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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to
Commission File Number 1-13419
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
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No[ ]
As of December 31, 2004, 11,778,185 shares of the registrant's common stock were
outstanding.
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
INDEX FORM 10-Q
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets, November 30, 2004 and 2003
and August 31, 2004 3
Consolidated Statements of Operations for the three-months
ended November 30, 2004 and 2003 4
Consolidated Statements of Cash Flows for the three-months
ended November 30, 2004 and 2003 5
Notes to Consolidated Financial Statements 6-13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION 14-19
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 19-20
ITEM 4 - CONTROLS AND PROCEDURES 20
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 21
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 21
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21
ITEM 5 - OTHER INFORMATION 21
ITEM 6 - EXHIBITS 21
SIGNATURE 22
2
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 2004 AND 2003 AND AUGUST 31, 2004
(UNAUDITED) (UNAUDITED)
NOVEMBER NOVEMBER AUGUST
($ IN THOUSANDS, EXCEPT PAR VALUES) 2004 2003 2004
----------------------------------- ----- ----- ----
ASSETS
Current assets:
Cash and cash equivalents ................................ $ 4,354 $ 6,263 $ 8,973
Marketable securities .................................... 11,277 5,730 14,802
Receivables .............................................. 39,314 29,691 34,369
Inventories .............................................. 26,250 21,728 19,780
Deferred income taxes .................................... 1,176 2,398 1,026
Other current assets ..................................... 3,987 1,538 2,422
--------- --------- ---------
Total current assets ..................................... 86,358 67,348 81,372
Long-term marketable securities ............................ 27,971 43,971 32,527
Property, plant and equipment, net ......................... 17,127 14,157 16,355
Other noncurrent assets .................................... 8,876 8,259 8,747
--------- --------- ---------
Total assets ............................................... $ 140,332 $ 133,735 $ 139,001
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................... $ 9,500 $ 10,172 $ 9,117
Other current liabilities ................................ 15,311 15,020 15,359
--------- --------- ---------
Total current liabilities ................................ 24,811 25,192 24,476
Pension benefits liability ................................. 2,247 2,315 2,169
Other noncurrent liabilities ............................... 57 632 172
--------- --------- ---------
Total liabilities .......................................... 27,115 28,139 26,817
--------- --------- ---------
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding) .......... - - -
Common stock, ($1 par value, 25,000,000 shares authorized,
17,497,785, 17,475,748 and 17,493,841 shares issued in
November 2004 and 2003 and August 2004, respectively) .. 17,498 17,476 17,494
Capital in excess of stated value ........................ 2,978 2,574 2,966
Retained earnings ........................................ 180,748 174,840 181,209
Less treasury stock (at cost, 5,724,069 shares) .......... (89,898) (89,898) (89,898)
Accumulated other comprehensive gain ..................... 1,891 604 413
--------- --------- ---------
Total shareholders' equity ................................. 113,217 105,596 112,184
--------- --------- ---------
Total liabilities and shareholders' equity ................. $ 140,332 $ 133,735 $ 139,001
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
3
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTHS ENDED NOVEMBER 30, 2004 AND 2003
(UNAUDITED)
THREE MONTHS ENDED
------------------
NOVEMBER NOVEMBER
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003
- ---------------------------------------- ---- ----
Operating revenues ......................... $ 39,767 $ 36,513
Cost of operating revenues ................. 33,194 29,159
-------- --------
Gross profit ............................... 6,573 7,354
-------- --------
Operating expenses:
Selling expense .......................... 2,747 2,867
General and administrative expense ....... 3,597 2,993
Engineering and research expense ......... 696 760
-------- --------
Total operating expenses ................... 7,040 6,620
-------- --------
Operating (loss) income .................... (467) 734
Interest income, net ....................... 261 424
Other income, net .......................... 384 449
-------- --------
Earnings before income taxes ............... 178 1,607
Income tax provision ....................... 3 514
-------- --------
Net earnings ............................... $ 175 $ 1,093
======== ========
Basic net earnings per share ............... $ 0.01 $ 0.09
======== ========
Diluted net earnings per share ............. $ 0.01 $ 0.09
======== ========
Average shares outstanding ................. 11,772 11,741
Diluted effect of stock options ............ 213 224
-------- --------
Average shares outstanding
assuming dilution ........................ 11,985 11,965
======== ========
Cash dividends per share ................... $ 0.055 $ 0.050
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
4
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED NOVEMBER 30, 2004 AND 2003
(UNAUDITED)
NOVEMBER NOVEMBER
($ IN THOUSANDS) 2004 2003
---------------- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ................................................................ $ 175 $ 1,093
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization ............................................ 906 774
Amortization of marketable securities premiums, net ...................... 49 40
Gain on sale of property, plant and equipment ............................ - 8
Provision for uncollectible accounts receivable .......................... 31 (60)
Equity in net (earnings) loss of equity method investments ............... (233) 7
Deferred income taxes .................................................... (28) (135)
Other, net ............................................................... 13 (27)
Changes in assets and liabilities:
Receivables .............................................................. (4,127) (6,214)
Inventories .............................................................. (5,471) (1,186)
Other current assets ..................................................... (1,279) (564)
Accounts payable ......................................................... (6) 1,080
Other current liabilities ................................................ (378) (935)
Current taxes payable .................................................... (139) (201)
Other noncurrent assets and liabilities .................................. 29 559
-------- --------
Net cash used in operating activities ....................................... (10,458) (5,761)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment .................................. (1,343) (721)
Proceeds from sale of property, plant and equipment ......................... 3 11
Purchases of marketable securities held-to-maturity ......................... - (2,982)
Proceeds from maturities or sales of marketable securities
held-to-maturity ........................................................ - 2,785
Purchases of marketable securities available-for-sale ....................... - (3,288)
Proceeds from maturities or sales of marketable securities
available-for-sale ...................................................... 7,740 1,315
-------- --------
Net cash provided by (used in) investing activities ......................... 6,400 (2,880)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under stock option plan .............. 29 110
Dividends paid .............................................................. (636) (586)
-------- --------
Net cash used in financing activities ....................................... (607) (476)
-------- --------
Effect of exchange rate changes on cash ..................................... 46 12
-------- --------
Net decrease in cash and cash equivalents ................................... (4,619) (9,105)
Cash and cash equivalents, beginning of period .............................. 8,973 15,368
-------- --------
Cash and cash equivalents, end of period .................................... $ 4,354 $ 6,263
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
5
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements are presented in accordance with the
requirements of Form 10-Q and do not include all of the disclosures normally
required by accounting principles generally accepted in the United States of
America for financial statements contained in Lindsay Manufacturing Co.'s (the
"Company") annual Form 10-K filing. Accordingly, these condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's most recent
Form 10-K for the fiscal year ended August 31, 2004.
