1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________ FORM 10-Q (MARK ONE) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE - ---------- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 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 9,603,995 - ----------------------------- -------------------------------- Title of Class Outstanding as of March 18, 1997 Exhibit index is located on page 2. Total number of pages 35. -1-
2 LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES INDEX <TABLE> <CAPTION> Page No. Part I - Financial Information <S> <C> Consolidated Balance Sheets, February 28, 1997 and February 29, 1996 and August 31, 1996 3 Consolidated Statements of Operations for the three months and six months ended February 28, 1997 and February 29, 1996. 4 Consolidated Statements of Cash Flows for the six months ended February 28, 1997 and February 29, 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 3 (a) - Restated Certificate of Incorporation of 16-33 Lindsay Manufacturing Co. dated October 12, 1988 3 (b) - Certificate of Amendment of the Restated 34 Certificate of Incorporation of Lindsay Manufacturing Co. dated February 7, 1997 11 - Statement re Computation of Per Share Earnings 35 </TABLE> -2-
3 PART I FINANCIAL INFORMATION Item 1. Financial Statements Lindsay Manufacturing Co. CONSOLIDATED BALANCE SHEETS February 28, 1997 and February 29, 1996 and August 31, 1996 (in thousands, except share amounts) <TABLE> <CAPTION> - --------------------------------------------------------------------------------------------------------- (Unaudited) (Unaudited) February February August 1997 1996 1996 ----------- ------------ ----------- <S> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents................................... $ 2,141 $ 5,005 $ 2,362 Marketable securities....................................... 15,060 22,814 23,926 Receivables................................................. 33,671 25,297 20,128 Inventories................................................. 9,882 7,587 7,800 Deferred income taxes....................................... 3,426 2,893 3,369 Other current assets........................................ 659 2,154 270 ----------- --------- ------------ Total current assets....................................... 64,839 65,750 57,855 Long-term marketable securities.............................. 29,341 22,048 28,146 Property, plant and equipment, net........................... 10,739 8,961 9,691 Other noncurrent assets...................................... 1,131 1,219 1,131 ----------- --------- ------------ Total assets................................................. $ 106,050 $ 97,978 $ 96,823 =========== ========== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, trade..................................... $ 7,453 $ 9,007 $ 5,915 Other current liabilities................................... 12,529 13,435 12,782 ----------- --------- ------------ Total current liabilities.................................. 19,982 22,442 18,697 Other noncurrent liabilities................................. 1,198 1,270 1,292 ----------- --------- ------------ Total liabilities............................................ 21,180 23,712 19,989 ----------- --------- ------------ Contingencies Stockholders' equity: Preferred stock, ($1 par value, 2,000,000 shares authorized, no shares issued and outstanding in February 1997 and 1996 and August 1996).................... Common stock, ($1 par value, 25,000,000 shares authorized, 11,182,625, 7,314,513 and 7,327,961 shares issued in February 1997 and 1996 and August 1996).......... 11,183 7,315 7,328 Capital in excess of stated value........................... 0 2,700 2,952 Retained earnings........................................... 98,151 80,414 88,002 Less treasury stock, (at cost, 1,578,630, 848,220 and 987,820 shares in February 1997 and 1996 and August 1996) (24,464) (16,163) (21,448) ----------- --------- ------------ Total stockholders' equity................................... 84,870 74,266 76,834 ----------- --------- ------------ Total liabilities and stockholders' equity................... $ 106,050 $ 97,978 $ 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 six months ended February 28, 1997 and February 29, 1996 (in thousands, except per share amounts) (Unaudited) <TABLE> <CAPTION> - ----------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended --------------------------- --------------------- February February February February 1997 1996 1997 1996 ----------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Operating revenues.............................. $ 45,693 $ 38,140 $ 85,160 $ 65,466 Cost of operating revenues...................... 33,942 28,336 63,945 49,241 ----------- ---------- --------- --------- Gross profit.................................... 11,751 9,804 21,215 16,225 ----------- ---------- --------- --------- Operating expenses: Selling expense................................ 1,266 1,106 2,299 2,061 General and administrative expense............. 