1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 2000 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _______________ Commission File Number 0-17116 Lindsay Manufacturing Co. (Exact name of registrant as specified in its charter) DELAWARE 47-0554096 -------- ----------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) BOX 156, 214 EAST 2ND STREET, LINDSAY, NEBRASKA 68644 - ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) 402-428-2131 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No|_| At July 5, 2000, 11,743,928 shares of common stock, $1.00 par value, of the registrant were outstanding. Exhibit index is located on page 2. Total number of pages 36. 1
2 LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES INDEX FORM 10-Q Page No. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Consolidated Balance Sheets, May 31, 2000 and 1999 and August 31, 1999 3 Consolidated Statements of Operations for the three months and nine months ended May 31, 2000 and 1999 4 Consolidated Statements of Cash Flows for the nine months ended May 31, 2000 and 1999 5 Notes to Consolidated Financial Statements 6-8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 9-12 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS 12 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 13 EXHIBIT INDEX 10(a) - Employment Agreement between the Company and Richard W. Parod effective March 8, 2000 14-35 27 - Financial Data Schedule 36 2
3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS LINDSAY MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS MAY 31, 2000 AND 1999 AND AUGUST 31, 1999 <TABLE> <CAPTION> (UNAUDITED) (UNAUDITED) MAY MAY AUGUST ($ IN THOUSANDS, EXCEPT PAR VALUES) 2000 1999 1999 - ----------------------------------- ---- ---- ---- <S> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents ..................................... $ 4,977 $ 6,926 $ 14,232 Marketable securities ......................................... 25,306 18,924 18,236 Receivables ................................................... 25,441 17,949 12,909 Inventories ................................................... 8,624 6,568 7,659 Deferred income taxes ......................................... 3,124 3,796 3,803 Other current assets .......................................... 392 267 85 --------- --------- --------- Total current assets ....................................... 67,864 54,430 56,924 Long-term marketable securities ............................... 19,433 31,171 27,229 Property, plant and equipment, net ............................ 15,751 14,587 15,416 Other noncurrent assets........................................ 839 1,020 820 --------- --------- --------- Total assets ..................................................... $ 103,887 $ 101,208 $ 100,389 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, trade ....................................... $ 5,620 $ 3,621 $ 4,081 Other current liabilities ..................................... 12,930 14,015 12,580 Current portion of capital lease obligation ................... 0 147 95 --------- --------- --------- Total current liabilities .................................. 18,550 17,783 16,756 Other noncurrent liabilities .................................. 872 1,052 935 --------- ---------- --------- Total liabilities ................................................ 19,422 18,835 17,691 --------- --------- --------- Contingencies Shareholders' equity: Preferred stock, ($1 par value, 2,000,000 shares authorized no shares issued and outstanding in May 2000 and 1999 and August 1999) Common stock, ($1 par value, 25,000,000 shares authorized, 17,309,443, 17,056,595 and 17, 074,491 shares issued in May 2000 and 1999 and August 1999) ............... 17,309 17,057 17,074 Capital in excess of stated value ............................. 2,426 1,446 2,118 Retained earnings.............................................. 145,142 132,710 134,708 Less treasury stock, at cost, 5,203,637, 4,515,237 and 4,650,237 shares in May 2000 and 1999 and August 1999................. (80,412) (68,840) (71,202) --------- --------- --------- Total shareholders' equity..................................... 84,465 82,373 82,698 --------- --------- --------- Total liabilities and shareholders' equity .................... $ 103,887 $101,208 $ 100,389 ========= ======== ========= </TABLE> The accompanying notes are an integral part of the financial statements. 3
