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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, 2001 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 NORTH 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 [ ]
As of November 23, 2001, 11,636,262 shares of the registrant's Common Stock were
outstanding and the aggregate market value of all Common Stock held by
non-affiliates (11,240,025 shares) was $205,692,458 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 29, 2002, annual
shareholders' meeting are incorporated herein by reference into Part III.
Exhibit index is located on page 29-30.
ITEM 1 - BUSINESS
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. The Company began manufacturing
and marketing a separate line of center pivot and lateral move irrigation
equipment for use on small fields (1 to 60 acres - sometimes referred to as
mini-pivots) under its "Greenfield" tradename (trademark applied for in August
2000). Since March 2001, the Company has also manufactured and marketed hose
reel travelers under the "Perrot" (Greenfield in the United States) tradename.
Hose reel travelers are most often used on irregular shaped fields or, like
mini-pivots, on small fields. The Company manufactures and markets repair and
replacement parts for its Zimmatic, Greenfield and Perrot 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). Industry segment
information is included in Part II, Item 8, Footnote M on page 25.
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.
IRRIGATION 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 somewhat shorter
than that in the U.S. market. Standard center pivot or lateral move systems can
also be custom designed and can irrigate from 25 to 500 acres. A mini-pivot is a
small version of the standard pivot and is used for smaller fields and/or
shorter crops, than that which standard pivots are used.
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. Mini-pivots and hose reel travelers
require, on average, a lower investment than a typical standard center pivot.
Other Types Of Irrigation. Center pivot and lateral move irrigation
systems compete with three other types of irrigation: flood, drip and other
mechanical devices such as hose reel travelers. 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, such as hose reel
travelers, irrigate the remaining irrigated acres.
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.
2
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:
FISCAL YEAR ENDED AUGUST 31,
($ IN THOUSANDS)
-------------------------------------------------------------------------------
2001 2001 2000 2000 1999 1999
% of Total % of Total % of Total
Revenues Revenues Revenues Revenues Revenues Revenues
-------- ---------- -------- --------- --------- ---------
United States ..................... $101,940 80 $107,780 83 $ 94,103 81
Europe, Africa & Middle East ...... 14,720 12 8,888 7 8,088 7
Mexico & Latin America ............ 3,207 3 5,081 4 6,709 6
Other International ............... 6,802 5 8,036 6 7,751 6
-------- --- -------- --- -------- ---
Total Revenues .................... $126,669 100 $129,785 100 $116,651 100
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.
3
Competition. During the 1970's there were over 30 domestic
manufacturers of center pivot irrigation systems, while six manufacturers remain
today. 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, 2001, Lindsay had an order backlog of $23.1 million, an
increase of 17% from $19.8 million at August 31, 2000. At fiscal year end 2001,
Lindsay had a $17.1 million order backlog for irrigation equipment. This was an
increase of 60% from fiscal year end 2000's irrigation equipment order backlog
of $10.7 million. At fiscal year end 2001, order backlog for diversified
products totaled $6.0 million, compared to $9.1 million at fiscal year end 2000.
Generally Lindsay manufactures a center pivot or lateral move system
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 2001, 2000 and 1999, were $2.9 million, $3.5
million and $4.0 million, respectively. Fiscal 2001 capital expenditures were
used primarily for updating manufacturing plant and equipment and to further
automate Lindsay's facility. Capital expenditures for fiscal year 2002 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.
PATENTS, TRADEMARKS, LICENSES
Lindsay's Zimmatic, Greenfield, GrowSmart, and other trademarks are registered
or applied for in the major markets in which the Company sells its products.
Lindsay follows a policy of applying for patents on all significant patentable
inventions. Although the Company 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 and its wholly owned subsidiaries at
fiscal year end 2001, 2000 and 1999 were 507, 531 and 480, respectively. Lindsay
and its wholly owned subsidiaries currently employs approximately 550 persons.
None of Lindsay's employees are represented by a union.
4
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 three wholly owned operating subsidiaries: Lindsay International
Sales Corporation, Lindsay Transportation, Inc. and Lindsay Europe SA (Perrot).
Since December, 2000, international sales personnel have been located at the
Omaha 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 115 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. Perrot was acquired in March 2001, and is a manufacturer
of irrigation systems located in La Chapelle d'Aligne, France. Lindsay also has
four non-operational subsidiaries.
ITEM 2 - PROPERTIES
Lindsay owns and occupies 43 acres in Lindsay, Nebraska. The Lindsay, Nebraska
facility has eight separate buildings, with approximately one-half million
square feet of manufacturing area under roof. Lindsay's La Chappelle d'Aligne,
France facility was acquired in March 2001 to provide a European location for
the manufacture of its irrigation products. The French facility consists of
three separate buildings situated on approximately 3.5 acres. With the Company's
current manufacturing capacity, Lindsay believes it can increase sales without a
significant new investment in facilities and capital equipment. Since December
1, 2000, the Company leases approximately 7,000 square feet of office space in
Omaha, Nebraska, where it maintains its executive and its domestic and
international sales and marketing offices. This Omaha office space lease expires
October 31, 2004 with a lease rent remaining of $294,000.
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 2001.
5
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 at
the Board of Directors meeting following the Company's annual shareholders'
meeting. This meeting is scheduled for January 29, 2002.
AGE POSITION WITH THE COMPANY
--- -------------------------
Richard W. Parod 48 President and Chief Executive Officer
Matthew T. Cahill 39 Vice President - Manufacturing
Eduardo R. Enriquez 61 Vice President - International Sales, Emerging Markets
Robert A. Finkenbiner 45 Vice President - International Business
Bruce C. Karsk 49 Executive Vice President, Chief Financial Officer, Treasurer and Secretary
Dirk A. Lenie 47 Vice President - Marketing
Charles H. Meis 55 Vice President - Engineering
Robert S. Snoozy 55 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 The Toro Company. 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
has held such position since 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 Vice President - International Sales,
Emerging Markets of Lindsay and was appointed to that position in November 2001.
From 1986 through November 2001, Mr. Enriquez was Vice-President - International
of Lindsay. 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. Robert A. Finkenbiner is Vice President - International Business of
Lindsay and was appointed to that position in September 2001 when he joined the
Company. Prior to that time and since 1998, Mr. Finkenbiner held several
positions with The Toro Company; most recently as the Brand Manager of the
Residential/Commercial Irrigation Division. Mr. Finkenbiner was employed by Rain
Bird Corporation from 1991 through 1998 as Brand Manager of Golf Irrigation
Controls.
