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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended August 31, 2000 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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.)
2707 N. 108TH STREET, SUITE 102, OMAHA, NEBRASKA 68164
------------------------------------------------ -------
(Address of principal executive offices) (Zip Code)
402-428-2131
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------- -----------------------------------------
Common Stock, $1.00 par value New York Stock Exchange, Inc.(Symbol LNN)
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|_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K |X|
As of November 7, 2000, 11,695,619 shares of the registrant's Common Stock were
outstanding and the aggregate market value of all Common Stock held by
non-affiliates (11,252,151 shares) was $248,953,841 based upon the final sales
price on the New York Stock Exchange, Inc. on such date.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement pertaining to the January 30, 2001, annual
shareholders' meeting are incorporated herein by reference into Part III.
Exhibit index is located on page 29-30.
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ITEM 1 - BUSINESS
(a) Lindsay Manufacturing Co. ("Lindsay" or the "Company") is a leading
designer, manufacturer and international and domestic marketer, under its
"Zimmatic" trademark, of electrically powered center pivot and lateral move
irrigation systems for use to irrigate agricultural crops. Since August, 2000
the Company has also manufactured and marketed a separate line of center pivot
and lateral move irrigation equipment for use on small fields (1 to 60 acres)
under its "Greenfield" tradename (trademark applied for). The Company
manufactures and markets repair and replacement parts for both the Zimmatic and
Greenfield systems. Additionally, Lindsay also produces and sells large diameter
thin wall steel tubing and manufactures and assembles products for other
manufacturers (such as corn planters and sub-assemblies for construction
equipment).
Lindsay was founded in 1955 and incorporated under Nebraska law in
1969. DEKALB Energy Company, ("DEKALB", formerly DEKALB Corporation) acquired
Lindsay in 1974 through its merger into Lindsay Manufacturing Co., a
wholly-owned Delaware subsidiary of DEKALB. The company was a wholly-owned
subsidiary of DEKALB until October 1988 at which time it became a separate
public corporation.
(b) Industry segment information is included in Part II, Item 8, Footnote N on
page 25.
(c) Products. Lindsay's irrigation systems are primarily of the standard sized
center pivot type, with a small portion of its products consisting of the
lateral move type. Both are automatic continuous move systems consisting of
sprinklers mounted on a water carrying pipeline which is supported approximately
11 feet off the ground by a truss system suspended between moving towers. Due to
lower price and simplicity of operation, center pivots currently account for
over 95 percent of Lindsay's irrigation system sales.
A typical standard center pivot for the U.S. market is approximately
1,250 feet long and is designed to circle within a quarter-section of land,
which comprises 160 acres, wherein it irrigates approximately 130 to 135 acres.
A typical standard center pivot for the international market is also
approximately 1,250 feet long. Center pivot or lateral move systems can also be
custom designed and can irrigate from 25 to 500 acres.
A center pivot system represents a significant investment to a farmer.
A typical standard center pivot system, fully installed, requires an investment
of up to approximately $60,000 to $70,000. Approximately one-half of such
expenditure is for the pivot itself and the remainder is attributable to
installation of additional equipment such as wells, pumps, underground water
pipe, electrical supply and a concrete pad upon which the pivot is anchored.
Lindsay estimates that there are approximately 165,000 to 175,000 standard
center pivot irrigation systems in operation worldwide, resulting in an active
repair and replacement parts business.
Other Types Of Irrigation. Center pivot and lateral move irrigation
systems compete with three other types of irrigation: flood, drip and other
mechanical devices. The bulk of the worldwide irrigation is accomplished by the
traditional method of flood irrigation. Flood irrigation is accomplished by
either flooding an entire field, or by providing a water source (ditches or a
pipe) along the side of a field, which is planed and slopes slightly away from
the water source. The water is released to the crop rows through gates in the
ditch or pipe, or through siphon tubes arching over the ditch wall into some of
the crop rows. It runs down through the crop row until it reaches the far end of
the row, at which time the water source is moved and another set of rows are
flooded. Note that a significant disadvantage or limitation of flood irrigation
is that it cannot be used to irrigate uneven, hilly or rolling terrain or
fields. In "drip" or "trickle" irrigation, perforated plastic pipe or tape is
installed on the ground or buried underground at the root level. Several other
types of mechanical devices irrigate the remaining irrigated acres. These other
types of mechanical devices are not generally being replaced and no longer
generate significant sales.
Center pivot and lateral move irrigation offers significant advantages
when compared with other types of irrigation. It requires less labor and
monitoring; it can be used on sandy ground which, due to poor water retention
ability, must have water applied frequently; it can be used on uneven ground,
thereby allowing previously unsuitable land to be brought into production; it
can also be used for the application of fertilizers, insecticides, herbicides or
other chemicals (termed "chemigation"); and it conserves water and chemicals
through precise control of the amount and timing of its application.
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Markets - General. Water is an essential and critical requirement for
crop production, and the extent, regularity and frequency of water application
can be a critical determinant in crop quality and yield.
The fundamental factors which govern the demand for center pivot and
lateral move systems are essentially the same in both the domestic and
international markets. Demand for center pivot and lateral move systems is
determined by whether the increased value of crop production attributable to
center pivot or lateral move irrigation exceeds any increased costs associated
with purchasing, installing and operating the equipment. Thus, the decision to
purchase a center pivot or lateral move system reflects the profitability of
agricultural production, which is determined primarily by the prices of
agricultural commodities and the costs of other farming inputs.
The current demand for center pivot systems has three sources:
conversion to center pivot systems from less water efficient, more labor
intensive types of irrigation; replacement of older center pivot systems, which
are beyond their useful lives or technologically outmoded; and conversion of dry
land farming to irrigated farming. In addition, demand for center pivots and
lateral move irrigation equipment depends upon the need for the particular
operational characteristics and advantages of such systems in relation to
alternative types of irrigation, primarily flood. Selection of center pivot or
lateral move systems, over competitive types of irrigation, is aided by the fact
that agricultural production is continually forced to become more efficient in
its use of the basic natural resources of land, water and energy. Increasing
global population not only increases demand for agricultural output, but also
places additional and competing demands on land, water and energy. As center
pivot and lateral move systems are required where the soil is sandy, the terrain
is not flat, there is a shortage of reliable labor, water supply is restricted
and conservation is critical, and/or chemigation will be utilized, Lindsay
expects demand for center pivots and lateral moves to increase relative to other
irrigation methods.
The following table describes Lindsay's total revenues for the past three years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31,
($ IN THOUSANDS)
--------------------------------------------------------------------------------
2000 2000 1999 1999 1998 1998
---- ---- ---- ---- ---- ----
% of Total % of Total % of Total
Revenues Revenues Revenues Revenues Revenues Revenues
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States.................. $107,780 83 $ 94,103 80 $127,933 82
Europe & Africa................ 6,170 5 7,769 5 7,753 5
Mexico & Latin America......... 5,081 4 6,709 6 8,235 5
Other Export................... 10,754 8 8,070 9 11,786 8
------- --- -------- --- ------- ----
Total.......................... $129,785 100 $116,651 100 $155,707 100
</TABLE>
United States Market. In the United States, Lindsay sells its
irrigation systems to approximately 200 independent dealers, who resell to their
customer, the farmer. Dealers assess their customer's requirements, assemble and
erect the system in the field from the parts delivered from Lindsay, and provide
additional system components, primarily relating to water supply (wells, pumps,
pipes) and electrical supply (on-site generation or hook-up to power lines).
Lindsay dealers generally are established local agri-businesses, which also deal
in related products, such as well drilling and water pump equipment, farm
implements, grain handling and storage systems or farm structures.
International Market. Over the years, Lindsay has sold center pivot and
lateral move irrigation systems in over 90 countries. The majority of Lindsay's
foreign sales are in U.S. dollars and are shipped against prepayments or U.S.
bank confirmed irrevocable letters of credit or other secured means.
Lindsay's export markets differ significantly with respect to need for
irrigation, ability to pay, demand, customer type, government support of
agriculture, marketing and sales methods, equipment requirements and difficulty
of on-site erection. The Company's industry position is such that Lindsay
believes that it will be approached as a potential supplier for most major
international agricultural developments utilizing center pivot or lateral move
irrigation systems.
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Competition. During the 1970's there were over 30 domestic
manufacturers of center pivot irrigation systems, while six manufacturers remain
today. Lindsay believes that it has a center pivot and lateral move irrigation
equipment U.S. market share of approximately 25 to 30 percent and an export
market share of approximately 45 percent.
There is a high level of price competition and utilization of seasonal
promotional programs. Competition also occurs in areas of product quality and
durability, advanced product technology, product characteristics, retention and
reputation of local dealers, post-sale service, and, at certain times of the
year, the availability of systems and their delivery time. Lindsay believes it
generally competes favorably with respect to these factors.
DIVERSIFIED PRODUCTS
Seeking to expand the throughput of its manufacturing facility and operation,
the company began in 1987 to more fully utilize off-season capacity by providing
outsource manufacturing services and selling large-diameter steel tubing.
Lindsay's customer base includes some of the country's most demanding industrial
companies, including Caterpillar Inc., Deere & Company and New Holland North
America, Inc. Each benefits from Lindsay's design and engineering capabilities
as well as the Company's ability to provide a wide spectrum of manufacturing
services, including welding, machining, painting, punching, forming, galvanizing
and hydraulic, electrical and mechanical assembly.
SEASONALITY/CYCLICALITY
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.
ORDER BACKLOG
As of August 31, 2000, Lindsay had an order backlog of $19.8 million, an
increase of 36% from $14.6 million at August 31, 1999. At fiscal year end 2000,
Lindsay had a $10.7 million order backlog for irrigation equipment. This was an
increase of 10% from fiscal year end 1999's irrigation equipment order backlog
of $9.7 million. At year end fiscal 2000, order backlog for diversified products
totaled $9.1 million, compared to $4.9 million at fiscal year end 1999.