4 LINDSAY MANUFACTURING CO. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED MAY 31, 2000 AND 1999 (UNAUDITED) <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- MAY MAY MAY MAY (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 2000 1999 - ---------------------------------------- ---- ---- ---- ---- <S> <C> <C> <C> <C> Operating revenues............................................ $46,603 $42,990 $106,102 $95,719 Cost of operating revenues.................................... 34,540 31,680 79,361 72,070 ------- ------- --------- -------- Gross profit.................................................. 12,063 11,310 26,741 23,649 ------- ------- --------- -------- Operating expenses: Selling expense............................................ 1,583 1,268 4,310 3,688 General and administrative expense............................ 1,870 2,253 5,988 5,914 Engineering and research expense........................... 512 425 1,476 1,297 ------- ------- --------- -------- Total operating expenses...................................... 3,965 3,946 11,774 10,899 ------- ------- --------- -------- Operating income.............................................. 8,098 7,364 14,967 12,750 Interest income, net.......................................... 621 676 1,953 2,088 Other income, net............................................ 43 78 71 308 ------- ------- --------- -------- Earnings before income taxes.................................. 8,762 8,118 16,991 15,146 Income tax provision.......................................... 2,799 2,598 5,268 4,847 ------- ------- --------- -------- Net earnings.................................................. $ 5,963 $ 5,520 $ 11,723 $ 10,299 ======= ======= ========= ======== Basic net earnings per share.................................. $ 0.49 $ 0.44 $ 0.95 $ 0.79 ======= ======= ========= ======== Diluted net earnings per share................................ $ 0.48 $ 0.42 $ 0.93 $ 0.77 ======= ======= ========= ======== Average shares outstanding.................................... 12,161 12,685 12,321 13,026 Diluted effect of stock options............................... 250 430 315 397 ------- ------- --------- -------- Average shares outstanding assuming dilution.................. 12,411 13,115 12,636 13,423 ======= ======= ========= ======== Cash dividends per share...................................... $ 0.035 $ 0.035 $ 0.105 $ 0.105 ======= ======= ========= ======== </TABLE> The accompanying notes are an integral part of the financial statements. 4
5 LINDSAY MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MAY 31, 2000 AND 1999 (UNAUDITED) <TABLE> <CAPTION> MAY MAY ($ IN THOUSANDS) 2000 1999 - ---------------- ---- ---- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net earnings................................................................ $ 11,723 $ 10,299 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization............................................ 2,187 1,942 Amortization of marketable securities premiums, net...................... 13 142 (Gain) on sale of fixed assets........................................... (59) (90) Loss (gain) early redemption of marketable securities held-to-maturity...................................................... 12 (5) Provision for uncollectible accounts receivable.......................... (276) (2) Deferred income taxes.................................................... 679 65 Changes in assets and liabilities: Receivables.............................................................. (12,256) (3,881) Inventories.............................................................. (965) 3,630 Other current assets..................................................... (307) (175) Accounts payable......................................................... 1,539 (1,315) Other current liabilities................................................ (1,312) (1,161) Current taxes payable.................................................... 1,662 3,453 Other noncurrent assets and liabilities.................................. (82) (129) --------- --------- Net cash provided by operating activities................................ 2,558 12,773 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment.................................. (2,522) (2,480) Proceeds from sale of property, plant and equipment......................... 59 112 Purchases of marketable securities held-to-maturity......................... (13,125) (500) Proceeds from maturities of marketable securities held-to-maturity.......... 13,826 12,136 -------- -------- Net cash (used in) provided by investing activities......................... (1,762) 9,268 --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments under capital lease obligation........................... (95) (103) Proceeds, net from issuance of common stock under stock option plan ........................................... 543 654 Dividends paid.............................................................. (1,289) (1,353) Purchases of treasury stock................................................. (9,210) (18,107) --------- -------- Net cash used in financing activities....................................... (10,051) (18,909) -------- -------- Net (decrease) increase in cash and cash equivalents........................ (9,255) 3,132 Cash and cash equivalents, beginning of period.............................. 14,232 3,794 -------- -------- Cash and cash equivalents, end of period.................................... $ 4,977 $ 6,926 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid........................................................... $ 2,958 $ 1,356 Interest paid............................................................... $ 32 $ 6 </TABLE> The accompanying notes are an integral part of the financial statements. 5
