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 November 30, 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, $1.00 par value 9,343,856 - ----------------------------- ----------------------------------- Title of Class Outstanding as of December 18, 1997 Exhibit index is located on page 2. Total number of pages 19. -1-
2 LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES INDEX Page No. -------- Part I - Financial Information Item 1. Consolidated Financial Statements Consolidated Balance Sheets, November 30, 1997 and 1996 and August 31, 1997 3 Consolidated Statements of Operations for the three months ended November 30, 1997 and 1996 4 Consolidated Statements of Cash Flows for the three months ended November 30, 1997 and 1996 5 Notes to Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Position 9-12 Item 3. Quantitative and Qualitative Disclosures about Market Risks 12 Part II - Other Information Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 Exhibit Index 4 - Specimen Form of Common Stock Certificate 16-17 11 - Statement re Computation of Per Share Earnings 18 27 - Financial Data Schedule 19 -2-
3 PART I FINANCIAL INFORMATION Item 1. Financial Statements Lindsay Manufacturing Co. CONSOLIDATED BALANCE SHEETS November 30, 1997 and 1996 and August 31, 1997 ($ in thousands, except par values) <TABLE> <CAPTION> (Unaudited) (Unaudited) November November August 1997 1996 1997 ASSETS --------- --------- --------- <S> <C> <C> <C> Current assets: Cash and cash equivalents $ 1,989 $ 3,462 $ 4,231 Marketable securities 12,389 19,319 12,077 Receivables 19,307 27,728 18,900 Inventories 9,297 9,084 9,995 Deferred income taxes 4,381 3,444 4,547 Other current assets 623 824 77 --------- --------- --------- Total current assets 47,986 63,861 49,827 Long-term marketable securities 49,809 28,868 45,802 Property, plant and equipment, net 11,283 10,019 11,294 Other noncurrent assets 1,123 1,131 1,060 --------- --------- --------- Total assets $ 110,201 $ 103,879 $ 107,983 ========= ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, trade $ 6,257 $ 7,589 $ 4,993 Other current liabilities 14,376 14,335 14,337 Current portion of capital lease obligation 150 0 149 --------- --------- --------- Total current liabilities 20,783 21,924 19,479 Other noncurrent liabilities 1,057 1,108 1,274 Obligation under capital lease less current portion 224 0 262 --------- --------- --------- Total liabilities 22,064 23,032 21,015 --------- --------- --------- Contigencies Stockholders' equity: Preferred stock, ($1 par value, 2,000,000 shares authorized, no shares issued and outstanding in November 1997 and 1996 and August 1997) Common stock, ($1 par value, 25,000,000 shares authorized, 11,220,586, 7,341,236 and 11,203,256 shares issued in November 1997 and 1996 and August 1997 11,221 7,341 11,203 Capital in excess of stated value 1,063 3,382 450 Retained earnings 111,003 92,494 106,639 Less treasury stock, (at cost, 1,876,730, 1,008,320 and 1,794,030 shares in November 1997 and 1996 and August 1997) (35,150) (22,370) (31,324) --------- --------- --------- Total stockholders' equity 88,137 80,847 86,968 --------- --------- --------- Total liabilities and stockholders' equity $ 110,201 $ 103,879 $ 107,983 ========= ========= ========= </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 ended November 30, 1997 and 1996 ($ in thousands, except per share amounts) (Unaudited) <TABLE> <CAPTION> November November 1997 1996 ---------- ---------- <S> <C> <C> Operating revenues...................................................... $ 37,448 $ 39,467 Cost of operating revenues.............................................. 27,891 30,003 ---------- ---------- Gross profit............................................................ 9,557 9,464 ---------- ---------- Operating expenses: Selling expense....................................................... 1,272 1,033 General and administrative expense.................................... 1,855 1,756 Engineering and research expense...................................... 460 383 ---------- ---------- Total operating expenses................................................ 3,587 3,172 ---------- ---------- Operating income........................................................ 5,970 6,292 Interest income, net.................................................... 791 774 Other income, net....................................................... 191 7 ---------- ---------- Earnings before income taxes............................................ 6,952 7,073 Income tax provision.................................................... 2,260 2,264 ---------- ---------- Net earnings............................................................ $ 4,692 $ 4,809 ========== ========== Net earnings per share.................................................. $ 0.48 $ 0.48 ========== ========== Cash dividends per share................................................ $ 0.035 $ 0.033 ========== ========== </TABLE> The accompanying notes are an integral part of the financial statements. -4-