Lindsay manufactures a center pivot or lateral move system only upon a
dealer's firm order for both the U.S. and export markets. Orders from U.S.
dealers are accompanied with a $1,000 (approximately 4 percent of sales price)
down payment. International orders are generally shipped against prepayments or
receipt of an irrevocable letter of credit confirmed by a U.S. bank or other
secured means, which call for delivery within time periods negotiated with the
customer.
RAW MATERIALS AND COMPONENTS
Raw materials used by Lindsay include coil steel, angle steel, plate steel,
zinc, tires, gearboxes, fasteners and electrical components (motors, switches,
cable and stators). Lindsay has, on occasion, faced shortages of certain such
materials. Lindsay believes it currently has ready access to adequate supplies
of raw materials and components.
CAPITAL EXPENDITURES
Capital expenditures for fiscal 2000, 1999 and 1998, were $3.5 million, $4.0
million and $5.1 million, respectively. Fiscal 2000 capital expenditures were
used primarily for updating manufacturing plant and equipment and to further
automate Lindsay's facility. Capital expenditures for fiscal year 2001 are
expected to be approximately $3.0 to $4.0 million and will be used to improve
the company's existing facilities, expand its manufacturing capabilities and
increase productivity. The Company expects annual capital expenditures for plant
expansion over the next several years to approximate the $3.0 to $4.0 million
level per year.
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PATENTS, TRADEMARKS, LICENSES
The Zimmatic, Greenfield and other trademarks are registered or applied for in
most markets in which Lindsay sells its product. Lindsay follows a policy of
applying for patents on all significant patentable inventions. Although Lindsay
believes it is important to follow a patent protection policy, Lindsay's
business is not dependent, to any material extent, on any single patent or group
of patents.
EMPLOYEES
The number of persons employed by Lindsay at fiscal year end 2000, 1999 and 1998
were 531, 480 and 551, respectively. Lindsay currently employs approximately 600
persons. None of Lindsay's employees are represented by a union.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
Like other manufacturing concerns, Lindsay is subject to numerous laws and
regulations which govern environmental and occupational health and safety
matters. Lindsay believes that its operations are substantially in compliance
with all such applicable laws and regulations. Permits are or may be required
for some of the operations at its facilities. Although management believes that
all currently required permits have been obtained by Lindsay, as with all such
permits, they are subject to revocation, modification and renewal. Even where
regulations or standards have been adopted, they are subject to varying and
conflicting interpretations and implementation. In some cases, compliance with
applicable environmental regulations or standards may require additional capital
and operational expenditures. However, management does not believe any material
additional capital and operational expenditures for such issues are currently
required.
SUBSIDIARIES
Lindsay has two wholly owned operating subsidiaries: Lindsay International Sales
Corporation and Lindsay Transportation, Inc. Since 1996, international sales
personnel have been located at the corporate office as part of Lindsay
International Sales Corporation, which conducts foreign sales operations for
Lindsay. Lindsay Transportation, Inc. was formed in 1975. It owns approximately
116 trailers and, through lease of tractors, supplies the ground transportation
in the United States and Canada for Lindsay's products and the bulk of incoming
raw materials, and hauls other products on backhauls. Lindsay also has three
non-operational subsidiaries.
ITEM 2 - PROPERTIES
Lindsay owns and occupies 43 acres in Lindsay, Nebraska. Its manufacturing
operation has eight separate buildings, with approximately one-half million
square feet of manufacturing area under roof. The company also leases a facility
in Nunn, Colorado where its Greenfield products are manufactured. With the
Company's current manufacturing capacity, the Company believes it can increase
sales without a significant new investment in facilities and capital equipment.
Beginning December 1, 2000, the Company will lease approximately 7,000 square
feet of office space in Omaha, Nebraska, where it will maintain its domestic and
international sales and marketing offices and its executive offices.
ITEM 3 - 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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of security holders during the fourth
quarter of Fiscal 2000.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages, positions and past five years
experience are set forth below. All officers are elected for one year terms,
which can be annually renewed at a Board of Directors meeting. This meeting is
scheduled for January 30, 2001.
AGE POSITION WITH THE COMPANY
--- -------------------------
Richard W. Parod 47 President and Chief Executive Officer
Matthew T. Cahill 38 Vice President - Manufacturing
Eduardo R. Enriquez 60 Vice President - International
Bruce C. Karsk 48 Vice President - Finance, Treasurer and Secretary
Dirk Lenie 46 Vice President - Marketing
Clifford P. Loseke 62 Vice President - Operations
Charles H. Meis 54 Vice President - Engineering
Robert S. Snoozy 54 Vice President - Domestic Sales
Mr. Richard W. Parod is President and Chief Executive Officer of
Lindsay, and has held such positions since April 2000. Prior to that time and
since 1997, Mr. Parod was Vice President and General manager of the
Irrigation Division of Toro Corporation. Mr. Parod was employed by James
Hardie Irrigation from 1993 through 1997 becoming President in 1994. Mr.
Parod has been a Director since April 2000 when he began his employment with
Lindsay.
Mr. Matthew T. Cahill is Vice President - Manufacturing of Lindsay, and
was appointed to that position in October, 2000 when he joined the company.
Prior to that time and since 1997, Mr. Cahill held several positions with
Ingersoll-Rand; most recently as the Fabrication and Machining Operations
Manager - Road Machinery Division. From 1997 through early 2000 Mr. Cahill was a
Process Engineering Consultant - Corporate Technology Staff. Prior to his
employment with Ingersoll-Rand and since 1996 Mr. Cahill was Operations Manager
with ACG Incorporated. Mr. Cahill was the Manager Operations Support Engineering
for Ingersoll-Rand Fluid Products Division in 1995 and part of 1996.
Mr. Eduardo R. Enriquez is President of Lindsay International Sales
Corporation and has served in that capacity and as Vice President -
International of Lindsay, since May of 1986. Prior to that time, and since
1981, he was Vice President - Sales of Lindsay International Sales
Corporation. Mr. Enriquez began his employment with Lindsay in 1981.
Mr. Bruce C. Karsk is Vice President - Finance, Treasurer and
Secretary of Lindsay, and has held such positions since 1984. Prior to that
time, and since 1981, Mr. Karsk had been the Controller. Mr. Karsk has been a
Director since 1998. Mr. Karsk began his employment with Lindsay in 1979.
Mr. Dirk Lenie is Vice President - Marketing of Lindsay, and was
appointed to that position in November, 2000 when he joined the Company. Prior
to that time, and since 1997, Mr. Lenie was Director of Sales and Marketing of
the Residential/Commercial Irrigation Division of Toro Corporation. Prior to
Toro Corporation, Mr. Lenie was employed by Pacific Enterprises (the holding
company of Southern California Gas) as Director of Seismic Safety Products in
1996/1997 and as Director of Product Development in 1995/1996. From 1981 through
1995 Mr. Lenie held several sales and marketing positions with Rainbird
Sprinkler Mfg. Corp.
Mr. Clifford P. Loseke is Vice President - Operations of Lindsay,
a position he has held since 2000. Prior to that time and since 1975 Mr.
Loseke had been Vice President - Manufacturing Operations. Mr. Loseke
began his employment with Lindsay in 1971.
Mr. Charles H. Meis is Vice President - Engineering of Lindsay, and
has held such position since 1975. Mr. Meis began his employment with Lindsay in
1971.
Mr. Robert S. Snoozy became Vice President - Domestic Sales of
Lindsay, in November 1997. From 1986 through November 1997 Mr. Snoozy was
Vice President of Sales and Marketing. Prior to that time, and since 1978, he
had been Vice President of Marketing. Mr. Snoozy began his employment with
Lindsay in 1973.
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PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Lindsay Common Stock began public trading on October 12, 1988. On October 21,
1997, Lindsay's Common Stock began trading on the New York Stock Exchange, Inc.
(NYSE) under the ticker symbol "LNN". Prior to trading on the NYSE, Lindsay
Common Stock traded on the Nasdaq National Market. As of November 7, 2000 there
were approximately 200 shareholders of record and an estimated 3,000 to 3,500
beneficial shareholders.
The following table sets forth for the periods indicated the range of
the high and low sales price and dividends paid:
<TABLE>
<CAPTION>
FISCAL YEAR 2000 FISCAL YEAR 1999
STOCK PRICE STOCK PRICE
----------- ----------------- ---------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
First Quarter $21.13 $16.38 $0.035 $21.31 $11.25 $0.035
Second Quarter 18.25 16.13 0.035 17.00 12.50 0.035
Third Quarter 20.81 14.00 0.035 22.38 14.88 0.035
Fourth Quarter 20.56 17.00 0.035 20.38 16.00 0.035
Year $21.13 $14.00 $0.140 $22.38 $11.25 $0.140
ITEM 6 - SELECTED FINANCIAL DATA
( IN MILLIONS, EXCEPT PER SHARE AMOUNTS) FOR THE YEARS ENDED AUGUST 31,
----------------------------------------- ------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----- ---- ----- ---- -----
Operating revenues........... $129.8 $116.7 $155.7 $158.3 $136.2 $111.8 $112.7 $102.1 $108.9 $98.7
Gross profit................. 31.6 30.6 42.8 40.9 32.7 25.9 25.7 23.8 23.8 21.5
Selling, general and
administrative, and
engineering and research
expenses................... 15.2 15.6 15.7 14.4 13.4 11.9 11.6 10.7 10.9 10.5
Earnings before cumulative
effect of accounting change 13.2 12.7 23.5 20.1 16.5 11.7 11.2 10.7 11.0 8.9
Net earnings................. 13.2 12.7 23.5 20.1 16.5 11.7 11.9 10.7 11.0 8.9
Earnings before cumulative
effect of accounting
change per share(1)........ 1.06 0.96 1.61 1.34 1.08 0.73 0.68 0.66 0.68 0.57
Net earnings per share(1).... 1.06 0.96 1.61 1.34 1.08 0.73 0.72 0.66 0.68 0.57
Cash dividends per share..... 0.14 0.14 0.125 0.091 0.067 0 0 0 0 0
Property, plant and
equipment, net............. 15.9 15.4 14.1 11.3 9.7 7.2 5.6 5.6 6.0 5.4
Total assets................. 95.8 100.4 108.9 108.0 96.8 86.1 88.4 79.9 71.4 60.4
Long-term obligation......... $ 0 $ 0 $ 0.1 $ 0.3 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Return on sales.............. 10.2% 10.9% 15.1% 12.7% 12.1% 10.5% 10.6% 10.5% 10.1% 9.0%
Return on beginning assets... 13.2% 11.7% 21.7% 20.7% 19.2% 13.2% 14.9% 15.0% 18.2% 19.0%
Diluted weighted average shares 12.503 13.285 14.556 14.980 15.226 15.933 16.418 16.358 16.310 15.690
(1) Per share amounts are calculated using diluted average shares outstanding.