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 May 31, 2000, Lindsay's cash equivalents were held primarily by one financial institution. Marketable securities and long-term marketable securities are categorized as held-to-maturity. Investments in the held-to-maturity category are carried at amortized cost. Lindsay considers all highly liquid investments with original maturities of three months or less to be cash equivalents, while those having maturities in excess of three months are classified as marketable securities or as long-term marketable securities when maturities are in excess of one year. Marketable securities and long-term marketable securities consist of investment-grade municipal bonds. The total amortized cost, gross unrealized holding gains, gross unrealized holding losses, and aggregate fair value for held-to-maturity securities are $44,739,000, $7,000, $294,000 and $44,452,000, respectively. In the held-to-maturity category at May 31, 2000, $25,306,000 in marketable securities mature within one year and $19,433,000 in long term marketable securities have maturities ranging from 12 to 42 months. The Company is not subject to material market risks with respect to its marketable securities. (3) INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for all inventories. <TABLE> <CAPTION> MAY MAY AUGUST $ IN THOUSANDS 2000 1999 1999 - --------------- ---- ---- ---- <S> <C> <C> <C> First-in, first-out (FIFO) inventory .................................... $ 13,463 $ 10,294 $ 11,983 LIFO reserves ........................................................... (3,904) (2,791) (3,389) Obsolescence reserve .................................................... (935) (935) (935) ---------- --------- --------- Total Inventories ....................................................... $ 8,624 $ 6,568 $ 7,659 ========== ========= ========= </TABLE> The estimated percentage distribution between major classes of inventory before reserves is as follows: <TABLE> <CAPTION> MAY MAY AUGUST 2000 1999 1999 ---- ---- ---- <S> <C> <C> <C> Raw materials ........................................................... 12% 18% 12% Work in process ......................................................... 5% 6% 5% Purchased parts ......................................................... 38% 35% 38% Finished goods .......................................................... 45% 41% 45% </TABLE> 6
7 (4) PROPERTY, PLANT AND EQUIPMENT Property, plant, equipment and capitalized lease assets are stated at cost. <TABLE> <CAPTION> MAY MAY AUGUST $ IN THOUSANDS 2000 1999 1999 - --------------- ---- ---- ----- Plant and equipment: <S> <C> <C> <C> Land ............................................................... $ 70 $ 70 $ 70 Buildings .......................................................... 5,917 5,043 5,781 Equipment .......................................................... 29,241 26,684 27,841 Other............................................................... 5,684 5,492 5,004 Capital lease: Equipment .......................................................... 458 458 458 -------- ------- -------- Total plant, equipment and capital lease ................................ 41,370 37,747 39,154 Accumulated depreciation and amortization: Plant and equipment ................................................ (25,322) (22,968) (23,520) Capital lease ...................................................... (297) (192) (218) --------- -------- --------- Property, plant and equipment, net ..................................... $ 15,751 $14,587 $ 15,416 ======== ======= ======== </TABLE> (5) CREDIT ARRANGEMENTS Lindsay entered into an agreement with a commercial bank in December 1999 for a $10.0 million unsecured revolving line of credit through December 31, 2000. Proceeds from this line of credit, if any, are to be used for working capital and general corporate purposes including stock repurchases. There have been no borrowings made under such unsecured revolving line of credit. Borrowings will bear interest at a rate equal to one percent per annum under the rate in effect from time to time and designated by the commercial bank as its National Base Rate. No covenants limit the ability of Lindsay to merge or consolidate, to encumber assets, to sell significant portions of its assets, to pay dividends, or to repurchase common stock. (6) CONTINGENCIES The Company and its subsidiaries are defendants in various legal actions arising in the ordinary course of their business activities. In the opinion of management, resolution of these legal actions will not result in a material adverse effect on Lindsay's consolidated financial position, results of operations or cash flows. (7) NET EARNINGS PER SHARE Basic net earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding. Diluted net earnings per share includes the dilutive effect of stock options. Options to purchase 99,750 shares of common stock at a weighted average price of $27.13 per share were outstanding during the third quarter of fiscal year 2000, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. These options expire between September 3, 2007 and September 3, 2008. 7
