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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, 1999 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.)
BOX 156, 214 EAST 2ND STREET, LINDSAY, NEBRASKA 68644
(Address of principal executive offices) (Zip Code)
402-428-2131
Registrant's telephone number, including area code
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 16, 1999, 12,408,614 shares of the registrant's Common Stock were
outstanding and the aggregate market value of all Common Stock held by
non-affiliates (7,716,413 shares) was $141,306,813 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 25, 2000, annual
shareholders' meeting are incorporated herein by reference into Part III.
Exhibit index is located on page 28-30.
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ITEM 1 - BUSINESS
(a) Lindsay Manufacturing Co. ("Lindsay" or the "Company") is a leading
designer, manufacturer and international and domestic marketer, under its
"Zimmatic" trademark, of electrically powered center pivot and lateral move
irrigation systems for use to irrigate agricultural crops. Additionally, the
Company manufactures and markets repair and replacement parts for its Zimmatic
irrigation systems. Lindsay also produces and sells large diameter thin wall
steel tubing and manufactures and assembles products for other manufacturers
(such as corn planters and sub-assemblies for construction equipment).
Lindsay was founded in 1955 and incorporated under Nebraska law in
1969. DEKALB Energy Company, ("DEKALB", formerly DEKALB Corporation) acquired
Lindsay in 1974 through its merger into Lindsay Manufacturing Co., a
wholly-owned Delaware subsidiary of DEKALB. The company was a wholly-owned
subsidiary of DEKALB until October 1988 at which time it became a separate
public corporation.
(b) Industry segment information is included in Part II, Item 8, Footnote M on
page 25.
(c) Product. Lindsay's irrigation systems are primarily of the 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 center pivot for the U.S. market is approximately 1,250 feet
long and is designed to circle within a standard quarter-section of land, which
comprises 160 acres, wherein it irrigates approximately 130 to 135 acres. A
typical center pivot for the international market is also approximately 1,250
feet long. Center pivot or lateral move systems can also be custom designed and
can irrigate from 25 to 500 acres.
A center pivot system represents a significant investment to a farmer.
A typical 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 center pivot irrigation systems
in operation worldwide, resulting in an active repair and replacement parts
business.
Types Of Irrigation - Competitive Products. Center pivot and lateral
move irrigation systems compete with three other types of irrigation: flood,
drip and other mechanical devices. The bulk of the worldwide irrigation is
accomplished by the traditional method of flood irrigation. Flood irrigation is
accomplished by either flooding an entire field, or by providing a water source
(ditches or a pipe) along the side of a field, which is planed and slopes
slightly away from the water source. The water is released to the crop rows
through gates in the ditch or pipe, or through siphon tubes arching over the
ditch wall into some of the crop rows. It runs down through the crop row until
it reaches the far end of the row, at which time the water source is moved and
another set of rows are flooded. Note that a significant disadvantage or
limitation of flood irrigation is that it cannot be used to irrigate uneven,
hilly or rolling terrain or fields. In "drip" or "trickle" irrigation,
perforated pipe is installed on the ground or buried underground at the root
level. Several other types of mechanical devices irrigate the remaining
irrigated acres. These other types of mechanical devices are not generally being
replaced and no longer generate significant sales.
Center pivot and lateral move irrigation offers significant advantages
when compared with other types of irrigation. It requires less labor and
monitoring; it can be used on sandy ground which, due to poor water retention
ability, must have water applied frequently; it can be used on uneven ground,
thereby allowing previously unsuitable land to be brought into production; it
can also be used for the application of fertilizers, insecticides, herbicides or
other chemicals (termed "chemigation"); and it conserves water and chemicals
through precise control of the amount and timing of its application.
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Markets - General. Water is an essential and critical requirement for
crop production, and the extent, regularity and frequency of water application
can be a critical determinant in crop quality and yield.
The fundamental factors which govern the demand for center pivot and
lateral move systems are essentially the same in both the domestic and
international markets. Demand for center pivot and lateral move systems is
determined by whether the increased value of crop production attributable to
center pivot or lateral move irrigation exceeds any increased costs associated
with purchasing, installing and operating the equipment. Thus, the decision to
purchase a center pivot or lateral move system reflects the profitability of
agricultural production, which is determined primarily by the prices of
agricultural commodities and the costs of other farming inputs.
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.
United States Market. 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 farm land.
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 pumping 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. Essentially all foreign
sales are in U.S. dollars and are essentially all 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 system,
marketing and sales methods, equipment requirements and difficulty of on-site
erection. Lindsay'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. The
following table describes Lindsay's total revenues for the past three years.
($ IN THOUSANDS) FISCAL YEAR ENDED AUGUST 31,
---------------------------------------------------------------------------
1999 1999 1998 1998 1997 1997
---------- ---------- ---------- ---------- ---------- ----------
% of Total % of Total % of Total
Revenues Revenues Revenues Revenues Revenues Revenues
---------- ---------- ---------- ---------- ---------- ----------
Europe & Africa .............. $ 7,769 5 $ 7,753 5 $ 9,781 6
Mexico & Latin America ....... 6,709 6 8,235 5 15,108
10
Other Export ................. 8,070 9 11,786 8 7,386
5
Domestic ..................... 94,103 80 127,933 82 126,052 79
---------- ---------- ---------- ---------- ---------- ----------
Total ......... $ 116,651 100 $ 155,707 100 $ 158,327 100
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Competition. During the 1970's there were over 30 domestic
manufacturers of center pivot irrigation systems, while six manufacturers remain
today. Lindsay believes that it has a center pivot and lateral move irrigation
equipment U.S. market share of approximately 25 to 30 percent and an export
market share of approximately 40 percent.
There is a high level of price competition and utilization of seasonal
promotional programs. Competition also occurs in areas of product quality and
durability, advanced product technology, product characteristics, retention and
reputation of local dealers, post-sale service, and, at certain times of the
year, the availability of systems and their delivery time. Lindsay believes it
generally competes favorably with respect to these factors.
DIVERSIFIED PRODUCTS
Seeking to expand the throughput of its manufacturing facility and operation,
the company began in 1987 to more fully utilize off-season capacity by providing
outsource manufacturing services and selling large-diameter steel tubing.
Lindsay's customer base includes some of the country's most demanding industrial
companies, including Caterpillar Inc., Deere & Company and New Holland North
America, Inc. Each benefits from Lindsay's design and engineering capabilities
as well as the company's ability to provide a wide spectrum of manufacturing
services, including welding, machining, painting, punching, forming, galvanizing
and hydraulic, electrical and mechanical assembly. Management's goal is to grow
this segment to 20 to 25% of total sales, primarily by broadening the range of
services Lindsay provides for its existing customer base. As irrigation
equipment manufacturing becomes even more sophisticated, so too will Lindsay's
outsource manufacturing capabilities.
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. Lindsay's expansion into diversified manufacturing
complements its irrigation operations by using available capacity and reducing
seasonality.
ORDER BACKLOG
As of August 31, 1999 and 1998, Lindsay had an order backlog of $14.6 million
and $14.1 million, respectively. At fiscal year end 1999, Lindsay had a $9.7
million order backlog for irrigation equipment. This was an increase of 41% from
fiscal year end 1998's irrigation equipment order backlog of $6.9 million.
Lindsay began fiscal 1999 with farmers somewhat dismayed over the significant
drop in agricultural commodity prices. For some farmers, the anticipation of
lower prices and lower income meant fewer capital expenditures; for others it
only delayed their purchase decision until Lindsay's third quarter when they
were better able to assess their financial health. This effect on timing is
evident in the Company's irrigation equipment backlog. At year end fiscal 1999,
order backlog for diversified products totaled $4.9 million, down 32% from $7.2
million at fiscal year end 1998. The reduction in diversified products order
backlog is due to a softer demand outlook or revised order placement procedures
for the products that the Company manufactures for its three major outsource
manufacturing customers.
Lindsay manufactures a center pivot or lateral move system only upon a
dealer's firm order for both the U.S. and export markets. Orders from U.S.
dealers are accompanied with a $1000 (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.
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CAPITAL EXPENDITURES
Capital expenditures for fiscal 1999, 1998 and 1997, were $4.0 million, $5.1
million and $3.8 million, respectively. Fiscal 1999 capital expenditures were
used primarily for a new employee breakroom and office renovation and expansion,
routine replacement and updating of manufacturing equipment and additional work
on converting a major fabrication process started in fiscal year 1998 to further
automate Lindsay's facility. Capital expenditures for fiscal year 2000 are
expected to be approximately $3.0 to $4.0 million and will be used to improve
the company's existing facilities, expand its manufacturing capabilities and
increase productivity. 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
The "Zimmatic" and other trademarks are registered in most markets in which
Lindsay sells its product. Lindsay follows a policy of applying for patents on
all significant patentable inventions. Although Lindsay believes it is important
to follow a patent protection policy, Lindsay's business is not dependent, to
any material extent, on any single patent or group of patents.
EMPLOYEES
The number of persons employed by Lindsay at fiscal year end 1999, 1998 and 1997
were 480, 551 and 553, respectively. Lindsay currently employs approximately 500
persons. None of Lindsay's employees are represented by a union.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
Like other manufacturing concerns, Lindsay is subject to numerous laws and
regulations which govern occupational health and safety and the discharge and
disposal of materials into the environment. 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 the Lindsay,
Nebraska facility. 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 environmental
regulations or standards can be achieved only through additional capital and
operational expenditures.