</TABLE>
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
Fiscal year 2000 exceeded the expectations that were discussed in last year's
Form 10-K and Annual Report. The Company had expected the results for fiscal
year 2000 to "approximate" those of the prior fiscal year. Quarter by quarter,
fiscal year 2000 operating revenues were better than those of the prior year; by
13.2 percent in the first quarter, by 12.6 percent in the second quarter by 8.4
percent in the third quarter and by 13.1 percent in the fourth quarter. For the
year full year, operating revenues exceeded the prior year by 11.3 percent. End
user demand was consistently greater than expected while average agricultural
commodity prices continued to be roughly flat, in line with expectations.
Net earnings of $13.2 million for fiscal year 2000 were 3.7 percent higher than
fiscal year 1999 while, due to Lindsay's share repurchases, diluted earnings per
share of $1.06 were 10.4 percent higher. During fiscal year 2000, Lindsay
utilized $16.8 million to repurchase 965,032 shares. The Company's balance sheet
continues to feature strong financial ratios and no long term debt.
RESULTS OF OPERATIONS
The following "Fiscal Year 2000 Compared to 1999" and the "Fiscal Year 1999
Compared to 1998" sections present an analysis of Lindsay's consolidated
operating results displayed in the Consolidated Statements of Earnings and
should be read together with the industry segment information in Note N to the
financial statements.
FISCAL YEAR 2000 COMPARED TO 1999
The following table provides highlights for fiscal year 2000 compared with
fiscal year 1999.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED PERCENT INCREASE
AUGUST 31, (DECREASE)
------------------------- ----------------
($ IN THOUSANDS) 2000 1999
---------------- ---- ----
<S> <C> <C> <C>
Consolidated
Operating Revenues....................................... $ 129,785 $ 116,651 11.3%
Cost of Operating Revenues............................... $ 98,189 $ 86,007 14.2
Gross Profit............................................. $ 31,596 $ 30,644 3.1
Gross Margin............................................. 24.3% 26.3%
Selling, Eng. & Research, and G&A Expense................ $ 15,170 $ 15,625 (2.9)
Operating Income......................................... $ 16,426 $ 15,019 9.4
Operating Margin......................................... 12.7% 12.9%
Interest Income, net..................................... $ 2,599 $ 2,822 (7.9)
Other Income, net........................................ $ 118 $ 348 (66.1)
Income Tax Provision..................................... $ 5,935 $ 5,457 8.8
Effective Income Tax Rate................................ 31.0% 30.0%
Net Earnings............................................. $ 13,208 $ 12,732 3.7
Irrigation Equipment Segment (See Note N)
Operating Revenues....................................... $ 115,618 $ 101,369 14.1
Operating Income......................................... $ 23,266 $ 22,025 5.6
Operating Margin......................................... 20.1% 21.7%
Diversified Products Segment (See Note N)
Operating Revenues....................................... $ 14,167 $ 15,282 (7.3)
Operating Income......................................... $ 2,670 $ 3,441 (22.4%)
Operating Margin......................................... 18.8% 22.5%
</TABLE>
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REVENUES
Fiscal year 2000 operating revenues increased 11 percent to $129.8 million from
$116.7 million in fiscal year 1999. Irrigation equipment revenues totaled $115.6
million in fiscal year 2000, an increase of 14 percent from $101.4 million in
the prior year. Of this $115.6 million in irrigation equipment revenues in
fiscal year 2000, $93.6 million was from sales to U.S. dealers, a 19 percent
increase from $79.0 million of U.S irrigation equipment revenues in fiscal year
1999. Fiscal year 2000 export irrigation equipment revenues of $22.0 million
were essentially flat with the prior year's $22.4 million. Fiscal year 2000
diversified product revenues of $14.2 million were 7 percent lower than fiscal
year 1999 diversified product revenues of $15.3 million. Other revenues,
consisting primarily of revenues from long haul over the road freight services
are included in irrigation equipment and totaled $3.3 million in fiscal year
2000 and $3.2 million in fiscal year 1999.
The fiscal year 2000 increase in U.S. irrigation equipment revenues
occurred throughout the year with each quarter contributing to the 19 percent
year over year increase. Somewhat stable (although low) agricultural commodity
prices, better than anticipated farm income and below normal precipitation in
some irrigation equipment markets led to the increased U.S. irrigation equipment
sales activity and revenues.
Export irrigation equipment sales and revenues during fiscal year 2000
continued to be constrained by the strength of the U.S. dollar relative to other
currencies, particularly those of Western Europe. Additionally, sales activity
and revenues from the Latin American region softened as the continued low
agricultural commodity prices led to reduced demand for irrigation equipment in
Argentina. Improved demand for irrigation equipment and revenues from the Middle
East and Australia and New Zealand nearly offset the European and Latin American
softness during fiscal year 2000.
Diversified products revenues of $14.2 million in fiscal year 2000 were
7 percent lower than fiscal year 1999's $15.3 million. As compared to fiscal
year 1999, revenues from sales of the Company's large diameter thin walled steel
tubing products were essentially flat while revenues from outsource
manufacturing services sales were lower. Caterpillar Inc., Deere & Company, and
New Holland North America, Inc. each continue to be significant outsource
manufacturing customers.
At August 31, 2000, Lindsay's order backlog for irrigation equipment
was $10.7 million, an increase of 10 percent from $9.7 million at August 31,
1999. Lindsay's diversified products order backlog at August 31, 2000 was $9.1
million compared to $4.9 million at August 31, 1999. The combined order backlog
of $19.8 million at August 31, 2000 was 36 percent higher than the prior year's
$14.6 million.
GROSS MARGIN
Raw material, labor and overhead cost increases during the year combined with
static average selling prices resulted in a fiscal year 2000 gross margin of
24.3 percent compared to a 26.3 percent gross margin in fiscal year 1999.
OPERATING EXPENSES
Fiscal year 2000's selling, engineering and research and general and
administrative (SG&A) expenses of $15.2 million were 3 percent lower than fiscal
year 1999's SG&A expenses of $15.6 million. Reduced salary and wage costs for
the year were partially offset by increases in professional fees and
depreciation costs.
INTEREST INCOME, OTHER INCOME AND TAXES
The Company's interest income is primarily generated from its investments in
short-term (0 to 12 months) and intermediate-term (12 to 42 month) investment
grade municipal bonds, on which interest earnings are exempt from federal income
taxes, and short-term investment grade commercial paper. Fiscal year 2000
interest income was $2.6 million, slightly lower than the prior year's interest
income of $2.8 million due to a lower amount invested in municipal bonds. Fiscal
year 2000's other income of $0.1 million compares to fiscal year 1999's $0.3
million.
Lindsay's fiscal year 2000 effective tax rate increased to 31.0 percent
from a 30.0 percent rate for fiscal year 1999. The fiscal year 2000 increase in
the effective rate was the result of a smaller portion (10.6%) of the Company's
pre-tax earnings coming from municipal bond interest (exempt from federal income
taxes) in fiscal year 2000 as compared to fiscal year 1999 when the Company's
municipal bond interest represented 13.1 percent of Lindsay's pre-tax earnings.
In addition to the federal tax free status on municipal bond interest income,
the Company benefits from the foreign sales corporation federal tax provisions
as they relate to export sales.
9
<PAGE> 10
RESULTS OF OPERATIONS
FISCAL YEAR 1999 COMPARED TO 1998
The following table provides highlights for fiscal year 1999 compared with
fiscal year 1998.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED PERCENT INCREASE
AUGUST 31, (DECREASE)
------------------------ ----------------
($ IN THOUSANDS) 1999 1998
---------------- ---- ----
<S> <C> <C> <C>
Consolidated
Operating Revenues....................................... $ 116,651 $ 155,707 (25.1%)
Cost of Operating Revenues............................... $ 86,007 $ 112,866 (23.8)
Gross Profit............................................. $ 30,644 $ 42,841 (28.5)
Gross Margin............................................. 26.3% 27.5%
Selling, Eng. & Research, and G&A Expense................ $ 15,625 $ 15,713 (0.6)
Operating Income......................................... $ 15,019 $ 27,128 (44.6)
Operating Margin......................................... 12.9% 17.4%
Interest Income, net..................................... $ 2,822 $ 3,197 (11.7)
Other Income, net........................................ $ 348 $ 4,307 (91.9)
Income Tax Provision..................................... $ 5,457 $ 11,152 (51.1)
Effective Income Tax Rate................................ 30.0% 32.2%
Net Earnings............................................. $ 12,732 $ 23,480 (45.8)
Irrigation Equipment Segment (See Note N)
Operating Revenues....................................... $ 101,369 $ 130,461 (22.3)
Operating Income......................................... $ 22,025 $ 31,840 (30.8)
Operating Margin......................................... 21.7% 24.4%
Diversified Products Segment (See Note N)
Operating Revenues....................................... $ 15,282 $ 25,246 (39.5)
Operating Income......................................... $ 3,441 $ 5,216 (34.0%)
Operating Margin......................................... 22.5% 20.7%
</TABLE>
REVENUES
Fiscal year 1999 operating revenues of $116.7 million were 25 percent lower than
fiscal year 1998's $155.7 million. Fiscal year 1999's U.S. irrigation equipment
revenues totaled $79.0 million, 23 percent lower than fiscal year 1998's revenue
from U.S. irrigation equipment of $102.7 million. Fiscal year 1999's export
irrigation equipment revenues totaled $22.4 million and were 19 percent lower
than fiscal 1998's export irrigation equipment revenue of $27.8 million.
