1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 29, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------ ----- Commission File Number 0-17116 Lindsay Manufacturing Co. ------------------------- (Exact name of registrant as specified in its charter) DELAWARE 47-0554096 --------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) BOX 156, 214 EAST 2ND STREET, LINDSAY, NEBRASKA 68644 - ----------------------------------------------- ------ (Address of principal executive offices) (Zip Code) 402-428-2131 - ------------ Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ] At March 17, 2000, 12,312,756 shares of common stock, $1.00 par value, of the registrant were outstanding. Exhibit index is located on page 2. Total number of pages 14.
2 LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES INDEX FORM 10-Q <TABLE> <CAPTION> Page No. -------- <S> <C> PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Consolidated Balance Sheets, February 29, 2000 and February 28, 1999 and August 31, 1999 3 Consolidated Statements of Operations for the three months and six months ended February 29, 2000 and February 28, 1999 4 Consolidated Statements of Cash Flows for the six months ended February 29, 2000 and February 28, 1999 5 Notes to Consolidated Financial Statements 6-8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 9-11 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS 12 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 13 EXHIBIT INDEX 27 - Financial Data Schedule 14 </TABLE> 2
3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS LINDSAY MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 AND AUGUST 31, 1999 <TABLE> <CAPTION> (UNAUDITED) (UNAUDITED) FEBRUARY FEBRUARY AUGUST ($ IN THOUSANDS, EXCEPT PAR VALUES) 2000 1999 1999 - ----------------------------------- ----------- ------------ ----------- <S> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents ........................................... $ 5,837 $ 647 $ 14,232 Marketable securities ............................................... 23,982 21,260 18,236 Receivables ......................................................... 23,842 17,625 12,909 Inventories ......................................................... 9,430 9,677 7,659 Deferred income taxes ............................................... 3,204 3,523 3,803 Other current assets ................................................ 541 511 85 ----------- ------------ ----------- Total current assets ............................................. 66,836 53,243 56,924 Long-term marketable securities ..................................... 20,560 31,616 27,229 Property, plant and equipment, net .................................. 15,653 14,365 15,416 Other noncurrent assets ............................................. 837 1,017 820 ----------- ------------ ----------- Total assets ........................................................... $ 103,886 $ 100,241 $ 100,389 =========== ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, trade ............................................. $ 7,482 $ 6,186 $ 4,081 Other current liabilities ........................................... 13,216 10,756 12,580 Current portion of capital lease obligation ......................... 15 157 95 ----------- ------------ ----------- Total current liabilities ........................................ 20,713 17,099 16,756 Other noncurrent liabilities ........................................ 781 970 935 Obligation under capital lease less current portion ................. 0 28 0 ----------- ------------ ----------- Total liabilities ...................................................... 21,494 18,097 17,691 ----------- ------------ ----------- Contingencies Shareholders' equity: Preferred stock, ($1 par value, 2,000,000 shares authorized no shares issued and outstanding in February 2000 and 1999 and August 1999) Common stock, ($1 par value, 25,000,000 shares authorized, 17,306,593, 17,055,920 and 17,074,491 shares issued in February 2000 and 1999 and August 1999) ................ 17,307 17,056 17,074 Capital in excess of stated value ................................... 2,406 1,441 2,118 Retained earnings ................................................... 139,602 127,629 134,708 Less treasury stock, at cost, 4,993,837, 4,267,050 and 4,650,237 shares in February 2000 and 1999 and August 1999 ................. (76,923) (63,982) (71,202) ----------- ------------ ----------- Total shareholders' equity .......................................... 82,392 82,144 82,698 ----------- ------------ ----------- Total liabilities and shareholders' equity .......................... $ 103,886 $ 100,241 $ 100,389 =========== ============ =========== </TABLE> The accompanying notes are an integral part of the financial statements. 3