SUBSIDIARIES
Lindsay has two wholly owned operating subsidiaries: Lindsay International Sales
Corporation and Lindsay Transportation, Inc. Since 1996, international sales
personnel have been located at the corporate office in Lindsay, Nebraska as part
of Lindsay International Sales Corporation, which conducts foreign sales
operations for Lindsay. Lindsay Transportation, Inc. was formed in 1975. It owns
approximately 110 trailers and, through lease of tractors, supplies the ground
transportation in the United States and Canada for Lindsay's products and the
bulk of incoming raw materials, and hauls other products on backhauls. Lindsay
also has three non-operational subsidiaries.
ITEM 2 - PROPERTIES
Lindsay owns and occupies 43 acres in Lindsay, Nebraska. Its manufacturing
operation has eight separate buildings, with approximately one-half million
square feet of manufacturing area under roof. With the Company's current
manufacturing capacity, the Company believes it can increase sales without a
major investment in facilities and capital equipment.
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 1999.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages, positions and past five years
experience are set forth below. All officers are elected for one year terms,
which can be annually renewed at a Board of Directors meeting. This meeting is
scheduled for January 25, 2000.
AGE POSITION WITH THE COMPANY
--- -------------------------
Gary D. Parker 54 Chairman, President and Chief Executive Officer
Eduardo R. Enriquez 59 Vice President - International
Bruce C. Karsk 47 Vice President - Finance, Treasurer and
Secretary
Clifford P. Loseke 61 Vice President - Manufacturing
Charles H. Meis 53 Vice President - Engineering
Robert S. Snoozy 53 Vice President - Domestic Sales
Mr. Gary D. Parker is Chairman, President and Chief Executive Officer
of Lindsay, and has held such positions since December 1989. Prior to that time,
and since 1984, he was President and Chief Executive Officer of Lindsay. He
served as Executive Vice President from 1978 to 1984. Mr. Parker has been a
Director since 1978. Mr. Parker began his employment with Lindsay in 1971.
Mr. Eduardo R. Enriquez is President of Lindsay International Sales
Corporation and has served in that capacity and as Vice President -
International of Lindsay since May of 1986. Prior to that time, and since 1981,
he was Vice President - Sales of Lindsay International Sales Corporation. Mr.
Enriquez began his employment with Lindsay in 1981.
Mr. Bruce C. Karsk is Vice President - Finance, Treasurer and Secretary
of Lindsay and has held such positions since 1984. Prior to that time, and since
1981, Mr. Karsk had been the Controller. Mr. Karsk has also been a Director
since 1998. Mr. Karsk began his employment with Lindsay in 1979.
Mr. Clifford P. Loseke is Vice President - Manufacturing of Lindsay, a
position he has held since 1975. Mr. Loseke began his employment with Lindsay in
1971.
Mr. Charles H. Meis is Vice President - Engineering of Lindsay and has
held such position since 1975. Mr. Meis began his employment with Lindsay in
1971.
Mr. Robert S. Snoozy became Vice President - Domestic Sales of Lindsay
in November 1997. From 1986 through November 1997 Mr. Snoozy was Vice President
of Sales and Marketing. Prior to that time, and since 1978, he had been Vice
President of Marketing. Mr. Snoozy began his employment with Lindsay in 1973.
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PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Lindsay Common Stock began public trading on October 12, 1988. On October 21,
1997, Lindsay's Common Stock began trading on the New York Stock Exchange, Inc.
(NYSE) under the ticker symbol "LNN". Prior to trading on the NYSE, Lindsay
Common Stock traded on the Nasdaq National Market. As of November 16, 1999 there
were approximately 250 shareholders of record and an estimated 4,100
shareholders for whom securities firms acted as nominees.
The following table sets forth for the periods indicated the range of
the high and low sales price and dividends paid:
FISCAL YEAR 1999 FISCAL YEAR 1998
---------------- ----------------
STOCK PRICE STOCK PRICE
----------- -----------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
--------- --------- --------- --------- -------- ---------
First Quarter $ 21.31 $ 11.25 $ 0.035 $ 33.50 $ 25.33 $ 0.024
Second Quarter 17.00 12.50 0.035 29.00 25.42 0.033
Third Quarter 22.38 14.88 0.035 32.58 26.21 0.033
Fourth Quarter 20.38 16.00 0.035 30.92 20.00 0.035
--------- --------- --------- --------- -------- ---------
Year $ 22.38 $ 11.25 $ 0.140 $ 33.50 $ 20.00 $ 0.125
========= ========= ========= ========= ======== =========
ITEM 6 - SELECTED FINANCIAL DATA
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS) FOR THE YEARS ENDED AUGUST 31,
- ------------------------------------------- ------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
Operating revenues ............................... $ 116.7 $ 155.7 $ 158.3 $ 136.2 $ 111.8
Gross profit ..................................... 30.6 42.8 40.9 32.7 25.9
Selling, general and
administrative, and
engineering and research
expenses ....................................... 15.6 15.7 14.4 13.4 11.9
Earnings before cumulative
effect of accounting change .................... 12.7 23.5 20.1 16.5 11.7
Net earnings ..................................... 12.7 23.5 20.1 16.5 11.7
Earnings before cumulative
effect of accounting
change per share(1) ........................... 0.96 1.61 1.34 1.08 0.73
Net earnings per share(1) ........................ 0.96 1.61 1.34 1.08 0.73
Cash dividends per share ......................... 0.14 0.125 0.091 0.067 0
Property, plant and
equipment, net ................................. 15.4 14.1 11.3 9.7 7.2
Total assets ..................................... 100.4 108.9 108.0 96.8 86.1
Long-term obligation ............................. $ 0 $ 0.1 $ 0.3 $ 0 $ 0
Return on sales .................................. 10.9% 15.1% 12.7% 12.1% 10.5%
Return on beginning assets ....................... 11.7% 21.7% 20.7% 19.2% 13.2%
Diluted weighted average shares .................. 13.285 14.556 14.980 15.226 15.933
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS) FOR THE YEARS ENDED AUGUST 31,
- ------------------------------------------- ------------------------------
1994 1993 1992 1991 1990 1989
--------- --------- --------- --------- --------- ---------
Operating revenues ............................... $ 112.7 $ 102.1 $ 108.9 $ 98.7 $ 102.7 $ 92.6
Gross profit ..................................... 25.7 23.8 23.8 21.5 20.0 18.6
Selling, general and
administrative, and
engineering and research
expenses ....................................... 11.6 10.7 10.9 10.5 9.6 8.2
Earnings before cumulative
effect of accounting change .................... 11.2 10.7 11.0 8.9 8.4 7.4
Net earnings ..................................... 11.9 10.7 11.0 8.9 8.4 7.4
Earnings before cumulative
effect of accounting
change per share(1) ........................... 0.68 0.66 0.68 0.57 0.54 0.47
Net earnings per share(1) ........................ 0.72 0.66 0.68 0.57 0.54 0.47
Cash dividends per share ......................... 0 0 0 0 0 0
Property, plant and
equipment, net ................................. 5.6 5.6 6.0 5.4 4.7 4.4
Total assets ..................................... 88.4 79.9 71.4 60.4 46.9 31.7
Long-term obligation ............................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Return on sales .................................. 10.6% 10.5% 10.1% 9.0% 8.2% 8.0%
Return on beginning assets ....................... 14.9% 15.0% 18.2% 19.0% 26.4% 30.8%
Diluted weighted average shares .................. 16.418 16.358 16.310 15.690 15.632 15.719
(1) Per share amounts are calculated using diluted average shares outstanding.
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
OVERVIEW
As the Company projected in its fiscal year 1998 Annual Report, both the U.S.
and export markets for Lindsay's center pivot and lateral move irrigation
equipment registered a decline in revenues in fiscal year 1999 as compared to
fiscal year 1998 due to lower average agricultural commodity prices. Diversified
products revenues for the year were also negatively influenced by these lower
agricultural commodity prices. In total, the Company's operating revenues in
fiscal year 1999 were 25 percent lower than its operating revenues in fiscal
year 1998. Net earnings for fiscal year 1999 of $12.7 million were 39 percent
lower than fiscal year 1998's net earnings of $20.8 million, excluding the
benefit of a third quarter fiscal year 1998 gain of $4.0 million ($2.7 million
after tax) from a litigation settlement.
During fiscal year 1999, Lindsay repurchased 1,250,499 shares of its
common stock for a total of $20.5 million. The Company's balance sheet features
no long-term debt and strong financial ratios.
RESULTS OF OPERATIONS
The following "Fiscal Year 1999 Compared to 1998" and the "Fiscal Year 1998
Compared to 1997" sections present an analysis of Lindsay's consolidated
operating results displayed in the Consolidated Statements of Earnings and
should be read together with the industry segment information in Note M to the
financial statements.
FISCAL YEAR 1999 COMPARED TO 1998
The following table provides highlights for fiscal year 1999 compared with
fiscal year 1998.
