<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number 0-17116
Lindsay Manufacturing Co.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0554096
-------- -----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
BOX 156, 214 EAST 2ND STREET, LINDSAY, NEBRASKA 68644
----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
402-428-2131
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No|_|
At July 5, 2000, 11,743,928 shares of common stock, $1.00 par value, of the
registrant were outstanding.
Exhibit index is located on page 2.
Total number of pages 36.
1
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LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES
INDEX FORM 10-Q
Page No.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheets, May 31, 2000 and 1999
and August 31, 1999 3
Consolidated Statements of Operations for the three months
and nine months ended May 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the nine
months ended May 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6-8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION 9-12
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 12
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 12
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
EXHIBIT INDEX
10(a) - Employment Agreement between the Company and
Richard W. Parod effective March 8, 2000 14-35
27 - Financial Data Schedule 36
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LINDSAY MANUFACTURING CO.
CONSOLIDATED BALANCE SHEETS
MAY 31, 2000 AND 1999 AND AUGUST 31, 1999
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
MAY MAY AUGUST
($ IN THOUSANDS, EXCEPT PAR VALUES) 2000 1999 1999
----------------------------------- ---- ---- ----
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 4,977 $ 6,926 $ 14,232
Marketable securities ......................................... 25,306 18,924 18,236
Receivables ................................................... 25,441 17,949 12,909
Inventories ................................................... 8,624 6,568 7,659
Deferred income taxes ......................................... 3,124 3,796 3,803
Other current assets .......................................... 392 267 85
--------- --------- ---------
Total current assets ....................................... 67,864 54,430 56,924
Long-term marketable securities ............................... 19,433 31,171 27,229
Property, plant and equipment, net ............................ 15,751 14,587 15,416
Other noncurrent assets........................................ 839 1,020 820
--------- --------- ---------
Total assets ..................................................... $ 103,887 $ 101,208 $ 100,389
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade ....................................... $ 5,620 $ 3,621 $ 4,081
Other current liabilities ..................................... 12,930 14,015 12,580
Current portion of capital lease obligation ................... 0 147 95
--------- --------- ---------
Total current liabilities .................................. 18,550 17,783 16,756
Other noncurrent liabilities .................................. 872 1,052 935
--------- ---------- ---------
Total liabilities ................................................ 19,422 18,835 17,691
--------- --------- ---------
Contingencies
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares authorized no shares
issued and outstanding in May 2000 and 1999 and August 1999)
Common stock, ($1 par value, 25,000,000 shares authorized, 17,309,443,
17,056,595 and 17, 074,491 shares
issued in May 2000 and 1999 and August 1999) ............... 17,309 17,057 17,074
Capital in excess of stated value ............................. 2,426 1,446 2,118
Retained earnings.............................................. 145,142 132,710 134,708
Less treasury stock, at cost, 5,203,637, 4,515,237 and 4,650,237
shares in May 2000 and 1999 and August 1999................. (80,412) (68,840) (71,202)
--------- --------- ---------
Total shareholders' equity..................................... 84,465 82,373 82,698
--------- --------- ---------
Total liabilities and shareholders' equity .................... $ 103,887 $101,208 $ 100,389
========= ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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LINDSAY MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED MAY 31,
2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
MAY MAY MAY MAY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 2000 1999
---------------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues............................................ $46,603 $42,990 $106,102 $95,719
Cost of operating revenues.................................... 34,540 31,680 79,361 72,070
------- ------- --------- --------
Gross profit.................................................. 12,063 11,310 26,741 23,649
------- ------- --------- --------
Operating expenses:
Selling expense............................................ 1,583 1,268 4,310 3,688
General and administrative expense............................ 1,870 2,253 5,988 5,914
Engineering and research expense........................... 512 425 1,476 1,297
------- ------- --------- --------
Total operating expenses...................................... 3,965 3,946 11,774 10,899
------- ------- --------- --------
Operating income.............................................. 8,098 7,364 14,967 12,750
Interest income, net.......................................... 621 676 1,953 2,088
Other income, net............................................ 43 78 71 308
------- ------- --------- --------
Earnings before income taxes.................................. 8,762 8,118 16,991 15,146
Income tax provision.......................................... 2,799 2,598 5,268 4,847
------- ------- --------- --------
Net earnings.................................................. $ 5,963 $ 5,520 $ 11,723 $ 10,299
======= ======= ========= ========
Basic net earnings per share.................................. $ 0.49 $ 0.44 $ 0.95 $ 0.79
======= ======= ========= ========
Diluted net earnings per share................................ $ 0.48 $ 0.42 $ 0.93 $ 0.77
======= ======= ========= ========
Average shares outstanding.................................... 12,161 12,685 12,321 13,026
Diluted effect of stock options............................... 250 430 315 397