4 LINDSAY MANUFACTURING CO. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 (UNAUDITED) <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED -------------------------- ------------------------- FEBRUARY FEBRUARY FEBRUARY FEBRUARY (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 2000 1999 - ---------------------------------------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Operating revenues .............................. $ 34,996 $ 31,087 $ 59,499 $ 52,729 Cost of operating revenues ...................... 26,058 23,426 44,821 40,390 ----------- ----------- ----------- ----------- Gross profit .................................... 8,938 7,661 14,678 12,339 ----------- ----------- ----------- ----------- Operating expenses: Selling expense .............................. 1,366 1,159 2,727 2,420 General and administrative expense ........... 1,889 1,839 4,118 3,661 Engineering and research expense ............. 492 477 964 872 ----------- ----------- ----------- ----------- Total operating expenses ........................ 3,747 3,475 7,809 6,953 ----------- ----------- ----------- ----------- Operating income ................................ 5,191 4,186 6,869 5,386 Interest income, net ............................ 613 671 1,332 1,412 Other (expense) income, net ..................... (8) 68 28 230 ----------- ----------- ----------- ----------- Earnings before income taxes .................... 5,796 4,925 8,229 7,028 Income tax provision ............................ 1,739 1,576 2,469 2,249 ----------- ----------- ----------- ----------- Net earnings .................................... $ 4,057 $ 3,349 $ 5,760 $ 4,779 =========== =========== =========== =========== Basic net earnings per share .................... $ 0.33 $ 0.26 $ 0.46 $ .36 =========== =========== =========== =========== Diluted net earnings per share .................. $ 0.32 $ 0.25 $ 0.45 $ .35 =========== =========== =========== =========== Average shares outstanding ...................... 12,380 13,040 12,400 13,197 Diluted effect of stock options ................. 270 359 348 380 ----------- ----------- ----------- ----------- Average shares outstanding assuming dilution .... 12,650 13,399 12,748 13,577 =========== =========== =========== =========== Cash dividends per share ........................ $ 0.035 $ 0.035 $ 0.070 $ 0.070 =========== =========== =========== =========== </TABLE> The accompanying notes are an integral part of the financial statements. 4
5 LINDSAY MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 (UNAUDITED) <TABLE> <CAPTION> FEBRUARY FEBRUARY ($ IN THOUSANDS) 2000 1999 - ---------------- ----------- ----------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net earnings .......................................................... $ 5,760 $ 4,779 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: Depreciation and amortization ...................................... 1,431 1,279 Amortization of marketable securities premiums, net ................ 31 96 (Gain) on sale of fixed assets ..................................... (57) (28) Loss (gain) on maturities of marketable securities held-to-maturity ................................................ 8 (5) Provision for uncollectible accounts receivable .................... (276) (2) Deferred income taxes .............................................. 599 338 Changes in assets and liabilities: Receivables ........................................................ (10,657) (3,557) Inventories ........................................................ (1,771) 521 Other current assets ............................................... (456) (419) Accounts payable ................................................... 3,401 1,250 Other current liabilities .......................................... 234 (2,202) Current taxes payable .............................................. 402 1,235 Other noncurrent assets and liabilities ............................ (171) (208) ----------- ----------- Net cash (used in) provided by operating activities ................ (1,522) 3,077 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment ............................ (1,668) (1,595) Proceeds from sale of property, plant and equipment ................... 57 50 Purchases of marketable securities held-to-maturity ................... (10,256) 0 Proceeds from maturities of marketable securities held-to-maturity .... 11,140 8,901 ----------- ----------- Net cash (used in) provided by investing activities ................... (727) 7,356 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments under capital lease obligation ..................... (80) (65) Proceeds, net from issuance of common stock under stock option plan ...................................... 521 648 Dividends paid ........................................................ (866) (914) Purchases of treasury stock ........................................... (5,721) (13,249) ----------- ----------- Net cash used in financing activities ................................. (6,146) (13,580) ----------- ----------- Net decrease in cash and cash equivalents ............................. (8,395) (3,147) Cash and cash equivalents, beginning of period ........................ 14,232 3,794 ----------- ----------- Cash and cash equivalents, end of period .............................. $ 5,837 $ 647 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid ..................................................... $ 1,459 $ 737 Interest paid ......................................................... $ 32 $ 4 </TABLE> The accompanying notes are an integral part of the financial statements. 5