FOR THE YEARS ENDED PERCENT INCREASE
AUGUST 31, (DECREASE)
------------------------ -----------------
($ IN THOUSANDS) 1999 1998
---------- ----------
Consolidated
Operating Revenues ............................ $ 116,651 $ 155,707 (25.1)%
Cost of Operating Revenues .................... $ 86,007 $ 112,866 (23.8)
Gross Profit .................................. $ 30,644 $ 42,841 (28.5)
Gross Margin .................................. 26.3% 27.5%
Selling, Eng. & Research, and G&A Expense ..... $ 15,625 $ 15,713 (0.6)
Operating Income .............................. $ 15,019 $ 27,128 (44.6)
Operating Margin .............................. 12.9% 17.4%
Interest Income, net .......................... $ 2,822 $ 3,197 (11.7)
Other Income, net ............................. $ 348 $ 4,307 (91.9)
Income Tax Provision .......................... $ 5,457 $ 11,152 (51.1)
Effective Income Tax Rate ..................... 30.0% 32.2%
Net Earnings .................................. $ 12,732 $ 23,480 (45.8)
Irrigation Equipment Segment (See Note M)
Operating Revenues ............................ $ 101,369 $ 130,461 (22.3)
Operating Income .............................. $ 22,025 $ 31,840 (30.8)
Operating Margin .............................. 21.7% 24.4%
Diversified Products Segment (See Note M)
Operating Revenues ............................ $ 15,282 $ 25,246 (39.5)
Operating Income .............................. $ 3,441 $ 5,216 (34.0)%
Operating Margin .............................. 22.5% 20.7%
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REVENUES
Fiscal year 1999 operating revenues of $116.7 million were 25 percent lower than
fiscal year 1998's $155.7 million. Fiscal year 1999's U.S. irrigation equipment
revenues totaled $75.8 million, 24 percent lower than fiscal year 1998's revenue
from U.S. irrigation equipment of $99.6 million. Fiscal year 1999's export
irrigation equipment revenues totaled $22.4 million and were 19 percent lower
than fiscal 1998's export irrigation equipment revenue of $27.8 million.
Diversified product revenues totaled $15.3 million in fiscal year 1999, a 39
percent reduction compared to fiscal year 1998's diversified product revenues of
$25.2 million. Other revenues, primarily consisting of revenues from long-haul
over the road freight services, are included in the Irrigation Equipment Segment
in the table above and totaled $3.2 million in fiscal year 1999 and $3.1 million
in fiscal year 1998.
Demand in the U.S. market for almost all agricultural related capital
equipment, including center pivot and lateral move irrigation equipment, began
to slow during Lindsay's fourth quarter of fiscal year 1998 due to lower
agricultural commodity prices and anticipated lower farm income. This
comparatively slow demand for center pivots and lateral move irrigation
equipment continued into Lindsay's first and second quarter of fiscal year 1999
as farmers postponed capital equipment purchases. Nearly all of fiscal year
1999's reduction in U.S. center pivot and lateral move irrigation equipment
revenues occurred during Lindsay's first two quarters of the fiscal year.
Demand in the export market for center pivot and lateral move equipment
during fiscal year 1999 was negatively influenced by the same low agricultural
commodity price factor as the U.S. market. Additionally, export irrigation
equipment sales were hurt by the strength of the U.S. dollar relative to certain
other currencies, particularly those of Western Europe. A $2.2 million sale for
a project in Romania during Lindsay's fiscal third quarter offset a portion of
the overall reduction in export sales revenue for fiscal year 1999.
Fiscal year 1999's reduction in diversified products revenues was the
result of a lower level of sales for both Lindsay's large diameter thin wall
steel tubing products and for the Company's outsource manufacturing services.
Caterpillar Inc., Deere & Company, and New Holland North America, Inc. each
continue to be significant outsource manufacturing customers.
At August 31, 1999, Lindsay's order backlog for irrigation equipment
was $9.7 million, an increase of 41 percent from $6.9 million at August 31,
1998. Lindsay's August 31, 1999 order backlog for diversified products was $4.9
million, a 32 percent decline from $7.2 million at August 31, 1998. Lindsay's
total order backlog at August 31, 1999 was $14.6 million, a modest increase from
$14.1 million of August 31, 1998.
GROSS MARGIN
Fiscal year 1999's manufacturing throughput was lower than that of fiscal year
1998 as a result of both center pivot and lateral move irrigation equipment
demand and revenues and diversified products demand and revenues being lower in
fiscal year 1999 than in fiscal year 1998. Despite this lower manufacturing
throughput and the resulting unfavorable overhead variances, Lindsay was able to
maintain the majority of its gross margin. This was accomplished largely due to
good cost controls, soft raw material prices and continued automation and
production improvements. The Company attained a gross margin of 26.3 percent in
fiscal year 1999, which compares only modestly unfavorably with a gross margin
of 27.5 percent posted in fiscal year 1998 when the Company had significantly
higher factory throughput.
OPERATING EXPENSES
Fiscal year 1999's selling, engineering and research and general and
administrative (SG&A) expenses of $15.6 million were only slightly lower than
fiscal year 1998's SG&A expenses of $15.7 million. Increased SG&A depreciation,
legal fees and group insurance expenses during the year were more than offset by
reduced salary and wage and employee and dealer travel costs.
INTEREST INCOME, OTHER INCOME AND TAXES
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 1999
interest income was $2.8 million, modestly lower than fiscal year 1998's
interest income of $3.2 million.
Fiscal year 1999's other income of $0.3 million was equal to fiscal
year 1998's $0.3 million, after adjusting fiscal year 1998's other income for
the recognition of $4.0 million due to an agreement that the Company reached
with an insurer to settle litigation which Lindsay initiated in 1990.
9
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Lindsay's fiscal year 1999 effective tax rate was reduced to 30.0
percent from a 32.2 percent rate for fiscal year 1998. The fiscal year 1999
reduction in the effective rate was the result of a larger portion (13.1%) of
the Company's pre-tax earnings coming from municipal bond interest (exempt from
federal income taxes) in fiscal year 1999 as compared to fiscal year 1998 when
the Company's municipal bond interest represented 7.7 percent of Lindsay's
pre-tax earnings. In addition to the federal tax free status on municipal bond
interest income, the Company currently benefits and expects to continue to
benefit from the foreign sales corporation federal tax provisions as they relate
to export sales, and to State of Nebraska economic development tax credits.
RESULTS OF OPERATIONS
FISCAL YEAR 1998 COMPARED TO 1997
The following table provides highlights for fiscal year 1998 compared with
fiscal year 1997.
FOR THE YEARS ENDED PERCENT INCREASE
AUGUST 31, (DECREASE)
------------------------ ----------------
($ IN THOUSANDS) 1998 1997
---------- ----------
Consolidated
Operating Revenues ............................ $ 155,707 $ 158,327 (1.7)%
Cost of Operating Revenues .................... $ 112,866 $ 117,407 (3.9)
Gross Profit .................................. $ 42,841 $ 40,920 4.7
Gross Margin .................................. 27.5% 25.8%
Selling, Eng. & Research, and G&A Expense ..... $ 15,713 $ 14,444 8.8
Operating Income .............................. $ 27,128 $ 26,476 2.5
Operating Margin .............................. 17.4% 16.7%
Interest Income, net .......................... $ 3,197 $ 2,998 6.6
Other Income, net ............................. $ 4,307 $ 455 N/A
Income Tax Provision .......................... $ 11,152 $ 9,877 12.9
Effective Income Tax Rate ..................... 32.2% 33.0%
Net Earnings .................................. $ 23,480 $ 20,052 17.1
Irrigation Equipment Segment (See Note M)
Operating Revenues ............................ $ 130,461 $ 131,583 (0.9)
Operating Income .............................. $ 31,840 $ 29,895 6.5
Operating Margin .............................. 24.4% 22.7%
Diversified Products Segment (See Note M)
Operating Revenues ............................ $ 25,246 $ 26,744 (5.6)
Operating Income .............................. $ 5,216 $ 6,055 (13.9)%
Operating Margin .............................. 20.7% 22.6%
REVENUES
Fiscal year 1998's operating revenues of $155.7 million were 1.7 percent lower
than fiscal year 1997's record revenues of $158.3 million. Domestic irrigation
equipment revenues increased 4% to $99.6 million from $96.2 million in fiscal
year 1997. Fiscal year 1998 export irrigation equipment revenues at $27.8
million were 14% lower than fiscal year 1997's $32.3 million. Diversified
product revenues totaled $25.2 million in fiscal year 1998, 6% lower than fiscal
year 1997's $26.7 million. Other revenues, primarily consisting of revenues from
freight services, are included with the Irrigation Equipment Segment in the
above table and totaled $3.1 million in each of fiscal years 1998 and 1997.
The U.S. market for center pivot and lateral move irrigation equipment
grew during the first three quarters of fiscal year 1998. During the fourth
quarter, however lower crop and other agricultural commodity prices raised
farmer concern about farm income. As a result, demand for center pivot and
lateral move irrigation slowed during the fourth quarter of fiscal year 1998.
10
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Fiscal year 1998 export irrigation equipment revenues were negatively
impacted by a strong U.S. dollar throughout most of the year, particularly in
the Company's Western European and South African markets. Additionally, an
abnormally wet spring in Lindsay's primary Latin American market reduced sales
activity.
Fiscal year 1998's 6% reduction in diversified products revenues was
the result of lower sales of both Lindsay's large diameter steel tubing and
outsource manufacturing services. Major outsource manufacturing customers during
the year were Caterpillar Inc., Deere & Company, and New Holland North America,
Inc.
