<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, 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.
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(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
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(Registrant's telephone number, including area code)
Common Stock $1.00 par Value New York Stock Exchange, Inc. (Symbol LNN)
- ---------------------------- ------------------------------------------
Title of Class Name of each exchange on which registered
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
12,541,358
---------------------------------------------
Outstanding Common Shares as of June 17, 1999
Exhibit index is located on page 2.
Total number of pages 16.
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LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
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Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, May 31, 1999 and 1998
and August 31, 1998 3
Consolidated Statements of Operations for the three
months and nine months ended May 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the nine
months ended May 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Position 8-13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 14
Part II - Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index
27 - Financial Data Schedule 16
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<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Lindsay Manufacturing Co.
CONSOLIDATED BALANCE SHEETS
May 31, 1999 and 1998 and August 31, 1998
($ in thousands, except par values)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
(Unaudited (Unaudited)
May May August
1999 1998 1998
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 6,926 $ 10,869 $ 3,794
Marketable securities...................................... 18,924 15,025 18,704
Receivables................................................ 17,949 25,457 14,066
Inventories................................................ 6,568 8,737 10,198
Deferred income taxes...................................... 3,796 3,837 3,861
Other current assets....................................... 267 269 92
--------- --------- ---------
Total current assets..................................... 54,430 64,194 50,715
Long-term marketable securities.............................. 31,171 40,459 43,164
Property, plant and equipment, net........................... 14,587 12,571 14,071
Other noncurrent assets...................................... 1,020 1,143 964
--------- --------- ---------
Total assets................................................. $101,208 $118,367 $108,914
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade.................................... $ 3,621 $ 4,654 $ 4,936
Other current liabilities.................................. 14,015 13,859 11,723
Current portion of capital lease obligation................ 147 153 142
--------- --------- ---------
Total current liabilities................................ 17,783 18,666 16,801
Other noncurrent liabilities................................. 1,052 1,221 1,125
Obligation under capital lease less current portion........... 0 147 108
--------- --------- ---------
Total liabilities............................................ 18,835 20,034 18,034
--------- --------- ---------
Contingencies
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in
May 1999 and 1998 and August 1998)
Common stock, ($1 par value, 25,000,000 shares
authorized, 17,056,595, 16,982,068 and 16,993,949 shares
issued in May 1999 and 1998 and August 1998)........... 17,057 16,982 16,994
Capital in excess of stated value........................ 1,446 0 855
Retained earnings........................................ 132,710 121,414 123,764
Less treasury stock, (at cost, 4,515,237, 2,994,045 and
3,399,788 shares in May 1999 and 1998 and August 1998). (68,840) (40,063) (50,733)
--------- --------- ---------
Total shareholders' equity................................... 82,373 98,333 90,880
--------- --------- ---------
Total liabilities and shareholders' equity................... $101,208 $118,367 $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 nine months ended May 31, 1999 and 1998
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
-------------------------- -----------------------------
May May May May
1999 1998 1999 1998
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating revenues.......................... $ 42,990 $ 43,904 $ 95,719 $ 131,060
Cost of operating revenues.................. 31,680 31,711 72,070 95,455
----------- ------------ ------------ ------------
Gross profit................................ 11,310 12,193 23,649 35,605
----------- ------------ ------------ ------------
Operating expenses:
Selling expense........................... 1,268 1,479 3,688 4,137
General and administrative expense........ 2,253 2,136 5,914 6,209
Engineering and research expense.......... 425 435 1,297 1,304
----------- ------------ ------------ ------------
Total operating expenses.................... 3,946 4,050 10,899 11,650
----------- ------------ ------------ ------------
Operating income............................ 7,364 8,143 12,750 23,955
Interest income, net........................ 676 784 2,088 2,342
Other income, net........................... 78 4,107 308 4,300
----------- ------------ ------------ ------------
Earnings before income taxes................ 8,118 13,034 15,146 30,597
Income tax provision........................ 2,598 4,237 4,847 9,945
----------- ------------ ------------ ------------
Net earnings................................ $ 5,520 $ 8,797 $ 10,299 $ 20,652
=========== ============ ============ ============
Basic net earnings per share................ $ 0.44 $ 0.63 $ 0.79 $ 1.48
=========== ============ ============ ============
Diluted net earnings per share.............. $ 0.42 $ 0.60 $ 0.77 $ 1.41