6 LINDSAY MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) GENERAL The consolidated financial statements included herein are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the registrant's annual Form 10-K filing. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Lindsay Manufacturing Co., (Lindsay) August 31, 1999 Annual Report to Shareholders. In the opinion of management the unaudited consolidated financial statements of Lindsay reflect all adjustments of a normal recurring nature necessary to present a fair statement of the results of operations for the respective interim periods. The results for interim periods are not necessarily indicative of trends or results expected for a full year. (2) CASH EQUIVALENTS, MARKETABLE SECURITIES AND LONG-TERM MARKETABLE SECURITIES Cash equivalents are included at cost, which approximates market. At February 29, 2000, Lindsay's cash equivalents were held primarily by one financial institution. Marketable securities and long-term marketable securities are categorized as held-to-maturity. Investments in the held-to-maturity category are carried at amortized cost. Lindsay considers all highly liquid investments with original maturities of three months or less to be cash equivalents, while those having maturities in excess of three months are classified as marketable securities or as long-term marketable securities when maturities are in excess of one year. Marketable securities and long-term marketable securities consist of investment-grade municipal bonds. The total amortized cost, gross unrealized holding gains, gross unrealized holding losses, and aggregate fair value for held-to-maturity securities are $44,542,000, $45,000, $196,000 and $44,391,000, respectively. In the held-to-maturity category at February 29, 2000, $23,982,000 in marketable securities mature within one year and $20,560,000 in long term marketable securities have maturities ranging from 12 to 42 months. The Company is not subject to material market risks with respect to its marketable securities. (3) INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for all inventories. <TABLE> <CAPTION> FEBRUARY FEBRUARY AUGUST $ IN THOUSANDS 2000 1999 1999 - --------------- -------- -------- -------- <S> <C> <C> <C> First-in, first-out (FIFO) inventory .................................... $ 14,050 $ 13,964 $ 11,983 LIFO reserves ........................................................... (3,685) (3,352) (3,389) Obsolescence reserve .................................................... (935) (935) (935) -------- --------- -------- Total Inventories ....................................................... $ 9,430 $ 9,677 $ 7,659 ======== ========= ======== </TABLE> The estimated percentage distribution between major classes of inventory before reserves is as follows: <TABLE> <CAPTION> FEBRUARY FEBRUARY AUGUST 2000 1999 1999 -------- -------- -------- <S> <C> <C> <C> Raw materials ........................................................... 12% 18% 12% Work in process ......................................................... 5% 6% 5% Purchased parts ......................................................... 38% 35% 38% Finished goods .......................................................... 45% 41% 45% </TABLE> 6
7 (4) PROPERTY, PLANT AND EQUIPMENT Property, plant, equipment and capitalized lease assets are stated at cost. <TABLE> <CAPTION> FEBRUARY FEBRUARY AUGUST $ IN THOUSANDS 2000 1999 1999 - --------------- -------- -------- -------- <S> <C> <C> <C> Plant and equipment: Land ............................................................... $ 70 $ 70 $ 70 Buildings .......................................................... 5,865 5,043 5,781 Equipment .......................................................... 28,413 26,644 27,841 Other .............................................................. 5,750 4,908 5,004 Capital lease: Equipment .......................................................... 458 458 458 -------- -------- -------- Total plant, equipment and capital lease ................................ 40,556 37,123 39,154 Accumulated depreciation and amortization: Plant and equipment ................................................ (24,633) (22,593) (23,520) Capital lease ...................................................... (270) (165) (218) -------- -------- -------- Property, plant and equipment, net ...................................... $ 15,653 $ 14,365 $ 15,416 ======== ======== ======== </TABLE> (5) CREDIT ARRANGEMENTS Lindsay entered into an agreement with a commercial bank in December 1999 for a $10.0 million unsecured revolving line of credit through December 31, 2000. Proceeds from this line of credit, if any, are to be used for working capital and general corporate purposes including stock repurchases. Borrowings will bear interest at a rate equal to one percent per annum under the rate in effect from time to time and designated by the commercial bank as its National Base Rate. No covenants limit the ability of Lindsay to merge or consolidate, to encumber assets, to sell significant portions of its assets, to pay dividends, or to repurchase common stock. (6) CONTINGENCIES The Company and its subsidiaries are defendants in various legal actions arising in the ordinary course of their business activities. In the opinion of management, resolution of these legal actions will not result in a material adverse effect on Lindsay's consolidated financial position, results of operations or cash flows. (7) NET EARNINGS PER SHARE Basic net earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding. Diluted net earnings per share includes the dilutive effect of stock options. Options to purchase 159,486 shares of common stock at a weighted average price of $24.06 per share were outstanding during the second quarter of fiscal year 2000, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. These options expire between September 3, 2007 and September 3, 2009. 7
8 (8) INDUSTRY SEGMENT INFORMATION The Company adopted SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information" in fiscal year 1999 which changes the way the Company reports information about its operating segments. The Company manages its business activities in two reportable segments: Irrigation: This segment includes the manufacture and marketing of center pivot and lateral move irrigation equipment. Diversified Products: This segment includes providing outsource manufacturing services and selling large diameter steel tubing. The accounting policies of the two reportable segments are the same as those described in the "Accounting Policies" in Note A. of the financial statements included in the Form 10-K for the fiscal year ended August 31, 1999. The Company evaluates the performance of its operating segments based on segment sales, gross profit and operating income and does not include general or administrative expenses (which include corporate expenses) or engineering and research expenses, interest income net, non-operating income and expenses, income taxes, and assets. Operating income does include selling and other overhead charges directly attributable to the segment. There are no intersegment sales. Summarized financial information concerning the Company's reportable segments is shown in the following table: <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED -------------------------- -------------------------- FEBRUARY FEBRUARY FEBRUARY FEBRUARY $ IN THOUSANDS 2000 1999 2000 1999 - -------------- ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Operating revenues: Irrigation ............................... $ 31,345 $ 26,630 $ 53,501 $ 44,341 Diversified products ..................... 3,651 4,457 5,998 8,388 ---------- ---------- ---------- ---------- Total operating revenues .................... $ 34,996 $ 31,087 $ 59,499 $ 52,729 ========== ========== ========== ========== Operating income: Irrigation ............................... $ 6,912 $ 5,946 $ 10,870 $ 8,297 Diversified products ..................... 660 556 1,081 1,622 ---------- ---------- ---------- ---------- Segment operating income .................... 7,572 6,502 11,951 9,919 Unallocated general & administrative and engineering & research expenses .......... 2,381 2,316 5,082 4,533 Interest and other (expense) income, net .... 605 739 1,360 1,642 ---------- ---------- ---------- ---------- Earnings before income taxes ................ $ 5,796 $ 4,925 $ 8,229 $ 7,028 ========== ========== ========== ========== Geographic area revenues: United States ............................ $ 29,638 $ 26,847 $ 49,040 $ 43,479 Europe & Africa .......................... 2,743 1,821 3,432 3,009 Mexico & Latin America ................... 1,275 714 2,942 2,631 Other export ............................. 1,340 1,705 4,085 3,610 ---------- ---------- ---------- ---------- Total revenues ........................... $ 34,996 $ 31,087 $ 59,499 $ 52,729 ========== ========== ========== ========== </TABLE> 8
9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table provides highlights for the three month and six month periods of fiscal year 2000 as compared to the same periods of fiscal year 1999 of Lindsay's consolidated operating results displayed in the Consolidated Statements of Operations and should be read together with the industry segment information in Note (8) to the consolidated financial statements. <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED ------------------------------- -------------------------------- PERCENT PERCENT INCREASE INCREASE ($ IN THOUSANDS) 02/29/00 02/28/99 (DECREASE) 02/29/00 02/28/99 (DECREASE) - ---------------- -------- -------- ---------- -------- -------- ---------- <S> <C> <C> <C> <C> <C> <C> Consolidated Operating Revenues.................................. $ 34,996 $ 31,087 12.6% $ 59,499 $ 52,729 12.8% Cost of Operating Revenues.......................... $ 26,058 $ 23,426 11.2 $ 44,821 $ 40,390 11.0 Gross Profit........................................ $ 8,938 $ 7,661 16.7 $ 14,678 $ 12,339 19.0 Gross Margin........................................ 