5 CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended November 30, 1997 and 1996 ($ in thousands) (Unaudited) <TABLE> <CAPTION> November November 1997 1996 ---------- ---------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net earnings........................................................... $ 4,692 $ 4,809 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization....................................... 554 455 Amortization of marketable securities premiums, net................. 38 68 (Gain) loss on sale of fixed assets................................. (12) 1 Provision for uncollectible accounts receivable..................... 0 15 Deferred income taxes............................................... 166 (75) Changes in assets and liabilities: Receivables......................................................... (407) (7,615) Inventories......................................................... 698 (1,284) Other current assets................................................ (546) (554) Accounts payable.................................................... 1,264 1,674 Other current liabilities........................................... (2,533) (810) Current taxes payable............................................... 2,572 2,363 Other noncurrent assets and liabilities............................. (280) (184) ---------- ---------- Net cash flows provided by (used in) operating activities.............. 6,206 (1,137) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment............................. (543) (799) Proceeds from sale of property, plant and equipment.................... 12 15 Purchases of marketable securities held-to-maturity.................... (6,572) (1,226) Proceeds from maturities of marketable securities held-to-maturity..... 2,215 5,043 ---------- ---------- Net cash flows (used in) provided by investing activities.............. (4,888) 3,033 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments under capital lease obligation...................... (37) 0 Proceeds from issuance of common stock under stock option plan......... 631 443 Dividends paid......................................................... (328) (317) Purchases of treasury stock............................................ (3,826) (922) ---------- ---------- Net cash flows used in financing activities............................ (3,560) (796) ---------- ---------- Net (decrease) increase in cash and cash equivalents................... (2,242) 1,100 Cash and cash equivalents, beginning of period......................... 4,231 2,362 ---------- ---------- Cash and cash equivalents, end of period............................... $ 1,989 $ 3,462 ========== ========== Supplemental Cash Flow Information: Income taxes paid...................................................... $ 2 $ 7 Interest paid.......................................................... $ 25 $ 0 </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, 1997 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 November 30, 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 November 30, 1997. Investments in the held-to-maturity category are included in marketable securities ($12.4 million) and long-term marketable securities ($49.8 million). The total amortized cost, gross unrealized holding gains, gross unrealized holding losses, and aggregate fair value for held-to-maturity securities are $62.2 million, $0.4 million, $0.0 million, and $62.6 million, respectively. There have not been any sales of held-to-maturity securities during the first quarter of fiscal 1998. In the held-to-maturity category, $12.4 million in securities mature within one year and $49.8 million have maturities ranging from one to three and two-thirds 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) -------------------------------------- November November August 1997 1996 1997 -------- -------- -------- <S> <C> <C> <C> Total manufactured goods First-in, first-out inventory $ 13,344 $ 13,845 $ 14,164 LIFO reserves (3,380) (4,073) (3,500) Obsolescence reserve (667) (688) (669) -------- -------- -------- Total inventories $ 9,297 $ 9,084 $ 9,995 ======== ======== ======== </TABLE> The estimated percentage distribution between major classes of inventory before reserves is as follows: <TABLE> <CAPTION> November November August 1997 1996 1997 -------- -------- ------ <S> <C> <C> <C> Raw materials 19% 16% 19% Work in process 6% 8% 6% Purchased parts 30% 32% 30% Finished goods 45% 44% 45% </TABLE> 4. Property, Plant and Equipment Property, plant and equipment are stated at cost. <TABLE> <CAPTION> (in thousands) -------------------------------------- November November August 1997 1996 1997 -------- -------- -------- <S> <C> <C> <C> Plant and equipment: Land $ 70 $ 70 $ 70 Buildings 5,033 4,757 5,033 Equipment 23,715 22,542 23,769 Other 2,673 2,625 2,135 Capital lease: Equipment 458 0 458 -------- -------- -------- Total plant, equipment & capital lease 31,949 29,994 31,465 Accumulated depreciation & amortization: Plant and equipment (20,631) (19,975) (20,145) Capital lease (35) 0 (26) -------- -------- -------- Property, plant and equipment, net $ 11,283 $ 10,019 $ 11,294 ======== ======== ======== </TABLE> 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 certain remediation costs. 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 -7-
