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, 1997 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, East Highway 91, 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 --- --- Common Stock, $1.00 par value 9,442,336 - ----------------------------- ------------------------------- Title of Class Outstanding as of June 11, 1997 Exhibit index is located on page 2. Total number of pages 15. -1-
2 LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES INDEX <TABLE> <CAPTION> Page No. -------- <S> <C> Part I - Financial Information Consolidated Balance Sheets, May 31, 1997 and 1996 and August 31, 1996 3 Consolidated Statements of Operations for the three months and nine months ended May 31, 1997 and 1996 4 Consolidated Statements of Cash Flows for the nine months ended May 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6-8 Management's Discussion and Analysis of Results of Operations and Financial Position 9-12 Part II - Other Information Item 1. Legal Proceedings 13-14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 Exhibit Index 11 - Statement re Computation of Per Share Earnings 16 </TABLE> -2-
3 PART I FINANCIAL INFORMATION Item 1. Financial Statements Lindsay Manufacturing Co. CONSOLIDATED BALANCE SHEETS May 31, 1997 and 1996 and August 31, 1996 (in thousands, except share amounts) - ------------------------------------------------------------------------------- <TABLE> <CAPTION> (Unaudited) (Unaudited) May May August 1997 1996 1996 --------- --------- --------- <S> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents..................... $ 3,288 $ 2,869 $ 2,362 Marketable securities......................... 16,564 21,857 23,926 Receivables................................... 20,479 20,583 20,128 Inventories................................... 9,719 7,974 7,800 Deferred income taxes......................... 3,800 3,030 3,369 Other current assets.......................... 639 2,037 270 --------- --------- --------- Total current assets........................ 54,489 58,350 57,855 Long-term marketable securities................ 37,591 29,158 28,146 Property, plant and equipment, net............. 11,248 9,393 9,691 Other noncurrent assets........................ 1,131 1,221 1,131 --------- --------- --------- Total assets................................... $ 104,459 $ 98,122 $ 96,823 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, trade....................... $ 4,662 $ 5,896 $ 5,915 Other current liabilities..................... 13,431 13,392 12,782 --------- --------- --------- Total current liabilities................... 18,093 19,288 18,697 Other noncurrent liabilities................... 1,273 1,355 1,292 --------- --------- --------- Total liabilities.............................. 19,366 20,643 19,989 --------- --------- --------- Contingencies Stockholders' equity: Preferred stock, ($1 par value, 2,000,000 shares authorized, no shares issued and outstanding in May 1997 and 1996 and August 1996) Common stock, ($1 par value, 25,000,000 shares authorized, 11,190,866, 7,320,414 and 7,327,961 shares issued in May 1997 and 1996 and August 1996......................... 11,191 7,320 7,328 Capital in excess of stated value............. 20 2,754 2,952 Retained earnings............................. 103,874 85,810 88,002 Less treasury stock, (at cost, 1,753,030, 907,120 and 987,820 shares in May 1997 and 1996 and August 1996)........................ (29,992) (18,405) (21,448) --------- --------- --------- Total stockholders' equity..................... 85,093 77,479 76,834 --------- --------- --------- Total liabilities and stockholders' equity..... $ 104,459 $ 98,122 $ 96,823 ========= ========= ========= </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, 1997 and 1996 (in thousands, except per share amounts) (Unaudited) - ------------------------------------------------------------------------------- <TABLE> <CAPTION> Three Months Ended Nine Months Ended ------------------ ----------------- May May May May 1997 1996 1997 1996 -------- -------- -------- -------- <S> <C> <C> <C> <C> Operating revenues...................... $ 41,663 $ 41,139 $126,823 $106,605 Cost of operating revenues.............. 30,370 30,534 94,315 79,775 -------- -------- -------- -------- Gross profit............................ 11,293 10,605 32,508 26,830 -------- -------- -------- -------- Operating expenses: Selling expense........................ 1,235 1,068 3,534 3,129 General and administrative expense..... 1,574 1,661 5,319 4,966 Engineering and research expense....... 361 364 1,117 1,055 -------- -------- -------- -------- Total operating expenses................ 3,170 3,093 9,970 9,150 -------- -------- -------- -------- Operating income........................ 8,123 7,512 22,538 17,680 Interest income, net.................... 724 615 2,172 1,987 Other income, net....................... 55 43 228 348 -------- -------- -------- -------- Earnings before income taxes............ 