Diversified product revenues totaled $15.3 million in fiscal year 1999, a 39
percent reduction compared to fiscal year 1998's diversified product revenues of
$25.2 million. Other revenues, primarily consisting of revenues from long-haul
over the road freight services, are included in irrigation equipment and totaled
$3.2 million in fiscal year 1999 and $3.1 million in fiscal year 1998.
Demand in the U.S. market for almost all agricultural related capital
equipment, including center pivot and lateral move irrigation equipment, began
to slow during Lindsay's fourth quarter of fiscal year 1998 due to lower
agricultural commodity prices and anticipated lower farm income. This
comparatively slow demand for center pivots and lateral move irrigation
equipment continued into Lindsay's first and second quarter of fiscal year 1999
as farmers postponed capital equipment purchases. Nearly all of fiscal year
1999's reduction in U.S. center pivot and lateral move irrigation equipment
revenues occurred during Lindsay's first two quarters of the fiscal year.
Demand in the export market for center pivot and lateral move equipment
during fiscal year 1999 was negatively influenced by the same low agricultural
commodity price factor as the U.S. market. Additionally, export irrigation
equipment sales were hurt by the strength of the U.S. dollar relative to certain
other currencies, particularly those of Western Europe. A $2.2 million sale for
a project in Romania during Lindsay's fiscal third quarter offset a portion of
the overall reduction in export sales revenue for fiscal year 1999.
10
<PAGE> 11
Fiscal year 1999's reduction in diversified products revenues was the
result of a lower level of sales for both Lindsay's large diameter thin wall
steel tubing products and for the Company's outsource manufacturing services.
At August 31, 1999, Lindsay's order backlog for irrigation equipment
was $9.7 million, an increase of 41 percent from $6.9 million at August 31,
1998. Lindsay's August 31, 1999 order backlog for diversified products was $4.9
million, a 32 percent decline from $7.2 million at August 31, 1998. Lindsay's
total order backlog at August 31, 1999 was $14.6 million, a modest increase from
$14.1 million at August 31, 1998.
GROSS MARGIN
Fiscal year 1999's manufacturing throughput was lower than that of fiscal year
1998 as a result of both center pivot and lateral move irrigation equipment
demand and revenues and diversified products demand and revenues being lower in
fiscal year 1999 than in fiscal year 1998. Despite this lower manufacturing
throughput and the resulting unfavorable overhead variances, Lindsay was able to
maintain the majority of its gross margin. This was accomplished largely due to
good cost controls, soft raw material prices and continued automation and
production improvements. The Company attained a gross margin of 26.3 percent in
fiscal year 1999, which compares only modestly unfavorably with a gross margin
of 27.5 percent posted in fiscal year 1998 when the Company had significantly
higher factory throughput.
OPERATING EXPENSES
Fiscal year 1999's selling, engineering and research and general and
administrative (SG&A) expenses of $15.6 million were only slightly lower than
fiscal year 1998's SG&A expenses of $15.7 million. Increased SG&A depreciation,
legal fees and group insurance expenses during the year were more than offset by
reduced salary and wage and employee and dealer travel costs.
INTEREST INCOME, OTHER INCOME AND TAXES
Fiscal year 1999 interest income was $2.8 million, modestly lower than fiscal
year 1998's interest income of $3.2 million due to a lower amount invested in
municipal bonds. Fiscal year 1999's other income of $0.3 million was equal to
fiscal year 1998's $0.3 million, after adjusting fiscal year 1998's other income
for the recognition of $4.0 million due to an agreement that the Company reached
with an insurer to settle litigation which Lindsay initiated in 1990.
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 totaled $8.1 million in fiscal
year 2000 compared to $19.6 million in fiscal year 1999. The cash flows provided
by operating activities in fiscal year 2000 were primarily due to net earnings,
partially offset by increased receivables and inventories. Fiscal year 1999 cash
flows provided by operating activities were principally due to net earnings and
decreased receivables and inventories.
Receivables at August 31, 2000, increased $4.7 million to $17.6 million
from $12.9 million, which was primarily due to increased sales activity during
the fourth quarter of the fiscal year and the increased use of a marketing
program that offered deferred payment terms on some transactions to our dealers.
Inventories of $11.3 million at August 31, 2000, increased $3.6 million from
$7.7 million at August 31, 1999. Inventory increased due to Lindsay's planned
build of inventory for quicker delivery and response times and to achieve higher
projected sales.
Current liabilities of $16.5 million at August 31, 2000, were slightly
less than the $16.8 million at August 31, 1999.
Cash flows used in investing activities of $1.1 million for fiscal year
2000 compared to $12.4 million provided by investing activities for fiscal year
1999. The cash flows used in investing activities in fiscal year 2000 were
primarily attributable to purchases of marketable securities and capital
expenditures partially offset by maturities of marketable securities. Fiscal
year 1999 cash flows provided by investing activities were primarily due to
maturities of marketable securities, partially offset by capital expenditures
and purchases of marketable securities.
Lindsay's cash and short-term marketable securities totaled $26.0
million at August 31, 2000 as compared to $32.5 million at August 31, 1999. At
August 31, 2000, Lindsay had $19.8 million invested in long-term marketable
securities which represent intermediate-term (12 to 42 months maturities)
municipal debt, as compared to $27.2 million at August 31, 1999.
Cash flows used in financing activities of $18.1 million for fiscal
year 2000 decreased from $21.6 million in fiscal year 1999 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 plans.
11
<PAGE> 12
Capital expenditures of $3.5 million during fiscal year 2000 decreased
from $4.0 million in fiscal year 1999. Fiscal year 2000 capital expenditures
were used primarily for updating manufacturing plant and equipment and to
further automate Lindsay's facility. Capital expenditures for fiscal year 2001
are expected to be approximately $3.0 to $4.0 million and will be used to
improve the company's facilities, expand its manufacturing capabilities and
increase productivity.
Depreciation totaled $3.0 million in fiscal 2000 and is expected to
increase to approximately $3.2 million in fiscal year 2001.
Lindsay expended $16.8 million in fiscal 2000 to repurchase 965,032
shares of its common stock. In fiscal year 1999, Lindsay repurchased 1,250,449
shares of its common stock for $20.5 million.
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.
FISCAL 2001 OUTLOOK
Lindsay expects that its revenues and earnings will grow modestly in fiscal year
2001 as compared to fiscal year 2000. Lindsay expects that the majority of the
fiscal year 2001 growth will occur in the first half of the year as the Company
realizes the benefit of several initiatives designed to level out factory
production and expand its delivery capacity. The last half of fiscal year 2001,
should have revenues similar to those of the last half of fiscal year 2000.
IRRIGATION EQUIPMENT
Stable agricultural commodity prices and net cash farm income and continued
strong farm balance sheets and debt to equity ratios will help lead to stronger
irrigation equipment demand and revenue growth. The expansion of the Company's
floor plan program which stocks Lindsay's U.S. dealers with a limited quantity
of irrigation systems in the dealer's inventory during the lower demand fall
season for delivery to their farmer customers during the higher demand spring
season should lead to increased revenues and earnings in Lindsay's first and
second quarters as compared to fiscal year 2000. During the third and fourth
quarters, fiscal year 2001 irrigation equipment revenues and earnings are
expected to more closely resemble the third and fourth quarters of fiscal year
2000.
Longer-term, Lindsay believes that the desire of U.S. farmers to reduce
variable input costs, stabilize or increase crop yields, reduce labor input and
conserve water and energy will continue to drive demand for center pivot and
lateral move irrigation equipment. The Company believes that these demand
drivers will result in long-term growth in U.S. demand for its irrigation
equipment to average in the 6% to 8% per annum range.
Export sales of center pivot and lateral move irrigation equipment in
fiscal year 2001 are expected to improve modestly from fiscal year 2000's $22.0
million as the company begins to gain the benefit of several planned
international growth initiatives. Lindsay expects that the majority of its
fiscal year 2001 export sales to come from Australia, Canada, Central and
Western Europe, Mexico, the Middle East and South Africa.
Approximately 17%, 19% and 18% of Lindsay's revenues were generated
from export sales in fiscal years 2000, 1999 and 1998, respectively. Lindsay
does not believe it has significant exposure to foreign currency translation
risks because its export sales are in U.S. dollars.
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, agricultural commodity prices,
aggregate net cash farm income, governmental policies regarding the agricultural
sector, water and energy conservation policies and the regularity of rainfall.
DIVERSIFIED PRODUCTS
Lindsay's diversified products segment consists of two major products:
large-diameter thin-wall round steel tubing and outsource manufacturing
services. Diversified products customers for both products primarily consist of
agricultural and industrial capital goods manufacturers. Lindsay believes that
its diversified product revenues will most likely improve slightly in fiscal
year 2001 compared to fiscal year 2000. The Company anticipates that Caterpillar
Inc., Deere & Company, and New Holland North America, Inc. will continue to be
significant outsource manufacturing customers.
12
<PAGE> 13
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.
Concerning Forward-Looking Statements - This Report on Form 10-K,
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 Form 10-K 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 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not subject to material market risks with respect to its
marketable securities because of their relatively short maturity (0 to 42
months) and the Company intends to hold the investments in these marketable
securities to maturity. Lindsay's export sales are principally U.S. dollar
denominated.
13
<PAGE> 14
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENT OF MANAGEMENT RESPONSIBILITY
The consolidated financial statements and notes to the consolidated financial
statements of Lindsay Manufacturing Co. have been prepared by management, which
has the responsibility for their integrity and objectivity. The statements have
been prepared in accordance with generally accepted accounting principles to
reflect, in all material aspects, the substance of financial events and
transactions occurring during the respective periods.