------- ------- --------- --------
Average shares outstanding assuming dilution.................. 12,411 13,115 12,636 13,423
======= ======= ========= ========
Cash dividends per share...................................... $ 0.035 $ 0.035 $ 0.105 $ 0.105
======= ======= ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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LINDSAY MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
MAY MAY
($ IN THOUSANDS) 2000 1999
---------------- ---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings................................................................ $ 11,723 $ 10,299
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization............................................ 2,187 1,942
Amortization of marketable securities premiums, net...................... 13 142
(Gain) on sale of fixed assets........................................... (59) (90)
Loss (gain) early redemption of marketable securities
held-to-maturity...................................................... 12 (5)
Provision for uncollectible accounts receivable.......................... (276) (2)
Deferred income taxes.................................................... 679 65
Changes in assets and liabilities:
Receivables.............................................................. (12,256) (3,881)
Inventories.............................................................. (965) 3,630
Other current assets..................................................... (307) (175)
Accounts payable......................................................... 1,539 (1,315)
Other current liabilities................................................ (1,312) (1,161)
Current taxes payable.................................................... 1,662 3,453
Other noncurrent assets and liabilities.................................. (82) (129)
--------- ---------
Net cash provided by operating activities................................ 2,558 12,773
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment.................................. (2,522) (2,480)
Proceeds from sale of property, plant and equipment......................... 59 112
Purchases of marketable securities held-to-maturity......................... (13,125) (500)
Proceeds from maturities of marketable securities held-to-maturity.......... 13,826 12,136
-------- --------
Net cash (used in) provided by investing activities......................... (1,762) 9,268
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation........................... (95) (103)
Proceeds, net from issuance of common
stock under stock option plan ........................................... 543 654
Dividends paid.............................................................. (1,289) (1,353)
Purchases of treasury stock................................................. (9,210) (18,107)
--------- --------
Net cash used in financing activities....................................... (10,051) (18,909)
-------- --------
Net (decrease) increase in cash and cash equivalents........................ (9,255) 3,132
Cash and cash equivalents, beginning of period.............................. 14,232 3,794
-------- --------
Cash and cash equivalents, end of period.................................... $ 4,977 $ 6,926
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid........................................................... $ 2,958 $ 1,356
Interest paid............................................................... $ 32 $ 6
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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LINDSAY MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) GENERAL
The consolidated financial statements included herein are presented in
accordance with the requirements of Form 10-Q and consequently do not include
all of the disclosures normally required by generally accepted accounting
principles or those normally made in the registrant's annual Form 10-K filing.
These consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Lindsay Manufacturing
Co., (Lindsay) August 31, 1999 Annual Report to Shareholders.
In the opinion of management the unaudited consolidated financial
statements of Lindsay reflect all adjustments of a normal recurring nature
necessary to present a fair statement of the results of operations for the
respective interim periods. The results for interim periods are not necessarily
indicative of trends or results expected for a full year.
(2) CASH EQUIVALENTS, MARKETABLE SECURITIES AND LONG-TERM MARKETABLE
SECURITIES
Cash equivalents are included at cost, which approximates market. At May 31,
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 $44,739,000, $7,000, $294,000 and $44,452,000, respectively. In
the held-to-maturity category at May 31, 2000, $25,306,000 in marketable
securities mature within one year and $19,433,000 in long term marketable
securities have maturities ranging from 12 to 42 months. The Company is not
subject to material market risks with respect to its marketable securities.
(3) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for all inventories.
<TABLE>
<CAPTION>
MAY MAY AUGUST
$ IN THOUSANDS 2000 1999 1999
--------------- ---- ---- ----
<S> <C> <C> <C>
First-in, first-out (FIFO) inventory .................................... $ 13,463 $ 10,294 $ 11,983
LIFO reserves ........................................................... (3,904) (2,791) (3,389)
Obsolescence reserve .................................................... (935) (935) (935)
---------- --------- ---------
Total Inventories ....................................................... $ 8,624 $ 6,568 $ 7,659
========== ========= =========
</TABLE>
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
<TABLE>
<CAPTION>
MAY MAY AUGUST
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Raw materials ........................................................... 12% 18% 12%
Work in process ......................................................... 5% 6% 5%
Purchased parts ......................................................... 38% 35% 38%
Finished goods .......................................................... 45% 41% 45%
</TABLE>
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(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant, equipment and capitalized lease assets are stated at cost.