At August 31, 1998, Lindsay's order backlog for irrigation equipment
was $6.9 million, down significantly from $17.1 million at August 31, 1997.
Lindsay's August 31, 1998, order backlog for diversified products was $7.2
million as compared to $10.2 million at August 31, 1997.
GROSS MARGIN
Fiscal year 1998 gross margin of 27.5% improved from gross margins of 25.8% in
fiscal year 1997 and 24.0% in fiscal year 1996. Gross margin for fiscal year
1998 was favorably influenced by increased automation resulting in improved
productivity and efficiencies and by continued strong demand during most of the
year in the U.S. market for irrigation equipment which yielded a continued
favorable pricing environment. Raw material costs, in total, continued to be
relatively stable.
OPERATING EXPENSES
Selling, engineering and research, and general and administrative expenses grew
8.8% in fiscal year 1998, totaling $15.7 million as compared to $14.4 million in
fiscal year 1997. The increase was primarily due to increases in wage, salary
and benefit costs (including group health insurance) and increased advertising
and dealer promotion expenditures partially offset by lower legal fee costs.
INTEREST INCOME, OTHER INCOME AND TAXES
Fiscal year 1998 interest income of $3.2 million is up slightly from $3.0
million in fiscal year 1997. Fiscal year 1998 other income of $4.3 million
included income of $4.0 million due to an agreement the Company reached with an
insurer to settle litigation which Lindsay initiated in 1990.
Lindsay's fiscal year 1998 effective tax rate decreased to 32.2% from
33% for fiscal year 1997. The Company benefited from the foreign sales
corporation federal tax provisions as they relate to export sales, the federal
tax free status of interest earned from its municipal investments and State of
Nebraska economic development tax credits.
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 $20.0 million in fiscal
year 1999 compared to $29.0 million in fiscal year 1998. The cash flows provided
by operating activities in fiscal year 1999 were primarily due to net earnings,
decreased receivables and decreased inventories. Fiscal year 1998 cash flows
provided by operating activities were principally due to net earnings and a
reduction in receivables.
Receivables at August 31, 1999, decreased $1.2 million to $12.9 million
from $14.1 million, which was primarily due to reduced sales activity during the
fourth quarter of the fiscal year. Inventories of $7.7 million at August 31,
1999, decreased from $10.2 million at August 31, 1998. Inventory was reduced by
using improved inventory planning systems and criteria.
Current liabilities of $16.8 million at August 31, 1999, were equal to
$16.8 million at August 31, 1998.
Cash flows provided by investing activities of $12.4 million for fiscal
year 1999 compared to $9.1 million used in fiscal year 1998. The cash flows
provided by investing activities in fiscal year 1999 were primarily due to
maturities of marketable securities partially offset by capital expenditures and
purchases of marketable securities. Fiscal year 1998 cash flows used in
investing activities were primarily attributable to purchases of marketable
securities and capital expenditures, partially offset by proceeds from
marketable securities.
Lindsay's cash and short-term marketable securities totaled $32.5
million at August 31, 1999 as compared to $22.5 million at August 31, 1998. At
August 31, 1999, Lindsay had $27.2 million invested in long-term marketable
securities which represent intermediate-term (12 to 42 months maturities)
municipal debt, as compared to $43.2 million at August 31, 1998.
11
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Cash flows used in financing activities of $21.6 million for fiscal
year 1999 increased from $20.3 million in fiscal year 1998 and for both periods
was primarily attributable to dividends paid and to purchases of treasury stock
partially offset by proceeds from the issuance of common stock under the
Company's stock option plans.
Capital expenditures of $4.0 million during fiscal year 1999 decreased
from $5.1 million in fiscal year 1998. Fiscal year 1999 capital expenditures
were used primarily for a new employee breakroom and office renovation and
expansion, routine replacement and updating of production equipment and
additional work on converting a major fabrication process started in fiscal year
1998 to further automate Lindsay's facility. Capital expenditures for fiscal
year 2000 are expected to be approximately $3.0 to $4.0 million and will be used
to improve the company's existing facilities, expand its manufacturing
capabilities and increase productivity.
Depreciation totaled $2.6 million in fiscal 1999 and is expected to
increase to approximately $3.0 million in fiscal year 2000.
Lindsay expended $20.5 million in fiscal 1999 to repurchase 1,250,449
shares of its common stock. In fiscal year 1998, Lindsay repurchased 708,743
shares of its common stock for $19.4 million.
Lindsay believes its capitalization (including cash and marketable
securities balances) and operating cash flow are sufficient to cover expected
working capital needs, planned capital expenditures, dividends and repurchases
of common stock.
FISCAL 2000 OUTLOOK
IRRIGATION EQUIPMENT
Assuming flat agricultural commodity pricing, the company expects results for
fiscal year 2000 to approximate those of fiscal year 1999. For fiscal year 2000
Lindsay expects easier comparisons in its first and second quarters, tougher
comparisons in its third quarter and similar performance in its fourth quarter,
versus the prior-year periods. In September 1998, Lindsay began fiscal year 1999
with farmers somewhat dismayed over the significant drop in agricultural
commodity prices. For some farmers, the anticipation of lower prices and lower
income meant fewer capital expenditures; for others it only delayed their
purchase decision until Lindsay's third quarter when they were better able to
assess their financial health. This effect on timing is evident in the company's
irrigation equipment August 31, 1999 backlog, (which is up 41 percent compared
with that at August 31, 1998) presenting the Company with the foundation for a
stronger fiscal year 2000 first half.
Lindsay believes agricultural commodity prices have bottomed and that
there is more upside potential than downside risk in agricultural commodity
prices. The question is when prices and the agricultural equipment industry will
recover. The Company will continue to employ its proven long-term growth
strategy to successfully weather the near-term climate through ongoing
investment in leading edge Zimmatic products, a strong dealer network and its
efficient manufacturing operations.
Longer-term, Lindsay believes that the desire of U.S. farmers to reduce
variable input costs, stabilize or increase crop yields, reduce labor input and
conserve water and energy will continue to drive demand for center pivot and
lateral move irrigation equipment. The Company believes that these demand
drivers will result in long-term growth in U.S. demand for its irrigation
equipment to average in the 6% to 8% per annum range.
Export sales of center pivot and lateral move irrigation equipment in
fiscal year 2000 are expected to be roughly flat with fiscal year 1999's $22.4
million. Lindsay expects the majority of its fiscal year 2000 export sales to
come from Canada, Mexico and Latin America, Australia, Central and Western
Europe and South and Central Africa.
Lindsay's domestic and international irrigation equipment sales are
highly dependent upon the need for irrigated agricultural production which, in
turn, depends upon many factors including total worldwide crop production, the
profitability of agricultural production, agricultural commodity prices,
aggregate net cash farm income, governmental policies regarding the agricultural
sector, water and energy conservation policies and the regularity of rainfall.
Approximately 19%, 18% and 20% of Lindsay's revenues were generated
from export sales in fiscal years 1999, 1998 and 1997, respectively. Lindsay
does not believe it has significant exposure to foreign currency translation
risks because its export sales are all in U.S. dollars and are generally all
shipped against prepayments or U.S. bank confirmed irrevocable letters of credit
or other secured means.
DIVERSIFIED PRODUCTS
Lindsay's diversified products segment consists of two major products:
large-diameter thin-wall round steel tubing and outsource manufacturing
services. Diversified products customers for both products primarily consist of
agricultural and
12
13
industrial capital goods manufacturers. Because of the ag-related component,
Lindsay believes that its diversified product revenues will most likely improve
slightly in fiscal year 2000 compared to fiscal year 1999. Lindsay's long-term
goal has been, and continues to be, to build its diversified products segment to
total 20 to 25% of total annual revenues.
SEASONALITY
Irrigation equipment sales are seasonal by nature. Farmers generally order
systems to be delivered and installed before the growing season. Shipments to
U.S. customers usually peak during Lindsay's second and third quarters for the
spring planting period. Lindsay's expansion into diversified products
complements its irrigation operations by using available capacity and reducing
seasonality.
YEAR 2000 ISSUES
During late fiscal year 1996, the Company began to address Year 2000 issues with
its Information Technology ("IT") systems with a decision to replace its
in-house-developed manufacturing and financial software with Year 2000 compliant
standardized Enterprise Resource Planning ("ERP") software. Management selected
System Software Associates, Inc.'s (BPCS) ERP software in early 1997. Hardware
procurement and BPCS ERP software implementation progressed during fiscal years
1997, 1998 and 1999. Implementation of the manufacturing modules of this BPCS
ERP software is complete with optimization work continuing. Implementation of
the financial modules of the BPCS ERP software will be undertaken in late fiscal
year 2000 or in fiscal year 2001.
Additionally, the Company, in March 1998, commenced a more
comprehensive review of its Year 2000 issues with the formation of a Year 2000
Task Force. This task force has inventoried and assessed both its IT and non-IT
systems (embedded technology such as microcontrollers or programmable logic
controllers in manufacturing equipment or in the products Lindsay sells). The
task force has also inventoried, assessed and confirmed the Year 2000 compliance
status of the Company's critical suppliers and third-party providers.