/s/ RICHARD W. PAROD /s/ BRUCE C. KARSK
------------------------------------ -----------------------------------
Richard W. Parod Bruce C. Karsk
President and Vice President-Finance,
Chief Executive Officer Treasurer and Secretary
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders' of Lindsay Manufacturing Co.:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 28, present fairly, in all material
respects, the financial position of Lindsay Manufacturing Co. and its
subsidiaries at August 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended August 31,
2000, in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 14(a)(2), presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
Omaha, Nebraska PricewaterhouseCoopers LLP
September 28, 2000
14
<PAGE> 15
LINDSAY MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
----------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 1998
---------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Operating revenues............................................ $129,785 $116,651 $155,707
Cost of operating revenues.................................... 98,189 86,007 112,866
-------- ------- --------
Gross profit.................................................. 31,596 30,644 42,841
-------- ------- --------
Operating expenses:
Selling expense............................................ 5,660 5,178 5,785
General and administrative expense......................... 7,446 8,559 8,102
Engineering and research expense........................... 2,064 1,888 1,826
-------- ------- --------
Total operating expenses...................................... 15,170 15,625 15,713
-------- ------- --------
Operating income.............................................. 16,426 15,019 27,128
Interest income, net.......................................... 2,599 2,822 3,197
Other income, net............................................. 118 348 4,307
-------- ------- --------
Earnings before income taxes.................................. 19,143 18,189 34,632
Income tax provision.......................................... 5,935 5,457 11,152
-------- ------- --------
Net earnings.................................................. $ 13,208 $12,732 $ 23,480
======== ======= ========
Basic net earnings per share.................................. $ 1.08 $ 0.99 $ 1.68
======== ======= ========
Diluted net earnings per share................................ $ 1.06 $ 0.96 $ 1.61
======== ======= ========
Average shares outstanding.................................... 12,199 12,884 13,936
Diluted effect of stock options............................... 304 401 620
-------- ------- --------
Average shares outstanding assuming dilution.................. 12,503 13,285 14,556
======== ======= ========
Cash dividends per share...................................... $ 0.140 $ 0.140 $ 0.125
======== ======= ========
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
SHARES OF CAPITAL IN ACCUMULATED
------------------ EXCESS OTHER TOTAL
COMMON TREASURY COMMON OF STATED RETAINED TREASURY COMPREHENSIVE SHAREHOLDERS'
($ IN THOUSANDS) STOCK STOCK STOCK VALUE EARNINGS STOCK INCOME (LOSS) EQUITY
------ -------- ------- --------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1997..... 11,203,256 1,794,030 $11,203 $ 450 $106,639 $(31,324) $ -- $86,968
Net earnings................... -- -- -- -- 23,480 -- -- 23,480
Cash dividends ($0.125 per share) -- -- -- -- (1,734) -- -- (1,734)
Net shares issued under stock
option plan.................... 126,273 -- 126 860 -- -- -- 986
Stock option tax benefits...... -- -- -- 591 -- -- -- 591
Acquisitions of common stock... -- 607,743 -- -- -- (19,409) -- (19,409)
Three-for-two stock split...... 5,664,514 998,015 5,665 (1,044) (4,621) -- -- --
Fractional shares paid from (94) -- -- (2) -- -- -- (2)
stock split ---------- -------- ------- ------- ------- ------- ---- --------
Balance at August 31, 1998..... 16,993,949 3,399,788 16,994 855 123,764 (50,733) -- 90,880
Net earnings................... -- -- -- -- 12,732 -- -- 12,732
Cash dividends ($0.140 per share) -- -- -- -- (1,788) -- -- (1,788)
Net shares issued under stock
option plan.................... 80,542 -- 80 740 -- -- -- 820
Stock option tax benefits...... -- -- -- 523 -- -- -- 523
Acquisitions of common stock... -- 1,250,449 -- -- -- (20,469) - (20,469)
---------- --------- ------- ----- ------ ------- ---- -------
Balance at August 31, 1999..... 17,074,491 4,650,237 17,074 2,118 134,708 (71,202) -- 82,698
Comprehensive income:
Net earnings................ -- -- -- -- 13,208 -- -- 13,208
Other comprehensive income:
Minimum pension liability. -- -- -- -- -- -- (303) (303)
------
Total comprehensive income..... -- -- -- -- -- -- -- 12,905
Cash dividends ($0.140 per share) -- -- -- -- (1,700) -- -- (1,700)
Net shares issued under stock
option plan.................... 235,706 -- 236 237 -- -- -- 473
Stock option tax benefits...... -- -- -- (144) -- -- -- (144)
Acquisitions of common stock... -- 965,032 -- -- -- (16,800) -- (16,800)
---------- --------- ------- ------ -------- -------- ----- -------
Balance at August 31, 2000..... 17,310,197 5,615,269 $17,310 $2,211 $146,216 $(88,002) $(303) $77,432
========== ========= ======= ====== ======== ======== ===== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 16
LINDSAY MANUFACTURING CO.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT AUGUST 31,
--------------
($ IN THOUSANDS, EXCEPT PAR VALUES) 2000 1999
----------------------------------- ---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................................... $ 3,105 $ 14,232
Marketable securities ............................................................... 22,894 18,236
Receivables ......................................................................... 17,589 12,909
Inventories ......................................................................... 11,335 7,659
Deferred income taxes ............................................................... 3,106 3,803
Other current assets ................................................................ 164 85
--------- ---------
Total current assets ............................................................. 58,193 56,924
Long-term marketable securities ........................................................ 19,780 27,229
Property, plant and equipment, net ..................................................... 15,938 15,416
Other noncurrent assets ................................................................ 1,905 820
--------- ---------
Total assets ........................................................................... $ 95,816 $ 100,389
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade ............................................................. $ 4,556 $ 4,081
Other current liabilities ........................................................... 11,914 12,580
Current portion of capital lease obligation ......................................... 0 95
--------- ---------
Total current liabilities ........................................................ 16,470 16,756
Other noncurrent liabilities. ....................................................... 1,914 935
--------- ---------
Total liabilities ...................................................................... 18,384 17,691
--------- ---------
Commitments and Contingencies
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares authorized, no shares issued
and outstanding in 2000 and 1999)
Common stock, ($1 par value, 25,000,000 shares authorized,
17,310,197 and 17,074,491 shares issued in 2000 and 1999) ........................ 17,310 17,074
Capital in excess of stated value ................................................... 2,211 2,118
Retained earnings ................................................................... 146,216 134,708
Less treasury stock, (at cost, 5,615,269 shares in 2000 and 4,650,237 shares in 1999) (88,002) (71,202)
Accumulated other comprehensive income............................................... (303) 0
--------- ---------
Total shareholders' equity ............................................................. 77,432 82,698
--------- ---------
Total liabilities and shareholders' equity ............................................ $ 95,816 $ 100,389
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 17
LINDSAY MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
----------------------
($ IN THOUSANDS) 2000 1999 1998
---------------- ---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings................................................................ $ 13,208 $ 12,732 $ 23,480
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization............................................ 2,960 2,626 2,286
Amortization of marketable securities premiums, net...................... (29) 183 187
Gain on sale of fixed assets............................................. (106) (119) (152)
Loss (gain) on maturities of marketable securities
held-to-maturity...................................................... 12 (18) (1)
Provision for uncollectible accounts receivable.......................... (276) (22) 0
Deferred income taxes.................................................... 697 58 686
Stock option tax (payables) benefits..................................... (144) 523 591
Changes in assets and liabilities:
Receivables.............................................................. (4,394) 1,179 4,834
Inventories.............................................................. (3,578) 2,539 (203)
Other current assets..................................................... (79) 7 (15)
Accounts payable......................................................... 475 (855) (57)
Other current liabilities................................................ (1,434) 105 (1,735)
Current taxes payable.................................................... 743 752 (879)
Other noncurrent assets and liabilities.................................. 7 (46) (53)
-------- -------- --------
Net cash provided by operating activities................................ 8,062 19,644 28,969
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.................................. (3,464) (3,993) (5,091)
Acquisitions................................................................ (545) 0 0
Proceeds from sale of property, plant and equipment......................... 134 141 180
Purchases of marketable securities held-to-maturity......................... (18,414) (2,756) (17,085)
Proceeds from maturities of marketable securities held-to-maturity.......... 21,222 18,994 12,910
-------- -------- --------
Net cash (used in) provided by investing activities......................... (1,067) 12,386 (9,086)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation........................... (95) (155) (161)
Proceeds from issuance of common stock under stock option plan ............. 473 820 986
Dividends paid.............................................................. (1,700) (1,788) (1,734)
Purchases of treasury stock................................................. (16,800) (20,469) (19,409)
Other....................................................................... 0 0 (2)
-------- -------- --------
Net cash used in financing activities....................................... (18,122) (21,592) (20,320)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents........................ (11,127) 10,438 (437)
Cash and cash equivalents, prior year....................................... 14,232 3,794 4,231
-------- -------- --------
Cash and cash equivalents, current year..................................... $ 3,105 $ 14,232 $ 3,794
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid........................................................... $ 4,517 $ 4,617 $ 11,344
Interest paid............................................................... $ 32 $ 8 $ 44
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 18
LINDSAY MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
Lindsay Manufacturing Co. (the "Company" or "Lindsay") manufactures and
distributes irrigation systems and manufactures other special metal products
serving both domestic and international markets. The Company's principal
facilities are located in Lindsay, Nebraska, USA. The principal accounting
policies of the Company are as follows:
(1) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany balances and transactions are
eliminated in consolidation.
(2) REVENUE RECOGNITION
Revenues and related cost of revenues for all irrigation and diversified
products are recognized when title passes. Generally this occurs at the time of
shipment of product to dealers or customers.
(3) WARRANTY COSTS
Cost of operating revenues include warranty costs of $1,026,000, $834,000 and
$774,000 for the years ended August 31, 2000, 1999 and 1998, respectively.
Provision for the estimated warranty costs is made in the period in which such
costs become probable. This provision is periodically adjusted to reflect actual
experience.
(4) CASH EQUIVALENTS, MARKETABLE SECURITIES AND LONG-TERM MARKETABLE SECURITIES
Cash equivalents are included at cost, which approximates market. At August 31,
2000, 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 original 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.