Mr. Bruce C. Karsk is Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of Lindsay, and has held such positions since
January 2001. From 1984 through January 2001 Mr. Karsk was Vice President -
Finance, Treasurer and Secretary. Prior to that time, and since 1981, Mr. Karsk
had been the Controller.
Mr. Dirk A. Lenie is Vice President - Marketing of Lindsay, and has
held such position since November 2000 when he joined the Company. Prior to that
time, and since 1997, Mr. Lenie was Director of Sales and Marketing of
Residential/Commercial Irrigation Division of The Toro Company. Prior to Toro,
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 Rain Bird Corporation.
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 is Vice President - Domestic Sales of Lindsay, and
has held such position since 1997. From 1986 through 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.
6
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 8, 2001 there
were approximately 200 shareholders of record and an estimated 3,000 beneficial
shareholders.
The following table sets forth for the periods indicated the range of
the high and low sales price and dividends paid:
FISCAL YEAR 2001 FISCAL YEAR 2000
STOCK PRICE STOCK PRICE
------------------------------------------ ----------------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------ ------ --------- ------ ------ ---------
First Quarter $22.19 $18.00 $0.035 $21.13 $16.38 $0.035
Second Quarter 26.00 19.69 0.035 18.25 16.13 0.035
Third Quarter 20.00 17.00 0.035 20.81 14.00 0.035
Fourth Quarter 19.15 17.40 0.035 20.56 17.00 0.035
Year $26.00 $17.00 $0.140 $21.13 $14.00 $0.140
ITEM 6 - SELECTED FINANCIAL DATA
(IN MILLIONS,
EXCEPT PER SHARE AMOUNTS) FOR THE YEARS ENDED AUGUST 31,
- ------------------------- ------------------------------
2001 2000 1999 1998 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Operating revenues .......... $ 126.7 $ 129.8 $ 116.7 $ 155.7 $ 158.3 $ 136.2 $ 111.8 $ 112.7 $ 102.1 $ 108.9
Gross profit ................ 27.9 31.6 30.6 42.8 40.9 32.7 25.9 25.7 23.8 23.8
Selling, general and
administrative, and
engineering and
research expenses ......... 17.4 15.2 15.6 15.7 14.4 13.4 11.9 11.6 10.7 10.9
Restructuring charges ....... 0.9 0 0 0 0 0 0 0 0 0
Earnings before cumulative
effect of accounting
change (1) ................ 8.0 13.2 12.7 23.5 20.1 16.5 11.7 11.2 10.7 11.0
Net earnings ................ 8.0 13.2 12.7 23.5 20.1 16.5 11.7 11.9 10.7 11.0
Earnings before cumulative
effect of accounting
change per share(1) (2) ... 0.67 1.06 0.96 1.61 1.34 1.08 0.73 0.68 0.66 0.68
Net earnings per share (2) .. 0.67 1.06 0.96 1.61 1.34 1.08 0.73 0.72 0.66 0.68
Cash dividends per share .... 0.14 0.14 0.14 0.125 0.091 0.067 0 0 0 0
Property, plant and
equipment, net ............ 14.9 15.9 15.4 14.1 11.3 9.7 7.2 5.6 5.6 6.0
Total assets ................ 100.3 95.8 100.4 108.9 108.0 96.8 86.1 88.4 79.9 71.4
Long-term obligation ........ $ 0 $ 0 $ 0 $ 0.1 $ 0.3 $ 0 $ 0 $ 0 $ 0 $ 0
Return on sales ............. 6.3% 10.2% 10.9% 15.1% 12.7% 12.1% 10.5% 10.6% 10.5% 10.1%
Return on beginning assets .. 8.3% 13.2% 11.7% 21.7% 20.7% 19.2% 13.2% 14.9% 15.0% 18.2%
Diluted weighted average
shares..................... 11.900 12.503 13.285 14.556 14.980 15.226 15.993 16.418 16.358 16.310
(1) In 1994 the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes".
(2) Per share amount are calculated using diluted average shares outstanding.
7
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
Fiscal year 2001's revenues and earnings were undercut by the weak agricultural
economy which became visible in late December 2000. Operating revenues of $126.7
million were 2.4 percent less than the prior years operating revenues. Net
earnings of $8.0 million were 39.7 percent less than the prior year's net
earnings of $13.2 million. The Company's year end balance sheet features strong
financial ratios and no long term debt.
RESULTS OF OPERATIONS
The following "Fiscal Year 2001 Compared to 2000" and the "Fiscal Year 2000
Compared to 1999" sections present an analysis of Lindsay's consolidated
operating results displayed in the Consolidated Statements of Earnings and
should be read together with the industry segment information in Note M to the
financial statements.
FISCAL YEAR 2001 COMPARED TO 2000
The following table provides highlights for fiscal year 2001 compared with
fiscal year 2000.
FOR THE YEARS ENDED PERCENT INCREASE
AUGUST 31, (DECREASE)
---------- ----------
($ IN THOUSANDS) 2001 2000
- ---------------- ---- ----
Consolidated
Operating Revenues ........................... $126,669 $129,785 (2.4)%
Cost of Operating Revenues ................... $ 98,739 $ 98,189 0.6
Gross Profit ................................. $ 27,930 $ 31,596 (11.6)
Gross Margin ................................. 22.0% 24.3%
Selling, Engineering and Research, and
General and Administrative Expenses ....... $ 17,386 $ 15,170 14.6
Restructuring Charges ........................ $ 899 $ 0 NA
Operating Income ............................. $ 9,645 $ 16,426 (41.3)
Operating Margin ............................. 7.6% 12.7%
Interest Income, net ......................... $ 1,754 $ 2,599 (32.5)
Other Income, net ............................ $ 2 $ 118 (98.3)
Income Tax Provision ......................... $ 3,440 $ 5,935 (42.0)
Effective Income Tax Rate .................... 30.2% 31.0%
Net Earnings ................................. $ 7,961 $ 13,208 (39.7)
Irrigation Equipment Segment (See Note M)
Operating Revenues ........................... $106,892 $115,618 (7.5)
Operating Income ............................. $ 16,579 $ 23,266 (28.7)
Operating Margin ............................. 15.5% 20.1%
Diversified Products Segment (See Note M)
Operating Revenues ........................... $ 19,777 $ 14,167 39.6
Operating Income ............................. $ 3,252 $ 2,670 21.8%
Operating Margin ............................. 16.4% 18.8%
REVENUES
Fiscal year 2001 operating revenues of $126.7 million were 2.4 percent less than
fiscal year 2000's operating revenues of $129.8 million.