8,902 8,170 24,938 20,015 Income tax provision.................... 2,849 2,451 7,980 6,005 -------- -------- -------- -------- Net earnings............................ $ 6,053 $ 5,719 $ 16,958 $ 14,010 ======== ======== ======== ======== Net earnings per share: Primary................................ $ 0.61 $ 0.56 $ 1.69 $ 1.38 ======== ======== ======== ======== Fully diluted......................... $ 0.61 $ 0.56 $ 1.69 $ 1.37 ======== ======== ======== ======== Cash dividends per share................ $ 0.035 $ 0.033 $ 0.102 $ 0.067 ======== ======== ======== ======== </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, 1997 and 1996 (in thousands) (Unaudited) - ------------------------------------------------------------------------------- <TABLE> <CAPTION> May May 1997 1996 -------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net earnings........................................ $ 16,958 $ 14,010 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation...................................... 1,496 1,084 Amortization of marketable securities premiums, net............................................. 171 247 (Gain) on sale of fixed assets.................... (57) (54) (Gain) Loss on maturities of marketable securities held-to-maturity..................... (14) 7 (Gain) on sale of marketable securities available-for-sale.............................. 0 (8) Provision for uncollectible accounts receivable... 45 (65) Deferred income taxes............................. (431) (226) Changes in assets and liabilities: Receivable........................................ (396) (10,165) Inventories....................................... (1,919) (2,590) Other current assets.............................. (369) (146) Accounts payable.................................. (1,253) 1,601 Other current liabilities......................... 222 1,946 Current taxes payable............................. 427 (190) Other noncurrent assets and liabilities........... (19) (97) -------- -------- Net cash flow provided by operating activities...... 14,861 5,354 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment.......... (3,073) (3,338) Proceeds from sale of property, plant and equipment. 77 79 Purchases of marketable securities held-to maturity. (18,329) (11,744) Proceeds from maturities of marketable securities held-to-maturity.................................. 16,089 9,753 Proceeds from sale of marketable securities available-for-sale................................ 0 3,525 -------- -------- Net cash flow used in investing activities.......... (5,236) (1,725) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issurance of common stock under stock option plan....................................... 815 821 Three-for-two stock split fractional shares paid in cash........................................... (2) (2) Dividends paid...................................... (968) (647) Purchases of treasury stock......................... (8,544) (5,446) -------- -------- Net cash flow used in financing activities.......... (8,699) (5,274) -------- -------- Net increase (decrease) in cash and cash equivalents.................................. 926 (1,645) Cash and cash equivalents, beginning of period...... 2,362 4,514 -------- -------- Cash and cash equivalents, end of period............ $ 3,288 $ 2,869 ======== ======== Supplemental Cash Flow Information: Income taxes paid................................... $ 7,942 $ 6,464 Interest paid....................................... $ 1 $ 86 </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, 1996 Annual Report to Stockholders. 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, 1997, Lindsay's cash equivalents were held primarily by one financial institution. Marketable securities and long-term marketable securities are categorized as held-to-maturity or available-for-sale. Investments in the held-to-maturity category are carried at amortized cost. Investments in the available-for-sale category are carried at fair value with unrealized gains and losses as a separate component of stockholders' equity. The carrying amounts of the securities used in computing unrealized and realized gains and losses are determined by specific identification. Lindsay considers all highly liquid investments with 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. There are no investments in the available-for-sale category included in Marketable securities at May 31, 1997. Investments in the held-to-maturity category are included in Marketable securities ($16.6 million) and Long-term marketable securities ($37.6 million). The total amortized cost, gross unrealized holding gains, gross unrealized holding losses, and aggregate fair value for held-to-maturity securities are $54.2 million, $0.1 million, $0.1 million, and $54.2 million, respectively. There have not been any sales of held-to-maturity securities for the first nine months of Fiscal 1997. In the held-to-maturity category, $16.6 million in securities mature within one year and $37.6 million have maturities ranging from one to four and one-half years. -6-