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 NINE MONTHS ENDED -------------------------- ------------------------- MAY MAY MAY MAY $ IN THOUSANDS 2000 1999 2000 1999 - -------------- ---- ---- ---- ---- <S> <C> <C> <C> <C> Operating revenues: Irrigation................................................. $41,911 $ 39,085 $ 95,412 $83,426 Diversified products....................................... 4,692 3,905 10,690 12,293 ------- -------- --------- ------- Total operating revenues...................................... $46,603 $ 42,990 $ 106,102 $95,719 ======= ======== ========= ======= Operating income: Irrigation................................................. $ 9,580 $ 9,198 $ 20,450 $17,495 Diversified products....................................... 900 844 1,981 2,466 ------- -------- --------- ------- Segment operating income...................................... 10,480 10,042 22,431 19,961 Unallocated general & administrative and engineering & research expenses............................ 2,382 2,678 7,464 7,211 Interest and other income, net................................ 664 754 2,024 2,396 ------- -------- --------- ------- Earnings before income taxes.................................. $ 8,762 $ 8,118 $ 16,991 $15,146 ======= ======== ========= ======= Geographic area revenues: United States.............................................. $40,042 $ 34,639 $ 89,082 $78,118 Europe & Africa............................................ 2,116 3,776 5,548 6,785 Mexico & Latin America.................................... 991 2,122 3,933 4,753 Other export............................................... 3,454 2,453 7,539 6,063 ------- -------- --------- ------- Total revenues............................................. $46,603 $ 42,990 $ 106,102 $95,719 ======= ======== ========= ======= </TABLE> (9) REVENUE RECOGNITION In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The guidance in the SAB is required to be followed no later than the fourth quarter of the fiscal year beginning after December 15, 1999 and will not have a material impact on the Company's consolidated financial position or results of operations. 8
9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table provides highlights for the three month and nine month periods of fiscal year 2000 as compared to the same periods of fiscal year 1999 of Lindsay's consolidated operating results displayed in the Consolidated Statements of Operations and should be read together with the industry segment information in Note (8) to the consolidated financial statements. <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED ------------------------------ ------------------------------- PERCENT PERCENT INCREASE INCREASE ($ IN THOUSANDS) 05/31/00 05/31/99 (DECREASE) 05/31/00 05/31/99 (DECREASE) - ---------------- -------- -------- ---------- -------- -------- --------- <S> <C> <C> <C> <C> <C> <C> Consolidated Operating Revenues.................................. $46,603 $ 42,990 8.4% $ 106,102 $ 95,719 10.8% Cost of Operating Revenues.......................... $34,540 $ 31,680 9.0 $ 79,361 $ 72,070 10.1 Gross Profit........................................ $12,063 $ 11,310 6.7 $ 26,741 $ 23,649 13.1 Gross Margin........................................ 25.9% 26.3% 25.2% 24.7% Selling, Eng. & Research, and G&A Expense........... $ 3,965 $ 3,946 0.5 $ 11,774 $ 10,899 8.0 Operating Income.................................... $ 8,098 $ 7,364 10.0 $ 14,967 $ 12,750 17.4 Operating Margin.................................... 17.4% 17.1% 14.1% 13.3% Interest Income, net................................ $ 621 $ 676 (8.1) $ 1,953 $ 2,088 (6.5) Other Income, net................................... $ 43 $ 78 (44.9) $ 71 $ 308 (76.9) Income Tax Provision................................ $ 2,799 $ 2,598 7.7 $ 5,268 $ 4,847 8.7 Effective Income Tax Rate........................... 31.9% 32.0% 31.0% 32.0% Net Earnings........................................ $ 5,963 $ 5,520 8.0 $ 11,723 $ 10,299 13.8 Irrigation Equipment Segment (See Note (8)) Operating Revenues.................................. $41,911 $ 39,085 7.2 $ 95,412 $ 83,426 14.4 Operating Income.................................... $ 9,580 $ 9,198 4.2 $ 20,450 $ 17,495 16.9 Operating Margin.................................... 