Fiscal year 2001 irrigation equipment revenues totaled $106.9 million,
7.5 percent less than the prior year's irrigation equipment revenues of $115.6
million. Due to the soft agricultural economy that began in December 2000, the
Company expects
8
that the worldwide agricultural irrigation market will incur a reduction of
approximately 20 percent for calendar year 2001. For Lindsay, incremental
irrigation equipment revenues from the Company's Greenfield mini-pivot product,
acquired in August of 2000, and Perrot's irrigation equipment products
manufactured in France, acquired in March 2001, helped dampen the negative
impact of the soft economy. Other revenues are included in irrigation equipment
revenues and totaled $2.7 million in fiscal year 2001 and $3.3 million in fiscal
year 2000.
Fiscal year 2001 diversified products revenues totaled $19.8 million, a
39.6 percent increase from the prior year's diversified product revenues of
$14.2 million. Fiscal year 2001's revenue from sales of Lindsay's large diameter
thin walled steel tubing products were less than the prior year, while revenues
from outsource manufacturing services sales were significantly greater than
those of the prior year. Deere & Company, Caterpillar Inc, and New Holland North
America, Inc each continued to be important customers.
Demand in the domestic market for almost all agricultural related
capital equipment began to slow during Lindsay's second fiscal quarter (December
through February) of 2001 due to lower agricultural commodity prices, the
expectation of increased agricultural input costs (particularly energy and
fertilizer), and the resulting prospect of lower farm income. Lindsay's fiscal
year 2001 domestic irrigation revenues were negatively affected by this soft
agricultural economy.
Demand in Lindsay's international market for agricultural irrigation
equipment improved, in total, during fiscal year 2001. The European and Middle
Eastern regions had revenue growth during the year, in part due to Lindsay's
acquisition during the year of Perrot located in France. The revenue growth in
these regions more than offsets a reduction in revenues in Lindsay's other
international markets, the result of a difficult market environment caused by
the same low agricultural commodity prices that were present in the United
States and by the strong U.S. dollar relative to certain other currencies.
At August 31, 2001, Lindsay's order backlog for irrigation equipment
was $17.1 million compared to $10.7 million at August 31, 2000. Lindsay's
diversified products order backlog at August 31, 2001 was $6.0 million compared
to $9.1 million at August 31, 2000. The combined order backlog of $23.1 million
at August 31, 2001 represents a 17 percent increase from the prior year's $19.8
million.
GROSS MARGIN
Gross Margin of 22.0 percent for fiscal year 2001 was lower than the prior
year's 24.3 percent. Fiscal year 2001's gross margin was negatively affected by
a sales mix that was less favorable than that of the prior year, factory
throughput that was lower than the prior year, and an unfavorable year-end
inventory adjustment. Average selling prices for irrigation equipment increased
slightly during the year while raw material cost reductions were offset by
increased production labor and overhead costs.
OPERATING EXPENSES
Fiscal year 2001's selling, engineering and research, general and administrative
(SG&A) expenses of $17.4 million were 15 percent higher than fiscal year 2000's
SG&A expenses of $15.2 million. The Company opened retail outlets in
Southwestern Kansas during the first quarter of fiscal year 2001 when it lost
its independent dealer representation in the region. The costs associated with
the Southwest Kansas outlets and the SG&A costs from its French operations,
commencing during the Company's third quarter, account for the majority of the
fiscal year 2001 increase in SG&A expense. Additionally, during its second
quarter of fiscal year 2001, the Company recorded a $0.9 million non-recurring
restructuring charge for writing down, to net realizable value, the value of
manufacturing equipment and processes that were discontinued.
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 2001
interest income was $1.8 million, 33 percent less than the prior year's interest
income of $2.6 million due to a lower amount invested in municipal bonds and a
lower interest rate earned on these investments.
Lindsay's fiscal year 2001 effective tax rate decreased to 30.2 percent
from a 31.0 percent rate for fiscal year 2000. The fiscal year 2001 reduction in
effective rate was the result of a larger portion of the Company's pre-tax
earnings coming from municipal bond interest (exempt from federal income taxes)
in fiscal year 2001 as compared to fiscal year 2000. In addition to the federal
tax-free status on municipal bond interest income, the Company benefits from the
foreign sales corporation federal tax provisions as they relate to export sales.
9
RESULTS OF OPERATIONS
FISCAL YEAR 2000 COMPARED TO 1999
The following table provides highlights for fiscal year 2000 compared with
fiscal year 1999.
FOR THE YEARS ENDED PERCENT INCREASE
AUGUST 31, (DECREASE)
---------- --------
($ IN THOUSANDS) 2000 1999
- ---------------- ---- ----
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, Engineering & Research, and
General and Administrative Expenses................... $ 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 M)
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 M)
Operating Revenues....................................... $ 14,167 $ 15,282 (7.3)
Operating Income......................................... $ 2,670 $ 3,441 (22.4)%
Operating Margin......................................... 18.8% 22.5%
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 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. were each significant outsource manufacturing
customers during the year.
10
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.
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 $10.0 million in fiscal
year 2001 compared to $8.1 million in fiscal year 2000. The cash flows provided
by operating activities in fiscal year 2001 were primarily due to net earnings
and decreased inventories, partially offset by increased receivables. Fiscal
year 2000 cash flows provided by operating activities were principally due to
net earnings, partially offset by increased receivables and inventories.
Receivables at August 31, 2001, increased $3.7 million to $21.3 million
from $17.6 million at August 31, 2000, 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 $10.1 million at August 31, 2001
decreased $1.2 million from $11.3 million at August 31, 2000. Inventory
decreased at year end due to Lindsay's focus on inventory reduction during the
fourth quarter.
Current liabilities of $16.8 million at August 31, 2001, were slightly
more than the $16.5 million at August 31, 2000.
Cash flows provided by investing activities of $8.0 million for fiscal
year 2001 compared to $1.1 million used in investing activities for fiscal year
2000. The cash flows provided by investing activities in fiscal year 2001 were
primarily attributable to maturities of marketable securities, partially offset
by purchases of marketable securities and capital expenditures. Fiscal year 2000
cash flows used in investing activities were primarily due to purchases of
marketable securities and capital expenditures, partially offset by maturities
of marketable securities.
Lindsay's cash and short-term marketable securities totaled $24.4
million at August 31, 2001 as compared to $26.0 million at August 31, 2000. At
August 31, 2001, Lindsay had $23.3 million invested in long-term marketable
securities, as compared to $19.8 million at August 31, 2000. Lindsay's long-term
marketable securities consist of municipal debt with maturities of 12 to 42
months.
Cash flows used in financing activities of $3.6 million for fiscal year
2001 decreased from $18.1 million in fiscal year 2000 and for both periods was
primarily attributable to dividends paid and to purchases of treasury stock.