<TABLE>
<CAPTION>
MAY MAY AUGUST
$ IN THOUSANDS 2000 1999 1999
--------------- ---- ---- -----
Plant and equipment:
<S> <C> <C> <C>
Land ............................................................... $ 70 $ 70 $ 70
Buildings .......................................................... 5,917 5,043 5,781
Equipment .......................................................... 29,241 26,684 27,841
Other............................................................... 5,684 5,492 5,004
Capital lease:
Equipment .......................................................... 458 458 458
-------- ------- --------
Total plant, equipment and capital lease ................................ 41,370 37,747 39,154
Accumulated depreciation and amortization:
Plant and equipment ................................................ (25,322) (22,968) (23,520)
Capital lease ...................................................... (297) (192) (218)
--------- -------- ---------
Property, plant and equipment, net ..................................... $ 15,751 $14,587 $ 15,416
======== ======= ========
</TABLE>
(5) CREDIT ARRANGEMENTS
Lindsay entered into an agreement with a commercial bank 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.
(6) CONTINGENCIES
The Company and its subsidiaries are defendants in various legal actions arising
in the ordinary course of their business activities. In the opinion of
management, resolution of these legal actions will not result in a material
adverse effect on Lindsay's consolidated financial position, results of
operations or cash flows.
(7) NET EARNINGS PER SHARE
Basic net earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding. Diluted net earnings per share
includes the dilutive effect of stock options.
Options to purchase 99,750 shares of common stock at a weighted average
price of $27.13 per share were outstanding during the third quarter of fiscal
year 2000, but were not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price of the common
shares. These options expire between September 3, 2007 and September 3, 2008.
7
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(8) INDUSTRY SEGMENT INFORMATION
The Company 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 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. 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. of the financial
statements included in the Form 10-K for the fiscal year ended August 31, 1999.
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 income 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:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------- -------------------------
MAY MAY MAY MAY
$ IN THOUSANDS 2000 1999 2000 1999
-------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues:
Irrigation................................................. $41,911 $ 39,085 $ 95,412 $83,426
Diversified products....................................... 4,692 3,905 10,690 12,293
------- -------- --------- -------
Total operating revenues...................................... $46,603 $ 42,990 $ 106,102 $95,719
======= ======== ========= =======
Operating income:
Irrigation................................................. $ 9,580 $ 9,198 $ 20,450 $17,495
Diversified products....................................... 900 844 1,981 2,466
------- -------- --------- -------
Segment operating income...................................... 10,480 10,042 22,431 19,961
Unallocated general & administrative and
engineering & research expenses............................ 2,382 2,678 7,464 7,211
Interest and other income, net................................ 664 754 2,024 2,396
------- -------- --------- -------
Earnings before income taxes.................................. $ 8,762 $ 8,118 $ 16,991 $15,146
======= ======== ========= =======
Geographic area revenues:
United States.............................................. $40,042 $ 34,639 $ 89,082 $78,118
Europe & Africa............................................ 2,116 3,776 5,548 6,785
Mexico & Latin America.................................... 991 2,122 3,933 4,753
Other export............................................... 3,454 2,453 7,539 6,063
------- -------- --------- -------
Total revenues............................................. $46,603 $ 42,990 $ 106,102 $95,719
======= ======== ========= =======
</TABLE>
(9) REVENUE RECOGNITION
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The
guidance in the SAB is required to be followed no later than the fourth quarter
of the fiscal year beginning after December 15, 1999 and will not have a
material impact on the Company's consolidated financial position or results of
operations.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table provides highlights for the three month and nine month
periods of fiscal year 2000 as compared to the same periods of fiscal year 1999
of Lindsay's consolidated operating results displayed in the Consolidated
Statements of Operations and should be read together with the industry segment