=========== ============ ============ ============
Average shares outstanding.................. 12,685 13,946 13,026 13,996
Diluted effect of stock options............. 430 609 397 653
---------- ----------- ----------- -----------
Average shares outstanding assuming dilution 13,115 14,555 13,423 14,649
========== =========== =========== ===========
Cash dividends per share.................... $ 0.035 $ 0.033 $ 0.105 $ 0.090
=========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Lindsay Manufacturing Co.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 1999 and 1998
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
May May
1999 1998
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................................... $ 10,299 $ 20,652
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization....................................... 1,942 1,695
Amortization of marketable securities premiums, net................. 142 131
(Gain) on sale of fixed assets...................................... (90) (145)
(Gain) on maturities of marketable securities held-to-maturity...... (5) (1)
Provision for uncollectible accounts receivable..................... (2) 0
Deferred income taxes............................................... 65 710
Changes in assets and liabilities:
Receivables......................................................... (3,881) (6,557)
Inventories......................................................... 3,630 1,258
Other current assets................................................ (175) (192)
Accounts payable.................................................... (1,315) (339)
Other current liabilities........................................... (1,161) (2,047)
Current taxes payable............................................... 3,453 1,569
Other noncurrent assets and liabilities............................. (129) (136)
---------- ---------
Net cash provided by operating activities.............................. 12,773 16,598
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment............................. (2,480) (2,984)
Proceeds from sale of property, plant and equipment.................... 112 157
Purchases of marketable securities held-to-maturity.................... (500) (6,675)
Proceeds from maturities of marketable securities held-to-maturity..... 12,136 8,940
---------- ---------
Net cash provided by (used in) investing activities.................... 9,268 (562)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation...................... (103) (111)
Proceeds from issuance of common stock under stock option plan......... 654 708
Dividends paid......................................................... (1,353) (1,256)
Purchases of treasury stock............................................ (18,107) (8,739)
---------- ---------
Net cash used in financing activities.................................. (18,909) (9,398)
---------- ---------
Net increase in cash and cash equivalents.............................. 3,132 6,638
Cash and cash equivalents, beginning of period......................... 3,794 4,231
---------- ---------
Cash and cash equivalents, end of period............................... $ 6,926 $ 10,869
========== =========
Supplemental Cash Flow Information:
Income taxes paid...................................................... $ 1,356 $ 7,652
Interest paid.......................................................... $ 6 $ 39
</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 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 May 31,
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 ($18.9 million) and long-term marketable securities ($31.2 million).
The total amortized cost, gross unrealized holding gains, gross unrealized
holding losses, and aggregate fair value for held-to-maturity securities are
$50.1 million, $0.4 million, $0.0 million, and $50.5 million, respectively.
There have not been any sales of held-to-maturity securities for the first nine
months of Fiscal 1999. In the held-to-maturity category, $18.9 million in
securities mature within one year and $31.2 million have maturities ranging from
one to three and one-fourth 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)
----------------------------------
May May August
1999 1998 1998
--------- --------- --------
Total manufactured goods
First-in, first-out inventory $10,294 $12,960 $14,361
LIFO reserves (2,791) (3,577) (3,228)
Obsolescence reserve (935) (646) (935)
--------- --------- --------
Total inventories $ 6,568 $ 8,737 $10,198
========= ========= ========
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Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
May May 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)
---------------------------------
May May August
1999 1998 1998
------- ------- -------
Plant and equipment:
Land $ 70 $ 70 $ 70
Buildings 5,043 5,113 5,043
Equipment 26,684 24,387 25,023
Other 5,492 3,938 5,280
Capital lease:
Equipment 458 458 458
------- ------- -------
Total plant, equipment & capital lease 37,747 33,966 35,874
Accumulated depreciation & amortization:
Plant and equipment (22,968) (21,308) (21,690)
Capital lease (192) (87) (113)
------- ------- -------
Property, plant and equipment, net $14,587 $12,571 $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 encumer assets, to sell
significant portions of its assets, to pay dividends, or to repurchase common
stock.
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.
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Lindsay Manufacturing Co.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Options to purchase 140,250 shares of common stock at a weighted average price
of $26.41 per share were outstanding during the third quarter of fiscal 1999,
but were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
The options expire on September 3, 2007, through November 6, 2007.