Capital expenditures of $2.9 million during fiscal year 2001 decreased
from $3.5 million in fiscal year 2000. Fiscal year 2001 capital expenditures
were used primarily for updating manufacturing plant and equipment and to
further automate Lindsay's facility. Capital expenditures for fiscal year 2002
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 and amortization totaled $3.4 million in fiscal 2001 and
is expected to increase to approximately $3.8 million in fiscal year 2002.
Lindsay expended $1.9 million in fiscal 2001 to repurchase 108,800
shares of its common stock. In fiscal year 2000, Lindsay repurchased 965,032
shares of its common stock for $16.8 million.
11
Lindsay has an agreement with a commercial bank for a $10.0 million
unsecured revolving line of credit through December 30, 2001. 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 (5.5 percent at August 31, 2001). The Company expects to renew this line of
credit on substantially similar terms.
Lindsay believes its capitalization (including cash and marketable
securities balances), operating cash flow and bank line of credit are sufficient
to cover expected working capital needs, planned capital expenditures, dividends
and repurchases of common stock.
FISCAL 2002 OUTLOOK
Lindsay expects increased earnings on revenue growth of about 8 percent for
fiscal year 2002. The majority of fiscal year 2002's increase in revenues and
earnings are expected to occur during Lindsay's second (ending February 28th)
and third (ending May 31st) quarters.
In the domestic irrigation market equipment market, stable corn,
soybean, wheat and stronger potato commodity prices, in combination with reduced
energy and interest costs, should lead to a stronger farmer confidence level
during fiscal year 2002 as compared to fiscal year 2001. Additionally, the
Company's dealer strengthening and repair parts initiatives should result in
increased revenues.
In Lindsay's international markets, the addition of the Company's
European manufacturing capability is expected to significantly improve its
irrigation equipment market penetration during fiscal year 2002. Lindsay also
expects to benefit during the year from several additional international growth
initiatives which should improve the Company's international market position.
Approximately 20%, 17%, and 19% of Lindsay's revenues were generated from
international sales in fiscal years 2001, 2000, and 1999, respectively.
Australia, Canada, Central and Western Europe, Mexico, the Middle East, South
Africa and South America are expected to generate the majority of Lindsay's
fiscal year 2002 international revenues.
Lindsay's domestic and international irrigation equipment sales are
highly dependent upon the need for irrigated agricultural crop production which,
in turn, depends upon many factors including total worldwide crop production,
the profitability of agricultural crop production, agricultural commodity
prices, aggregate net cash farm income, governmental policies regarding the
agricultural sector, water and energy conservation policies, the regularity of
rainfall, and foreign currency exchange rate.
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 contract somewhat in fiscal year 2002
compared to fiscal year 2001. The Company anticipates that Caterpillar Inc.,
Deere & Company, and New Holland North America, Inc. will each continue to be
significant outsource manufacturing customers during the year.
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 has the ability and intends to hold the investments in
these marketable securities to maturity. Lindsay's export sales are principally
U.S. dollar denominated.
12
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 accounting principles generally accepted in the
United States of America 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 Executive Vice President,
Chief Financial Officer, Chief Executive Officer
Treasurer and Secretary
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Lindsay Manufacturing Co.:
We have audited the accompanying consolidated balance sheet of Lindsay
Manufacturing Co. as of August 31, 2001, and the related consolidated statements
of operations, shareholders' equity and comprehensive income, and cash flows for
the year then ended. In connection with our audit of the consolidated financial
statements, we have also audited the information in the financial statement
schedule for the year ended August 31, 2001 listed in Item 14(a)(2) of this Form
10-K. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audit. The accompanying consolidated financial
statements and financial statement schedule of Lindsay Manufacturing Co. for the
years ended August 31, 2000 and 1999, were audited by other auditors whose
report thereon dated September 28, 2000, expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the 2001 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Lindsay Manufacturing Co. as of August 31, 2001, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information for the
year ended August 31, 2001, set forth therein.
/s/ KPMG LLP
---------------------
KPMG LLP
Omaha, Nebraska
October 5, 2001
13
LINDSAY MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31,
----------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2001 2000 1999
- ---------------------------------------- ---- ---- ----
Operating revenues ............................... $126,669 $129,785 $116,651
Cost of operating revenues ....................... 98,739 98,189 86,007
-------- -------- --------
Gross profit ..................................... 27,930 31,596 30,644
-------- -------- --------
Operating expenses:
Selling expense ............................... 7,200 5,660 5,178
General and administrative expense ............ 7,885 7,446 8,559
Engineering and research expense .............. 2,301 2,064 1,888
Restructuring charges ......................... 899 0 0
-------- -------- --------
Total operating expenses ......................... 18,285 15,170 15,625
-------- -------- --------
Operating income ................................. 9,645 16,426 15,019
Interest income, net ............................. 1,754 2,599 2,822
Other income, net ................................ 2 118 348
-------- -------- --------
Earnings before income taxes ..................... 11,401 19,143 18,189
Income tax provision ............................. 3,440 5,935 5,457
-------- -------- --------
Net earnings ..................................... $ 7,961 $ 13,208 $ 12,732
======== ======== ========
Basic net earnings per share ..................... $ 0.68 $ 1.08 $ 0.99
======== ======== ========
Diluted net earnings per share ................... $ 0.67 $ 1.06 $ 0.96
======== ======== ========
Average shares outstanding ....................... 11,684 12,199 12,884
Diluted effect of stock options .................. 216 304 401
-------- -------- --------
Average shares outstanding assuming dilution ..... 11,900 12,503 13,285
======== ======== ========
Cash dividends per share ......................... $ 0.140 $ 0.140 $ 0.140
======== ======== ========
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
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
---------- ---------- -------- ---------- --------- -------- ------------- ------------
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 expense ........... -- -- -- (144) -- -- -- (144)
Acquisitions of common stock ....... -- 965,032 -- -- -- (16,800) -- (16,800)
---------- --------- -------- ------- --------- -------- -------- --------
Balance at August 31, 2000 ......... 7,310,197 5,615,269 17,310 2,211 146,216 (88,002) (303) 77,432
Comprehensive income:
Net earnings .................... -- -- -- -- 7,961 -- -- 7,961
Other comprehensive income:
Currency translation .......... -- -- -- -- -- -- (4) (4)
Minimum pension liability ..... -- -- -- -- -- -- (367) (367)
-------
Total comprehensive income ......... -- -- -- -- -- -- -- 7,590
Cash dividends ($0.140 per share) .. -- -- -- -- (1,636) -- --
(1,636)
Net shares issued under stock
option plan ..................... 57,832 -- 58 (78) -- --
-- (20)
Stock option tax expense ........... -- -- -- (54) -- -- -- (54)
Acquisitions of common stock ....... -- 108,800 -- -- -- (1,896) -- (1,896)
---------- --------- -------- ------- --------- -------- -------- --------
Balance at August 31, 2001 ......... 17,368,029 5,724,069 $ 17,368 $ 2,079 $ 152,541 $(89,898) $ (674) $ 81,416
========== ========= ======== ======= ========= ======== ======== ========
The accompanying notes are an integral part of the financial statements.
