and
3,399,788 shares in February 1999 and 1998 and August 1998). (63,982) (40,063) (50,733)
---------- ----------- -----------
Total shareholders' equity........................................ 82,144 89,984 90,880
---------- ----------- -----------
Total liabilities and shareholders' equity........................ $ 100,241 $ 115,780 $ 108,914
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Lindsay Manufacturing Co.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and six months ended February 28, 1999 and 1998
(in thousands, except per share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
-------------------------- ----------------------------
February February February February
1999 1998 1999 1998
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues.......................... $ 31,087 $ 49,708 $ 52,729 $ 87,156
Cost of operating revenues.................. 23,426 35,853 40,390 63,744
---------- ----------- ----------- ------------
Gross profit................................ 7,661 13,855 12,339 23,412
---------- ----------- ----------- ------------
Operating expenses:
Selling expense........................... 1,159 1,386 2,420 2,658
General and administrative expense........ 1,839 2,218 3,661 4,073
Engineering and research expense.......... 477 409 872 869
---------- ----------- ----------- ------------
Total operating expenses.................... 3,475 4,013 6,953 7,600
---------- ----------- ----------- ------------
Operating income............................ 4,186 9,842 5,386 15,812
Interest income, net........................ 671 767 1,412 1,558
Other income, net........................... 68 2 230 193
---------- ----------- ----------- ------------
Earnings before income taxes................ 4,925 10,611 7,028 17,563
Income tax provision........................ 1,576 3,448 2,249 5,708
---------- ----------- ----------- ------------
Net earnings................................ $ 3,349 $ 7,163 $ 4,779 $ 11,855
========== =========== =========== ============
Basic net earnings per share................ $ 0.26 $ 0.51 $ 0.36 $ 0.85
========== =========== =========== ============
Diluted net earnings per share.............. $ 0.25 $ 0.49 $ 0.35 $ 0.81
========== =========== =========== ============
Average shares outstanding.................. 13,040 13,956 13,197 14,021
Diluted effect of stock options............. 359 652 380 675
---------- ----------- ---------- -----------
Average shares outstanding assuming dilution 13,399 14,608 13,577 14,696
========== =========== ========== ===========
Cash dividends per share.................... $ 0.035 $ 0.034 $ 0.070 $ 0.057
========== =========== =========== ============
</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, 1999 and 1998
(in thousands)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
February February
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................................... $ 4,779 $ 11,855
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization....................................... 1,279 1,113
Amortization of marketable securities premiums, net................. 96 85
(Gain) on sale of fixed assets...................................... (28) (56)
(Gain) on sale of marketable securities held-to-maturity............ (5) 0
Provision for uncollectible accounts receivable..................... (2) 0
Deferred income taxes............................................... 338 266
Changes in assets and liabilities:
Receivables......................................................... (3,557) (11,521)
Inventories......................................................... 521 (784)
Other current assets................................................ (419) (394)
Accounts payable.................................................... 1,250 6,538
Other current liabilities........................................... (2,202) (2,573)
Current taxes payable............................................... 1,235 1,025
Other noncurrent assets and liabilities............................. (208) (215)
---------- -----------
Net cash provided by operating activities.............................. 3,077 5,339
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment............................. (1,595) (1,576)
Proceeds from sale of property, plant and equipment.................... 50 56
Purchases of marketable securities held-to-maturity.................... 0 (6,675)
Proceeds from maturities of marketable securities held-to-maturity..... 8,901 7,605
---------- -----------
Net cash provided by (used in) investing activities.................... 7,356 (590)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation ..................... (65) (74)
Proceeds from issuance of common stock under stock option plan......... 648 691
Dividends paid......................................................... (914) (791)
Purchases of treasury stock............................................ (13,249) (8,739)
---------- -----------
Net cash used in financing activities.................................. (13,580) (8,913)
---------- -----------
Net decrease in cash and cash equivalents.............................. (3,147) (4,164)
Cash and cash equivalents, beginning of period......................... 3,794 4,231
---------- -----------
Cash and cash equivalents, end of period............................... $ 647 $ 67
========== ===========
Supplemental Cash Flow Information:
Income taxes paid...................................................... $ 737 $ 4,389
Interest paid.......................................................... $ 4 $ 29
</TABLE>
The accompanying notes are an integral part of the financial statements.