7 Lindsay Manufacturing Co. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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> (in thousands) --------------------------------- May May August 1997 1996 1996 ------- ------- ------- <S> <C> <C> <C> Total manufactured goods First-in, first-out inventory $14,582 $11,539 $12,060 LIFO reserves (4,185) (2,948) (3,570) Obsolescence reserve (678) (617) (690) ------- ------- ------- Total inventories $ 9,719 $ 7,974 $ 7,800 ======= ======= ======= </TABLE> The estimated percentage distribution between major classes of inventory before reserves is as follows: <TABLE> <CAPTION> May May August 1997 1996 1996 ------ ------ -------- <S> <C> <C> <C> Raw materials 16% 21% 16% Work in process 8% 7% 8% Purchased parts 32% 28% 32% Finished goods 44% 44% 44% </TABLE> 4 Property, Plant and Equipment Property, plant and equipment are stated at cost. <TABLE> <CAPTION> (in thousands) --------------------------------- May May August 1997 1996 1996 ------- ------- ------- <S> <C> <C> <C> Land $ 70 $ 70 $ 70 Buildings 4,945 4,426 4,756 Equipment 22,782 19,858 22,563 Other 3,301 4,344 1,859 ------- ------- ------- 31,098 28,698 29,248 Less accumulated depreciation 19,850 19,305 19,557 ------- ------- ------- Property, plant and equipment, net $11,248 $ 9,393 $ 9,691 ======= ======= ======= </TABLE> -7-
8 Lindsay Manufacturing Co. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Contingencies The Company and its subsidiaries are defendants in various legal actions arising in the course of their business activities. During fiscal 1996, Lindsay substantially completed certain environmental remediation efforts at its manufacturing facility. Lindsay believes that its insurer should cover the costs of remediation. The insurer reduced its reimbursement of remediation costs in early 1990. In late 1990, Lindsay filed suit against the insurer. The insurer completely stopped reimbursement of remediation costs in 1991 and in 1992 the insurer filed a counterclaim against Lindsay for previously reimbursed remediation costs. In December 1995 the court dismissed Lindsay's suit against the insurer and entered a judgment in the amount of $2.4 million in favor of the insurer for which the Company has not made a provision. Lindsay has appealed the dismissal of it's case against the insurer and the judgment against Lindsay. In the opinion of management, an unfavorable outcome with respect to any or all of these matters will not result in a material adverse effect on Lindsay's consolidated financial position, results of operations or cash flows. 6. Net Earnings Per Share Primary net earnings per share are calculated by dividing the earnings by the weighted average number of common and common equivalent (stock options) shares outstanding of 9,926,936 for the three months and 10,028,764 for the nine months ended May 31, 1997 as compared to 10,206,281 for the three months and 10,157,103 for the nine months ended May 31, 1996. The difference between shares for primary and fully diluted earnings per share was not significant in any period. 7. Stock Split On February 7, 1997, the Board of Directors declared a three-for-two split of Lindsay's common stock effective March 10, 1997, to stockholders of record on March 3, 1997. Accordingly, the average number of shares outstanding, and per share information have been adjusted to reflect the stock split. -8-
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following table provides highlights for the three month and nine month periods indicated of Fiscal Year 1997 as compared to the same periods of Fiscal Year 1996. <TABLE> <CAPTION> Three Months Ended Nine Months Ended --------------------------- --------------------------- Percent Percent Increase Increase ($ in thousands) 5/31/97 5/31/96 (Decrease) 5/31/97 5/31/96 (Decrease) - ------------------------------------------------------------------------------------------------------------- Consolidated <S> <C> <C> <C> <C> <C> <C> Operating Revenues .....................$41,663 $41,139 1.3% $126,823 $106,605 19.0% Cost of Operating Revenues .............$30,370 $30,534 (.5) $ 94,315 $ 79,775 18.2 Gross Profit ...........................$11,293 $10,605 6.5 $ 32,508 $ 26,830 21.2 Gross Margin ........................... 27.1% 25.8% 25.6% 25.2% Selling, Eng. & Research, and G&A Expense ............................$ 3,170 $ 3,093 2.5 $ 9,970 $ 9,150 9.0 Operating Income .......................$ 8,123 $ 7,512 8.2 $ 22,538 $ 17,680 27.5 Operating Margin ....................... 19.5% 18.3% 17.8% 16.6% Interest Income, net ...................