information in Note (8) to the consolidated financial statements.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
------------------------------ -------------------------------
PERCENT PERCENT
INCREASE INCREASE
($ IN THOUSANDS) 05/31/00 05/31/99 (DECREASE) 05/31/00 05/31/99 (DECREASE)
---------------- -------- -------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Consolidated
Operating Revenues.................................. $46,603 $ 42,990 8.4% $ 106,102 $ 95,719 10.8%
Cost of Operating Revenues.......................... $34,540 $ 31,680 9.0 $ 79,361 $ 72,070 10.1
Gross Profit........................................ $12,063 $ 11,310 6.7 $ 26,741 $ 23,649 13.1
Gross Margin........................................ 25.9% 26.3% 25.2% 24.7%
Selling, Eng. & Research, and G&A Expense........... $ 3,965 $ 3,946 0.5 $ 11,774 $ 10,899 8.0
Operating Income.................................... $ 8,098 $ 7,364 10.0 $ 14,967 $ 12,750 17.4
Operating Margin.................................... 17.4% 17.1% 14.1% 13.3%
Interest Income, net................................ $ 621 $ 676 (8.1) $ 1,953 $ 2,088 (6.5)
Other Income, net................................... $ 43 $ 78 (44.9) $ 71 $ 308 (76.9)
Income Tax Provision................................ $ 2,799 $ 2,598 7.7 $ 5,268 $ 4,847 8.7
Effective Income Tax Rate........................... 31.9% 32.0% 31.0% 32.0%
Net Earnings........................................ $ 5,963 $ 5,520 8.0 $ 11,723 $ 10,299 13.8
Irrigation Equipment Segment (See Note (8))
Operating Revenues.................................. $41,911 $ 39,085 7.2 $ 95,412 $ 83,426 14.4
Operating Income.................................... $ 9,580 $ 9,198 4.2 $ 20,450 $ 17,495 16.9
Operating Margin.................................... 22.9% 23.5% 21.4% 21.0%
Diversified Products Segment (See Note (8))
Operating Revenues.................................. $ 4,692 $ 3,905 20.2 $ 10,690 $ 12,293 (13.0)
Operating Income.................................... $ 900 $ 844 6.6% $ 1,981 $ 2,466 (19.7%)
Operating Margin.................................... 19.2% 21.6% 18.5% 20.1%
</TABLE>
As the above table displays, operating revenues for the three month
period ended May 31, 2000 increased 8.4 percent ($3.6 million) from the
comparable period of the prior year. The increase in this year's third quarter
revenue was the net result of a 16 percent ($4.7 million) increase in U.S.
irrigation equipment revenues, a 21 percent ($1.8 million) decrease in export
irrigation equipment revenues and a 16 percent ($0.7 million) increase in
diversified products and other revenues.
For the nine month period ended May 31, 2000, operating revenues were
10.8 percent ($10.4 million) higher than the nine month period of the prior
year. U.S. irrigation equipment revenue was 20 percent ($12.4 million) higher,
export irrigation equipment revenue was 3 percent ($0.6 million) lower, while
diversified products and other revenue for the nine month period was 10 percent
($1.4 million) lower than at this time last year.
Lindsay believes that the long-term demand drivers for higher
irrigation equipment consisting of the need for farmers to conserve water,
energy and labor while at the same time improving crop yields and increasing
crop production remain in place in both its U.S. market and in its markets
outside the U.S. However, these long-term demand drivers continue to be somewhat
muted by low agricultural commodity prices both in the U.S. and in our export
markets. These low agricultural commodity prices are in part due to near record
1998 and 1999 crop production in the U.S. Agricultural commodity prices have
stabilized somewhat within the last nine months however, and farmer confidence
has improved leading to our increase in center pivot sales in the U.S. market.
Domestic irrigation equipment pricing (net of discounts and promotional
program allowances) on units shipped and sold during the three months ended May
31, 2000 was, on average, approximately equal to that of the prior year's
comparative three month period. Irrigation equipment costs (at standard cost and
before warranty expenses) on units
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<PAGE> 10
shipped and sold during the third quarter of fiscal year 2000 were on average
slightly higher then that of the prior year's third quarter due to higher raw
material costs (primarily steel costs).
Export irrigation equipment revenues for the three month period ended
May 31, 2000, were negatively affected by an unfavorable foreign exchange rate
(strong U.S. dollar) in several export markets.
Third quarter fiscal year 2000 diversified products and other revenue
was higher primarily due to improved sales of outsource manufacturing products
to Deere & Company. For the nine month period revenues from outsource
manufacturing were lower due to reduced sales to both Deere & Company and
Caterpillar, Inc. Large diameter tubing revenue during both the three and nine
month periods of fiscal year 2000 were about equal to the prior year's
comparative periods.