The total amortized cost, gross unrealized holding gains, gross
unrealized holding losses, and aggregate fair value for held-to-maturity
securities are $42,674,000, $60,000, $55,000 and $42,679,000, respectively. In
the held-to-maturity category at August 31, 2000, $22,894,000 in marketable
securities mature within one year and $19,780,000 in long term marketable
securities have maturities ranging from 12 to 42 months.
(5) 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.
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant, equipment and capitalized lease assets are stated at cost. The
Company's policy is to capitalize expenditures for major renewals and
betterments and to charge to operating expenses the cost of current maintenance
and repairs. Provisions for depreciation and amortization have been computed
principally on the straight-line method for buildings and equipment. Rates used
for depreciation are based principally on the following expected lives:
buildings -- 20 to 30 years; equipment -- three to 10 years; other -- two to 20
years; and leasehold improvements -- term of lease. All of the Company's
long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected discounted future cash flows is less than the carrying
amount of the asset, a loss is recognized. The cost and accumulated depreciation
relating to assets retired or otherwise disposed of are eliminated from the
respective accounts at the time of disposition. The resultant gain or loss is
included in the consolidated statements of operations.
(7) GOODWILL
Goodwill represents the excess of the purchase price over the fair value of an
acquired company and is being amortized on a straight line basis over 20 years.
18
<PAGE> 19
(8) 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 99,750 shares of common stock at a weighted average
price of $27.13 per share were outstanding during the fourth quarter of fiscal
2000, but were not included in the computation of diluted EPS because the
options' exercise price was greater that the average market price of the common
shares. These options expire on or between September 3, 2007 and September 3,
2008.
(9) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(10) RECLASSIFICATIONS
Certain reclassifications have been made to prior financial statements amounts
to conform to the current-year presentation.
(11) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In fiscal year 1999, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 131 "Disclosures About Segments of an Enterprise and
Related Information" (see Note N) and SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits" (see Note L). These standards
expand or modify disclosures and have no effect on the company's consolidated
financial position, results of operations or cash flows. Information for prior
years has been restated to conform to the requirements of these standards.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." The guidance in the SAB is required to be followed no later that
the fourth quarter of the fiscal year beginning after December 15, 1999 and will
not have a material impact on the Company's consolidated financial position or
results of operations.
(12) ACQUISITIONS
Lindsay purchased the assets of Oasis Enterprises, Inc. based in Nunn, Colorado
in August 2000. This separate line of center pivot and lateral move irrigation
equipment for use on small fields 1 to 60 acres is manufactured and marketed
under the Company's Greenfield tradename (trademark applied for).
The purchase was a cash transaction with an annual earnout provision if
certain revenue levels are achieved during the first four years. Lindsay
recorded a goodwill asset from this purchase which is recorded in the Company's
consolidated balance sheets under other noncurrent assets (see Note G). The
goodwill asset from this purchase will increase if and when annual earnouts are
incurred over the four year earnout period. Management expects the aggregate
earnout to be less than $1.0 million.
B. NON-OPERATING ITEMS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
------------------------------
$ IN THOUSANDS 2000 1999 1998
--------------- ---- ---- -----
<S> <C> <C> <C>
Other income, net:
Litigation settlement (1) ............................................ $ (30) $ 0 $ 4,000
Gain on sales of fixed assets......................................... 106 119 152
State economic development tax credits ............................... 0 176 165
Finance charges....................................................... 56 27 41
All other, net ....................................................... (14) 26 (51)
------ ------- -------
Total other income, net ................................................. $ 118 $ 348 $ 4,307
====== ======= =======
</TABLE>
(1) In May 1998, the Company reached an agreement with an insurer to settle a
litigation issue for $4.0 million.
19
<PAGE> 20
C. INCOME TAX PROVISION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
-------------------------------------
$ IN THOUSANDS 2000 1999 1998
--------------- ---- ---- -----
<S> <C> <C> <C>
Current taxes ........................................................... $5,238 $ 5,399 $ 10,466
Deferred taxes .......................................................... 697 58 686
------ ------- --------
Total income tax provision .............................................. $5,935 $ 5,457 $ 11,152
====== ======= ========
Total tax provisions resulted in effective tax rates differing from that of the
statutory federal income tax rates. The reasons for these differences are:
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------------------------------
2000 1999 1998
---- ---- ----
$ IN THOUSANDS AMOUNT % AMOUNT % AMOUNT %
-------------- ------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory rate.............................. $ 6,622 34.6 $ 6,244 34.3 $ 12,121 35.0
State and local taxes............................ 269 1.4 227 1.3 262 0.8
Qualified export activity........................ (113) (0.6) (164) (0.9) (236) (0.7)
Municipal bonds.................................. (702) (3.7) (816) (4.5) (930) (2.7)
Other............................................ (141) (0.7) (34) (0.2) (65) (0.2)
------- ----- ------- ---- --------- -----
Total ........................................... $ 5,935 31.0 $ 5,457 30.0 $ 11,152 32.2
======= ==== ======= ==== ======== ====
Significant components of the Company's deferred tax assets and liabilities are
as follows:
FOR THE YEARS ENDED AUGUST 31,
------------------------------
$ IN THOUSANDS 2000 1999
--------------- ---- -----
<S> <C> <C>
Book depreciation in excess of (less than) tax .......................... $ (13) $ (14)
Employee benefits ....................................................... 2,333 2,576
Inventory adjustments ................................................... 154 249
Accruals not currently deductible for taxes.............................. 632 992
------ -------
Net deferred tax assets ................................................ $3,106 $ 3,803
====== =======
Management does not believe there are uncertainties surrounding realization of
the net deferred tax assets.
D. RECEIVABLES
AUGUST 31,
--------------------------
$ IN THOUSANDS 2000 1999
-------------- ---- ----
<S> <C> <C>
Trade accounts and notes ................................................ $ 18,034 $ 13,630
Less allowance for doubtful accounts .................................... 445 721
-------- --------
Net receivables ........................................................ $ 17,589 $ 12,909
======== ========
</TABLE>
20
<PAGE> 21
E. INVENTORIES
<TABLE>
<CAPTION>
AUGUST 31,
-------------------------
$ IN THOUSANDS 2000 1999
---- -----
<S> <C> <C>
First-in, first-out (FIFO) inventory .................................... $ 15,374 $ 11,983
LIFO reserves ........................................................... (3,408) (3,389)
Obsolescence reserve .................................................... (631) (935)
-------- --------
Total Inventories . ..................................................... $ 11,335 $ 7,659
======== ========
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
AUGUST 31,
-------------------------
2000 1999
---- -----
<S> <C> <C>
Raw materials ........................................................... 13% 12%
Work in process ......................................................... 6% 5%
Purchased parts ......................................................... 33% 38%
Finished goods .......................................................... 48% 45%
F. PROPERTY, PLANT & EQUIPMENT
AUGUST 31,
-------------------------
$ IN THOUSANDS 2000 1999
---- ----
<S> <C> <C>
Plant and equipment:
Land ................................................................ $ 70 $ 70
Buildings ........................................................... 8,352 5,781
Equipment ........................................................... 30,269 27,841
Other ............................................................... 3,300 5,004
Capital lease:
Equipment ........................................................... 0 458
-------- --------
Total plant, equipment and capital lease ................................ 41,991 39,154
Accumulated depreciation and amortization:
Plant and equipment ................................................. (26,053) (23,520)
Capital lease ....................................................... 0 (218)
-------- --------
Property, plant and equipment, net ..................................... $ 15,938 $ 15,416
======== ========
G. OTHER NONCURRENT ASSETS
AUGUST 31,
-------------------------
$ IN THOUSANDS 2000 1999
---- ----
<S> <C> <C>
Goodwill, net............................................................ $ 416 $ 0
Intangible pension asset................................................. 649 0
Split dollar life insurance.............................................. 840 820
-------- --------
Other noncurrent assets.................................................. $ 1,905 $ 820
======== ========
</TABLE>
21
<PAGE> 22
H. OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
AUGUST 31,
-------------------------
$ IN THOUSANDS 2000 1999
---- ----
<S> <C> <C>
Current state and federal income taxes.................................................. $ 974 $ 258
Payroll and vacation.................................................................... 2,621 3,435
Retirement plans........................................................................ 2,368 2,089
Taxes, other than income................................................................ 222 195
Insurance............................................................................... 1,550 1,551
Dealer service, commission and related items............................................ 2,222 2,417
Export freight.......................................................................... 212 228
Warranty................................................................................ 757 657
Legal settlements....................................................................... 221 720
Other ................................................................................. 767 1,030
-------- --------
Total other current liabilities......................................................... $ 11,914 $ 12,580
======== ========
</TABLE>
I. CREDIT ARRANGEMENTS
Lindsay entered into an agreement in December 1999 for a $10.0 million unsecured
revolving line of credit through December 31, 2000. Proceeds from this line of
credit, if any, are to be used for working capital and general corporate
purposes including stock repurchases. There have been no borrowings made 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 its National Base Rate. No covenants limit
the ability of Lindsay to merge or consolidate, to encumber assets, to sell
significant portions of its assets, to pay dividends, or to repurchase common
stock.
J. LEASE
During the fourth quarter of fiscal 1997, the Company recorded a three-year
capital lease for computer equipment in the amount of $457,850, at interest of
approximately 4% with a one-dollar end-of-lease purchase option. This lease
expired June 1, 2000, thus there are no future lease payments at August 31,
2000.
K. COMMITMENTS AND CONTINGENCIES
In the normal course of business, Lindsay is contingently liable under
arrangements with its third-party financing vendors for limited financing
guarantees aggregating up to a maximum exposure of approximately $0.9 million.
These limited financing guarantees relate to financing provided by third-party
financing vendors to facilitate the financing of the Company's irrigation
equipment sold through its authorized dealer network to the dealer's customers.