In the opinion of management, the consolidated financial statements of the
Company reflect all adjustments of a normal recurring nature necessary to
present a fair statement of the financial position and the results of operations
and cash flows for the respective interim periods. The results for interim
periods are not necessarily indicative of trends or results expected by the
Company for a full year.
Notes to the consolidated financial statements describe various elements
of the financial statements and the accounting policies, estimates, and
assumptions applied by management. While actual results could differ from those
estimated by management in the preparation of the consolidated financial
statements, management believes that the accounting policies, assumptions, and
estimates applied promote the representational faithfulness, verifiability,
neutrality, and transparency of the accounting information included in the
consolidated financial statements.
(2) STOCK BASED COMPENSATION
The Company maintains a stock option plan and accounts for this plan under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees". Net earnings does not reflect stock-based employee
compensation cost as all options granted under this plan had an exercise price
equal to the market value of the underlying common stock on the date of grant.
The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of SFAS No.
123, "Accounting for Stock-Based Compensation", to stock-based employee
compensation.
FOR THE THREE-MONTHS ENDED
--------------------------
NOVEMBER NOVEMBER
$ IN THOUSANDS 2004 2003
-------------- ---- ----
Net earnings, as reported ................................. $ 175 $ 1,093
Deduct: total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects ............................. 361 323
--------- ---------
Proforma net (loss) earnings .............................. $ (186) $ 770
========= =========
Earnings (loss) per share:
Basic-as reported ................................... $ 0.01 $ 0.09
Basic-pro forma ..................................... $ (0.02) $ 0.07
Diluted-as reported ................................. $ 0.01 $ 0.09
Diluted-pro forma ................................... $ (0.02) $ 0.06
6
(3) CASH EQUIVALENTS, MARKETABLE SECURITIES, AND LONG-TERM MARKETABLE SECURITIES
Cash equivalents are included at cost, which approximates market. At November
30, 2004, primarily one financial institution held the Company's cash
equivalents. The Company 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.
At the date of acquisition of an investment security, management
designates the security as belonging to a trading portfolio, an
available-for-sale portfolio, or a held-to-maturity portfolio. Following
management's fiscal year 2004 decision to transfer debt securities from the
held-to-maturity portfolio, the Company will not designate purchases to the
held-to-maturity portfolio for a period of at least two years. Currently, the
Company holds no securities designated as held-to-maturity or trading. All
investment securities are classified as available-for-sale and carried at fair
value. Unrealized appreciation or depreciation in the fair value of
available-for-sale securities is reported in accumulated other comprehensive
income, net of related income tax effects. The Company monitors its investment
portfolio for any decline in fair value that is other-than-temporary and records
any such impairment as an impairment loss. No impairment losses for
other-than-temporary declines in fair value have been recorded in the three
months ended November 30, 2004 and 2003. In the opinion of management, the
Company is not subject to material market risks with respect to its portfolio of
investment securities because the investment grade quality of the securities and
the maturities of these securities are relatively short, making their value less
susceptible to interest rate fluctuations.
Gross realized gains and losses from sale of available-for-sale securities were
a $5,000 gain and $51,000 loss, respectively, for the three-months ended
November 30, 2004 and $0 for the three-months ended November 30, 2003.
Amortized cost and fair value of investments in marketable securities classified
as held-to-maturity or available-for-sale according to management's intent are
summarized as follows:
$ IN THOUSANDS
HELD-TO-MATURITY SECURITIES
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
As of November 30, 2004:
Due within one year ................. $ - $ - $ - $ -
Due after one year through
five years ....................... - - - -
------- ------- ------- -------
$ - $ - $ - $ -
======= ======= ======= =======
As of November 30, 2003:
Due within one year ................. $ 5,730 $ 61 $ (1) $ 5,790
Due after one year through
five years ....................... 31,578 479 (34) 32,023
------- ------- ------- -------
$37,308 $ 540 $ (35) $37,813
======= ======= ======= =======
As of August 31, 2004:
Due within one year ................. $ - $ - $ - $ -
Due after one year through
five years ....................... - - - -
------- ------- ------- -------
$ - $ - $ - $ -
======= ======= ======= =======
7
AVAILABLE-FOR-SALE SECURITIES
As of November 30, 2004:
Due within one year ................. $ 11,232 $ 46 $ (1) $ 11,277
Due after one year through
five years ....................... 27,964 90 (83) 27,971
-------- -------- -------- --------
$ 39,196 $ 136 $ (84) $ 39,248
======== ======== ======== ========
As of November 30, 2003:
Due within one year ................. $ - $ - $ - $ -
Due after one year through
five years ....................... 12,354 74 (35) 12,393
-------- -------- -------- --------
$ 12,354 $ 74 $ (35) $ 12,393
======== ======== ======== ========
As of August 31, 2004:
Due within one year ................. $ 14,678 $ 124 $ - $ 14,802
Due after one year through
five years ....................... 32,353 214 (40) 32,527
-------- -------- -------- --------
$ 47,031 $ 338 $ (40) $ 47,329
======== ======== ======== ========
(4) INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is determined
by the last-in, first-out (LIFO) method for the Company's Lindsay, Nebraska
inventory. Cost is determined by the weighted average method for inventories at
the Company's other operating locations in Washington State, France, Brazil, and
South Africa. At all locations, the Company establishes reserves for obsolete,
slow moving, and excess inventory by estimating the net realizable value based
on the potential future use of such inventory.