25.5% 24.6% 24.7% 23.4% Selling, Eng. & Research, and G&A Expense........... $ 3,747 $ 3,475 7.8 $ 7,809 $ 6,953 12.3 Operating Income.................................... $ 5,191 $ 4,186 24.0 $ 6,869 $ 5,386 27.5 Operating Margin.................................... 14.8% 13.5% 11.6% 10.2% Interest Income, net................................ $ 613 $ 671 (8.6) $ 1,332 $ 1,412 (5.7) Other (Expense) Income, net......................... $ (8) $ 68 (111.8) $ 28 $ 230 (87.8) Income Tax Provision................................ $ 1,739 $ 1,576 10.3 $ 2,469 $ 2,249 9.8 Effective Income Tax Rate........................... 30.0% 32.0% 30.0% 32.0 Net Earnings........................................ $ 4,057 $ 3,349 21.1 $ 5,760 $ 4,779 20.5 Irrigation Equipment Segment (See Note (8)) Operating Revenues.................................. $ 31,345 $ 26,630 17.7 $ 53,501 $ 44,341 20.7 Operating Income.................................... $ 6,912 $ 5,946 16.2 $ 10,870 $ 8,297 31.0 Operating Margin.................................... 22.1% 22.3% 20.3% 18.7% Diversified Products Segment (See Note (8)) Operating Revenues.................................. $ 3,651 $ 4,457 (18.1) $ 5,998 $ 8,388 (28.5) Operating Income.................................... $ 660 $ 556 18.7% $ 1,081 $ 1,622 (33.4%) Operating Margin.................................... 18.1% 12.5% 18.0% 19.3% </TABLE> As the above table displays, operating revenues for the three month period ended February 29, 2000 increased 12.6 percent ($3.9 million) from the comparable period of the prior year. The increase in second quarter revenue was the net result of a 15 percent ($3.3 million) increase in U.S. irrigation equipment revenues, a 26 percent ($1.1 million) increase in export irrigation equipment revenues and a 9 percent ($.5 million) decrease in diversified products and other revenues. For the six month period ended February 29, 2000, operating revenues were 12.8 percent ($6.8 million) higher than the comparable period of the prior year. U.S. irrigation equipment revenue was 23 percent ($7.7 million) higher, export irrigation equipment revenue was 13 percent ($1.2 million) higher, while diversified products and other revenues for the six month period were 22 percent ($2.1 million) lower than the second quarter of fiscal year 1999. Lindsay believes that the long-term demand drivers for higher irrigation equipment consisting of the need for farmers to conserve water, energy and labor while at the same time improving crop yields and increasing crop production remain in place in both its U.S. market and in its markets outside the U.S. However, these long-term demand drivers continue to be somewhat muted by low agricultural commodity prices both in the U.S. and in our export markets. These low agricultural commodity prices are due to near record 1998 and 1999 production in the U.S. (increased supply) occurring concurrently with the economic downturn in Asia and other developing economic regions leading to a reduced ability in those regions for the purchase and importation of grain and meat commodities (reduced demand). Agricultural commodity prices have stabilized within the last six months however, and farmer confidence has improved leading to our increase in center pivot sales. Domestic irrigation equipment pricing (net of discounts and promotional program allowances) on units shipped and sold during the three months ended February 29, 2000 was, on average, approximately equal to that of the prior year's 9
10 comparative three month period. Irrigation equipment costs (at standard cost and before warranty expenses) on units shipped and sold during the second quarter of fiscal year 2000 were on average, also equal to that of the prior year's second quarter. Export irrigation equipment revenues for the three month period ended February 29, 2000, were favorably affected by a third shipment of equipment to Romania. This shipment had an unfavorable effect to gross margin, however. Both year-to-date and second quarter fiscal year 2000 diversified products and other revenues were lower primarily due to reduced sales of outsource manufacturing products to Deere & Company and Caterpillar, Inc. Large diameter tubing revenues during the second quarter of fiscal year 2000 were about equal to the prior year's comparative period. Gross margin for the three months ended February 29, 2000, as a percent of operating revenues, was 25.5 percent, up from 24.6 percent of the prior year's comparative period. For the six months ended February 29, 2000, gross margin as a percent of operating revenues was 24.7 percent as compared to 23.4 percent for the six months ended February 28, 1999. Increased manufacturing throughput resulted in favorable manufacturing overhead variances as compared to the prior year's comparable period which had a favorable effect on the Company's gross margin. Selling, general and administrative, and engineering and research expenses for the three month period ended February 29, 2000, were $3.7 million as compared to $3.5 million during the prior year's comparative period. For the six month period, fiscal year 2000 selling, general and administrative, and