14
LINDSAY MANUFACTURING CO.
CONSOLIDATED BALANCE SHEETS
AT AUGUST 31,
-------------
($ IN THOUSANDS, EXCEPT PAR VALUES) 2001 2000
- ----------------------------------- --------- ---------
ASSETS
Current assets:
Cash and cash equivalents ........................................................... $ 17,575 $ 3,105
Marketable securities ............................................................... 6,845 22,894
Receivables ......................................................................... 21,316 17,589
Inventories ......................................................................... 10,112 11,335
Deferred income taxes ............................................................... 2,164 3,106
Other current assets ................................................................ 474 164
---------- ---------
Total current assets ............................................................. 58,486 58,193
Long-term marketable securities ..................................................... 23,299 19,780
Property, plant and equipment, net .................................................. 14,893 15,938
Other noncurrent assets ............................................................. 3,578 1,905
---------- ---------
Total assets ........................................................................... $ 100,256 $ 95,816
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade ............................................................. $ 5,590 $ 4,556
Other current liabilities ........................................................... 11,234 11,914
---------- ---------
Total current liabilities ........................................................ 16,824 16,470
Other noncurrent liabilities ........................................................ 2,016 1,914
---------- ---------
Total liabilities ...................................................................... 18,840 18,384
---------- ---------
Commitments and Contingencies
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in 2001 and 2000) ................... 0 0
Common stock, ($1 par value, 25,000,000 shares authorized,
17,368,029 and 17,310,197 shares issued in 2001 and 2000, respectively) .......... 17,368 17,310
Capital in excess of stated value ................................................... 2,079 2,211
Retained earnings ................................................................... 152,541 146,216
Less treasury stock, (at cost, 5,724,069 shares in 2001 and 5,615,269
shares in 2000) .................................................................. (89,898) (88,002)
Accumulated other comprehensive income .............................................. (674) (303)
---------- ---------
Total shareholders' equity ............................................................. 81,416 77,432
---------- ---------
Total liabilities and shareholders' equity .......................................... $ 100,256 $ 95,816
========== =========
The accompanying notes are an integral part of the financial statements.
15
LINDSAY MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31,
----------------------
($ IN THOUSANDS) 2001 2000 1999
- ---------------- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings .............................................................. $ 7,961 $ 13,208 $ 12,732
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization .......................................... 3,359 2,960 2,626
Non-cash restructuring charges relating to write-down of equipment ..... 749 0 0
Amortization of marketable securities premiums, net .................... (311) (29) 183
Loss (gain) on sale of fixed assets .................................... 10 (106) (119)
Loss (gain) on maturities of marketable securities held-to-maturity .... 0 12 (18)
Provision for uncollectible accounts receivable ........................ 87 (276) (22)
Deferred income taxes .................................................. 942 697 58
Stock option tax (payables) benefits ................................... (54) (144) 523
Other net, ............................................................. (4) 0 0
Changes in assets and liabilities:
Receivables ............................................................ (2,488) (4,394) 1,179
Inventories ............................................................ 2,898 (3,578) 2,539
Other current assets ................................................... (245) (79) 7
Accounts payable, trade ................................................ (584) 475 (855)
Other current liabilities .............................................. (1,143) (1,434) 105
Current taxes payable .................................................. (426) 743 752
Other noncurrent assets and liabilities ................................ (714) 7 (46)
-------- -------- --------
Net cash provided by operating activities .............................. 10,037 8,062 19,644
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment ................................ (2,929) (3,464) (3,993)
Acquisitions of businesses, net of cash acquired .......................... (1,985) (545) 0
Proceeds from sale of property, plant and equipment ....................... 58 134 141
Purchases of marketable securities held-to-maturity ....................... (10,049) (18,414) (2,756)
Proceeds from maturities of marketable securities held-to-maturity ........ 22,890 21,222 18,994
-------- -------- --------
Net cash provided by (used in) investing activities ....................... 7,985 (1,067) 12,386
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation ......................... 0 (95) (155)
(Repurchases and cancellations) proceeds from issuance of common
stock under stock option plan, net ........................................ (20) 473 820
Dividends paid ............................................................ (1,636) (1,700) (1,788)
Purchases of treasury stock ............................................... (1,896) (16,800) (20,469)
-------- -------- --------
Net cash used in financing activities ..................................... (3,552) (18,122) (21,592)
-------- -------- --------
Effect of exchange rate changes on cash ................................... 0 0 0
Net increase (decrease) in cash and cash equivalents ...................... 14,470 (11,127) 10,438
Cash and cash equivalents, prior year ..................................... 3,105 14,232 3,794
-------- -------- --------
Cash and cash equivalents, current year ................................... $ 17,575 $ 3,105 $ 14,232
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid ......................................................... $ 3,587 $ 4,517 $ 4,617
Interest paid ............................................................. $ 82 $ 32 $ 8
The accompanying notes are an integral part of the financial statements.
16
LINDSAY MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT 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 generally recognized upon delivery of product to dealers or
customers.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements". Lindsay has complied with the provisions of SAB No. 101, and that
compliance did not have any impact on the Company's consolidated financial
position or results of operation.
(3) WARRANTY COSTS
Cost of operating revenues include warranty costs of $1,645,000, $1,026,000 and
$834,000 for the years ended August 31, 2001, 2000 and 1999, 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,
2001, Lindsay's cash equivalents were held primarily by one financial
institution. Marketable securities and long-term marketable securities are
categorized as held-to-maturity and 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 original 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 at August 31, 2001, were $30,144,000, $421,000, $28,000 and
$30,537,000, respectively, of which $6,845,000 in marketable securities mature
within one year and $23,299,000 in long term marketable securities have
maturities ranging from 12 to 42 months. In the opinion of management, the
Company is not subject to material market risks with respect to its marketable
securities.
(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.
17
During the second quarter of fiscal year 2001, the Company took a
pre-tax non-recurring restructuring charge of $899,000 or $0.05 per share after
tax. Of this total restructuring charge, $749,000 is for a write-down to net
realizable value, the value of fixed assets associated with a manufacturing
process under development since 1998 that was discontinued due to difficulty in
ensuring quality consistency that would satisfy our customers' needs and
$150,000 for other costs related to manufacturing processes for which the
decision and plan to discontinue were made in the second quarter of fiscal year
2001.