NOVEMBER NOVEMBER AUGUST
$ IN THOUSANDS 2004 2003 2004
-------------- ---- ---- ----
Inventory:
First-in, first-out (FIFO) inventory ........ $ 20,810 $ 16,423 $ 16,043
LIFO reserves ............................... (5,333) (2,494) (5,333)
-------- -------- --------
LIFO inventory .............................. 15,477 13,929 10,710
Weighted average inventory .................. 11,229 8,315 9,597
Obsolescence reserve ........................ (456) (516) (527)
-------- -------- --------
Total inventories ........................... $ 26,250 $ 21,728 $ 19,780
======== ======== ========
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
NOVEMBER NOVEMBER AUGUST
2004 2003 2004
---- ---- ----
Raw materials .......................... 30% 20% 20%
Work in process ........................ 5% 10% 10%
Finished goods and purchased parts ..... 65% 70% 70%
8
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, net of accumulated
depreciation, as follows:
NOVEMBER NOVEMBER AUGUST
$ IN THOUSANDS 2004 2003 2004
-------------- ---- ---- ----
Property, plant and equipment:
Land ....................................... $ 336 $ 336 $ 336
Buildings .................................. 10,263 9,393 10,192
Equipment .................................. 39,778 37,548 38,886
Other ..................................... 4,616 3,076 3,954
-------- -------- --------
Total property, plant and equipment ............ 54,993 50,353 53,368
Accumulated depreciation and amortization ...... (37,866) (36,196) (37,013)
======== ======== ========
Property, plant and equipment, net ............. $ 17,127 $ 14,157 $ 16,355
======== ======== ========
Depreciation expense was $867,000 and $756,000 for the three-months ended
November 30, 2004 and 2003, respectively.
(6) CREDIT ARRANGEMENTS
The Company has an agreement with a commercial bank for a $10.0 million
unsecured revolving line of credit through December 28, 2005. 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. Under the terms of the line of credit,
borrowings, if any, 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 (5.00% at November 30, 2004). The Company expects to
renew this line of credit on substantially similar terms.
The Company's European subsidiary, Lindsay Europe, has an unsecured
revolving line of credit with a commercial bank under which it could borrow up
to the Euro equivalent of $2.7 million for working capital purposes. As of
November 30, 2004, there was a $782,000 outstanding balance on this line. Under
the terms of the line of credit, borrowings, if any, bear interest at a floating
rate in effect from time to time designated by the commercial bank as LIBOR+200
basis points. (4.65% at November 30, 2004).
(7) NET EARNINGS PER SHARE
Basic net earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding during the period. Diluted net
earnings per share includes the incremental dilutive effect of stock options,
which have an exercise price below the average market price of the Company's
common shares during the period.
The Company had additional stock options outstanding during the period,
but these options were excluded from the calculation of diluted earnings per
share because they had an exercise price exceeding the average market price of
the Company's common shares during the period, as set forth in the following
table:
NOVEMBER 30, 2004 NOVEMBER 30, 2003
------------------------------------------------- --------------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES PRICE EXPIRE SHARES PRICE EXPIRE
------ ----- ------ ------ ----- ------
November , 2007- November , 2007-
204,750 $26.49 April, 2014 148,250 $25.84 May, 2012
======= ====== ======= ======
(8) INDUSTRY SEGMENT INFORMATION
The Company manages its business activities in two reportable segments:
Irrigation: This segment includes the manufacture and marketing of center
pivot, lateral move, and hose reel irrigation systems. The irrigation segment
consists of six operating segments that have similar economic characteristics
and meet the aggregation criteria of SFAS No. 131.
9
Diversified Products: This segment includes providing outsource
manufacturing services and the manufacturing and selling of 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 to the consolidated
financial statements contained in the Company's 10-K for the fiscal year ended
August 31, 2004. 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, and net income taxes, and assets. Operating
income for segment purposes does include selling expenses and other overhead
charges directly attributable to the segment. There are no inter-segment sales.
Because the Company utilizes common operating assets for its irrigation and
diversified segments, it is not practical to separately identify assets by
reportable segment. Similarly, other segment reporting proscribed by FAS 131 is
not shown as this information cannot be reasonably disaggregated by segment and
is not utilized by the Company's management.
The Company has no single customer representing 10% or more of its total
revenues during the three-months ended November 30, 2004 or 2003.