Gross margin for the three months ended May 31, 2000, was 25.9 percent,
down slightly from 26.3 percent of the prior year's comparative period. For the
nine months ended May 31, 2000, gross margin was 25.2 percent as compared to
24.7 percent for the nine months ended May 31, 1999. Increased manufacturing
throughput resulted in favorable manufacturing overhead variances as compared to
the prior year's comparable period, however, these favorable overhead rate
variances were more than offset by the higher steel costs discussed earlier.
Selling, general and administrative, and engineering and research
expenses for the three month period ended May 31, 2000, were $4.0 million as
compared to $3.9 million during the prior year's comparative period. For the
nine month period, fiscal year 2000 selling, general and administrative, and
engineering and research expenses totaled $11.8 million as compared to $10.9
million in fiscal year 1999. Higher sales wages, depreciation expense, group and
comprehensive general and liability insurance costs, and professional and legal
fees were responsible for the majority of the increase in selling, general and
administrative, and engineering and research expenses for the nine month period.
The effective tax rate for the nine month period ended May 31, 2000 was
adjusted to 31.0 percent which resulted in a 31.9 percent rate for the third
quarter. This compares to an effective tax rate of 32.0 percent for both the
comparable three month and nine month periods of the prior year. Due to the
federal income tax exempt status of interest income from its municipal bond
investments, and the foreign sales corporation federal tax provisions as they
relate to export sales, Lindsay benefits from an effective tax rate that is
lower than the combined federal and state statutory rates, currently estimated
at 36.2 percent.
FINANCIAL POSITION AND LIQUIDITY
The discussion of financial position and liquidity focuses on the balance sheet
and statement of cash flows. Lindsay requires cash for financing its
receivables, inventories, capital expenditures, stock repurchases and dividends.
Over the years, Lindsay has financed its growth through funds provided by
operations. Cash flows provided by operations totaled $2.6 million for the first
nine months of fiscal year 2000 compared to cash flows provided by operations of
$12.8 million for the first nine months of fiscal year 1999. The cash flows
provided by operating activities for fiscal year 2000 were primarily due to net
earnings partially offset by increased receivables. Fiscal year 1999 cash flows
provided by operating activities were principally due to net earnings, decreased
inventories and increased current taxes payable partially offset by increased
receivables.
Receivables of $25.4 million at May 31, 2000 increased $12.5 million
from $12.9 million at August 31, 1999 and increased $7.5 million from $17.9
million at May 31, 1999. The increases were principally due to the higher level
of U.S. irrigation equipment sales activity during May 2000 and increased use of
a marketing program that offered deferred payment terms on some transactions to
our dealers, as compared to August 1999 and May 1999. Inventories at May 31,
2000 totaled $8.6 million which is higher than their $7.7 million balance at
August 31, 1999 and $6.6 million balance at May 31, 1999.
Current liabilities of $18.6 million at May 31, 2000 are higher than
their $16.8 million balance at August 31, 1999 and their $17.8 million balance
at May 31, 1999. The increase from August 31, 1999 is principally due to
increased trade payables and a higher accrual for taxes payable partially offset
by a lower accrual for payroll and vacation and international dealer
prepayments. The increase from May 31, 1999 is primarily due to increased trade
payables partially offset by a lower accrual for taxes payable.
Cash flows used in investing activities of $1.8 million for the first
nine months of fiscal year 2000 compared to cash flows provided by investing
activities of $9.3 million for the first nine months of fiscal year 1999. The
cash flows used in investing activities in fiscal year 2000 were attributable to
capital expenditures and purchases of marketable securities partially offset by
proceeds from maturities of marketable securities. Fiscal year 1999 cash flows
provided by investing activities was primarily due to proceeds from maturities
of marketable securities, partially offset by capital expenditures and purchases
of marketable securities.
Lindsay's cash and short-term marketable securities totaled $30.3
million at May 31, 2000, as compared to $32.5 million at August 31, 1999 and
$25.9 million at May 31, 1999. At May 31, 2000, Lindsay had $19.4 million
invested in
10
<PAGE> 11
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 and from $31.2 million at May 31, 1999.
Cash flows used in financing activities of $10.1 million for the first
nine months of fiscal year 2000 decreased from $18.9 million for the nine months
of fiscal year 1999 and for both periods was primarily attributable to purchases
of treasury stock and dividends paid partially offset by proceeds from the
issuance (net) of common stock under Lindsay's employee stock option plan.