(7) GOODWILL
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired and is being amortized on a straight line basis over 20 years.
(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 232,000 shares of common stock at a weighted
average price of $22.21 per share were outstanding during the fourth quarter of
fiscal 2001, 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 April 27, 2011.
(9) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 October 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets", replacing SFAS No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". The provisions of Statement No. 144 are effective for financial statements
issued for fiscal years beginning after December 15, 2001 and will not have a
material impact on the Company's consolidated financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". The provisions of Statement No. 143 are effective for
financial statements issued for fiscal years beginning after June 15, 2002 and
will not have a material impact on the Company's consolidated financial position
or results of operations.
In July 2001, the FASB issued SFAS No. 141 "Business Combinations" and
SFAS No. 142 "Goodwill and Other Intangible Assets". The provisions of Statement
No. 141 require that the purchase method be used for business combinations
initiated after June 30, 2001, and the provisions of Statement No. 142 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001. Statement No. 142 replaces the requirement to amortize
goodwill and intangible assets with indefinite lives with a requirement for an
impairment test on a periodic basis. Neither statement is expected to have a
material impact on the Company's consolidated financial position or results of
operations.
(12) ACQUISITIONS
In March 2001, the Company acquired 100% of the stock of Perrot SA (now Lindsay
Europe SA), a manufacturer of irrigation systems located in La Chapelle d'
Aligne, France, for approximately $1.0 million in cash. The acquisition was
accounted for under the purchase method of accounting. The purchase resulted in
the recording of approximately $0.3 million of goodwill, representing the amount
of cash paid in excess of the estimated fair value of the assets acquired less
liabilities assumed, which is currently being amortized using a useful life of
20 years. The transaction may require the payment of additional consideration
totaling approximately $0.2 million, which is contingent upon the achievement of
certain earn-out and other provisions included under the share purchase
agreement. This additional consideration will not be paid or recorded by the
Company until the related contingencies are resolved. As a result, the purchase
price allocation for Perrot SA as recorded by the Company is preliminary and
subject to future adjustment as further information is obtained.
The results of operations for Perrot SA, which were not material to the
Company's consolidated results for the year ended August 31, 2001, have been
included in the Company's consolidated results from the acquisition date.
18
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. OTHER INCOME, NET
FOR THE YEARS ENDED AUGUST 31,
------------------------------
$ IN THOUSANDS 2001 2000 1999
- -------------- ---- ---- ----
Other income, net:
Litigation settlement ......................... $ 0 $ (30) $ 0
(Loss) gain on sales of fixed assets........... (10) 106 119
State economic development tax credits ........ 0 0 176
Finance charges................................ 31 56 27
All other, net................................. (19) (14) 26
------ ----- -----
Total other income, net ......................... $ 2 $ 118 $ 348
====== ===== =====
C. INCOME TAX PROVISION
FOR THE YEARS ENDED AUGUST 31,
------------------------------
$ IN THOUSANDS 2001 2000 1999
- -------------- ---- ---- ----
Current taxes ................................... $2,498 $5,238 $5,399
Deferred taxes .................................. 942 697 58
------ ------ ------
Total income tax provision ...................... $3,440 $5,935 $5,457
====== ====== ======
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,
------------------------------
2001 2000 1999
---- ---- ----
$ IN THOUSANDS AMOUNT % AMOUNT % AMOUNT %
- -------------- ------ ---- ------ ---- ------ ----
U.S. statutory rate.............................. $ 3,876 34.0 $ 6,622 34.6 $ 6,244 34.3
State and local taxes............................ 207 1.8 269 1.4 227 1.3
Qualified export activity........................ (165) (1.4) (113) (0.6) (164) (0.9)
Municipal bond interest income................... (480) (4.2) (702) (3.7) (816) (4.5)
Other............................................ 2 0.0 (141) (0.7) (34) (0.2)
------- ---- ------- ---- -------- ----
Total ........................................... $ 3,440 30.2 $ 5,935 31.0 $ 5,457 30.0
======= ==== ======= ==== ======== ====
19
Significant components of the Company's deferred tax assets and liabilities are
as follows:
FOR THE YEARS ENDED AUGUST 31,
------------------------------
$ IN THOUSANDS 2001 2000
- -------------- ---- ----
Book depreciation less than tax ................. $ (137) $ (13)
Employee benefits................................ 1,601 2,333
Inventory adjustments ........................... 160 154
Accruals not currently deductible for taxes...... 540 632
------ -------
Net deferred tax assets ........................ $2,164 $ 3,106
====== =======
Management does not believe there are uncertainties surrounding realization of
the net deferred tax assets.
D. RECEIVABLES
AUGUST 31,
----------
$ IN THOUSANDS 2001 2000
- -------------- ---- ----
Trade accounts and notes ........................ $ 21,893 $ 18,034
Less allowance for doubtful accounts ............ 577 445
-------- --------
Net receivables ................................ $ 21,316 $ 17,589
======== ========
E. INVENTORIES
AUGUST 31,
----------
$ IN THOUSANDS 2001 2000
- -------------- ---- ----
First-in, first-out (FIFO) inventory ............ $ 13,292 $ 15,374
LIFO reserves ................................... (2,551) (3,408)
Obsolescence reserve ............................ (629) (631)
-------- --------
Total Inventories . ............................. $ 10,112 $ 11,335
======== ========
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
AUGUST 31,
----------
2001 2000
---- ----
Raw materials ................................... 12% 13%
Work in process ................................. 5% 6%
Finished goods and purchased parts .............. 83% 81%
F. PROPERTY, PLANT & EQUIPMENT
AUGUST 31,
----------
$ IN THOUSANDS 2001 2000
- -------------- ---- ----
Land ........................................ $ 70 $ 70
Buildings ................................... 8,628 8,352
Equipment ................................... 32,416 30,269
Other ....................................... 2,339 3,300
-------- --------
Total plant, equipment........................... 43,453 41,991
Accumulated depreciation and amortization........ (28,560) (26,053)
-------- --------
Property, plant and equipment, net ............. $ 14,893 $ 15,938
======== ========
20
G. OTHER NONCURRENT ASSETS
AUGUST 31,
----------
$ IN THOUSANDS 2001 2000
- -------------- ---- ----
Goodwill, net of accumulated amortization of $20 and $3....... $ 737 $ 416
Intangible pension asset....................................... 580 649
Split dollar life insurance.................................... 858 840
Other.......................................................... 1,403 0
-------- --------
Other noncurrent assets........................................ $ 3,578 $ 1,905
======== ========
H. OTHER CURRENT LIABILITIES
AUGUST 31,
----------
$ IN THOUSANDS 2001 2000
- -------------- ---- ----
Current state and federal income taxes.............. $ 10 $ 974
Payroll and vacation................................ 2,349 2,621
Retirement plans.................................... 1,912 2,368
Taxes, other than income............................ 760 222
Insurance........................................... 1,301 1,550
Dealer service, commission and related items........ 1,921 2,222
Export freight...................................... 215 212
Warranty............................................ 1,396 757
Legal settlements................................... 200 221
Other ............................................. 1,170 767
-------- --------
Total other current liabilities..................... $ 11,234 $ 11,914
======== ========
I. CREDIT ARRANGEMENTS
Lindsay has an agreement with a commercial bank for a $10.0 million unsecured
revolving line of credit through December 30, 2001. 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 (5.5 percent at
August 31, 2001). 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. 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 $1.0 million at
August 31, 2001 compared to $0.9 million at August 31, 2000. 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,
2001 and August 31, 2000. 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.