$ 724 $ 615 17.7 $ 2,172 $ 1,987 9.3 Other Income, net ......................$ 55 $ 43 27.9 $ 228 $ 348 (34.5) Income Tax Provision ...................$ 2,849 $ 2,451 16.2 $ 7,980 $ 6,005 32.9 Effective Income Tax Rate .............. 32.0% 30.0% 32.0% 30.0% Net Earnings............................$ 6,053 $ 5,719 5.8% $ 16,958 $ 14,010 21.0% </TABLE> As the above table displays, operating revenues for the three month period ended May 31, 1997 increased slightly, 1.3 percent ($0.5 million) from the comparable period of the prior year. For the nine month period ended May 31, 1997, operating revenues were up 19.0 percent ($20.2 million). The increase in third quarter revenue was the net result of a 17 percent ($5.4 million) decrease in North American irrigation equipment revenues being more than offset by a 94 percent ($3.2 million) increase in export irrigation equipment revenues and a 48 percent ($2.7 million) increase in diversified product and other revenues. For the nine month period, fiscal 1997 North American irrigation equipment revenues increased 12 percent ($8.9 million) and export irrigation equipment revenues increased 50 percent ($6.1 million), as compared to the prior year. Diversified product and other revenues for the nine month period grew 30 percent ($5.3 million), as compared to the prior year. North American irrigation equipment revenues for both the three and nine month periods ending May 31, 1997, continued to be favorably impacted by the long term demand drivers of continued farmer emphasis on conserving water, energy, and labor. Third quarter fiscal 1997 North American irrigation equipment revenues were negatively impacted, however, by the success during our first and second quarters of our fall and winter marketing programs including our early order and early shipment (dealer floor plan and customer interest free) programs. These programs were designed to pull some North American irrigation equipment sales and shipments forward into the first and second quarters, freeing up manufacturing and shipping capacity in our third quarter for incremental late season orders. Due to agricultural commodity prices being somewhat lower than at this time last year, the incremental late season orders did not develop to the degree anticipated, resulting in North American -9-
10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) irrigation equipment revenues being lower than the prior year's for the third quarter of fiscal 1997, but higher than the prior year's for the first nine months of fiscal 1997. Export irrigation equipment sales for both the three and nine month periods of fiscal 1997 were concentrated in our Western European and Latin American markets, similar to fiscal 1996. The increase in three month and nine month fiscal 1997 diversified products and other revenues was the result of higher sales of both large diameter steel tubing and outsource manufacturing services. Gross margin for the three months ended May 31, 1997, as a percent of operating revenues, was 27.1 percent as compared to 25.8 percent of revenues for the prior year's comparative period. For the nine months ended May 31, 1997, gross margin as a percent of operating revenues was 25.6 percent as compared to 25.2 percent for the nine months ended May 31, 1996. Ongoing demand for irrigation equipment in both the North American and export markets for the three and nine month periods of fiscal 1997 resulted in a continued favorable pricing environment. Additionally, raw material costs, in total, increased only slightly during both the three and nine month periods of the current year. Selling, general and administrative, and engineering and research expenses for the three month period ended May 31, 1997, were $3.2 million as compared to $3.1 million during the prior year's comparative period. For the nine month period, fiscal 1997 selling, general and administrative, and engineering and research expenses totaled $10.0 million as compared to $9.2 million for the first nine months of fiscal 1996. Higher wage & salary expenses and increased advertising expenditures account for the majority of the increased expenses for both the three and nine month periods. The effective tax rate for both the three month and nine month periods ended May 31, 1997 was 32.0 percent. This compares to an effective tax rate of 30.0 percent for both the comparable three month and nine month periods of the prior year. Due to the tax exempt status (for federal income tax purposes) of interest earned on municipal bond investments, State of Nebraska economic development tax credits, and the Foriegn Sales Corporation federal tax provisions as they relate to export sales, Lindsay continues to benefit from an effective tax rate that is lower than the combined federal and state statutory rates (currently estimated at 37.5 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 of $14.8 million for the first nine months of fiscal 1997 increased from $5.4 million for the first nine months of fiscal 1996. The increase in cash flows provided by operating activities in fiscal 1997 was primarily due to net earnings. Fiscal 1996 cash flows provided by operating activities was principally due to net earnings partially offset by increased receivables. -10-