The Company believes that 95 to 100% of the remediation work to become
Year 2000 compliant has been completed, however final testing is continuing.
Lindsay believes that it has addressed its Year 2000 issues for all
mission critical components and that it will have fully addressed Year 2000
issues by the end of December 1999 for non-mission critical components. Lindsay
believes that its costs for becoming Year 2000 compliant are expected to total
approximately $2.1 million of which 95% has been incurred to date (approximately
$0.9 million in both fiscal years 1997 and 1998 and $0.2 million in fiscal year
1999). These costs include hardware costs, software costs and outside consulting
costs but do not include the costs for time that its employees have or are
expected to spend on Year 2000 issues.
The Company believes that its most reasonable likely worst case Year
2000 scenario includes a short-term interruption in its ability to manufacture
and ship product because: (1) one or more of the company's suppliers or
third-party providers are unable to provide the material or services expected,
and (2) one or more parts of the Company's IT system software or non-IT systems
operate incorrectly.
Because of the progress which has been made toward achieving Year 2000
compliance, the Company has not made specific formal contingency plans. However,
informal contingency plans have been made. If knowledge of outside providers'
noncompliance becomes evident or events occur that are adverse to the Company's
plan for compliance, the Company will develop and implement specific formal
contingency plans as required. Despite the Company's efforts to address its Year
2000 issues, there can be no assurances that Year 2000 related failures of the
Company's IT or non-IT systems, or that Year 2000 related failures by suppliers
or third parties with which the Company interacts, will not have a material
adverse effect on the Company.
Concerning Forward-Looking Statements - This Report on Form 10-K,
including the Management's Discussion and Analysis, Year 2000 and other
sections, contains forward-looking statements that are subject to risks and
uncertainties and which reflect management's current beliefs and estimates of
future economic circumstances, industry conditions, Company performance and
financial results. Forward-looking statements include the information concerning
possible or assumed future results of operations of the Company and those
statements preceded by, followed by or include the words "future", "position",
"anticipate(s)", "expect", "believe(s)", "see", "plan", "further improve",
"outlook", "should", or similar expressions. For these statements, the Company
claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. Readers of
this 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:
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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.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENT OF MANAGEMENT RESPONSIBILITY
The consolidated financial statements and notes to the consolidated financial
statements of Lindsay Manufacturing Co. have been prepared by management, which
has the responsibility for their integrity and objectivity. The statements have
been prepared in accordance with generally accepted accounting principles to
reflect, in all material aspects, the substance of financial events and
transactions occurring during the respective periods.
/s/ GARY D. PARKER /s/ BRUCE C. KARSK
- ---------------------------------- ------------------------------
Gary D. Parker Bruce C. Karsk
Chairman, President and Vice President-Finance,
Chief Executive Officer Treasurer and Secretary
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders' of Lindsay Manufacturing Co.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and shareholders equity and cash flows
present fairly, in all material respects, the financial position of Lindsay
Manufacturing Co. and its subsidiaries at August 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended August 31, 1999, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Omaha, Nebraska /s/ PricewaterhouseCoopers LLP
September 24, 1999 ------------------------------
PricewaterhouseCoopers LLP
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LINDSAY MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31,
------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998 1997
-------- -------- --------
Operating revenues ............................... $116,651 $155,707 $158,327
Cost of operating revenues ....................... 86,007 112,866 117,407
-------- -------- --------
Gross profit ..................................... 30,644 42,841 40,920
-------- -------- --------
Operating expenses:
Selling expense ............................... 5,178 5,785 4,970
General and administrative expense ............ 8,559 8,102 7,898
Engineering and research expense .............. 1,888 1,826 1,576
-------- -------- --------
Total operating expenses ......................... 15,625 15,713 14,444
-------- -------- --------
Operating income ................................. 15,019 27,128 26,476
Interest income, net ............................. 2,822 3,197 2,998
Other income, net ................................ 348 4,307 455
-------- -------- --------
Earnings before income taxes ..................... 18,189 34,632 29,929
Income tax provision ............................. 5,457 11,152 9,877
-------- -------- --------
Net earnings ..................................... $ 12,732 $ 23,480 $ 20,052
======== ======== ========
Basic net earnings per share ..................... $ 0.99 $ 1.68 $ 1.41
======== ======== ========
Diluted net earnings per share ................... $ 0.96 $ 1.61 $ 1.34
======== ======== ========
Average shares outstanding ....................... 12,884 13,936 14,244
Diluted effect of stock options .................. 401 620 736
-------- -------- --------
Average shares outstanding assuming dilution ..... 13,285 14,556 14,980
======== ======== ========
Cash dividends per share ......................... $ 0.140 $ 0.125 $ 0.091
======== ======== ========
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
SHARES OF CAPITAL
---------------------------------------- IN EXCESS
COMMON TREASURY COMMON OF STATED
($ IN THOUSANDS) STOCK STOCK STOCK VALUE
----------- ----------- ----------- -----------
Balance at August 31, 1996 ................... 7,327,961 987,820 $ 7,328 $ 2,952
Net earnings ................................. -- -- -- --
Cash dividends ($0.091 per share)- ........... -- -- -- --
Net shares issued under stock
option plan ................................ 147,790 -- 148 855
Stock option tax benefits .................... -- -- -- 255
Acquisitions of common stock ................. -- 280,000 -- --
Three-for-two stock split .................... 3,727,560 526,210 3,727 (3,610)
Fractional shares paid from
stock split ................................ (55) -- -- (2)
----------- ----------- ----------- -----------
Balance at August 31, 1997 ................... 11,203,256 1,794,030 11,203 450
Net earnings ................................. -- -- -- --
Cash dividends ($0.125 per share) ........... -- -- -- --
Net shares issued under stock
option plan ................................ 126,273 -- 126 860
Stock option tax benefits .................... -- -- -- 591
Acquisitions of common stock ................. -- 607,743 -- --
Three-for-two stock split .................... 5,664,514 998,015 5,665 (1,044)
Fractional shares paid from
stock split ................................ (94) -- -- (2)
----------- ----------- ----------- -----------
Balance at August 31, 1998 .................. 16,993,949 3,399,788 16,994 855
Net earnings ................................. -- -- -- --
Cash dividends ($0.140 per share) ............ -- -- -- --
Net shares issued under stock option plan .... 80,542 -- 80 740
Stock option tax benefits .................... -- -- -- 523
Acquisitions of common stock ................. -- 1,250,449 -- --
----------- ----------- ----------- -----------
Balance at August 31, 1999 .................. 17,074,491 4,650,237 $ 17,074 $ 2,118
=========== =========== =========== ===========
TOTAL
RETAINED TREASURY SHAREHOLDERS'
EARNINGS STOCK EQUITY
----------- ----------- -----------
Balance at August 31, 1996 ................. $ 88,002 $ (21,448) $ 76,834
Net earnings ................................. 20,052 -- 20,052
Cash dividends ($0.091 per share)- ........... (1,298) -- (1,298)
Net shares issued under stock
option plan ................................ -- -- 1,003
Stock option tax benefits .................... -- -- 255
Acquisitions of common stock ................. -- (9,876) (9,876)
Three-for-two stock split .................... (117) -- --
Fractional shares paid from
stock split ................................ -- -- (2)
----------- ----------- -----------
Balance at August 31, 1997 ................... 106,639 (31,324) 86,968
Net earnings ................................. 23,480 -- 23,480
Cash dividends ($0.125 per share) ........... (1,734) -- (1,734)
Net shares issued under stock
option plan ................................ -- -- 986
Stock option tax benefits .................... -- -- 591
Acquisitions of common stock ................. -- (19,409) (19,409)
Three-for-two stock split .................... (4,621) -- --
Fractional shares paid from
stock split ................................ -- -- (2)
----------- ----------- -----------
Balance at August 31, 1998 .................. 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 .... -- -- 820
Stock option tax benefits .................... -- -- 523
Acquisitions of common stock ................. -- (20,469) (20,469)
----------- ----------- -----------
Balance at August 31, 1999 .................. $ 134,708 $ (71,202) $ 82,698
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
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LINDSAY MANUFACTURING CO.
CONSOLIDATED BALANCE SHEETS
AT AUGUST 31,
----------------------
($ IN THOUSANDS, EXCEPT PAR VALUES) 1999 1998
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents ........................................................... $ 14,232 $ 3,794
Marketable securities ............................................................... 18,236 18,704
Receivables ......................................................................... 12,909 14,066
Inventories ......................................................................... 7,659 10,198
Deferred income taxes ............................................................... 3,803 3,861
Other current assets ................................................................ 85 92
--------- ---------
Total current assets ............................................................. 56,924 50,715
Long-term marketable securities ..................................................... 27,229 43,164
Property, plant and equipment, net .................................................. 15,416 14,071
Other noncurrent assets ............................................................. 820 964
--------- ---------
Total assets ........................................................................... $ 100,389 $ 108,914
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade ............................................................. $ 4,081 $ 4,936
Other current liabilities ........................................................... 12,580 11,723
Current portion of capital lease obligation ......................................... 95 142
--------- ---------
Total current liabilities ........................................................ 16,756 16,801
Other noncurrent liabilities ........................................................ 935 1,125
Obligation under capital lease less current portion ................................. 0 108
--------- ---------
Total liabilities ...................................................................... 17,691 18,034
========= =========
Contingencies
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding in 1999 and 1998)
Common stock, ($1 par value, 25,000,000 shares authorized,
17,074,491 and 16,993,949 shares issued in 1999 and 1998) ........................ 17,074 16,994
Capital in excess of stated value ................................................... 2,118 855
Retained earnings ................................................................... 134,708 123,764
Less treasury stock, (at cost, 4,650,237 shares in 1999 and 3,399,788 shares in 1998) (71,202) (50,733)
--------- ---------
Total shareholders' equity ............................................................. 82,698 90,880
--------- ---------
Total liabilities and shareholders' equity ............................................. $ 100,389 $ 108,914
========= =========
The accompanying notes are an integral part of the financial statements.