21
K. 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. Lindsay's total contributions charged to
expense under this plan were $283,000 for the year ended August 2001 and
$750,000 for each of the years ended August 2000 and 1999. 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:
FOR THE YEARS ENDED AUGUST 31,
------------------------------
$ IN THOUSANDS 2001 2000 1999
- -------------- ---- ---- ----
Change in benefit of obligation:
Benefit obligation at beginning of year ................................$ 2,778 $ 1,868 $ 1,937
Service cost ........................................................... 13 75 81
Interest cost .......................................................... 187 131 136
Actuarial (gain)/loss .................................................. 395 704 (286)
Benefits Paid .......................................................... (136) 0 0
------- ------- -------
Benefit obligation at end of year ......................................$ 3,237 $ 2,778 $ 1,868
------- ------- -------
Funded status ..........................................................$(3,237) $(2,778) $(1,868)
Unrecognized net actuarial loss ........................................ 1,326 1,009 357
------- ------- -------
Net amount recognized ..................................................$(1,911) $(1,769) $(1,511)
======= ======= =======
Amounts recognized in the statement of financial position consist of:
Accrued benefit cost ...................................................$ 1,911 $ 1,769 $ 1,511
Intangible pension asset ............................................... (580) (649) 0
Additional benefit liability ........................................... 1,250 952 0
Other comprehensive income ............................................. (670) (303) 0
------- ------- -------
Net amount recognized ..................................................$ 1,911 $ 1,769 $ 1,511
======= ======= =======
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 ...........................................................$ 13 $ 75 $ 81
Interest cost .......................................................... 187 131 136
Net Amortization and Deferral .......................................... 78 52 69
------- ------- -------
Total ..................................................................$ 278 $ 258 $ 286
======= ======= =======
22
L. 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.
On January 30, 2001, the shareholders approved the Lindsay
Manufacturing Co. 2001 Long-Term Incentive Plan (the "2001 Plan"). The 2001 Plan
supercedes the 1988 Plan and 1991 Plan and no further options or other awards
will be granted under the 1988 Plan and 1991 Plan (the "Prior Plans"). The 2001
Plan is similar in most material respects to the 1991 Plan and provides for
awards of stock options, restricted stock or stock appreciation rights ("SARs")
to employees of the Company and for annual awards of stock options to
nonemployee directors. A total of 900,000 shares of the Company's common stock
may be issued under the Plan, subject to adjustments to reflect stock splits and
similar events. If options or restricted stock awarded under the 2001 Plan (or
options issued under the Prior Plans or outside of the Prior Plans) terminate
without being fully vested or exercised, the number of shares represented
thereby will be available again for grant under the 2001 Plan. No more than
180,000 shares of common stock may be issued to employees other than through
options having an exercise price of not less than the fair market value of the
underlying shares. The 2001 Plan also limits the total awards that may be made
to any individual.
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 date for
awards in fiscal 2001, 2000 and 1999 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:
AUGUST 31,
----------
$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 2001 2000 1999
- ---------------------------------------- ---- ---- ----
Net earnings - as reported..................... $ 7,961 $ 13,208 $ 12,732
Net earnings - pro forma....................... $ 6,967 $ 12,389 $ 12,447
Net earnings per share - as reported........... $ 0.67 $ 1.06 $ 0.96
Net earnings per share - pro forma............. $ 0.59 $ 0.99 $ 0.94
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 2001, 2000 and 1999, dividend yield of
0.7% to 0.8%, expected volatility of 34.9% to 36.0%, risk-free interest rates
ranging from 5.2% to 6.4%, and expected lives of the options of 7 years.
23
A summary of the status of the Company's stock plans is presented below:
FOR THE YEARS ENDED AUGUST 31,
RESTRICTED SHARES ------------------------------
$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 2001 2000 1999
- ---------------------------------------- ---- ---- ----
Number of shares issued.............................. 0 50,625 66,225
Average price........................................ $ 0.00 $ 17.06 $ 20.49
Total value of shares issued......................... $ 0 $ 864 $ 1,357
Total compensation cost recognized in the
statements of operations.......................... $ 0 $ (58) $ 1,155
OPTION SHARES NUMBER OF SHARES AVERAGE PRICE
- ------------- ---------------- -------------
Officers, Directors and Key Employees:
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
Outstanding at August 31, 2000........................................ 916,943 13.93
Granted............................................................ 172,750 18.44
Exercised.......................................................... (107,525) 8.59
-------
Outstanding at August 31, 2001..................................... 982,168 15.30
=======
Exercisable at August 31, 2001........................................ 391,318 13.51
=======
Weighted average fair value of options granted during fiscal 2001..... $ 8.63
The number of stock awards available for grant under the 1988, 1991 and 2001
plans are 868,149, 140,899 and 135,265 shares as of August 31, 2001, 2000 and
1999, respectively.
The following table summarizes information about the Company's Common Stock
options outstanding at August 31, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED
AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
PRICES AT 8/31/01 LIFE PRICE AT 8/31/01 PRICE
------ ---------- ---- ----- ---------- -----
$ 8.37-10.52 222,905 2.09 years $ 9.24 222,905 $ 9.24
14.00-20.00 669,638 8.49 years 15.63 114,638 15.04
$ 26.17-28.17 89,625 6.16 years $ 27.94 53,775 $27.94
------- -------
982,168 391,318
======= =======
24
M. 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 Company manages its business activities in two reportable segments:
Irrigation: This segment includes the manufacture and marketing
of center pivot and lateral move and hose reel irrigation systems.