8 Lindsay Manufacturing Co. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Contingencies - Continued 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. In July 1997, the United States Court of Appeals reversed the judgment of $2.4 million and remanded the case to the district court for further proceedings. The Company has not made a provision for the previously reimbursed remediation costs. In the opinion of management, an unfavorable outcome with respect to any or all of these matters will not result in a material adverse effect on Lindsay's consolidated financial position, results of operations or cash flows. 6. Net Earnings Per Share Primary net earnings per share are calculated by dividing the earnings by the weighted average number of common and common equivalent (stock options) shares outstanding of 9,854,473 and 10,091,094 for the three months ended November 30, 1997 and 1996, respectively. The difference between shares for primary and fully diluted earnings per share was not significant in any period. 7. Stock Split On February 7, 1997, the Board of Directors declared a three-for-two split of Lindsay's common stock effective March 10, 1997 to stockholders of record on March 3, 1997. Accordingly, the average number of shares outstanding and per share information have been adjusted to reflect the stock split. -8-
9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table provides highlights for the first quarter of fiscal year 1998 compared with the first quarter of fiscal year 1997. <TABLE> <CAPTION> For The Three Months Ended ------------------------------------ Percent ----------------------- Increase ($ in thousands) 11/30/97 11/30/96 (Decrease) - ---------------- -------- -------- ---------- <S> <C> <C> <C> Consolidated Operating Revenues .............. $ 37,448 $ 39,467 (5.1)% Cost of Operating Revenues ...... $ 27,891 $ 30,003 (7.0) Gross Profit .................... $ 9,557 $ 9,464 1.0 Gross Margin .................... 25.5% 24.0% Selling, Eng. & Research, and G&A Expense ................... $ 3,587 $ 3,172 13.1 Operating Income ................ $ 5,970 $ 6,292 (5.1) Operating Margin ................ 15.9% 15.9% Interest Income, net ............ $ 791 $ 774 2.2 Other Income, net ............... $ 191 $ 7 N/A Income Tax Provision ............ $ 2,260 $ 2,264 (.2) Effective Income Tax Rate ....... 32.5% 32.0% Net Earnings .................... $ 4,692 $ 4,809 (2.4)% </TABLE> As the above table displays, operating revenues for the three month period ended November 30, 1997, were 5.1 percent ($2.0 million) lower than the first quarter of fiscal 1997. This decrease was the net result of 3 percent ($0.7 million) reduction in U.S. irrigation equipment revenues, a 20 percent ($1.9 million) reduction in export irrigation equipment revenues and a 9 percent ($0.6 million) increase in diversified products and other revenues. During the first quarter of fiscal 1998 Lindsay restricted the availability of and shipped fewer units under its "floor plan" marketing program as compared to the first quarter of fiscal 1997. The "floor plan" marketing program is a deferred payment program that encourages Lindsay's dealers in the United States to purchase and take delivery of center pivots before the peak selling season of January through May. Lindsay believes that during the past two years it has expanded manufacturing capacity and efficiency through automation to a point that allows the Company to reduce its use of the "floor plan" program without negatively impacting irrigation system deliveries during the peak U.S. selling season. Export irrigation equipment revenue for the first quarter of fiscal 1998 was negatively impacted by lower sales to our irrigation equipment dealers in the Latin American market due to above average precipitation - particularly in Argentina. Sales to the Australian, South African, and Western European markets each expanded modestly during the first quarter of fiscal 1998 as compared to the first quarter of fiscal 1997. Lindsay believes that the long term demand drivers 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 both in the U.S. and in its markets outside of the U.S. -9-
10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) The increase in diversified products and other revenue during the first quarter of fiscal 1998 as compared to the first quarter of fiscal 1997 was due to an increase of outsource manufacturing and other revenues partially offset by a reduction in large diameter steel tubing revenues. Gross margin for the three months ended November 30, 1997, was 25.5 percent, up from 24.0 percent of the prior year's comparable period. First quarter gross margin benefited from the reduction in floor plan unit shipments to the domestic market as discussed above, strong manufacturing efficiencies and stable raw material costs. First quarter fiscal 1998's selling, general and administrative and engineering and research expenses, in total, increased 13.1 percent from the prior year's comparative period. Higher product advertising costs and wage and employee benefit costs accounted for the majority of the increase. The effective tax rate for the first quarter of fiscal 1998 was 32.5 percent as compared to 32.0 percent for the comparative period of fiscal 1997. Due to the federal income tax exempt status of interest income from its municipal bond investments, the state economic development tax credits and the foreign sales corporation federal tax provisions as they relate to export sales, Lindsay benefits from an effective tax rate which is lower than the combined federal and state statutory rates, currently estimated at 36.7 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 cash dividends. Over the years, Lindsay has financed its growth through funds provided by operations. Cash flows provided by operations of $6.2 million for the first three months of fiscal 1998 compared to cash flows used in operations of $1.1 million for the first three months