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LINDSAY MANUFACTURING CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31,
--------------------------------
($ IN THOUSANDS) 1999 1998 1997
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ........................................................ $ 12,732 $ 23,480 $ 20,052
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization .................................... 2,626 2,286 2,015
Amortization of marketable securities premiums, net .............. 183 187 213
(Gain) loss on sale of fixed assets .............................. (119) (152) 13
Gain on maturities of marketable securities
held-to-maturity .............................................. (18) (1) (14)
Provision for uncollectible accounts receivable .................. (22) 0 20
Deferred income taxes ............................................ 58 686 (1,178)
Stock option tax benefits ........................................ 523 591 255
Changes in assets and liabilities:
Receivables ...................................................... 1,179 4,834 1,208
Inventories ...................................................... 2,539 (203) (2,195)
Other current assets ............................................. 7 (15) 193
Accounts payable ................................................. (855) (57) (922)
Other current liabilities ........................................ 105 (1,735) 1,891
Current taxes payable ............................................ 752 (879) (336)
Other noncurrent assets and liabilities .......................... (46) (53) 53
-------- -------- --------
Net cash provided by operating activities ........................ 19,644 28,969 21,268
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment .......................... (3,993) (5,091) (3,335)
Proceeds from sale of property, plant and equipment ................. 141 180 162
Purchases of marketable securities held-to-maturity ................. (2,756) (17,085) (30,910)
Proceeds from maturities of marketable securities held-to-maturity .. 18,994 12,910 24,904
-------- -------- --------
Net cash provided by (used in) investing activities ................. 12,386 (9,086) (9,179)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation ................... (155) (161) (47)
Proceeds from issuance of common stock under stock option plan ...... 820 986 1,003
Three-for-two stock split fractional shares paid in cash ............ 0 (2) (2)
Dividends paid ...................................................... (1,788) (1,734) (1,298)
Purchases of treasury stock ......................................... (20,469) (19,409) (9,876)
-------- -------- --------
Net cash used in financing activities ............................... (21,592) (20,320) (10,220)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ................ 10,438 (437) 1,869
Cash and cash equivalents, prior year ............................... 3,794 4,231 2,362
-------- -------- --------
Cash and cash equivalents, current year ............................. $ 14,232 $ 3,794 $ 4,231
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid ................................................... $ 4,617 $ 11,344 $ 11,421
Interest paid ....................................................... $ 8 $ 44 $ 17
The accompanying notes are an integral part of the financial statements.
17
18
LINDSAY MANUFACTURING CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
Lindsay Manufacturing Co. (the "Company" or "Lindsay") manufactures and
distributes irrigation systems and manufactures other special metal products
serving both domestic and international markets. The Company's principal
facilities are located in Lindsay, Nebraska, USA. The principal accounting
policies of the Company are as follows:
(1) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany balances and transactions are
eliminated in consolidation.
(2) REVENUE RECOGNITION
Revenues and related cost of revenues for all irrigation and diversified
products are recognized when title passes. Generally this occurs at the time of
shipment of product to dealers or customers.
(3) WARRANTY COSTS
Cost of operating revenues include warranty costs of $834,000, $774,000 and
$796,000 for the years ended August 31, 1999, 1998 and 1997, 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,
1999, Lindsay's cash equivalents were held primarily by one financial
institution. Marketable securities and long-term marketable securities are
categorized as held-to-maturity. Investments in the held-to-maturity category
are carried at amortized cost. Lindsay considers all highly liquid investments
with original maturities of three months or less to be cash equivalents, while
those having maturities in excess of three months are classified as marketable
securities or as long-term marketable securities when maturities are in excess
of one year. Marketable securities and long-term marketable securities consist
of investment-grade municipal bonds.
The total amortized cost, gross unrealized holding gains, gross
unrealized holding losses, and aggregate fair value for held-to-maturity
securities are $45,465,000, $150,000, $75,000 and $45,540,000, respectively. In
the held-to-maturity category at August 31, 1999, $18,236,000 in marketable
securities mature within one year and $27,229,000 in long term marketable
securities have maturities ranging from 12 to 42 months. The Company is not
subject to material market risks with respect to its marketable securities.
18
19
(5) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for all inventories.
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant, equipment and capitalized lease assets are stated at cost. The
Company's policy is to capitalize expenditures for major renewals and
betterments and to charge to operating expenses the cost of current maintenance
and repairs. Provisions for depreciation and amortization have been computed
principally on the straight-line method for buildings and equipment. Rates used
for depreciation are based principally on the following expected lives:
buildings -- 20 to 30 years; equipment -- three to 10 years; other -- two to 20
years; and leasehold improvements -- term of lease. All of the Company's
long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If the
sum of the expected discounted future cash flows is less than the carrying
amount of the asset, a loss is recognized. The cost and accumulated depreciation
relating to assets retired or otherwise disposed of are eliminated from the
respective accounts at the time of disposition. The resultant gain or loss is
included in the consolidated statements of operations.
(7) 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 140,250 shares of common stock at a weighted
average price of $26.41 per share were outstanding during the fourth quarter of
fiscal 1999, but were not included in the computation of diluted EPS because the
options' exercise price was greater that the average market price of the common
shares. These options expire on or between September 3, 2007 and September 3,
2008.
(8) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(9) RECLASSIFICATIONS
Certain reclassifications have been made to prior financial statements amounts
to conform to the current-year presentation.
(10) ACCOUNTING CHANGES
In fiscal year 1999, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 131 "Disclosures About Segments of an Enterprise and
Related Information" (see Note M) and SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits" (see Note K). These standards
expand or modify disclosures and have no effect on the company's consolidated
financial position, results of operations or cash flows. Information for prior
years has been restated to conform to the requirements of these standards.
19
20
B. NON-OPERATING ITEMS
FOR THE YEARS ENDED AUGUST 31,
-------------------------------------
$ IN THOUSANDS 1999 1998 1997
---------- ---------- ----------
Other income, net:
Litigation settlement (1) ..................... $ 0 $ 4,000 $ 0
Gain (loss) on sales of fixed assets .......... 119 152 (13)
State economic development tax credits ........ 176 165 387
Finance charges ............................... 27 41 24
All other, net ................................ 26 (51) 57
---------- ---------- ----------
Total other income, net .......................... $ 348 $ 4,307 $ 455
========== ========== ==========
(1) In May 1998, the Company reached an agreement with an insurer to settle a
litigation issue for $4.0 million.
C. INCOME TAX PROVISION
FOR THE YEARS ENDED AUGUST 31,
------------------------------------
$ IN THOUSANDS 1999 1998 1997
---------- ---------- ----------
Current taxes .................................... $ 5,399 $ 10,466 $ 11,055
Deferred taxes ................................... 58 686 (1,178)
---------- ---------- ----------
Total income tax provision ....................... $ 5,457 $ 11,152 $ 9,877
========== ========== ==========
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,
-----------------------------------------------------------------------------
1999 1998 1997
----------------------- ----------------------- ------------------------
$ IN THOUSANDS AMOUNT % AMOUNT % AMOUNT %
---------- ---------- ---------- ---------- ---------- ----------
U.S. statutory rate .............................. $ 6,244 34.3 $ 12,121 35.0 $ 10,475
35.0
State and local taxes ............................ 227 1.3 262 0.8 292 1.0
Qualified export activity ........................ (164) (0.9) (236) (0.7) (347) (1.2)
Municipal bonds .................................. (816) (4.5) (930) (2.7) (806) (2.7)
Other ............................................ (34) (0.2) (65) (0.2) 263 0.9
---------- ---------- ---------- ---------- ---------- ----------
Total ............................................ $ 5,457 30.0 $ 11,152 32.2 $ 9,877 33.0
========== ========== ========== ========== ========== ==========
Significant components of the Company's deferred tax assets and liabilities are
as follows:
FOR THE YEARS ENDED AUGUST 31,
------------------------------
$ IN THOUSANDS 1999 1998
------------ --------------
Book depreciation in excess of (less than) tax ... $ (14) $ 52
Employee benefits ................................ 2,576 2,560
Inventory adjustments ............................ 249 261
Accruals not currently deductible for taxes ...... 992 988
---------- ----------
Net deferred tax assets .......................... $ 3,803 $ 3,861
========== ==========
Management does not believe there are uncertainties surrounding realization of
the net deferred tax assets.