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, with operating income for segment purposes excluding
general and administrative expenses (which include corporate expenses)
engineering and research expenses, interest income net, other income and
expenses, net income taxes, and assets. Operating income for segment purposes
does include selling expenses and restructuring 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 2001 2000 1999
- ------------- ---- ---- ----
Operating revenues:
Irrigation......................................................... $ 106.9 $ 115.6 $ 101.4
Diversified products............................................... 19.8 14.2 15.3
------- -------- -------
Total operating revenues.............................................. $ 126.7 129.8 $ 116.7
======= ======== =======
Operating income:
Irrigation......................................................... $ 16.6 $ 23.2 $ 22.0
Diversified products............................................... 3.2 2.7 3.5
------- -------- -------
Segment operating income.............................................. 19.8 25.9 25.5
Unallocated general & administrative and
engineering & research expenses.................................... (10.2) (9.5) (10.5)
Interest and other income, net........................................ 1.8 2.7 3.2
------- -------- -------
Earnings before income taxes.......................................... $ 11.4 $ 19.1 $ 18.2
======= ======== =======
Geographic area revenues:
United States...................................................... $ 102.0 $ 107.8 $ 94.1
Europe, Africa & Middle East...................................... 14.7 8.9 8.1
Mexico & Latin America............................................ 3.2 5.1 6.7
Other International................................................ 6.8 8.0 7.8
------- -------- -------
Total revenues..................................................... $ 126.7 $ 129.8 $ 116.7
======= ======== =======
25
N. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The follow is a tabulation of the unaudited quarterly results of operations for
the years ended August 31, 2001 and 2000.
QUARTERLY DATA
FOR THE THREE MONTHS ENDED THE LAST DAY OF
------------------------------------------
$ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS NOVEMBER FEBRUARY MAY AUGUST
- ---------------------------------------- -------- -------- --- ------
Fiscal 2001
Operating revenues...................... $ 33,956 $28,275 $ 39,032 $ 25,406
Cost of operating revenues.............. 26,228 21,616 29,580 21,315
Earnings before income taxes............ 3,676 1,114 5,680 931
Net earnings............................ 2,536 769 3,931 725
Diluted net earnings per share.......... $ 0.21 $ 0.06 $ 0.33 $ 0.06
Market price (NYSE)
High.................................. $ 22.19 $ 26.00 $ 20.00 $ 19.15
Low................................... $ 18.00 $ 19.69 $ 17.00 $ 17.40
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
Diluted net earning 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
2001: Fourth-quarter adjustments resulting in a net decrease in pre-tax earnings
of $426,000 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 compensation costs
including bonus earnouts and vacation pay, increased pre-tax earnings $804,000
and $152,000 respectively.
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.
Share amounts and per share results for all periods are stated on a diluted
basis.
26
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Reported in Form 8-K as Filed by the Company on October 4, 2001.
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, 2001. 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, 2001 except for late filings of Form 3
Initial Statement of Beneficial Ownership of Securities; (1) Matthew T. Cahill,
due November 3, 2000, filed December 4, 2000 (2) Dirk A. Lenie, due November 21,
2000, filed December 4, 2000 (3) William F. Welsh II due April 13, 2001, filed
April 25, 2001 and Form 5 Annual Statement of Beneficial Ownership of Securities
for Eduardo R. Enriquez due October 15, 2001, filed October 31, 2001.
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
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.
PAGE
----
Report of Independent Accountants......................................................................... 13
Consolidated Statements of Operations for the Years
ended August 31, 2001, 2000 and 1999................................................................ 14
Consolidated Balance Sheets at
August 31, 2001 and 2000............................................................................ 15
Consolidated Statements of Shareholders' Equity and Comprehensive Income
for the years ended August 31, 2001, 2000 and 1999.................................................. 14
Consolidated Statements of Cash Flows for the Years
ended August 31, 2001, 2000 and 1999................................................................ 16
Notes to Consolidated Financial Statement................................................................. 17-26
(a)(2) Financial Statement Schedule
PAGE
----
Report of Independent Accountants......................................................................... 13
Schedule
Valuation and Qualifying Accounts -
Years ended August 31, 2001, 2000 and 1999.......................................................... 32
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
a(3) EXHIBIT INDEX
Sequential
Exhibit Page
Number Description Number
- ------- ----------- ---------
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, incorporated
by reference to Exhibit 3(b) of the Company's
Annual Report on Form 10-K for the fiscal year
ended August 31, 2000. -
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. -
29
a(3) EXHIBIT INDEX
Sequential
Exhibit Page
Number Description Number
- ------- ----------- ---------
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, incorporated by reference
to Exhibit 10(f) of the Company's Annual Report on
Form 10-K for the fiscal year ended August 31,
2000. -
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. -
10(i) Lindsay Manufacturing Co. 2001 Amended and Restated
Long-Term Incentive Plan. 33-48
21 Subsidiaries of the Company 49
23 Consent of KPMG LLP 50
23(a) Consent of PricewaterhouseCoopers LLP 51
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 2001 on behalf of certain
directors. 52
99 Report of Independent Accountants of
PricewaterhouseCoopers LLP 53
(b) Reports on Form 8-K.
The registrant did not file any reports on Form 8-K during the fourth
quarter of Fiscal year 2001.
30
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, 2001.
LINDSAY MANUFACTURING CO.
By: /s/ Bruce C. Karsk
------------------
Name: Bruce C. Karsk
Title: Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
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, 2001.
/s/ RICHARD W. PAROD Director, President and Chief Executive Officer
- -----------------------------
Richard W. Parod
/s/ BRUCE C. KARSK Executive Vice President,
- ----------------------------- Chief Financial Officer,
Bruce C. Karsk Treasurer and Secretary
/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
/s/ WILLIAM F. WELSH II(1) Director
- -----------------------------
William F. Welsh II
(1) By: /s/ Bruce C. Karsk
---------------------------------
Bruce C. Karsk, Attorney-In-Fact.
31
LINDSAY MANUFACTURING CO.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED AUGUST 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)
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
----------- --------- ---------- --------- ---------- ----------
Year ended August 31, 2001:
Deducted in the balance sheet from
the assets to which they apply:
- Allowance for doubtful accounts........................ $ 445 $ 180 $ 45 $ 93(a) $ 577
===== ======= ======= ==== ======
- Allowance for inventory obsolescence................... $ 631 $ 65 $ 0 $ 67(b) $ 629
===== ======= ======= ==== ======
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 $ 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
===== ======= ======= ==== ======
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.
See accompanying independent auditor's reports.
32