11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) FINANCIAL POSITION AND LIQUIDITY - Continued Receivables of $20.5 million at May 31, 1997 were comparable to $20.1 million at August 31, 1996 and $20.6 million at May 31, 1996. Inventories at May 31, 1997 totaled $9.7 million, higher than their $7.8 million balance at August 31, 1996 and $8.0 million balance at May 31, 1996. May 1997 North American irrigation sales did not develop to the degree anticipated, resulting in increased inventory at May 31, 1997. Current liabilities of $18.1 million at May 31, 1997 are lower than their $18.7 million balance at August 31, 1996 and $19.3 million balance at May 31, 1996. The decrease from August 31, 1996 is principally due to decreased trade payables. The decrease from May 31, 1996 is primarily due to decreased trade payables and lower accruals for environmental remediation costs partially offset by higher accruals for payroll and vacation pay and insurance. Cash flows used in investing activities of $5.2 million for the first nine months of fiscal 1997 increased from $1.7 million for the first nine months of fiscal 1996 and for both periods was 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 $19.9 million at May 31, 1997, as compared to $26.3 million at August 31, 1996, and $24.7 million at May 31, 1996. At May 31, 1997, Lindsay had $37.6 million invested in long-term marketable securities which represent intermediate term (one to four and one-half year maturities) municipal debt, as compared to $28.1 million at August 31, 1996 and from $29.2 million at May 31, 1996. Cash flows used in financing activities of $8.7 million for the first nine months of fiscal 1997 increased from $5.3 million for the first nine months of fiscal 1996 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 plan. Lindsay's equity increased to $85.1 million at May 31, 1997 from $76.8 million at August 31, 1996, due to its net earnings of $17.0 million, less $8.5 million used to repurchase 271,300 (split adjusted) shares of common stock per Lindsay's previously announced stock repurchase plan, plus the proceeds of $0.8 million from the issuance of 135,400 shares of common stock under Lindsay's employee stock option plan, less dividends paid of $1.0 million. Lindsay's equity at May 31, 1996 was $77.5 million. Capital expenditures totaling $3.1 million for the first nine months of 1997 were used primarily for upgrading manufacturing plant equipment. Lindsay expects its fiscal 1997 capital expenditures to be approximately $3.5 to $4.5 million which will be used principally to improve Lindsay's existing facilities and expand its manufacturing capabilities. 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. -11-
12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) SEASONALITY Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered and installed before the growing season. In North America shipments to customers usually peak during March and April for the spring planting period. North American irrigation equipment sales activity is typically at its lowest level in the company's fourth quarter which can vary significantly from year to year depending on weather patterns during the quarter. 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, profitability of agricultural production, commodity prices, aggregate net farm income, governmental policies regarding the agricultural sector, water and energy conservation policies, and regularity of rainfall. Approximately 14 and 11 percent of Lindsay's operating revenues for the first nine months of 1997 and 1996 respectively, were generated from export sales. For the full year of 1996, approximately 15 percent 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 irrevocable letters of credit which are confirmed by a U.S. bank or other secured means. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In October 1995, FASB issued statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans and transactions in which goods or services are the consideration received for the issuance of equity instruments. This statement requires that an employer's financial statements include certain disclosures about stock-based employee compensation regardless of the method used to account for them. Lindsay will continue its accounting in accordance with Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees". In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" which, when adopted, will replace the current methodology for calculating and presenting earnings per share. Under SFAS No. 128, primary earnings per share will be replaced with a presentation of basic earnings per share and fully diluted earnings per share will be replaced with diluted earnings per share. The statement will be effective beginning in the Company's first quarter ended November 30, 1997, and accordingly, the financial statements for such quarter will include a restatement of historical earnings per share to conform to the requirements of SFAS No.128. The Company has not yet determined the impact of implementation of SFAS No. 128. -12-