8. Stock Split
On May 6, 1998, the Board of Directors declared a three-for-two split of
Lindsay's common stock effective June 15, 1998, to stockholders of record on
June 5, 1998. Accordingly, the average number of shares outstanding and per
share information have been adjusted to reflect the stock split.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table provides highlights for the three month and nine month
periods indicated of Fiscal Year 1999 as compared to the same periods of Fiscal
Year 1998.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- -----------------------------
Percent Percent
Increase Increase
($ in thousands) 5/31/99 5/31/98 (Decrease) 5/31/99 5/31/98 (Decrease)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated
Operating Revenues .....................$42,990 $43,904 (2.1)% $ 95,719 $131,060 (27.0)%
Cost of Operating Revenues .............$31,680 $31,711 (0.1) $ 72,070 $ 95,455 (24.5)
Gross Profit ...........................$11,310 $12,193 (7.2) $ 23,649 $ 35,605 (33.6)
Gross Margin ........................... 26.3% 27.8% 24.7% 27.2%
Selling, Eng. & Research, and
G&A Expense ..........................$ 3,946 $ 4,050 (2.6) $ 10,899 $ 11,650 (6.4)
Operating Income .......................$ 7,364 $ 8,143 (9.6) $ 12,750 $ 23,955 (46.8)
Operating Margin ....................... 17.1% 18.6% 13.3% 18.3%
Interest Income, net ...................$ 676 $ 784 (13.8) $ 2,088 $ 2,342 (10.8)
Other Income, net ......................$ 78 $ 4,107 (98.1) $ 308 $ 4,300 (92.8)
Income Tax Provision ...................$ 2,598 $ 4,237 (38.7) $ 4,847 $ 9,945 (51.3)
Effective Income Tax Rate .............. 32.0% 32.5% 32.0% 32.5%
Net Earnings............................$ 5,520 $ 8,797 (37.3)% $ 10,299 $ 20,652 (50.1)%
</TABLE>
As the above table displays, operating revenues for the three month period ended
May 31, 1999, were 2.1 percent ($0.9 million) lower than the comparable period
of the prior year. The reduction in third quarter revenue was the result of a 1
percent ($0.4 million) increase in U.S. irrigation equipment revenues, a 16
percent ($1.2 million) increase in export irrigation euqipment revenues and a 34
percent ($2.5 million) decrease in diversified products and other revenues.
For the nine month period ended May 31, 1999, operating revenues were down 27.0
percent ($35.3 million) from the comparable period of the prior year. U.S.
irrigation equipment revenue was off 27 percent ($23.3 million), export
irrigation equipment revenue was off 18 percent ($3.9 million) and diversified
products and other revenues for the nine month period were off 36 percent ($8.1
million).
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
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 somewhat 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).
U.S. demand for and shipments of center pivots peaked during Lindsay's fiscal
third quarter this year - one quarter later than that of the prior two years. In
the prior two years the company was able to somewhat smooth the seasonal demand
curve in the U.S. market for irrigation equipment by using it's floor plan and
other marketing programs to pull orders ahead from the January through May peak
selling period. Concerns over weak agricultural commodity prices and anticipated
lower farm income, however, caused most farmers to be more conservative in
purchasing capital equipment this year, with many delaying their purchase
decisions as far into the Spring of 1999 as possible. This dynamic was evidenced
by the year-over-year increase in unit volume of our domestic irrigation
equipment during our third quarter.
Domestic irrigation equipment pricing (net of discounts and promotional program
allowances) on units shipped and sold during the three months ended May 31, 1999
was, on average, approximately equal to 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 third quarter of fiscal
1999 were, on average, also equal to that of the prior year's third quarter.
Export Irrigation equipment revenues for both the three and nine month periods
ended May 31, 1999, were negatively affected by the same low agricultural
commodity price situation that affected the U.S. irrigation equipment market.
However, Lindsay did have a $2.0 million lateral move irrigation equipment sale
and shipment to Romania during the quarter at a gross margin significantly below
normal irrigation equipment margins.
Both year-to-date and third 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 nine 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 only slightly lower than that
of the prior year's comparable periods. Deere & Company has notified Lindsay
that one group of products which Lindsay has been manufacturing for them will
move back to Deere's own facility as part of Deere's strategy to better utilize
their own manufacturing capacity. This group of products generated approximately
20 percent of Lindsay projected fiscal 1999 diversified product revenues of $14
to $15 million.
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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 May 31, 1999, as a percent of operating
revenues, was 26.3 percent, down from 27.8 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 24.7 percent as compared to 27.2 percent for
the nine months ended May 31, 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 May 31, 1999, were $3.9 million as compared to $4.1
million during the prior year's comparative period. For the nine month period,
fiscal 1999 selling, general and administrative, and engineering and research
expenses totaled $10.9 million as compared to $11.7 million in fiscal 1998.