Additionally, the Company has issued a guarantee to facilitate the issuance of
long term debt to a strategic third party totaling approximately $1.1 million at
August 31, 2000 and reducing at various dates through 2003. The risk of loss to
the Company under the above agreements is minimal due to the value of the leased
irrigation equipment, a reserve included in the allowance for doubtful accounts
and the specific nature of the various guarantees or agreements. Management
believes these guarantees and agreements will not adversely affect its
consolidated financial position, results of operations or cash flows.
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.
L. RETIREMENT PLANS
During 1996, Lindsay adopted an amended and restated defined contribution
profit-sharing plan to include a 401(k) provision covering all employees.
Participants may voluntarily contribute a percentage of compensation, but not in
excess of the maximum allowed under the Internal Revenue Code. The plan provides
for a matching contribution by Lindsay. Additionally, the plan provides for
Lindsay to contribute a discretionary amount when warranted by results of
operations. The contribution is allocated to participants based upon their
respective percentage of wages to total wages of all participants in the plan.
Lindsay's total
22
<PAGE> 23
contributions charged to expense under this plan were $750,000 for each of the
years ended August 2000 and 1999 and $800,000 for the year ended August 1998. A
supplementary non-qualified, non-funded retirement plan for certain key
executives is also maintained. Plan benefits are based on the executive's
average total compensation during the three highest compensation years of
employment. This unfunded supplemental retirement plan is not subject to the
minimum funding requirements of ERISA.
Cost and the assumptions for the Company's supplemental retirement plan includes
the following components:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31,
-----------------------------------------
$ IN THOUSANDS 2000 1999 1998
-------------- ---- ---- ----
<S> <C> <C> <C>
Change in benefit of obligation:
Benefit obligation at beginning of term.............. $ 1,868 $ 1,937 $ 1,820
Service cost......................................... 75 81 80
Interest cost........................................ 131 136 128
Actuarial (gain)/loss................................ 704 (286) (91)
------- -------- -------
Benefit obligation at end of year.................... $ 2,778 $ 1,868 $ 1,937
------- -------- -------
Funded status........................................ $(2,778) $ (1,868) $(1,937)
Unrecognized net actuarial loss...................... 1,009 357 513
------- -------- -------
Net amount recognized................................ $(1,769) $ (1,511) $(1,424)
======= ======== =======
Amounts recognized in the statement of financial position consist of:
Accrued benefit cost................................. $ 1,769 $ 1,511 $ 1,225
Intangible pension asset............................. (649) 0 0
Additional benefit liability......................... 952 0 199
Other comprehensive income........................... (303) 0 0
------- -------- -------
Net amount recognized................................ $ 1,769 $ 1,511 $ 1,424
======= ======== =======
Weighted-average assumptions as of year ends:
Discount Rate........................................ 7.00% 7.00% 7.00%
Assumed rates of compensation increases.............. 3.50% 3.50% 3.50%
Components of net periodic benefit cost:
Service cost......................................... $ 75 $ 81 $ 80
Interest cost........................................ 131 136 128
Net Amortization and Deferral........................ 52 69 69
------- -------- -------
Total................................................ $ 258 $ 286 $ 277
======= ======== =======
</TABLE>
M. STOCK OPTIONS
The Company adopted a Long-Term Incentive Plan in October 1988, (1988
Plan) which provides for awards of stock options, stock appreciation rights,
stock indemnification rights and restricted stock (collectively stock awards) to
officers and key employees. Options may be granted at, above or below the fair
market value of the stock at the date of the grant and are exercisable within
periods specified by the Company's Compensation Committee. Options currently
vest ratably over five years and expire ten years from the grant dates.
In February 1992, the shareholders approved the 1991 Long-Term
Incentive Plan (1991 Original Plan) which is similar in most material respects
to the 1988 Plan except that the 1991 Original Plan provides for non-qualified
stock options to directors who are not officers or employees of the Company or
its subsidiaries. The 1991 Original Plan was amended and restated in its
entirety as the Amended and Restated 1991 Long Term Incentive Plan (1991 Plan)
in April, 2000 by the Board of Directors. This action was necessary to clarify
certain provisions of the 1991 Original Plan and to eliminate certain provisions
no longer necessary. No substantive changes were made which would require
shareholder approval.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
Stock-Based Compensation." Accordingly, no compensation cost has been
recognized for the stock option shares. Had compensation cost for the
Company's stock option shares been determined based on the fair value at the
grant
23
<PAGE> 24
date for awards in fiscal 2000, 1999 and 1998 consistent with the provisions of
SFAS No. 123, net earnings and net earnings per share would have been reduced to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
AUGUST 31,
-------------------------------------
$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 2000 1999 1998
---------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Net earnings - as reported................................................. $13,208 $ 12,732 $ 23,480
Net earnings - pro forma................................................... $12,389 $ 12,447 $ 23,321
Net earnings per share - as reported....................................... $ 1.06 $ 0.96 $ 1.61
Net earnings per share - pro forma......................................... $ 0.99 $ 0.94 $ 1.60
</TABLE>
The pro forma effect on net earnings for fiscal 2000, 1999 and 1998 is not fully
representative of the pro forma effect on net earnings in future years because
it does not take into consideration pro forma compensation expense related to
the vesting of grants made prior to fiscal 1996. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions used for all grants in
fiscal 2000, 1999 and 1998, dividend yield of 0.4% to 0.8%, expected volatility
of 31.2% to 36.0%, risk-free interest rates ranging from 5.0% to 6.4%, and
expected lives of the options of 7 years.
A summary of the status of the Company's stock plans is presented below:
<TABLE>
<CAPTION>
RESTRICTED SHARES FOR THE YEARS ENDED AUGUST 31,
---------------------------------------
$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Number of shares issued............................................... 50,625 66,225 66,375
Average price......................................................... $17.06 $ 20.49 $ 26.97
Total value of shares issued.......................................... $ 864 $ 1,357 $ 1,790
Total compensation cost recognized in the
statements of operations.......................................... $ (58) $ 1,155 $ 1,543
OPTION SHARES NUMBER OF SHARES AVERAGE PRICE
---------------- -------------
Officers, Directors and Key Employees:
Outstanding at August 31, 1997........................................ 888,051 $ 6.19
Granted............................................................ 120,000 27.49
Exercised.......................................................... (169,827) 3.01
Cancelled.......................................................... (4,725) 8.72
Outstanding at August 31, 1998........................................ 833,499 9.89
Exercisable at August 31, 1998........................................ 625,412 6.48
Weighted average fair value of options granted during fiscal 1998..... 6.36
Outstanding at August 31, 1998........................................ 833,499 9.89
Granted............................................................ 116,250 16.13
Exercised.......................................................... (61,855) 6.31
Cancelled.......................................................... (1,350) 8.37
Outstanding at August 31, 1999........................................ 886,544 10.96
Exercisable at August 31, 1999........................................ 625,357 7.49
Weighted average fair value of options granted during fiscal 1999..... 7.70
Outstanding at August 31, 1999........................................ 886,544 10.96
Granted............................................................ 390,500 14.33
Exercised.......................................................... (263,344) 3.76
Cancelled.......................................................... (96,757) 16.00
Outstanding at August 31, 2000........................................ 916,943 13.93
Exercisable at August 31, 2000........................................ 385,106 11.23
Weighted average fair value of options granted during fiscal 2000..... $ 9.91
</TABLE>
The number of stock awards available for grant under the 1988 and 1991 plans are
140,899, 135,265 and 316,388 shares as of August 31, 2000, 1999 and 1998,
respectively.
24
<PAGE> 25
The following table summarizes information about the Company's Common Stock
options outstanding at August 31, 2000:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED
AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
PRICES AT 8/31/00 LIFE PRICE AT 8/31/00 PRICE
------ ---------- ---- ----- ---------- -----
$ 6.17-10.52 328,630 2.89 years $ 8.99 322,556 $ 8.97
14.00-20.00 498,688 9.14 years 14.66 26,700 16.10
$26.17-28.17 89,625 7.16 years $ 27.94 35,850 $27.94
-------- --------
916,943 385,106
======= =======
N. INDUSTRY SEGMENT INFORMATION
The Company has adopted SFAS No. 131 "Disclosures About Segments of
an Enterprise and Related Information" in fiscal year 1999 which changes the way
the Company reports information about its operating segments. The information
for 1998 is presented to conform to the 1999 and 2000 presentation.
The Company manages its business activities in two reportable segments:
Irrigation: This segment includes the manufacture and marketing of
center pivot and lateral move irrigation equipment and other
revenues consisting primarily of revenues from long haul over the
road freight services.
Diversified Products: This segment includes providing outsource
manufacturing services and selling large diameter steel tubing.
The accounting policies of the two reportable segments are the same as
those described in the "Accounting Policies" in Note A. The Company evaluates
the performance of its operating segments based on segment sales, gross profit
and operating income and does not include general or administrative expenses
(which include corporate expenses) or engineering and research expenses,
interest income net, non-operating income and expenses, income taxes, and
assets. Operating earnings does include selling and other overhead charges
directly attributable to the segment. There are no intersegment sales.
Summarized financial information concerning the Company's reportable segments is
shown in the following table:
FOR THE YEARS ENDED AUGUST 31,
--------------------------------------
$ IN MILLIONS 2000 1999 1998
------------- ---- ---- ----
Operating revenues:
Irrigation......................................................... $ 115.6 $ 101.4 $ 130.5
Diversified products............................................... 14.2 15.3 25.2
------- -------- --------
Total operating revenues.............................................. $ 129.8 116.7 $ 155.7
======= ======== ========
Operating income:
Irrigation......................................................... $ 23.2 $ 22.0 $ 31.8
Diversified products............................................... 2.7 3.5 5.2
------- -------- --------
Segment operating income.............................................. 25.9 25.5 37.0
Unallocated general & administrative and
engineering & research expenses.................................... (9.5) (10.5) (9.9)
Interest and other income, net........................................ 2.7 3.2 7.5
------- -------- -------
Earnings before income taxes.......................................... $ 19.1 $ 18.2 $ 34.6
======= ======== =======
Geographic area revenues:
United States...................................................... $ 107.8 $ 94.2 $ 127.9
Europe & Africa.................................................... 6.2 7.7 7.8
Mexico & Latin America............................................ 5.1 6.7 8.2
Other export....................................................... 10.7 8.1 11.8
------- -------- -------
Total revenues..................................................... $ 129.8 $ 116.7 $ 155.7
======= ======== ========
</TABLE>
25
<PAGE> 26
O. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The follow is a tabulation of the unaudited quarterly results of operations for
the years ended August 31, 2000 and 1999.