20
21
D. RECEIVABLES
AUGUST 31,
-------------------------
$ IN THOUSANDS 1999 1998
---------- ----------
Trade accounts and notes ....................... $ 13,630 $ 14,809
Less allowance for doubtful accounts ........... 721 743
---------- ----------
Net receivables ................................ $ 12,909 $ 14,066
========== ==========
E. INVENTORIES
AUGUST 31,
-------------------------
$ IN THOUSANDS 1999 1998
---------- ----------
First-in, first-out (FIFO) inventory ........... $ 11,983 $ 14,361
LIFO reserves .................................. (3,389) (3,228)
Obsolescence reserve ........................... (935) (935)
---------- ----------
Total Inventories .............................. $ 7,659 $ 10,198
========== ==========
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
AUGUST 31,
-------------------------
1999 1998
---------- ----------
Raw materials .................................. 12% 18%
Work in process ................................ 5% 6%
Purchased parts ................................ 38% 35%
Finished goods ................................. 45% 41%
F. PROPERTY, PLANT & EQUIPMENT
AUGUST 31,
-------------------------
$ IN THOUSANDS 1999 1998
---------- ----------
Plant and equipment:
Land ....................................... $ 70 $ 70
Buildings .................................. 5,781 5,043
Equipment .................................. 27,841 25,023
Other ...................................... 5,004 5,280
Capital lease:
Equipment .................................. 458 458
---------- ----------
Total plant, equipment and capital lease ....... 39,154 35,874
Accumulated depreciation and amortization:
Plant and equipment ........................ (23,520) (21,690)
Capital lease .............................. (218) (113)
---------- ----------
Property, plant and equipment, net ............. $ 15,416 $ 14,071
========== ==========
21
22
G. OTHER CURRENT LIABILITIES
AUGUST 31,
-----------------------
$ IN THOUSANDS 1999 1998
---------- ----------
Current state and federal income taxes ........... $ 258 $ (524)
Payroll and vacation ............................. 3,435 3,882
Retirement plans ................................. 2,089 1,846
Taxes, other than income ......................... 195 225
Insurance ........................................ 1,551 1,595
Dealer service, commission and related items ..... 2,417 2,310
Export freight ................................... 228 174
Warranty ......................................... 657 607
Legal settlements ................................ 720 572
Environmental .................................... 0 116
Other ............................................ 1,030 920
---------- ----------
Total other current liabilities .................. $ 12,580 $ 11,723
========== ==========
H. CREDIT ARRANGEMENTS
Lindsay entered into an agreement in December 1998 for a $10.0 million unsecured
revolving line of credit with a commercial bank to be used for working capital
and general corporate purposes including stock repurchases. This line of credit
expired on October 25, 1999. There were not any borrowings made under such
unsecured revolving line of credit. Borrowings would have borne interest at a
rate equal to one percent per annum under the rate in effect from time to time
and designated by the commercial bank as its National Base Rate. No covenants
would have limited 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. Lindsay is currently entering discussions for a new
agreement similar to the expired agreement. It is anticipated the new agreement
would be signed in December 1999 and expire mid December 2000.
I. LEASE
During the fourth quarter of fiscal 1997, the Company recorded a three-year
capital lease for computer equipment in the amount of $457,850, at interest of
approximately 4% with a one-dollar end-of-lease purchase option.
Future minimum lease payments at August 31, 1999, under this capital lease
together with the present value of the minimum lease payments are as follows:
TWELVE MONTHS ENDING AUGUST 31 $ IN THOUSANDS
---------------
2000 ............................................. $ 96
---------------
Total minimum payments ........................... 96
Amount representing interest ..................... (1)
---------------
Present value of minimum payments ................ 95
Current portion .................................. (95)
---------------
Total noncurrent portion ......................... $ 0
===============
J. CONTINGENCIES
The Company and its subsidiaries are defendants in various legal actions arising
in the course of their business activities. In the opinion of management, 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.
22
23
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. Additionally, the plan provides for
Lindsay to contribute a discretionary amount when warranted by results of
operations. The contribution is allocated to participants based upon their
respective percentage of wages to total wages of all participants in the plan.
Lindsay's total contributions charged to expense under this plan were $750,000
for the year ended August 1999 and $800,000 for each of the years ended August
1998 and 1997. 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 1999 1998
------------ ------------
Change in benefit of obligation:
Benefit obligation at beginning of term ................................ $ 1,937 $ 1,820
Service cost ........................................................... 81 80
Interest cost .......................................................... 136 128
Actuarial gain ......................................................... (286) (91)
------------ ------------
Benefit obligation at end of year ...................................... $ 1,868 $ 1,937
------------ ------------
Funded status .......................................................... $ (1,868) $ (1,937)
Unrecognized net actuarial loss ........................................ 357 513
------------ ------------
Net amount recognized .................................................. $ (1,511) $ (1,424)
============ ============
Amounts recognized in the statement of financial position consist of:
Accrued benefit cost ................................................... $ 1,511 $ 1,225
Additional benefit liability ........................................... 0 199
------------ ------------
Net amount recognized .................................................. $ 1,511 $ 1,424
============ ============
Weighted-average assumptions as of year ends:
Discount Rate .......................................................... 7.00% 7.00%
Assumed rates of compensation increases ................................ 3.50% 3.50%
Components of net periodic benefit cost:
Service cost ........................................................... $ 81 $ 80
Interest cost .......................................................... 136 128
Net Amortization and Deferral .......................................... 69 69
------------ ------------
Total .................................................................. $ 286 $ 277
============ ============
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.
In February 1992, the shareholders approved the 1991 Long-Term Incentive
Plan (1991 Plan) which is similar in most material respects to the 1988 Plan
except that the 1991 Plan provides for non-qualified stock options to directors
who are not officers or employees of the Company or its subsidiaries.
Options currently vest ratably over five years and expire ten years from the
grant dates.
23
24
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 1999, 1998 and 1997 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 1999 1998 1997
------------ ------------ ------------
Net earnings - as reported .................. $ 12,732 $ 23,480 $ 20,052
Net earnings - pro forma .................... $ 12,447 $ 23,321 $ 19,996
Net earnings per share - as reported ........ $ 0.96 $ 1.61 $ 1.34
Net earnings per share - pro forma .......... $ 0.94 $ 1.60 $ 1.33
The pro forma effect on net earnings for fiscal 1999, 1998 and 1997 is not fully
representative of the pro forma effect on net earnings in future years because
it does not take into consideration pro forma compensation expense related to
the vesting of grants made prior to fiscal 1996. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions used for all grants in
fiscal 1999, 1998 and 1997, dividend yield of 0.5% to 0.8%, expected volatility
of 31.2% to 34.5%, risk-free interest rates ranging from 5.0% to 6.9%, and
expected lives of the options of 7 to 8 years.
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 1999 1998 1997
----------- ----------- -----------
Number of shares issued ................................................ 66,225 66,375 67,275
Average price .......................................................... $ 20.49 $ 26.97 $ 18.58
Total value of shares issued ........................................... $ 1,357 $ 1,790 $ 1,250
Total compensation cost recognized in the
statements of operations ........................................... $ 1,155 $ 1,543 $ 1,749
OPTION SHARES NUMBER OF SHARES AVERAGE PRICE
---------------- -------------
Officers, Directors and Key Employees:
Outstanding at August 31, 1996 ......................................... 1,207,278 $ 5.51
Granted ............................................................. 20,250 17.22
Exercised ........................................................... (324,289) 4.07
Cancelled ........................................................... (15,188) 12.05
Outstanding at August 31, 1997 ......................................... 888,051 6.19
Exercisable at August 31, 1997 ......................................... 730,439 5.44
Weighted average fair value of options granted during fiscal 1997 ...... 13.31
Outstanding at August 31, 1997 ......................................... 888,051 6.19
Granted ............................................................. 120,000 27.49
Exercised ........................................................... (169,827) 3.01
Cancelled ........................................................... (4,725) 8.72
Outstanding at August 31, 1998 ......................................... 833,499 9.89
Exercisable at August 31, 1998 ......................................... 625,412 6.48
Weighted average fair value of options granted during fiscal 1998 ...... 6.36
Outstanding at August 31, 1998 ......................................... 833,499 9.89
Granted ............................................................. 116,250 16.13
Exercised ........................................................... (61,855) 6.31
Cancelled ........................................................... (1,350) 8.37
Outstanding at August 31, 1999 ......................................... 886,544 10.96
Exercisable at August 31, 1999 ......................................... 625,357 7.49
Weighted average fair value of options granted during fiscal 1999 ...... $ 7.70
24
25
The number of stock awards available for grant under the 1988 and 1991 plans are
58,312, 265,562 and 498,708 shares as of August 31, 1999, 1998 and 1997,
respectively.
The following table summarizes information about the Company's Common Stock
options outstanding at August 31, 1999:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------- ---------------------------
WEIGHTED
AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
PRICES AT 8/31/99 LIFE PRICE AT 8/31/99 PRICE
----------- ----------- ----------- ------------ ----------- -------------
$2.91- 6.17 282,089 1.35 years $ 3.56 282,089 $ 3.56
8.37-10.52 353,018 4.02 years 9.27 313,193 9.30
15.31-20.00 131,437 8.94 years 16.26 6,075 17.22
26.17-28.17 120,000 8.12 years 27.49 24,000 27.49
------- ---------
886,544 625,357
======= =========
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 information
for 1998 and 1997 is presented to conform to the 1999 presentation.
The Company manages its business activities in two reportable segments:
Irrigation: This segment includes the manufacture and marketing of
center pivot and lateral move irrigation equipment.