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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, 1998 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, 1999, 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 ($21.3 million) and long-term marketable securities ($31.6 million).
The total amortized cost, gross unrealized holding gains, gross unrealized
holding losses, and aggregate fair value for held-to-maturity securities are
$52.9 million, $0.5 million, $0.0 million, and $53.4 million, respectively.
There have not been any sales of held-to-maturity securities for the first six
months of fiscal 1999. In the held-to-maturity category, $21.3 million in
securities mature within one year and $31.6 million have maturities ranging from
one to two and one-half years.
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.
(in thousands)
------------------------------------
February February August
1999 1998 1998
---------- ---------- ----------
Total manufactured goods
First-in, first-out inventory $13,964 $14,940 $14,361
LIFO reserves (3,352) (3,499) (3,228)
Obsolescence reserve ( 935) ( 662) ( 935)
---------- ---------- ----------
Total inventories $ 9,677 $10,779 $10,198
========== ========== ==========
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Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
3. Inventories (Continued)
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
February February August
1999 1998 1998
-------- -------- ------
Raw materials 18% 19% 18%
Work in process 6% 6% 6%
Purchased parts 35% 30% 35%
Finished goods 41% 45% 41%
4. Property, Plant and Equipment
Property, plant and equipment are stated at cost.
(in thousands)
-----------------------------------
February February August
1999 1998 1998
---------- ---------- ---------
Plant and equipment:
Land $ 70 $ 70 $ 70
Buildings 5,043 5,118 5,043
Equipment 26,644 24,008 25,023
Other 4,908 3,237 5,280
Capital lease:
Equipment 458 458 458
---------- ---------- ---------
Total plant, equipment & capital lease 37,123 32,891 35,874
Accumulated depreciation & amortization:
Plant and equipment (22,593) (21,073) (21,690)
Capital lease (165) (61) (113)
---------- ---------- ---------
Property, plant and equipment, net $14,365 $11,757 $14,071
========== ========== =========
5. Credit Arrangements
Lindsay entered into an agreement in December, 1998 for a $10.0 million
unsecured revolving line of credit through October 25, 1999 with a commercial
bank to be used for working capital and general corporate purposes including
stock repurchases. There have been no borrowings outstanding under such
unsecured revolving line of credit. Borrowings will bear interest at a rate
equal to one percent per annum under the rate in effect from time to time and
designated by the commercial bank as it's National Base Rate. No covenants limit
the ability of Lindsay to merge or consolidate to encumber assets or to sell
significant portions of its assets.
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.
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<PAGE> 8
Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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 251,438 shares of common stock at a weighted average price
of $21.62 per share were outstanding during the second quarter of fiscal 1999,
but were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
The options expire on September 3, 2006, through November 24, 2008.
8. Stock Split
On May 6, 1998, the Board of Directors declared a three-for-two split of
Lindsay's common stock effective June 15, 1998, to shareholders of record on
June 5, 1998. Accordingly, the average number of shares outstanding and per
share information have been adjusted to reflect the stock split.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table provides highlights for the three month and six month
periods indicated of Fiscal Year 1999 as compared to the same periods of Fiscal
Year 1998.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- -------------------------------
Percent Percent
Increase Increase
($ in thousands) 2/28/99 2/28/98 (Decrease) 2/28/99 2/28/98 (Decrease)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated
Operating Revenues ....................$31,087 $49,708 (37.5)% $52,729 $87,156 (39.5)%
Cost of Operating Revenues ............$23,426 $35,853 (34.7) $40,390 $63,744 (36.6)
Gross Profit ..........................$ 7,661 $13,855 (44.7) $12,339 $23,412 (47.3)
Gross Margin ........................... 24.6% 27.9% - 23.4% 26.9% -
Selling, Eng. & Research, and
G&A Expense .........................$ 3,475 $ 4,013 (13.4) $ 6,953 $ 7,600 (8.5)
Operating Income ......................$ 4,186 $ 9,842 (57.5) $ 5,386 $15,812 (65.9)
Operating Margin ...................... 13.5% 19.8% 10.2% 18.2% -
Interest Income, net ..................$ 671 $ 767 (12.5) $ 1,412 $ 1,558 (9.4)
Other Income, net .....................$ 68 $ 2 N/A $ 230 $ 193 19.2
Income Tax Provision ..................$ 1,576 $ 3,448 (54.3) $ 2,249 $ 5,708 (60.6)
Effective Income Tax Rate ............. 32.0% 32.5% - 32.0% 32.5% -
Net Earnings...........................$ 3,349 $ 7,163 (53.3)% $ 4,779 $11,855 (59.7)%
</TABLE>
As the above table displays, operating revenues for the three month period ended
February 28, 1999 decreased 37.5 percent ($18.6 million) from the comparable
period of the prior year. The decrease in second quarter revenue was the result
of a 39 percent ($13.8 million) decrease in domestic irrigation equipment
revenues, a 31 percent ($1.9 million) decrease in export irrigation equipment
revenues and a 37 percent ($2.9 million) decrease in diversified products and
other revenues.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
For the six month period ended February 28, 1999, operating revenues were down
39.5 percent ($34.4 million) from the comparable period of the prior year. U.S.