Summarized financial information concerning the Company's reportable segments is
shown in the following table:
FOR THE THREE MONTHS ENDED
--------------------------
NOVEMBER NOVEMBER
$ IN THOUSANDS 2004 2003
-------------- ---- ----
Operating revenues:
Irrigation .................................................... $35,402 $33,970
Diversified products .......................................... 4,365 2,543
------- -------
Total operating revenues............................................ $39,767 $36,513
======= =======
Operating income:
Irrigation .................................................... $ 3,511 $ 4,240
Diversified products .......................................... 315 247
------- -------
Segment operating income ........................................... 3,826 4,487
Unallocated general & administrative and engineering & research
expenses .......................................................... 4,293 3,753
Interest and other income, net...................................... 645 873
------- -------
Earnings before income taxes ....................................... $ 178 $ 1,607
======= =======
(9) OTHER NONCURRENT ASSETS
NOVEMBER NOVEMBER AUGUST
$ IN THOUSANDS 2004 2003 2004
-------------- ---- ---- ----
Cash surrender value of life insurance policies................. $1,924 $1,836 $1,903
Deferred income taxes .......................................... 1,718 1,637 1,840
Equity method investments ...................................... 1,597 1,430 1,364
Goodwill ....................................................... 1,320 1,194 1,254
Split dollar life insurance .................................... 916 914 916
Intangible pension assets ...................................... 373 442 373
Other intangibles, net ......................................... 717 532 472
Other .......................................................... 311 274 625
------ ------ ------
Total noncurrent assets ........................................ $8,876 $8,259 $8,747
====== ====== ======
10
Goodwill represents the excess of the allocable purchase price for assets
acquired in certain business acquisitions over the fair value of these assets at
the time of the acquisitions. Other intangible assets include non-compete
agreements, tradenames, patents, and plans and specifications. Goodwill and
intangible assets with indefinite useful lives are not amortized, but instead
are tested for impairment of their values at least annually in accordance with
SFAS No. 142, "Goodwill and Other Intangible Assets." The estimated fair value
of these assets depends on a number of assumptions including forecasted sales
growth and operating expenses of the reporting segment in which the assets are
used. To the extent that the relevant reporting unit is unable to achieve these
assumptions, impairment losses may be recognized. The Company completed its
annual impairment evaluation of these assets at August 31, 2004 and determined
that no impairment losses were indicated. Other intangible assets that have
finite lives are amortized over their realizable lives. During the first quarter
of fiscal year 2005, the Company capitalized costs of $279,000 for software
rights purchased from a development company, which will be marketed to
customers. The amortization method for this software is the greater of the ratio
of current sales to forecasted sales or a 3-year straight-line method.
Amortization expense for other intangible assets was $39,000 and $42,000 for the
three-months ended November 30, 2004 and 2003, respectively. The following table
summarizes the Company's other intangible assets:
NOVEMBER NOVEMBER AUGUST
$ IN THOUSANDS 2004 2003 2004
-------------- ---- ---- ----
Other intangible assets:
Non-compete agreements ............ $ 392 $ 358 $ 385
Tradenames ........................ 145 147 145
Patent ............................ 100 100 100
Plans and specifications .......... 75 77 75
Software .......................... 279 - -
Other ............................. 34 30 31
Accumulated amortization ............. (308) (180) (264)
----- ----- -----
Total other intangibles assets, net .... $ 717 $ 532 $ 472
===== ===== =====
(10) COMPREHENSIVE INCOME
The accumulated other comprehensive gain or loss shown in the Company's
consolidated balance sheets includes the unrealized gains on securities and
accumulated foreign currency translation adjustment. The following table shows
the difference between the Company's reported net earnings and its comprehensive
income:
FOR THE THREE-MONTHS ENDED
--------------------------
NOVEMBER NOVEMBER
$ IN THOUSANDS 2004 2003
-------------- ---- ----
Comprehensive income:
Net earnings ............................... $ 175 $ 1,093
Other comprehensive (loss) income:
Unrealized gains on securities,
net of taxes ............................. (153) 126
Foreign currency translation ............... 1,631 566
------- -------
Total comprehensive income ...................... $ 1,653 $ 1,785
======= =======
11
(11) GUARANTEES
The Company is currently party to guarantee arrangements relating to
dealer/customer financing arrangements, the debt for a business in which the
Company held a minority equity investment, and warranties of the Company's
products.
The following table provides the amount of estimated maximum potential
future payments for each major group of the Company's guarantees:
NOVEMBER NOVEMBER AUGUST
$ IN THOUSANDS 2004 2003 2004
-------------- ---- ---- ----
Guarantees:
Guarantees for customer equipment financing ........... $3,900 $3,900 $3,700
Guarantees on third party debt of equity investment ... 250 700 700
Product warranties .................................... N/A N/A N/A
------ ------ ------
Total guarantees ........................................... $4,150 $4,600 $4,400
====== ====== ======
CUSTOMER EQUIPMENT FINANCING
In the normal course of its business, the Company has arranged for unaffiliated
financial institutions to make favorable financing terms available to end-user
purchasers of the Company's irrigation equipment. In order to facilitate these
arrangements, the Company provided the financial institutions with limited
recourse guarantees or full guarantees as described below. The Company recorded,
at estimated fair value, deferred revenue of $70,000 at November 30, 2004,
compared to $78,000 at November 30, 2003 and $83,000 at August 31, 2004,
classified with other current liabilities, for guarantees. The estimated fair
values of these guarantees are based, in large part, on the Company's experience
with this agreement and related transactions. The Company recognizes the revenue
for the estimated fair value of the guarantees ratably over the term of the
guarantee. Separately, related to these exposures, the Company has accrued a
liability of $339,000, $302,000, and $290,000 at November 30, 2004 and 2003 and
August 31, 2004, respectively, also classified with other current liabilities,
for estimated losses on such guarantees.
The Company maintains an agreement with a single financial institution
that guarantees the financial institution's pool of financing agreements with
end users. This guarantee is approximately $1.7 million as November 30, 2004 and
2003 and August 31, 2004. Generally, the Company's exposure is limited to unpaid
interest and principal where the first and/or second annual customer payments
have not yet been made as scheduled. The maximum exposure of these limited
recourse guarantees is equal to 2.75% of the aggregate amounts originally
financed.
Separately, the Company maintains limited, specific customer financing
recourse arrangements with three financial institutions including the
institution referred to above. The original amount of these specific guarantees
is approximately $2.2 million at November 30, 2004 and 2003 and August 31, 2004.
Generally, the Company's exposure is limited to unpaid interest and principal
where customer payments have not yet been made as scheduled. In some cases, the
guarantee may cover all scheduled payments of a loan.
All of the Company's customer-equipment recourse guarantees are
collateralized by the value of the equipment being financed.