Lower wage and salary costs (due primarily to lower bonus earn out accruals)
partially offset by higher legal fee and legal settlement accruals generated the
majority of the reduction in selling, general and administrative and engineering
and research expenses for both the three and nine month periods.
The $4.0 million decline in other income during both the third quarter and
year-to-date of fiscal 1999 as compared to the prior year's comparative periods
was due to fiscal 1998's $4.0 million litigation settlement from an insurer.
The effective tax rate for both the three month and nine month periods ended May
31, 1999 was 32.0 percent. This compares to an effective tax rate of 32.5
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 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 these items through funds provided by
operations. Cash flows provided by operations of $12.8 million for the first
nine months of fiscal 1999 compared to cash flows provided by operations of
$16.6 million for the first nine months of fiscal 1998. The cash flows provided
by operating activities in fiscal 1999 was primarily due to net earnings,
decreased inventories and decreased current taxes payable partially offset by
increased receivables. Fiscal 1998 cash flows provided by operating activities
was principally due to net earnings partially offset by increased receivables.
Receivables of $17.9 million at May 31, 1999 increased $3.8 million from $14.1
million at August 31, 1998 and decreased $7.6 million from $25.5 million at May
31, 1998. The increase from August 31, 1998, was principally due to the higher
level of U.S. irrigation equipment sales activity during May 1999 as compared to
August 1998. The decrease from May 31, 1998, was primarily due to the lower
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
level of sales during May 1999 and reduced use of a marketing program that
offered deferred payment terms to our dealers. Inventories at May 31, 1999,
totaled $6.6 million, lower than their $10.2 million balance at August 31, 1998
and $8.7 million balance at May 31, 1998.
Current liabilities of $17.8 million at May 31, 1999 are higher than their $16.8
million balance at August 31, 1998 and lower than their $18.7 million balance at
May 31, 1998. The increase from August 31, 1998 is principally due to a higher
accrual for taxes payable partially offset by decreased trade payables and lower
accruals for payroll and vacation pay and international dealer prepayments. The
decrease from May 31, 1998 is primarily due to decreased trade payables and a
lower accrual for payroll and vacation partially offset by higher accruals for
taxes payable and legal fee and legal settlement.
Cash flows provided by investing activities of $9.3 million for the first nine
months of fiscal 1999 compared to cash flows used in investing activities of
$0.6 million for the first nine 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 and purchases of
marketable securities. 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 $25.9 million at May
31, 1999, as compared to $22.5 million at August 31, 1998, and $25.9 million at
May 31, 1998. At May 31, 1999, Lindsay had $31.2 million invested in long-term
marketable securities which represent intermediate term (one to three and
one-fourth year maturities) municipal debt, as compared to $43.2 million at
August 31, 1998 and from $40.5 million at May 31, 1998.
Cash flows used in financing activities of $18.9 million for the first nine
months of fiscal 1999 increased from $9.4 million for the first nine 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 $82.4 million at May 31, 1999 from $90.9 million
at August 31, 1998, due to its net earnings of $10.3 million, less $18.1 million
used to repurchase 1,115,449 shares of common stock per Lindsay's previously
announced stock repurchase plan, plus the proceeds of $0.7 million from the
issuance of 62,646 shares of common stock under Lindsay's employee stock option
plan, less dividends paid of $1.4 million. Lindsay's equity at May 31, 1998 was
$98.3 million.
Capital expenditures totaling $2.5 million for the first nine 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, complete the new employee
breakroom and office renovation and expansion and expand its manufacturing
capabilities.
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<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDIITON
(Continued)
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.
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,
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
nine 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
Systems Software 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 the
manufacturing modules of this BPCS ERP software is estimated to be 90 to 95%
complete as of May 31, 1999. Implementation of the financial modules of the BPCS
ERP software will be undertaken in Fiscal 2000.
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.
To date, 84 percent of these suppliers have responded to our inquiry indicating
full year 2000 compliance or expected year 2000 compliance prior to December
1999.
-12-
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
The Company believes that 90 to 95% of the remediation work to become Year 2000
compliant has been completed, however final testing is continuing. Lindsay
believes that it will be fully Year 2000 compliant in the September 1999,/
October 1999, timeframe.
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.
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.
-13-
<PAGE> 14
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 condition, results of operations or cash flows.
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, 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: July 2, 1999 Bruce C. Karsk
------------ -------------------------
Bruce C. Karsk
Vice President - Finance, Treasurer and Secretary;
Principal Financial and Accounting Officer
Date: July 2, 1999 Ralph J. Kroenke
------------ ------------------------
Ralph J. Kroenke
Controller
-15-
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