irrigation equipment revenue was off 41 percent ($23.7 million), export
irrigation equipment revenue was off 35 percent ($5.1 million) and diversified
products and other revenues for the six month period were off 37 percent ($5.6
million).
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 both 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 1998 production in the U.S. (increased
supply) occurring concurrently with the economic downturn in Asia and other
developing economic regions leading to a reduced ability in those regions 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 the use of it's "floor
plan" marketing program with its dealers during the first half of fiscal 1999.
Only approximately three percent of Lindsay's U.S. pivot sales during the first
half of fiscal 1999 were floor plan units compared to 11 percent during the
first half of fiscal 1998. Lindsay's "floor plan" marketing program 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.
Domestic irrigation equipment pricing (net of discounts and promotional program
allowances) on units shipped and sold during the three months ended February 28,
1999 was, on average, approximately two percent under that of the prior year's
comparative three month period. Irrigation equipment costs (at standard cost and
before warranty expenses) on units shipped and sold during the second quarter of
fiscal 1999 were, on average, approximately two percent under that of the prior
year's second quarter.
Export Irrigation equipment revenues for both the three and six month periods
ended February 28, 1999, were negatively affected by the same low agricultural
commodity price situation that effected the U.S. irrigation equipment market.
Both year-to-date and second 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 both the six month and three
month periods of fiscal 1999 were also lower than the prior year's comparative
periods, but to a lesser degree. Outsource manufacturing product revenue due to
our sales to Caterpillar Inc. were essentially equal to the prior year's
comparable periods.
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<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, 1999, as a percent of
operating revenues, was 24.6 percent, down from 27.9 percent of the prior year's
comparative period. For the six months ended February 28, 1999, gross margin as
a percent of operating revenues was 23.4 percent as compared to 26.9 percent for
the six months ended February 28, 1998. Reduced manufacturing throughput
resulted in unfavorable manufacturing overhead variances (as compared to the
prior year's comparable periods) which negatively impacted the Company's gross
margin.
Selling, general and administrative, and engineering and research expenses for
the three month period ended February 28, 1999, were $3.5 million as compared to
$4.0 million during the prior year's comparative period. For the six month
period, fiscal 1999 selling, general and administrative, and engineering and
research expenses totaled $7.0 million as compared to $7.6 million in fiscal
1998. Lower wage and salary and costs (due primarily to lower bonus earn out
accruals) generated the majority of the reduction in selling, general and
administrative and engineering and research 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, 1999 was 32.0 percent. This compares to an effective tax rate of
32.5 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 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 dividends.
Over the years, Lindsay has financed its growth through funds provided by
operations. Cash flows provided by operations of $3.1 million for the first six
months of fiscal 1999 compared to cash flows provided by operations of $5.3
million for the first six months of fiscal 1998. The cash flows provided by
operating activities in fiscal 1999 was primarily due to net earnings partially
offset by increased receivables. Fiscal 1998 cash flows provided by operating
activities was principally due to an increase in accounts payable and net
earnings partially offset by increased receivables.