GUARANTEES ON THIRD PARTY DEBT RELATED TO EQUITY INVESTMENT
The Company has guaranteed three bank loans and a standby letter of credit on
behalf of the irrigation dealership based in Kansas in which the Company
previously held a minority equity investment position. The guarantees continue
until the loans, including accrued interest and fees, have been paid in full.
The bank loans have been declared to be in default by the bank due to the
insolvency of the dealership. As of November 30, 2004, the maximum aggregate
amount associated with the guarantees and letter of credit was approximately
$250,000. The Company has recorded a current liability as of November 30, 2004
for $250,000 based upon its best estimate of expected aggregate liability
associated with the bank loan guarantees. The majority owner of the business
provides a separate personal guarantee of the bank notes, although the
likelihood of recovery from the majority owner guarantee is uncertain.
12
PRODUCT WARRANTIES
The Company generally warrants its products against certain manufacturing and
other defects. These product warranties are provided for specific periods and/or
usage of the product. The accrued product warranty costs are for a combination
of specifically identified items and other incurred, but not identified, items
based primarily on historical experience of actual warranty claims. This reserve
is classified with other current liabilities. The following table provides the
changes in the Company's product warranties:
FOR THE THREE-MONTHS ENDED
NOVEMBER NOVEMBER
$ IN THOUSANDS 2004 2003
-------------- ---- ----
Warranties:
Product warranty accrual balance, September 1 .......... $ 1,339 $ 1,152
Liabilities accrued for warranties during the period ... 190 425
Warranty claims paid during the period ................. (406) (434)
------- -------
Product warranty accrual balance, end of period ............ $ 1,123 $ 1,143
======= =======
(12) RETIREMENT PLAN
The Company has a supplementary non-qualified, non-funded retirement plan for
six current and former executives. Plan benefits are based on the participant'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. The Company has purchased life insurance
policies on four of the participants named in this supplemental retirement plan
to provide partial funding for this liability. Components of net periodic
benefit cost for the Company's supplemental retirement plan include:
FOR THE THREE-MONTHS ENDED
--------------------------
NOVEMBER NOVEMBER
$ IN THOUSANDS 2004 2003
-------------- ---- ----
Net periodic benefit cost:
Service cost ........................................... $ 9 $ 10
Interest cost .......................................... 67 73
Net amortization and deferral .......................... 76 74
---- ----
Total net periodic benefit cost ............................ $152 $157
==== ====
(13) COMMITMENTS AND CONTINGENCIES
In the ordinary course of its business operations, the Company is involved, from
time to time, in commercial litigation, employment disputes, administrative
proceedings, and other legal proceedings. These include a consent decree that
the Company entered in 1992 with the U.S. Environmental Protection Agency
concerning groundwater contamination at its Lindsay, Nebraska facility, which is
included as an EPA superfund site. Management does not believe that these
matters, individually or in the aggregate, are likely to have a material adverse
effect on the Company's consolidated financial condition, results of operations,
or cash flows.
The Company holds a minority position in an irrigation dealership based
outside of the United States. The Company has an obligation to purchase the
remaining shares of this company for an amount of approximately $1.5 million by
August 31, 2005.
13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
CONCERNING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains not only historical information, but
also forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Statements that are not historical are forward-looking and reflect expectations
for future Company conditions or performance. In addition, forward-looking
statements may be made orally or in press releases, conferences, reports, on the
Company's worldwide web site, or otherwise, in the future by or on behalf of the
Company. When used by or on behalf of the Company, the words "expect",
"anticipate", "estimate", "believe", "intend", and similar expressions generally
identify forward-looking statements. The entire section entitled "Market
Conditions and Fiscal 2005 Outlook" should be considered forward-looking
statements. 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.
Forward-looking statements involve a number of risks and uncertainties,
including but not limited to those discussed in the "Risk Factors" section in
the Company's annual report on Form 10-K for the year ended August 31, 2004.
Readers should not place undue reliance on any forward-looking statement and
should recognize that the statements are predictions of future results or
conditions, which may not occur as anticipated. Actual results or conditions
could differ materially from those anticipated in the forward-looking statements
and from historical results, due to the risks and uncertainties described
herein, as well as others not now anticipated. The risks and uncertainties
described herein are not exclusive and further information concerning the
Company and its businesses, including factors that potentially could materially
affect the Company's financial results, may emerge from time to time. Except as
required by law, the Company assumes no obligation to update forward-looking
statements to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements.
ACCOUNTING POLICIES
In preparing the Company's financial statements in conformity with accounting
principles generally accepted in the United States of America, management must
make a variety of decisions, which impact the reported amounts and the related
disclosures. These decisions include the selection of the appropriate accounting
principles to be applied and the assumptions on which to base accounting
estimates. In making these decisions, management applies its judgment based on
its understanding and analysis of the relevant circumstances and the Company's
historical experience.
The Company's accounting policies that are most important to the
presentation of its results of operations and financial condition, and which
require the greatest use of judgments and estimates by management, are
designated as its critical accounting policies. These critical accounting
policies are described in Note A to the Consolidated Financial Statements in the
Company's Form 10-K for fiscal 2004. Management periodically re-evaluates and
adjusts its critical accounting policies as circumstances change. However, there
were no significant changes in the Company's critical accounting policies during
the three-months ended November 30, 2004.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Beginning in fiscal 2005, Section 404 of the Sarbanes-Oxley Act of 2002 requires
the Company to include in the annual report on Form 10-K a report on
management's assessment of the effectiveness of the Company's internal controls
over financial reporting and a statement that the Company's independent auditor
has issued an attestation report on management's assessment of the Company's
internal controls over financial reporting. The Company believes it is
progressing on the project plan generally as expected to meet this requirement,
and has not identified material weaknesses in internal controls over financial
reporting, to-date. There are no assurances however, that the Company will not
discover deficiencies in its internal controls as it implements new
documentation and testing procedures to comply with the new Section 404
reporting requirement. If the Company discovers deficiencies or is unable to
complete the work necessary to properly evaluate its internal controls over
financial reporting, there is a risk that management and or the Company's
independent auditor may not be able to conclude that the Company's internal
controls over financial reporting are effective.