engineering and research expenses totaled $7.8 million as compared to $7.0 million in fiscal year 1999. Higher group and comprehensive general and liability insurance costs, and professional and legal fees were responsible for the majority of the increase in selling general and administrative and engineering and research expenses for both the three and six month periods. The effective tax rate for both the three month and six month periods ended February 29, 2000 was 30.0 percent. This compares to an effective tax rate of 32.0 percent for both the comparable three month and six month periods of the prior year. Due to the federal income tax exempt status of interest income from its municipal bond investments, and the foreign sales corporation federal tax provisions as they relate to export sales, Lindsay benefits from an effective tax rate that is lower than the combined federal and state statutory rates, currently estimated at 36.0 percent. FINANCIAL POSITION AND LIQUIDITY The discussion of financial position and liquidity focuses on the balance sheet and statement of cash flows. Lindsay requires cash for financing its receivables, inventories, capital expenditures, stock repurchases and dividends. Over the years, Lindsay has financed its growth through funds provided by operations. Cash flows used in operations totaled $1.5 million for the first six months of fiscal year 2000 compared to cash flows provided by operations of $3.1 million for the first six months of fiscal year 1999. The use of cash flows in operating activities for fiscal year 2000 were primarily due to increased receivables and increased inventories partially offset by net earnings and increased payables. Fiscal year 1999 cash flows provided by operating activities were principally due to net earnings and increased current taxes payable partially offset by increased receivables and decreased other current liabilities. Receivables of $23.8 million at February 29, 2000 increased $10.9 million from $12.9 million at August 31, 1999 and increased $6.2 million from $17.6 million at February 28, 1999. The increases were principally due to the higher level of U.S. and export irrigation equipment sales activity during February 2000 and increased use of a marketing program that offered deferred payment terms on some transactions to our dealers, as compared to August 1999 and February 1999. Inventories at February 29, 2000 totaled $9.4 million which is higher than their $7.7 million balance at August 31, 1999 and lower than their $9.7 million balance at February 28, 1999. Inventory was reduced from February 1999 by using improved inventory planning systems and criteria. Current liabilities of $20.7 million at February 29, 2000 are higher than their $16.8 million balance at August 31, 1999 and their $17.1 million balance at February 28, 1999. The increase from August 31, 1999 is principally due to increased trade payables and international dealer prepayments partially offset by a lower accrual for payroll and vacation. The increase from February 28, 1999 is primarily due to increased trade payables and international dealer prepayments. Cash flows used in investing activities of $0.8 million for the first six months of fiscal year 2000 compared to cash flows provided by investing activities of $7.4 million for the first six months of fiscal year 1999. The cash flows used in investing activities in fiscal year 2000 were attributable to capital expenditures and purchases of marketable securities partially offset by proceeds from maturities of marketable securities. Fiscal year 1999 cash flows provided by investing activities was primarily due to proceeds from maturities of marketable securities, partially offset by capital expenditures. Lindsay's cash and short-term marketable securities totaled $29.8 million at February 29, 2000, as compared to $32.5 million at August 31, 1999 and $21.9 million at February 28, 1999. At February 29, 2000, Lindsay had $20.6 million 10
11 invested in long-term marketable securities which represent intermediate term (12 to 42 months maturities) municipal debt, as compared to $27.2 million at August 31, 1999 and from $31.6 million at February 28, 1999. Cash flows used in financing activities of $6.1 million for the first six months of fiscal year 2000 decreased from $13.6 million for the six months of fiscal year 1999 and for both periods was primarily attributable to purchases of treasury stock and dividends paid partially offset by proceeds from the issuance of common stock under Lindsay's employee stock option plan. Lindsay's equity decreased to $82.4 million at February 29, 2000 from $82.7 million at August 31, 1999 due to its net earnings of $5.8 million, less $5.7 million used to repurchase 343,600 shares of common stock per Lindsay's previously announced stock repurchase plan, plus $0.5 million from the proceeds, (net) issuance of common stock under Lindsay's employee stock option plan, less dividends paid of $0.9 million. Lindsay's equity at February 28, 1999 was $82.1 million. Capital expenditures of $1.7 million during the first six months of fiscal year 2000 compared