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 earnings and does not include general or administrative expenses
(which include corporate expenses) or engineering and research expenses,
interest income net, non-operating income and expenses, income taxes, and
assets. Operating earnings does include selling and other overhead charges
directly attributable to the segment. There are no intersegment sales.
Summarized financial information concerning the Company's reportable segments is
shown in the following table:
FOR THE YEARS ENDED AUGUST 31,
--------------------------------------
$ IN MILLIONS 1999 1998 1997
---------- ---------- ----------
Operating revenues:
Irrigation .................................... $ 101.4 $ 130.5 $ 131.6
Diversified products .......................... 15.3 25.2 26.7
---------- ---------- ----------
Total operating revenues ......................... $ 116.7 $ 155.7 $ 158.3
========== ========== ==========
Operating earnings:
Irrigation .................................... $ 22.0 $ 31.8 $ 29.9
Diversified products .......................... 3.5 5.2 6.1
---------- ---------- ----------
Segment operating earnings ....................... 25.5 37.0 36.0
Unallocated general & administrative and
engineering & research expenses ............... (10.5) (9.9) (9.5)
Interest and other income, net ................... 3.2 7.5 3.4
---------- ---------- ----------
Earnings before income taxes ..................... $ 18.2 $ 34.6 $ 29.9
========== ========== ==========
Geographic area revenues:
Europe & Africa ............................... $ 7.7 $ 7.8 $ 9.8
Mexico & Latin America ....................... 6.7 8.2 15.1
Other export .................................. 8.1 11.8 7.4
United States ................................. 94.2 127.9 126.0
---------- ---------- ----------
Total revenues ................................ $ 116.7 $ 155.7 $ 158.3
========== ========== ==========
25
26
N. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The follow is a tabulation of the unaudited quarterly results of operations for
the years ended August 31, 1999 and 1998.
QUARTERLY DATA
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FOR THE THREE MONTHS ENDED THE LAST DAY OF
--------------------------------------------------------------------
NOVEMBER FEBRUARY MAY AUGUST
------------ ---------------- -------------- ---------------
Fiscal 1999
Operating revenues...................... $ 21,642 $ 31,087 $ 42,990 $ 20,932
Cost of operating revenues.............. 16,964 23,426 31,680 13,937
Earnings before income taxes............ 2,103 4,925 8,118 3,043
Net earnings............................ 1,430 3,349 5,520 2,433
Net earning per share................... 0.10 0.25 0.42 0.19
Market price (NYSE)
High................................. $ 21 5/16 $ 17 $ 22 3/8 $ 20 3/8
Low.................................. 11 1/4 12 1/2 14 7/8 16
Fiscal 1998
Operating revenues...................... $ 37,448 $ 49,708 $ 43,904 $ 24,647
Cost of operating revenues.............. 27,891 35,853 31,711 17,411
Earnings before income taxes............ 6,952 10,611 13,034 4,035
Net earnings............................ 4,692 7,163 8,797 2,828
Net earnings per share.................. 0.32 0.49 0.60 0.20
Market price (NYSE)
High.................................. $ 33 1/2 $ 29 $ 32 9/16 $ 30 15/16
Low................................... 25 5/16 25 7/16 26 3/16 20
1999: Fourth-quarter adjustments resulting in a net increase in pre-tax earnings
of $2,184,000 were made to inventory accounts (due to physical inventory) and
the LIFO inventory reserve. Additional fourth-quarter accrual adjustments
decreased pre-tax earnings $810,000 for compensation costs including bonus
earnouts and vacation pay.
1998: During the third quarter the Company reached an agreement to settle
litigation for $4.0 million (post tax $2.7 million/$0.18 per share) which is
included in other income. Fourth-quarter adjustments resulting in a net increase
in pre-tax earnings of $1,673,000 were made to inventory accounts (due to
physical inventory), the LIFO inventory reserve and the obsolete inventory
reserve. Additional fourth-quarter accrual adjustments increased pre-tax
earnings $410,000 for compensation costs including bonus earnouts and vacation
pay.
Share amounts and per share results for all periods are stated on a diluted
basis.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company will file with the Securities and Exchange Commission a definitive
Proxy Statement not later than 120 days after the close of its fiscal year ended
August 31, 1999. 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.
26
27
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, 1999 except for late filings of Form 4
Statement of Changes to Beneficial Ownership for Vaughn L. Beals, Jr. relating
to stock purchases on October 15, 1998 due November 10, 1998, filed December 22,
1998 and on November 13, 1998, due on December 10, 1998, filed December 22,
1998. Both "due" filing dates were inadvertently overlooked by Mr. Beals.
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
None.
27
28
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements of Lindsay Manufacturing Co. are
included in Part II Item 8.
PAGE
----
Report of Independent Accountants 14
Consolidated Statements of Operations for the Years
ended August 31, 1999, 1998 and 1997 15
Consolidated Balance Sheets at
August 31, 1999 and 1998 16
Consolidated Statements of Shareholders' Equity
for the years ended August 31, 1999, 1998 and 1997 15
Consolidated Statements of Cash Flows for the Years
ended August 31, 1999, 1998 and 1997 17
Notes to Consolidated Financial Statement 18-26
(a)(2) Financial Statement Schedule
PAGE
----
Report of Independent Accountants 14
Schedule
VIII. Valuation and Qualifying Accounts -
Years ended August 31, 1999, 1998 and 1997 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
29
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 incorporated by reference to Amended
Exhibit 3(b) of Amendment No. 3 to the Company's Registration
Statement on Form S-1 (Registration No. 33-23084), filed
September 23, 1988. -
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) Employment Agreement between the Company and Gary D. Parker, effective
September 1, 1998. 33-44
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
30
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. 1991 Long-Term Incentive Plan, incorporated
by reference to Exhibit 10(h) of the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1992. -
10(g) Employment Agreement between the Company and Bruce C. Karsk, Eduardo
R. Enriquez, Clifford P. Loseke, Charles H. Meis, and Robert S. Snoozy,
effective September 1, 1997, incorporated by reference to Exhibit 10(g)
of the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997. -
10(h) Lindsay Manufacturing Co. Supplemental Retirement Plan, incorporated
by reference to Exhibit 10(j) of the Company's Annual Report on Form
10K for the fiscal year ended August 31, 1994. -
21 Subsidiaries of the Company, incorporated by reference to Exhibit 22 of
the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1988. -
23 Consent of PricewaterhouseCoopers LLP 45
24(a) The Power of Attorney authorizing Bruce C. Karsk
to sign the Annual Report on Form 10-K on
behalf of certain directors. 46
27 Financial Data Schedule 47
(b) Reports on Form 8-K
The Registrant has not filed any reports on Form 8-K during the fourth
quarter of fiscal 1999.
30
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 24th day of
November, 1999.
LINDSAY MANUFACTURING CO.
By: /s/ BRUCE C. KARSK
-----------------------------------------
Name: Bruce C. Karsk
Title: Director, Vice President-Finance,
Treasurer and Secretary; Principal
Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on this 24th day of November, 1999.
/s/ GARY D. PARKER (1) Chairman, President and Chief Executive Officer
- ------------------------------------------------
Gary D. Parker
/s/ BRUCE C. KARSK Director, Vice President - Finance, Treasurer and
- ------------------------------------------------ Secretary; Principal Financial and Accounting
Bruce C. Karsk Officer
/s/ RALPH J. KROENKE Controller
- ------------------------------------------------
Ralph J. Kroenke
/s/ VAUGHN L. BEALS, JR. (1) Director
- ------------------------------------------------
Vaughn L. Beals, Jr.
/s/ HOWARD G. BUFFETT (1) Director
- ------------------------------------------------
Howard G. Buffett
/s/ JOHN W. CROGHAN (1) Director
- ------------------------------------------------
John W. Croghan
/s/ MICHAEL N. CHRISTODOLOU (1) Director
- ------------------------------------------------
Michael N. Christodolou
(1) By: /s/ Bruce C. Karsk
----------------------------------------
Bruce C. Karsk, Attorney-In-Fact.
31
32
LINDSAY MANUFACTURING CO.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED AUGUST 31, 1999, 1998 AND 1997
(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, 1999:
Deducted in the balance sheet from the
assets to which they apply:
- Allowance for doubtful accounts ........... $ 743 $ 0 $ 0 $ 22(a) $ 721
============ ============ ============ ============ ============
- Allowance for inventory obsolescence ...... $ 935 $ 0 $ 0 $ 0(b) $ 935
============ ============ ============ ============ ============
Year ended August 31, 1998:
Deducted in the balance sheet from
the assets to which they apply:
- Allowance for doubtful accounts ........... $ 743 $ 0 $ 0 $ 0(a) $ 743
============ ============ ============ ============ ============
- Allowance for inventory obsolescence ...... $ 669 $ 330 $ 0 $ 64(b) $ 935
============ ============ ============ ============ ============
Year ended August 31, 1997:
Deducted in the balance sheet from the
assets to which they apply:
- Allowance for doubtful accounts ........... $ 723 $ 60 $ 0 $ 40(a) $ 743
============ ============ ============ ============ ============
- Allowance for inventory obsolescence ...... $ 690 $ 3 $ 0 $ 24(b) $ 669
============ ============ ============ ============ ============
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.
32