13 Part II OTHER INFORMATION Item 1. Legal Proceedings Lindsay is a party to a number of lawsuits arising from environmental and other issues 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 financial condition, results of operations or cash flows. Environmental contamination at Lindsay's manufacturing facility occurred in 1982 when a drill, operated by a sub-contractor installing groundwater monitoring wells, punctured a silt and sand lens and an underlying clay layer beneath a clay-lined lagoon. The 1982 puncture of the clay layer caused acid and solvent leachate to enter the sand and gravel aquifer. Since 1983, Lindsay has worked actively with the Nebraska Department of Environmental Control ("NDEC") to remediate this contamination by purging and treating the aquifer. In October 1989, the Environmental Protection Agency ("EPA") added Lindsay to the list of priority Superfund sites. In 1988, a sampling which was performed in connection with an investigation of the extent of aquifer groundwater contamination, revealed solvent contamination (volatile organic compounds) in the soil and shallow groundwater in three locations at and in the vicinity of the plant. Under a 1988 agreement with the EPA and NDEC, Lindsay conducted a Remedial Investigation/Feasibility Study ("RI/FS"). This study was completed in June 1990. Lindsay does not believe that there is any other soil or groundwater contamination at the manufacturing facility. In September 1990, the EPA issued its Record of Decision ("ROD") selecting a plan for completing the remediation of both contaminations. The selected plan implementation was delayed until finalization of the Consent Decree in April 1992. The final remediation plans were approved in 1993 and 1994 and the remediation plans were fully implemented during Fiscal 1995. The balance sheet reserve for this remediation was $0.3 million at May 31, 1997 and August 31, 1996. Lindsay believes that the current reserve is sufficient to cover the estimated total cost for complete remediation of both the aquifer and soil and shallow groundwater contaminations under the final plans. Lindsay believes that its insurer should cover costs associated with the contamination of the aquifer that was caused by the puncture of the clay layer in 1982. However, Lindsay and the insurer are in litigation over the extent of the insurance coverage. In 1987, the insurer agreed to reimburse Lindsay for remediation costs incurred by Lindsay. The insurer reduced its reimbursement of remediation costs in early 1990. In late 1990, Lindsay filed suit against the insurer. The insurer completely stopped reimbursement of remediation costs in 1991 and in 1992 the insurer filed a counterclaim against Lindsay for previously reimbursed remediation costs. In December 1995, the court dismissed Lindsay's suit against the insurer and entered a judgment in the amount of $2.4 million in favor of the insurer. Lindsay has appealed the dismissal of it's case against the insurer and the judgment against Lindsay. If the EPA or the NDEC require remediation which is in addition to or different from the current plan and depending on the success of Lindsay's litigation against the insurer, this reserve could increase or decrease depending on the nature of the change in events. -13-
14 OTHER INFORMATION (Continued) 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 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 Report 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 6. Exhibits and Reports on Form 8-K (a) Exhibits - 4 - Specimen Form of Common Stock Certificate incorporated by reference to Exhibit 4 of Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 33-23084), filed September 23, 1988. 11 - Statement re Computation of Per Share Earnings. 27 - Financial Data Schedule (b) Reports on Form 8-K - No Form 8-K was filed during the quarter ended May 31, 1997. -14-
15 SIGNATURES Pursuant to the requirements 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. LINDSAY MANUFACTURING CO. Date: June 13, 1997 Bruce C. Karsk ------------- ------------------------ Bruce C. Karsk Vice President - Finance, Treasurer and Secretary; Principal Financial and Accounting Officer Date: June 13, 1997 Ralph J. Kroenke ------------- ------------------------ Ralph J. Kroenke Controller -15-