22.9% 23.5% 21.4% 21.0% Diversified Products Segment (See Note (8)) Operating Revenues.................................. $ 4,692 $ 3,905 20.2 $ 10,690 $ 12,293 (13.0) Operating Income.................................... $ 900 $ 844 6.6% $ 1,981 $ 2,466 (19.7%) Operating Margin.................................... 19.2% 21.6% 18.5% 20.1% </TABLE> As the above table displays, operating revenues for the three month period ended May 31, 2000 increased 8.4 percent ($3.6 million) from the comparable period of the prior year. The increase in this year's third quarter revenue was the net result of a 16 percent ($4.7 million) increase in U.S. irrigation equipment revenues, a 21 percent ($1.8 million) decrease in export irrigation equipment revenues and a 16 percent ($0.7 million) increase in diversified products and other revenues. For the nine month period ended May 31, 2000, operating revenues were 10.8 percent ($10.4 million) higher than the nine month period of the prior year. U.S. irrigation equipment revenue was 20 percent ($12.4 million) higher, export irrigation equipment revenue was 3 percent ($0.6 million) lower, while diversified products and other revenue for the nine month period was 10 percent ($1.4 million) lower than at this time last year. Lindsay believes that the long-term demand drivers for higher irrigation equipment consisting of the need for farmers to conserve water, energy and labor while at the same time improving crop yields and increasing crop production remain in place in both its U.S. market and in its markets outside the U.S. However, these long-term demand drivers continue to be somewhat muted by low agricultural commodity prices both in the U.S. and in our export markets. These low agricultural commodity prices are in part due to near record 1998 and 1999 crop production in the U.S. Agricultural commodity prices have stabilized somewhat within the last nine months however, and farmer confidence has improved leading to our increase in center pivot sales in the U.S. market. Domestic irrigation equipment pricing (net of discounts and promotional program allowances) on units shipped and sold during the three months ended May 31, 2000 was, on average, approximately equal to that of the prior year's comparative three month period. Irrigation equipment costs (at standard cost and before warranty expenses) on units 9
10 shipped and sold during the third quarter of fiscal year 2000 were on average slightly higher then that of the prior year's third quarter due to higher raw material costs (primarily steel costs). Export irrigation equipment revenues for the three month period ended May 31, 2000, were negatively affected by an unfavorable foreign exchange rate (strong U.S. dollar) in several export markets. Third quarter fiscal year 2000 diversified products and other revenue was higher primarily due to improved sales of outsource manufacturing products to Deere & Company. For the nine month period revenues from outsource manufacturing were lower due to reduced sales to both Deere & Company and Caterpillar, Inc. Large diameter tubing revenue during both the three and nine month periods of fiscal year 2000 were about equal to the prior year's comparative periods. Gross margin for the three months ended May 31, 2000, was 25.9 percent, down slightly from 26.3 percent of the prior year's comparative period. For the nine months ended May 31, 2000, gross margin was 25.2 percent as compared to 24.7 percent for the nine months ended May 31, 1999. Increased manufacturing throughput resulted in favorable manufacturing overhead variances as compared to the prior year's comparable period, however, these favorable overhead rate variances were more than offset by the higher steel costs discussed earlier. Selling, general and administrative, and engineering and research expenses for the three month period ended May 31, 2000, were $4.0 million as compared to $3.9 million during the prior year's comparative period. For the nine month period, fiscal year 2000 selling, general and administrative, and engineering and research expenses totaled $11.8 million as compared to $10.9 million in fiscal year 1999. Higher sales wages, depreciation expense, group and comprehensive general and liability insurance costs, and professional and legal fees were responsible for the majority of the increase in selling, general and administrative, and engineering and research expenses for the nine month period. The effective tax rate for the nine month period ended May 31, 2000 was adjusted to 31.0 percent which resulted in a 31.9 percent rate for the third quarter. This compares to an effective tax rate of 32.0 percent for both the comparable three month and nine month periods of the prior year. Due to the federal income tax exempt status of interest income from its municipal bond investments, and the foreign sales corporation federal tax provisions