to $1.6 million during the first six months of fiscal year 1999. Fiscal year 2000 capital expenditures were used primarily for upgrading manufacturing plant and equipment and to further automate Lindsay's facility. Capital expenditures for fiscal year 2000 are expected to be approximately $3.0 to $4.0 million and will be used to improve the company's existing facilities, expand its manufacturing capabilities and increase productivity. Lindsay believes its capitalization (including cash and marketable securities balances), operating cash flow and line of credit are sufficient to cover expected working capital needs, planned capital expenditures, dividends and continued repurchases of common stock. SEASONALITY Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered and installed before the growing season. Shipments to U.S. customers usually peak during Lindsay's second and third quarters for the spring planting period. Lindsay's expansion into diversified products complements its irrigation operations by using available capacity and reducing seasonality. OTHER FACTORS Lindsay's domestic and international irrigation equipment sales are highly dependent upon the need for irrigated agricultural production which, in turn, depends upon many factors including total worldwide crop production, the profitability of agricultural production, agricultural commodity prices, aggregate net cash farm income, governmental policies regarding the agricultural sector, water and energy conservation policies and the regularity of rainfall. Approximately 18% of Lindsay's operating revenues for both the first six months of fiscal year 2000 and 1999 were generated from export sales. For the full year of 1999 approximately 19% of Lindsay's operating revenues were generated from export sales. Lindsay does not believe it has significant exposure to foreign currency translation risks because its export sales are all in U.S. dollars and are generally all shipped against prepayments or U.S. bank confirmed irrevocable letters of credit or other secured means. Concerning Forward-Looking Statements - This Report on Form 10-Q, including the Management's Discussion and Analysis and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company and those statements preceded by, followed by or including the words "future", "position", "anticipate(s)", "expect", "believe(s)", "see", "plan", "further improve", "outlook", "should", or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should understand that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in these forward-looking statements: availability of and price of raw materials, product pricing, competitive environment and related domestic and international market conditions, operating efficiencies and actions of domestic and foreign governments. Any changes in such factors could result in significantly different results. 11
12 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is not subject to material market risks with respect to its marketable securities. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS Lindsay is a party to a number of lawsuits in the ordinary course of its business. Management does not believe that these lawsuits, either individually or in the aggregate, are likely to have a material adverse effect on Lindsay's consolidated financial condition, results of operations or cash flows. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Lindsay's annual shareholder's meeting was held on January 25, 2000. The shareholders voted to elect a director, and to ratify the appointment of PricewaterhouseCoopers LLP as independent accountants for the fiscal year ending August 31, 2000. There were 12,408,614 shares of common stock entitled to vote at the meeting and a total of 11,135,260 shares (89.74%) were represented at the meeting. <TABLE> <S> <C> <C> <C> 1. Election of Director: For Against Withheld Larry H. Cunningham 11,095,149 3,673 36,438 2. Auditors. Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for the fiscal year ended August 31, 2000. For - 11,122,918 Against - 7,421 Abstain - 4,921 Broker non-vote - 0 </TABLE> ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - 4 - Specimen Form of Common Stock Certificate incorporated by reference to Exhibit 4 to the Company's Report on Form 10-Q for the fiscal quarter ended November 30, 1997 27 - Financial Data Schedule (b) Reports on Form 8-K - The registrant filed a report on Form 8-K dated December 1, 1999, reporting under Item 5. Other Events, which included a copy of a press release announcing that its Chairman, President and CEO, Gary D. Parker will be retiring from the Company by the conclusion of the fiscal year ending August 31, 2000 or upon the naming of a successor. 12
13 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 27th day of March, 2000. LINDSAY MANUFACTURING CO. By: /s/ BRUCE C. KARSK ------------------------------------ Name: Bruce C. Karsk Title: Director, Vice President-Finance, Treasurer and Secretary; Principal Financial and Accounting Officer By: /s/ RALPH J. KROENKE ------------------------------------ Name: Ralph J. Kroenke Title: Controller 13