QUARTERLY DATA
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED THE LAST DAY OF
----------------------------------------------------------
$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS NOVEMBER FEBRUARY MAY AUGUST
-------- -------- --- ------
<S> <C> <C> <C> <C>
Fiscal 2000
Operating revenues...................... $ 24,503 $34,996 $ 46,603 $ 23,683
Cost of operating revenues.............. 18,763 26,058 34,540 18,828
Earnings before income taxes............ 2,433 5,796 8,762 2,152
Net earnings............................ 1,703 4,057 5,963 1,485
Net earnings per share.................. $ 0.13 $ 0.32 $ 0.48 $ 0.12
Market price (NYSE)
High.................................. $ 21.13 $ 18.25 $ 20.81 $ 20.56
Low................................... $ 16.38 $ 16.13 $ 14.00 $ 17.00
Fiscal 1999
Operating revenues...................... $ 21,642 $31,087 $ 42,990 $ 20,932
Cost of operating revenues.............. 16,964 23,426 31,680 13,937
Earnings before income taxes............ 2,103 4,925 8,118 3,043
Net earnings............................ 1,430 3,349 5,520 2,433
Net earning per share................... $ 0.10 $ 0.25 $ 0.42 $ 0.19
Market price (NYSE)
High................................. $ 21.31 $ 17.00 $ 22.38 $ 20.38
Low.................................. $ 11.25 $ 12.50 $ 14.88 $ 16.00
</TABLE>
2000: Fourth-quarter adjustments resulting in a net increase in pre-tax earnings
of $440,000 were made to inventory accounts (due to physical inventory), the
LIFO inventory reserve and the obsolete inventory reserve. Additional
fourth-quarter accrual adjustments, for insurance and warranty, increased
pre-tax earnings $286,000 and $178,000 respectively.
1999: Fourth-quarter adjustments resulting in a net increase in pre-tax earnings
of $2,184,000 were made to inventory accounts (due to physical inventory) and
the LIFO inventory reserve. Additional fourth-quarter accrual adjustments
decreased pre-tax earnings $810,000 for compensation costs including bonus
earnouts and vacation pay.
Share amounts and per share results for all periods are stated on a diluted
basis.
26
<PAGE> 27
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company will file with the Securities and Exchange Commission a definitive
Proxy Statement not later than 120 days after the close of its fiscal year ended
August 31, 2000. Information about the Directors required by item 401 of
Regulation S-K is incorporated by reference from the proxy statement.
Information about Executive Officers is shown on page 6 of this filing.
Section 16(a) Beneficial Ownership Reporting Compliance - Item 405 of
Regulation S-K calls for disclosure of any known late filing or failure by an
insider to file a report required by Section 16 of the Securities Exchange Act.
The Company believes that it complied with all section 16 filing requirements
during the fiscal year ended August 31, 2000.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the
Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from the
Proxy Statement.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from the
Proxy Statement.
27
<PAGE> 28
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements of Lindsay Manufacturing Co. are
included in Part II Item 8.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................................................... 14
Consolidated Statements of Operations for the Years
ended August 31, 2000, 1999 and 1998................................................................ 15
Consolidated Balance Sheets at
August 31, 2000 and 1999............................................................................ 16
Consolidated Statements of Shareholders' Equity and Comprehensive Income
for the years ended August 31, 2000, 1999 and 1998.................................................. 15
Consolidated Statements of Cash Flows for the Years
ended August 31, 2000, 1999 and 1998................................................................ 17
Notes to Consolidated Financial Statement................................................................. 18-26
(a)(2) Financial Statement Schedule
PAGE
----
Report of Independent Accountants......................................................................... 14
Schedule
Valuation and Qualifying Accounts -
Years ended August 31, 2000, 1999 and 1998.......................................................... 32
</TABLE>
Financial statements and schedules other than those listed are omitted
for the reason that they are not required, are not applicable or that equivalent
information has been included in the financial statements or notes thereto.
28
<PAGE> 29
A(3) EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------
<S> <C> <C>
3(a) Restated Certificate of Incorporation of the Company,
incorporated by reference to Exhibit 3(a)
to the Company's Report on Form 10-Q for the fiscal
quarter ended February 28, 1997. -
3(b) By-Laws of the Company amended and restated by the Board
of Directors on April 28, 2000. 33-51
3(c) Certificate of Amendment of the Restated Certificate of
Incorporation of Lindsay Manufacturing Co. dated February 7,
1997, incorporated by reference to Exhibit 3(b) to the
Company's Report on Form 10-Q for the fiscal quarter ended
February 28, 1997. -
4(a) Specimen Form of Common Stock Certificate incorporated by reference
to Exhibit 4 to the Company's report on Form 10-Q for the fiscal
quarter ended November 30, 1997. -
10(a) Lindsay Manufacturing Co. Executive Compensation Plan
incorporated by reference to Exhibit 10(a) to the Company's
report on Form 10-Q for the fiscal quarter ended February 28,
1998. -
10(b) Agreement between the Company and Gary D. Parker, effective December 1,
1999 incorporated by reference to Exhibit 10(a) to the Company's Report
on Form 10-Q for the fiscal quarter ended
November 30, 1999. -
10(c) Indemnification Agreement between the Company and its directors and
officers, dated October 10, 1988, incorporated by reference to Exhibit
10(f) of the Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 1988. -
10(d) Lindsay Manufacturing Co. Long-Term Incentive Plan,
incorporated by reference to amended Exhibit 10(h) of
Amendment No. 3 to the Company's Registration Statement
on Form S-1 (Registration No. 33-23084), filed September
23, 1988. -
</TABLE>
29
<PAGE> 30
a(3) EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------
<S> <C> <C>
10(e) Lindsay Manufacturing Co. Profit Sharing Plan, incorporated
by reference to Exhibit 10(i) of the Company's Registration
Statement on Form S-1 (Registration No. 33-23084), filed
July 15, 1988. -
10(f) Lindsay Manufacturing Co. amended and restated 1991 Long-Term
Incentive Plan. 52-68
10(g) Employment Agreement between the Company and Richard W. Parod
effective March 8, 2000, incorporated by reference to Exhibit 10(a) of the
Company's Report on Form 10-Q for the fiscal quarter ended May 31, 2000. -
10(h) Lindsay Manufacturing Co. Supplemental Retirement Plan, incorporated
by reference to Exhibit 10(j) of the Company's Annual Report on Form
10K for the fiscal year ended August 31, 1994. -
21 Subsidiaries of the Company, incorporated by reference to Exhibit 22
of the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1988. -
23 Consent of PricewaterhouseCoopers LLP 69
24(a) The Power of Attorney authorizing Richard W. Parod and Bruce C. Karsk
to sign the Annual Report on Form 10-K for fiscal year 2000 on
behalf of certain directors. 70
27 Financial Data Schedule 71
(b) Reports on Form 8-K
The Registrant has not filed any reports on Form 8-K during the fourth
quarter of fiscal 2000.
</TABLE>
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 29th day of
November, 2000.
LINDSAY MANUFACTURING CO.
By: /s/ BRUCE C. KARSK
----------------------------
Name: Bruce C. Karsk
Title: Director, Vice President-Finance,
Treasurer and Secretary;
Principal Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on this 29th day of November, 2000.
/s/ RICHARD W. PAROD Director, President and
-------------------------------------------- Chief Executive Officer
Richard W. Parod
/s/ BRUCE C. KARSK Director, Vice President -
-------------------------------------------- Finance, Treasurer and
Bruce C. Karsk Secretary; Principal
Financial and Accounting
Officer
/s/ RALPH J. KROENKE Controller
--------------------------------------------
Ralph J. Kroenke
/s/ LARRY H. CUNNINGHAM (1) Director
--------------------------------------------
Larry H. Cunningham
/s/ HOWARD G. BUFFETT (1) Director
--------------------------------------------
Howard G. Buffett
/s/ JOHN W. CROGHAN (1) Chairman of the Board
-------------------------------------------- of Directors
John W. Croghan
/s/ MICHAEL N. CHRISTODOLOU (1) Director
--------------------------------------------
Michael N. Christodolou
(1) By: /s/ Bruce C. Karsk
-------------------------------------
Bruce C. Karsk, Attorney-In-Fact.
<PAGE> 32
LINDSAY MANUFACTURING CO.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED AUGUST 31, 2000, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- ---------------------- -------- --------
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
--------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended August 31, 2000:
Deducted in the balance sheet from the
assets to which they apply:
- Allowance for doubtful accounts........................ $ 721 $ 0 $ 0 $276(a) $ 445
===== ======= ======= ==== ======
- Allowance for inventory obsolescence................... $ 935 $ $ 0 $304(b) $ 631
===== ======= ======= ==== ======
Year ended August 31, 1999:
Deducted in the balance sheet from the
assets to which they apply:
- Allowance for doubtful accounts........................ $ 743 $ 0 $ 0 $ 22(a) $ 721
===== ======= ======= ==== ======
- Allowance for inventory obsolescence................... $ 935 $ 0 $ 0 $ 0(b) $ 935
===== ======= ======= ==== ======
Year ended August 31, 1998:
Deducted in the balance sheet from
the assets to which they apply:
- Allowance for doubtful accounts........................ $ 743 $ 0 $ 0 $ 0(a) $ 743
===== ======= ======= ==== ======
- Allowance for inventory obsolescence................... $ 669 $ 330 $ 0 $ 64(b) $ 935
===== ======= ======= ==== ======
</TABLE>
Notes:
(a) Deductions consist of uncollectable items written off, less recoveries
of items previously written off.
(b) Deductions consist of obsolete items sold or scrapped.