as they relate to export sales, Lindsay benefits from an effective tax rate that is lower than the combined federal and state statutory rates, currently estimated at 36.2 percent. FINANCIAL POSITION AND LIQUIDITY The discussion of financial position and liquidity focuses on the balance sheet and statement of cash flows. Lindsay requires cash for financing its receivables, inventories, capital expenditures, stock repurchases and dividends. Over the years, Lindsay has financed its growth through funds provided by operations. Cash flows provided by operations totaled $2.6 million for the first nine months of fiscal year 2000 compared to cash flows provided by operations of $12.8 million for the first nine months of fiscal year 1999. The cash flows provided by operating activities for fiscal year 2000 were primarily due to net earnings partially offset by increased receivables. Fiscal year 1999 cash flows provided by operating activities were principally due to net earnings, decreased inventories and increased current taxes payable partially offset by increased receivables. Receivables of $25.4 million at May 31, 2000 increased $12.5 million from $12.9 million at August 31, 1999 and increased $7.5 million from $17.9 million at May 31, 1999. The increases were principally due to the higher level of U.S. irrigation equipment sales activity during May 2000 and increased use of a marketing program that offered deferred payment terms on some transactions to our dealers, as compared to August 1999 and May 1999. Inventories at May 31, 2000 totaled $8.6 million which is higher than their $7.7 million balance at August 31, 1999 and $6.6 million balance at May 31, 1999. Current liabilities of $18.6 million at May 31, 2000 are higher than their $16.8 million balance at August 31, 1999 and their $17.8 million balance at May 31, 1999. The increase from August 31, 1999 is principally due to increased trade payables and a higher accrual for taxes payable partially offset by a lower accrual for payroll and vacation and international dealer prepayments. The increase from May 31, 1999 is primarily due to increased trade payables partially offset by a lower accrual for taxes payable. Cash flows used in investing activities of $1.8 million for the first nine months of fiscal year 2000 compared to cash flows provided by investing activities of $9.3 million for the first nine months of fiscal year 1999. The cash flows used in investing activities in fiscal year 2000 were attributable to capital expenditures and purchases of marketable securities partially offset by proceeds from maturities of marketable securities. Fiscal year 1999 cash flows provided by investing activities was primarily due to proceeds from maturities of marketable securities, partially offset by capital expenditures and purchases of marketable securities. Lindsay's cash and short-term marketable securities totaled $30.3 million at May 31, 2000, as compared to $32.5 million at August 31, 1999 and $25.9 million at May 31, 1999. At May 31, 2000, Lindsay had $19.4 million invested in 10
11 long-term marketable securities which represent intermediate term (12 to 42 months maturities) municipal debt, as compared to $27.2 million at August 31, 1999 and from $31.2 million at May 31, 1999. Cash flows used in financing activities of $10.1 million for the first nine months of fiscal year 2000 decreased from $18.9 million for the nine months of fiscal year 1999 and for both periods was primarily attributable to purchases of treasury stock and dividends paid partially offset by proceeds from the issuance (net) of common stock under Lindsay's employee stock option plan. Lindsay's equity increased to $84.5 million at May 31, 2000 from $82.7 million at August 31, 1999 due to its net earnings of $11.7 million, less $9.2 million used to repurchase 553,400 shares of common stock per Lindsay's previously announced stock repurchase plan, plus $0.6 million of proceeds from the issuance (net) of common stock under Lindsay's employee stock option plan, less dividends paid of $1.3 million. Lindsay's equity at May 31, 1999 was $82.4 million. Capital expenditures of $2.5 million during the first nine months of fiscal year 2000 compared to $2.5 million during the first nine months of fiscal year 1999. Fiscal year 2000 capital expenditures were used primarily for upgrading manufacturing plant and equipment and to further automate Lindsay's facility. Capital expenditures for fiscal year 2000 are expected to be approximately $3.0 to $4.0 million and will be used to improve the company's existing facilities, expand its manufacturing capabilities and increase productivity. Lindsay believes its capitalization (including cash and marketable securities balances), operating cash flow and line of credit ($10.0 million) are sufficient to cover expected working capital needs, planned capital expenditures, dividends and continued repurchases