14
OVERVIEW
Lindsay Manufacturing Co. ("Lindsay" or the "Company") is a leading designer and
manufacturer of self-propelled center pivot and lateral move irrigation systems
which are used principally in the agricultural industry to increase or stabilize
crop production while conserving water, energy, and labor. The Company has been
in continuous operation since 1955, making it one of the pioneers in the
automated irrigation industry. The Company markets its standard size center
pivot and lateral move irrigation systems domestically and internationally under
its Zimmatic brand. The Company also manufactures and markets separate lines of
center pivot and lateral move irrigation equipment for use on smaller fields
under its Greenfield and Stettyn brands, and hose reel travelers under the
Perrot brand (Greenfield in the United States). The Company also produces
irrigation controls and chemical injection systems which it sells under its
GrowSmart brand. In addition to whole systems, the Company manufactures and
markets repair and replacement parts for its irrigation systems and controls.
Lindsay also produces and sells large diameter steel tubing products and
manufactures and assembles diversified agricultural and construction products on
a contract manufacturing basis for certain large industrial companies. Industry
segment information about Lindsay is included in Note 8 to the consolidated
financial statements.
Lindsay, a Delaware corporation, maintains its corporate offices in Omaha,
Nebraska, USA. The Company's principal manufacturing facilities are located in
Lindsay, Nebraska, USA. The Company also has foreign sales and production
facilities in France, Brazil, and South Africa which provide it with important
bases of operations in key international markets. Lindsay Europe SA, located in
France, was acquired in March 2001 and manufactures and markets irrigation
equipment for the European market. Lindsay America do Sul Ltda., located in
Brazil, was acquired in April 2002 and manufactures and markets irrigation
equipment for the South American market. Lindsay Manufacturing Africa, (PTY)
Ltd, located in South Africa, was organized in September 2002 and manufactures
and markets irrigation equipment in markets in southern Africa.
Lindsay has two additional operating subsidiaries including Irrigation
Specialists, Inc., which is a retail irrigation dealership based in Washington
State that operates at four locations ("Irrigation Specialists"). Irrigation
Specialists was acquired by the Company in March 2002 and provides a strategic
distribution channel in a key regional irrigation market. The other operating
subsidiary is Lindsay Transportation, Inc.
15
RESULTS OF OPERATIONS
The following section presents an analysis of the Company's consolidated
operating results displayed in the consolidated statements of operations for the
three-months ended November 30, 2004 and 2003. It should be read together with
the industry segment information in Note 8 to the consolidated financial
statements:
FOR THE THREE-MONTHS ENDED
--------------------------
PERCENT
NOVEMBER NOVEMBER INCREASE
($ IN THOUSANDS) 2004 2003 (DECREASE)
---------------- ---- ---- ----------
Consolidated
Operating revenues ................ $ 39,767 $ 36,513 8.9%
Cost of operating revenues ........ $ 33,194 $ 29,159 13.8
Gross profit ...................... $ 6,573 $ 7,354 (10.6)
Gross margin ...................... 16.5% 20.1%
Operating expenses ................ $ 7,040 $ 6,620 6.3
Operating (loss) income ........... $ (467) $ 734 (163.6)
Operating margin .................. (1.2)% 2.0%
Interest income, net .............. $ 261 $ 424 (38.4)
Other income, net ................. $ 384 $ 449 (14.5)
Income tax provision .............. $ 3 $ 514 (99.4)
Effective income tax rate ......... 1.7% 32.0%
Net earnings ...................... $ 175 $ 1,093 (84.0)
Irrigation Equipment Segment (1)
Operating revenues ................ $ 35,402 $ 33,970 4.2
Operating income .................. $ 3,511 $ 4,240 (17.2)
Operating margin .................. 9.9% 12.5%
Diversified Products Segment (1)
Operating revenues ................ $ 4,365 $ 2,543 71.6
Operating income .................. $ 315 $ 247 27.6
Operating margin .................. 7.2% 9.7%
(1) Excludes unallocated general & administrative and engineering & research
expenses
FOR THE THREE-MONTHS ENDED NOVEMBER 30, 2004
REVENUES
Operating revenues for the three months ended November 30, 2004 rose 9 percent
to $39.8 million from $36.5 million for the year-ago period. This increase was
attributable to both irrigation and diversified products improvements.
Domestic irrigation revenues declined $.4 million or 2 percent, from the
same prior year period. The decline in revenue was due to a slightly more than
20% decline in unit volume, which was offset by price increases implemented
primarily in the second half of fiscal 2004. The Company believes pricing
policies, equipment prices, and commodity prices all contributed to the decline
in unit volume. The Company implemented a change to its pricing policies during
the rapid steel cost increases of 2004 which reduced the protected price period
to 30 days. Domestic irrigation equipment prices are approximately 20% higher
than the same period last year while agriculture commodity prices have declined.
International irrigation equipment revenues for the three months ended
November 30, 2004 increased $1.9 million or 19% over the same prior year period.
These revenues include both the export sales of equipment manufactured in the
United States and sales of the Company's manufacturing operations in France,
Brazil, and South Africa. Export shipments to Australia and New Zealand were
significantly above the same period last year. Exports to the Middle East
increased but remain at historically low levels. Europe and South Africa
revenues were up significantly, and include the revenues of Stettyn, the
irrigation manufacturing company acquired in South Africa during the fourth
quarter of fiscal 2004. South American revenues were lower due in part to the
lower agricultural commodity prices.
16
Diversified manufacturing revenues for the three months ended November 30,
2004 of $4.4 million increased $1.8 million or 72% from the same prior year
period. Revenues in this segment depend to a large degree on orders from a
relatively small number of customers. However, a significant portion of the new
business in this segment is from industrial customers, which are outside the
traditional agricultural equipment base. This segment utilizes and leverages the
equipment in the Lindsay, Nebraska plant.