of fiscal 1997. The increase in cash flows provided by operating activities in fiscal 1998 was primarily due to net earnings of $4.7 million. Fiscal 1997 cash flows used in operating activities was principally due to increased receivables of $7.6 million, partially offset by net earnings of $4.8 million. Receivables of $19.3 million at November 30, 1997 were comparable to $18.9 million at August 31, 1997 and decreased $8.4 million from $27.7 million at November 30, 1996, due to the lower level of sales and marketing programs that offered extended payment terms to our dealers and customers. Inventories at November 30, 1997 totaled $9.3 million, lower than their $10.0 million balance at August 31, 1997 and higher than their $9.1 million balance at November 30, 1996. Current liabilities of $20.8 million at November 30, 1997 are comparable to their $19.5 million balance at August 31, 1997 and $21.9 million balance at November 30, 1996. The increase from August 31, 1997 is principally due to increased trade payables and higher accruals for taxes payable partially offset by lower accruals for payroll and vacation pay. The decrease from November 30, 1996 is primarily due to decreased trade payables. -10-
11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) FINANCIAL POSITION AND LIQUIDITY - Continued Cash flows used in investing activities of $4.9 million for the first three months of fiscal 1998 compared to cash flows provided by investing activities of $3.0 million for the first three months of fiscal 1997. The cash flows used in investing activities in fiscal 1998 was attributable to purchases of marketable securities and capital expenditures, partially offset by proceeds from marketable securities. Fiscal 1997 cash flows provided by investing activities was primarily due to proceeds from marketable securities, partially offset by purchases of marketable securities and capital expenditures. Lindsay's cash and short-term marketable securities totaled $14.4 million at November 30, 1997, as compared to $16.3 million at August 31, 1997, and $22.8 million at November 30, 1996. At November 30, 1997, Lindsay had $49.8 million invested in long-term marketable securities which represent intermediate term (one to three and two-thirds year maturities) municipal debt, as compared to $45.8 million at August 31, 1997 and from $28.9 million at November 30, 1996. Cash flows used in financing activities of $3.6 million for the first three months of fiscal 1998 increased from $0.8 million for the first three months of fiscal 1997 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 $88.1 million at November 30, 1997 from $87.0 million at August 31, 1997, due to its net earnings of $4.7 million, less $3.8 million used to repurchase 82,700 (split adjusted) shares of common stock per Lindsay's previously announced stock repurchase plan, plus the proceeds of $0.6 million from the issuance of 17,330 shares of common stock under Lindsay's employee stock option plan, less dividends paid of $0.3 million. Lindsay's equity at November 30, 1996 was $80.8 million. Capital expenditures totaling $543,000 for the first quarter of 1998 were used primarily for upgrading manufacturing plant equipment. Lindsay expects its fiscal 1998 capital expenditures to total approximately $3.5 to $4.0 million which will be used primarily 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 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 North American 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. -11-
12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) 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, commodity prices, aggregate net farm income, governmental policies regarding the agricultural sector, water and energy conservation policies, and regularity of rainfall. Approximately 22 and 26 percent of Lindsay's operating revenues for the first quarter of 1998 and 1997 respectively, were generated from export sales. For the full year of 1997, approximately 20 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 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 and fully diluted earnings per share will be replaced with basic and diluted earnings per share. The statement will be effective beginning in the Company's second quarter ending February 28, 1998, 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 impact of implementation of SFAS No. 128 is not expected to be material. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Not Applicable. -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 November 30, 1997 and August 31, 1997. Lindsay believes that the current reserve is sufficient to cover the estimated 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. In July 1997, the United States Court of Appeals reversed the judgment of $2.4 million and remanded the case to the district court for further proceedings. The Company has not made a provision for the previously reimbursed remediation costs. 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 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 November 30, 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: December 23, 1997 Bruce C. Karsk ----------------- ------------------------------------- Bruce C. Karsk Vice President - Finance, Treasurer and Secretary; Principal Financial and Accounting Officer Date: December 23, 1997 Ralph J. Kroenke ----------------- ------------------------------------- Ralph J. Kroenke Controller -15-