of common stock. SEASONALITY Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered and installed before the growing season. Shipments to U.S. customers usually peak during Lindsay's second and third quarters for the spring planting period. Lindsay's diversified products business complements its irrigation operations by using available capacity and reducing seasonality. RECENT EVENTS On June 20, 2000, Lindsay entered into an agreement to purchase the assets of Oasis Enterprises, Inc. (Oasis), a privately-held manufacturer of irrigation systems based in Nunn, Colorado. Oasis manufactures mini-pivot and lateral move irrigation systems that irrigate small fields, from 1-60 acres, while Lindsay's core line of center pivot and lateral move systems normally irrigate 40 or more acres. The mini-systems manufactured by Oasis are utilized primarily on farms raising such crops as vegetables, turfgrass (sod) and alfalfa, in contrast to the corn, soybeans and cotton that are more common crops for the larger systems. This acquisition is a strategic, product line extension that leverages Lindsay's existing manufacturing and distribution expertise in markets the company knows and with technologies Lindsay understands. The cash purchase is expected to close during the fourth quarter, pending due diligence and other procedures and will have negligible effect in the first year after closing and is expected to be accretive to earnings thereafter. OTHER FACTORS Lindsay's domestic and international irrigation equipment sales are highly dependent upon the need for irrigated agricultural production which, in turn, depends upon many factors including total worldwide crop production, the profitability of agricultural production, agricultural commodity prices, aggregate net cash farm income, governmental policies regarding the agricultural sector, water and energy conservation policies and the regularity of rainfall. Approximately 16% and 18% of Lindsay's operating revenues for the first nine months of fiscal year 2000 and 1999 respectively, were generated from export sales. For the full year of 1999, approximately 19% of Lindsay's operating revenues were generated from export sales. Lindsay does not believe it has significant exposure to foreign currency translation risks because its export sales are all in U.S. dollars and are generally all shipped against prepayments or U.S. bank confirmed irrevocable letters of credit or other secured means. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The guidance is the SAB is required to be followed no later than the fourth quarter of the fiscal year beginning after December 15, 1999 and will not have a material impact on the Company's consolidated financial position or results of operations. 11
12 Concerning Forward-Looking Statements - This Report on Form 10-Q, including the Management's Discussion and Analysis and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company and those statements preceded by, followed by or including the words "future", "position", "anticipate(s)", "expect", "believe(s)", "see", "plan", "further improve", "outlook", "should", or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should understand that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in these forward-looking statements: availability of and price of raw materials, product pricing, competitive environment and related domestic and international market conditions, operating efficiencies and actions of domestic and foreign governments. Any changes in such factors could result in significantly different results. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is not subject to material market risks with respect to its marketable securities. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS Lindsay is a party to a number of lawsuits in the ordinary course of its business. Management does not believe that these lawsuits, either individually or in the aggregate, are likely to have a material adverse effect on Lindsay's consolidated financial condition, results of operations or cash flows. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - 4 - Specimen Form of Common Stock Certificate incorporated by reference to Exhibit 4 to the Company's Report on Form 10-Q for the fiscal quarter ended November 30, 1997 10(a) - Employment Agreement between the Company and Richard W. Parod effective March 8, 2000. 27 - Financial Data Schedule (b) Reports on Form 8-K - No Form 8-K was filed during the quarter ended May 31, 2000. 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 12th day of July, 2000. LINDSAY MANUFACTURING CO. By: /s/ BRUCE C. KARSK -------------------------------------------- Name: Bruce C. Karsk Title: Director, Vice President-Finance, Treasurer and Secretary; Principal Financial and Accounting Officer By: /s/ RALPH J. KROENKE -------------------------------------------- Name: Ralph J. Kroenke Title: Controller 13