GROSS MARGIN
Gross margin declined to 16.5 percent from 20.1 percent a year ago. Gross
selling margins in the domestic market were near the prior-year levels; however,
they were negatively impacted by higher overhead allocations per unit due to
lower production levels and higher factory spending. While margins in foreign
facilities continued to improve, they remain lower than domestic irrigation.
OPERATING EXPENSES
Operating expenses rose 6 percent to $7.0 million from $6.6 million, due to
increases in insurance, audit and tax preparation costs, and incremental
operating expenses of Stettyn, the South African business acquired in the fourth
quarter of fiscal 2004. However, operating leverage continued to improve, with
operating expenses at 17.7 percent of revenue compared with 18.1 percent of
revenue in the fiscal 2004 period.
INTEREST INCOME, OTHER INCOME, AND TAXES
Net interest income during the three-months ended November 30, 2004 of $261,000
was comparable to $424,000 the same prior year period. This $163,000 decrease
reflects a reduction of interest income from securities and interest bearing
checking accounts and an increase in interest expense.
Other income, net of $384,000 during the three-months ended November 30,
2004 reflects a decrease of $65,000 compared to other income, net of $449,000
for the same prior year period, primarily reflecting lower foreign currency net
gains compared to the same prior year period.
The income tax provision for the three months ended November 30, 2004 was
reduced by adjustments identified during the period primarily related to the tax
effect of inter-company inventory profit eliminations and a change in the
extraterritorial income credit. The effective tax rate expected for fiscal 2005
is 33.15% compared with 32.5% for fiscal 2004. This higher rate is due to higher
expected operating income in relation to the tax-exempt interest income from the
Company's municipal bond investments. Overall, the Company benefits from a U.S.
effective tax rate which is lower than the combined federal and state statutory
rates primarily due to the federal tax-exempt interest income on this portfolio.
The American Jobs Creation Act of 2004 (the Act) which was signed into law
on October 22, 2004 includes provisions which phase out the extraterritorial
income deduction over a two year period beginning January 1, 2005. The first
year phase out of 20% will impact the Company's tax rates for the eight months
of 2005, which are in the fiscal year. This phase out has been included in the
effective tax rate calculation.
The Act also includes provisions for a one-time deduction for qualifying
repatriations of foreign earnings during fiscal 2005. The Company does not
intend to repatriate earnings of its foreign subsidiaries during fiscal 2005.
The incentive for U.S. production activities included in the Act,
effective for fiscal years beginning after December 31, 2004, will not impact
the Company's tax rate in fiscal 2005.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires cash for financing its receivables and inventories, paying
operating costs and capital expenditures, and for dividends. Historically, the
Company has met its liquidity needs and financed all capital expenditures
exclusively from its available cash and funds provided by operations.
17
The Company's cash and marketable securities totaled $43.6 million at
November 30, 2004, $56.3 million at August 31, 2003, and $56.0 million at
November 30, 2003. The Company's marketable securities consist primarily of
tax-exempt high-grade municipal debt.
Cash flows used in operations totaled $10.5 million during the
three-months ended November 30, 2004 compared to $5.8 million provided by
operations during the same prior year period. Cash flows used in operations
increased $4.7 million compared to the same prior year period primarily due to
higher inventory builds of $4.3 million, a $1.1 million higher change in
accounts payable, and a $918,000 decrease in net earnings offset partially by a
lower $2.1 million change in accounts receivable. The inventory change was
primarily due to unit sales volumes which were lower than planned and the
accounts receivable change was primarily due to timing of dealer programs.
Capital expenditures were $1.3 million during the three-months ended November
30, 2004 compared to $721,000 during the same prior year period. Capital
expenditures were used primarily for updating manufacturing plant and equipment,
expanding manufacturing capacity, and further automating the Company's
facilities. Capital expenditures for fiscal 2005 are expected to be
approximately $4 to $5 million and will be used to improve the Company's
facilities and expand its manufacturing capacity. The Company may also use cash
to finance business acquisitions and stock repurchases from time to time.
The Company made no repurchases of its common stock under the Company's
stock repurchase plan during the three-months ended November 30, 2004. From time
to time, the Company's Board of Directors has authorized management to
repurchase shares of the Company's common stock. Most recently, during August
2000, the Company announced a 1.0 million share increase in the number of shares
authorized for repurchase. Under this share repurchase plan, management has
existing authorization to purchase, without further announcement, up to 1.2
million shares of the Company's common stock in the open market or otherwise.
The Company has an agreement with a commercial bank for a $10.0 million
unsecured revolving line of credit through December 28, 2005. 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. Under the terms of the line of credit,
borrowings, if any, 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 (5.00% at November 30, 2004). The Company expects to
renew this line of credit on substantially similar terms.
The Company's European subsidiary, Lindsay Europe, has an unsecured
revolving line of credit with a commercial bank under which it could borrow up
to the Euro equivalent of $2.7 million for working capital purposes. As of
November 30, 2004, there was a $782,000 outstanding balance on this line. Under
the terms of the line of credit, borrowings, if any, bear interest at a floating
rate in effect from time to time designated by the commercial bank as LIBOR+200
basis points. (4.65% at November 30, 2004).
The Company believes its current cash resources (including cash and
marketable securities balances), projected operating cash flow, and prospective
bank line of credit are sufficient to cover all of its expected working capital
needs, planned capital expenditures, dividends, and other cash needs. During the
three-months ended November 30, 2004, the Company had $7.7 million of securities
that matured or were sold; these funds were used for working capital needs.
OFF-BALANCE SHEET ARRANGEMENTS
There have been no material changes in our off balance sheet arrangements as
described on page 18 in our Form 10-K for the fiscal year ended August 31, 2004.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
There have been no material changes in our contractual obligations and financial
commitments as described on page 18 in our Form 10-K for the fiscal year ended
August 31, 2004.