Lindsay's equity increased to $84.5 million at May 31, 2000 from $82.7
million at August 31, 1999 due to its net earnings of $11.7 million, less $9.2
million used to repurchase 553,400 shares of common stock per Lindsay's
previously announced stock repurchase plan, plus $0.6 million of proceeds from
the issuance (net) of common stock under Lindsay's employee stock option plan,
less dividends paid of $1.3 million. Lindsay's equity at May 31, 1999 was $82.4
million.
Capital expenditures of $2.5 million during the first nine months of
fiscal year 2000 compared to $2.5 million during the first nine months of fiscal
year 1999. Fiscal year 2000 capital expenditures were used primarily for
upgrading manufacturing plant and equipment and to further automate Lindsay's
facility. Capital expenditures for fiscal year 2000 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.
Lindsay believes its capitalization (including cash and marketable
securities balances), operating cash flow and line of credit ($10.0 million) are
sufficient to cover expected working capital needs, planned capital
expenditures, dividends and continued repurchases of common stock.
SEASONALITY
Irrigation equipment sales are seasonal by nature. Farmers generally order
systems to be delivered and installed before the growing season. Shipments to
U.S. customers usually peak during Lindsay's second and third quarters for the
spring planting period. Lindsay's diversified products business complements its
irrigation operations by using available capacity and reducing seasonality.
RECENT EVENTS
On June 20, 2000, Lindsay entered into an agreement to purchase the assets of
Oasis Enterprises, Inc. (Oasis), a privately-held manufacturer of irrigation
systems based in Nunn, Colorado. Oasis manufactures mini-pivot and lateral move
irrigation systems that irrigate small fields, from 1-60 acres, while Lindsay's
core line of center pivot and lateral move systems normally irrigate 40 or more
acres. The mini-systems manufactured by Oasis are utilized primarily on farms
raising such crops as vegetables, turfgrass (sod) and alfalfa, in contrast to
the corn, soybeans and cotton that are more common crops for the larger systems.
This acquisition is a strategic, product line extension that leverages Lindsay's
existing manufacturing and distribution expertise in markets the company knows
and with technologies Lindsay understands. The cash purchase is expected to
close during the fourth quarter, pending due diligence and other procedures and
will have negligible effect in the first year after closing and is expected to
be accretive to earnings thereafter.
OTHER FACTORS
Lindsay's domestic and international irrigation equipment sales are highly
dependent upon the need for irrigated agricultural production which, in turn,
depends upon many factors including total worldwide crop production, the
profitability of agricultural production, agricultural commodity prices,
aggregate net cash farm income, governmental policies regarding the agricultural
sector, water and energy conservation policies and the regularity of rainfall.
Approximately 16% and 18% of Lindsay's operating revenues for the first
nine months of fiscal year 2000 and 1999 respectively, were generated from
export sales. For the full year of 1999, approximately 19% of Lindsay's
operating revenues were generated from export sales. Lindsay does not believe it
has significant exposure to foreign currency translation risks because its
export sales are all in U.S. dollars and are generally all shipped against
prepayments or U.S. bank confirmed irrevocable letters of credit or other
secured means.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The
guidance is the SAB is required to be followed no later than 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.
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Concerning Forward-Looking Statements - This Report on Form 10-Q,
including the Management's Discussion and Analysis and other sections, contains
forward-looking statements that are subject to risks and uncertainties and which
reflect management's current beliefs and estimates of future economic
circumstances, industry conditions, Company performance and financial results.
Forward-looking statements include the information concerning possible or
assumed future results of operations of the Company and those statements
preceded by, followed by or including 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. You 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 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not subject to material market risks with respect to its
marketable securities.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Lindsay is a party to a number of lawsuits in the ordinary course of its
business. Management does not believe that these lawsuits, either individually
or in the aggregate, are likely to have a material adverse effect on Lindsay's
consolidated financial condition, results of operations or cash flows.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
4 - Specimen Form of Common Stock Certificate incorporated by reference
to Exhibit 4 to the Company's Report on Form 10-Q for the fiscal
quarter ended November 30, 1997
10(a) - Employment Agreement between the Company and Richard W. Parod
effective March 8, 2000.
27 - Financial Data Schedule
(b) Reports on Form 8-K -
No Form 8-K was filed during the quarter ended May 31, 2000.
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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 12th day of
July, 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
By: /s/ RALPH J. KROENKE
--------------------------------------------
Name: Ralph J. Kroenke
Title: Controller
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