Receivables of $17.6 million at February 28, 1999 increased $3.5 million from
$14.1 million at August 31, 1998 and decreased $12.8 million from $30.4 million
at February 28, 1998. The increase from August 31, 1998, was principally due to
the higher level of U.S. irrigation equipment sales activity during February
1999 as compared to August 1998. The decrease from February 28, 1998, was
primarily due to the lower level of sales and reduced use of a marketing program
that offered deferred payment terms to our dealers. Inventories at February 28,
1999, totaled $9.7 million, lower than their $10.2 million balance at August 31,
1998 and $10.8 million balance at February 28, 1998.
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
Current liabilities of $17.1 million at February 28, 1999 are comparable to
their $16.8 million balance at August 31, 1998 and lower than their $24.5
million balance at February 28, 1998. The increase from August 31, 1998 is
principally due to increased trade payables and a higher accrual for taxes
payable partially offset by a lower accrual for payroll and vacation pay. The
decrease from February 28, 1998 is primarily due to decreased trade payables and
lower accruals for taxes payable and payroll and vacation pay partially offset
by a higher accrual for international dealer prepayments.
Cash flows provided by investing activities of $7.4 million for the first six
months of fiscal 1999 compared to cash flows used in investing activities of
$0.6 million for the first six 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 $21.9 million at
February 28, 1999, as compared to $22.5 million at August 31, 1998, and $11.3
million at February 28, 1998. At February 28, 1999, Lindsay had $31.6 million
invested in long-term marketable securities which represent intermediate term
(one to two and one-half year maturities) municipal debt, as compared to $43.2
million at August 31, 1998 and from $45.7 million at February 28, 1998.
Cash flows used in financing activities of $13.6 million for the first six
months of fiscal 1999 increased from $8.9 million for the first six months of
fiscal 1998 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 decreased to $82.1 million at February 28, 1999 from $90.9
million at August 31, 1998, due to its net earnings of $4.8 million, less $13.3
million used to repurchase 867,262 shares of common stock per Lindsay's
previously announced stock repurchase plan, plus the proceeds of $0.6 million
from the issuance of 61,971 shares of common stock under Lindsay's employee
stock option plan, less dividends paid of $0.9 million. Lindsay's equity at
February 28, 1998 was $90.0 million.
Capital expenditures totaling $1.6 million for the first six months 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 be 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 line of credit are sufficient to cover
expected working capital needs, planned capital expenditures, dividends and
repurchases of common stock.
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<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
U.S. customers usually peak during Lindsay's second and third quarters for the
spring planting period. Lindsay's expansion into diversified products
compliments 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 18 and 16 percent of Lindsay's operating revenues for the first
six months 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, fiscal 1998 and year-to-date fiscal 1999. Implementation of this
BPCS ERP software is estimated to be 75 to 80% complete as of February 28, 1999.
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
continuing 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 July 1999,
through October 1999, timeframe.
-12-
<PAGE> 13
ITEM 2. 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 80% has been incurred to date
(approximately $0.9 million in both fiscal 1997 and 1998 and $0.2 million in
year-to-date fiscal 1999). 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 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 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.
-13-
<PAGE> 14
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.
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 4. Submission of Matters to a Vote of Security Holders
Lindsay's annual shareholder's meeting was held on January 26, 1999. The
shareholders voted to elect two directors, and to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants for the fiscal year ending
August 31, 1999. There were 13,146,657 shares of common stock entitled to vote
at the meeting and a total of 12,730,066 shares (96.83%) were represented at the
meeting.
1. ELECTION OF DIRECTORS: FOR WITHHELD
John W. Croghan 12,706,462 23,604
Michael N. Christodolou 12,697,615 32,451
2. AUDITORS. Ratification of the appointment of PricewaterhouseCoopers LLP as
independent auditors for the fiscal year ended August 31, 1999
FOR - 12,712,711 AGAINST - 10,839 ABSTAIN - 6,516 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.
27 - Financial Data Schedule
(b) Reports on Form 8-K -
No Form 8-K was filed during the quarter ended February 28, 1999.
-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 16, 1999 Bruce C. Karsk
-------------- -------------------------
Bruce C. Karsk
Vice President - Finance, Treasurer and Secretary;
Principal Financial and Accounting Officer
Date: March 16, 1999 Ralph J. Kroenke
-------------- ------------------------
Ralph J. Kroenke
Controller
-15-
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