18
MARKET CONDITIONS AND FISCAL 2005 OUTLOOK
For fiscal 2005, the Company expects unit volume growth in the international
markets for irrigation equipment, but the Company remains uncertain as to the
effect of price and pricing policy changes on the demand in our domestic
markets. While many of the major agriculture commodity prices have declined, net
cash farm income domestically is projected to be high, creating favorable
conditions for growers to invest in income producing equipment, such as
irrigation equipment. In addition, demand can be favorably or unfavorably
impacted by weather conditions during the primary selling season, which begins
mid-way through the Company's second quarter. International market demand
remains relatively strong and the weak U.S. dollar results in conditions
favorable for exporting equipment.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB 123R, (revised December 2004), "Share-Based Payment" sets accounting
requirements for "share-based" compensation to employees, including
employee-stock-purchase-plans (ESPPs) and provides guidance on accounting for
awards to non-employees. This Statement will require the Company to recognize in
the income statement the grant-date fair value of stock options and other
equity-based compensation issued to employees, but expresses no preference for a
type of valuation model. For public entities, this Statement is effective for
the first interim period beginning after June 15, 2005. The Company will adopt
this Statement in the fourth quarter of fiscal 2005 and is evaluating this
pronouncement's effect on the Company's financial position and net income.
FASB 151, "Inventory Costs" eliminates the "so abnormal" criterion in ARB
43 "Inventory Pricing". This Statement no longer permits a company to capitalize
inventory costs on their balances sheets when the production defect rate varies
significantly from the expected rate. The Statement reduces the differences
between U.S. and international accounting standards. This Statement is effective
for inventory cost incurred during annual periods beginning after June 15, 2005.
The Company will adopt this Statement in the first quarter of fiscal 2006 and is
evaluating this pronouncement's effect on the Company's financial position and
net income.
FASB 153, "Exchanges of Productive Assets" eliminates the exception to the
fair-value principle for exchanges of "similar productive assets," which had
been accounted for based on the book value of the asset surrendered with no gain
recognition. Nonmonetary exchanges have to be accounted for at fair-value,
recognizing any gain or loss, if the transactions meet the commercial-substance
criterion and fair-value determinable. The Statement reduces the differences
between U.S. and international accounting standards. This Statement is effective
for nonmonetary transactions occurring in fiscal periods after June 15, 2005.
The Company will adopt this Statement in the first quarter of fiscal 2006 and is
evaluating this pronouncement's effect on the Company's financial position and
net income.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market value of the Company's investment securities fluctuates inversely
with movements in interest rates because all of these investment securities bear
interest at fixed rates. Accordingly, during periods of rising interest rates,
the market value of these securities will decline. However, the Company does not
consider itself to be subject to material market risks with respect to its
portfolio of investment securities because the maturity of these securities is
relatively short, making their value less susceptible to interest rate
fluctuations.
The Company has manufacturing operations in the United States, France,
Brazil, and South Africa. The Company has sold products throughout the world and
purchases certain of its components from third-party foreign suppliers. Export
sales made from the United States are principally U.S. dollar denominated.
Accordingly, these sales are not subject to significant currency translation
risk. However, a majority of the Company's revenue generated from operations
outside the United States is denominated in local currency. The Company's most
significant transactional foreign currency exposures are the Euro, Brazilian
real, and the South African rand in relation to the U.S. dollar. Fluctuations in
the value of foreign currencies create exposures, which can adversely affect the
Company's results of operations. The Company attempts to manage its
transactional foreign exchange exposure by monitoring foreign currency cash flow
forecasts and commitments arising from the settlement of receivables and
payables, and from future purchases and sales.
19
The Company's translation exposure resulting from translating the
financial statements of foreign subsidiaries into U.S. dollars is not hedged.
The most significant translation exposures are the Euro, Brazilian real, and the
South African rand in relation to the U.S. dollar.
ITEM 4 - CONTROLS AND PROCEDURES
Based upon their evaluation of the effectiveness of the Company's disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e), management, including the Chief Executive Officer and Chief Financial
Officer, concluded that the Company's disclosure controls and procedures were
effective as of November 30, 2004.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
November 30, 2004 through the date of this Quarterly Report on Form 10-Q,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
20
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In the ordinary course of its business operations, the Company is involved, from
time to time, in commercial litigation, employment disputes, administrative
proceedings, and other legal proceedings. These include a consent decree that
the Company entered in 1992 with the U.S. Environmental Protection Agency
concerning groundwater contamination at its Lindsay, Nebraska facility, which is
included as an EPA superfund site. Management does not believe that these
matters, individually or in the aggregate, are likely to have a material adverse
effect on the Company's consolidated financial condition, results of operations,
or cash flows.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company made no repurchases of its common stock under the Company's stock
repurchase plan during the three months ended November 30, 2004; therefore,
tabular disclosure is not presented. From time to time, the Company's Board of
Directors has authorized management to repurchase shares of the Company's common
stock. Most recently, during August 2000, the Company announced a 1.0 million
share increase in the number of shares authorized for repurchase. Under this
share repurchase plan, management has existing authorization to purchase,
without further announcement, up to 1.2 million shares of the Company's common
stock in the open market or otherwise.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5- OTHER INFORMATION
None
ITEM 6 - EXHIBITS
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 December 16, 2004, incorporated by reference to
Exhibit 3(b) of the Company's Report on Form 8-K filed on
December 22, 2004.
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.
31(a) Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350.
31(b) Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350.
32(a) Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 18 U.S.C. Section 1350.
21
SIGNATURE
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 10th day of
January 2005.
LINDSAY MANUFACTURING CO.
By: /s/ DAVID B. DOWNING
-------------------------------
Name: David B. Downing
Title: Vice President, Chief Financial Officer
(Principal Financial Officer)
22