1,989 1,829 3,745 3,305 Engineering and research expense............... 373 339 756 691 ----------- ---------- --------- --------- Total operating expenses........................ 3,628 3,274 6,800 6,057 ----------- ---------- --------- --------- Operating income................................ 8,123 6,530 14,415 10,168 Interest income, net............................ 674 708 1,448 1,372 Other income, net............................... 166 285 173 305 ----------- ---------- --------- --------- Earnings before income taxes.................... 8,963 7,523 16,036 11,845 Income tax provision............................ 2,867 2,258 5,131 3,554 ----------- ---------- --------- --------- Net earnings.................................... $ 6,096 $ 5,265 $ 10,905 $ 8,291 =========== ========== ========= ========= Net earnings per share: Primary........................................ $ 0.61 $ 0.52 $ 1.08 $ 0.82 =========== ========== ========= ========= Fully diluted.................................. $ 0.61 $ 0.52 $ 1.08 $ 0.81 =========== ========== ========= ========= Cash dividends per share........................ $ 0.033 $ 0.033 $ 0.067 $ 0.033 =========== ========== ========= ========= </TABLE> The accompanying notes are an integral part of the financial statements. -4-
5 Lindsay Manufacturing Co. CONSOLIDATED STATEMENTS OF CASH FLOWS For the six months ended February 28, 1997 and February 29, 1996 (in thousands) (Unaudited) <TABLE> - -------------------------------------------------------------------------------------------------------- February February 1997 1996 ------------ ------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net earnings........................................................... $ 10,905 $ 8,291 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation........................................................... 990 717 Amortization of marketable securities premiums, net.................... 123 167 (Gain) loss on sale of fixed assets.................................... (10) (14) (Gain) on sale of marketable securities held-to-maturity............... (14) 0 (Gain) on sale of marketable securities available-for-sale............. 0 (8) Provision for uncollectible accounts receivable........................ 30 16 Deferred income taxes.................................................. (57) (89) Changes in assets and liabilities: Receivables............................................................ (13,573) (14,960) Inventories............................................................ (2,082) (2,203) Other current assets................................................... (389) (263) Accounts payable....................................................... 1,538 4,712 Other current liabilities.............................................. (1,085) 454 Current taxes payable.................................................. 832 1,021 Other noncurrent assets and liabilities................................ (94) (180) ----------- ----------- Net cash flows provided by (used in) operating activities.............. (2,886) (2,339) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment............................. (2,057) (2,537) Proceeds from sale of property, plant and equipment.................... 29 37 Purchases of marketable securities held-to-maturity.................... (8,527) (1,211) Proceeds from maturities of marketable securities held-to-maturity..... 16,089 5,460 Proceeds from sale of marketable securities available-for-sale......... 0 3,525 ----------- ----------- Net cash flows provided by investing activities........................ 5,534 5,274 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock under stock option plan......... 787 762 Three-for-two stock split fractional shares paid in cash............... (2) (2) Dividends paid......................................................... (638) 0 Purchases of treasury stock............................................ (3,016) (3,204) ----------- ----------- Net cash flows used in financing activities............................ (2,869) (2,444) ----------- ----------- Net increase (decrease) in cash and cash equivalents................... (221) 491 Cash and cash equivalents, beginning of period......................... 2,362 4,514 ----------- ----------- Cash and cash equivalents, end of period............................... $ 2,141 $ 5,005 =========== =========== Supplemental Cash Flow Information: Income taxes paid...................................................... $ 4,391 $ 2,636 Interest paid.......................................................... $ 1 $ 1 Supplemental schedule of noncash financing activities: Dividends payable...................................................... $ 0 $ 324 </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 February 28, 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 February 28, 1997. Investments in the held-to-maturity category are included in Marketable securities ($15.1 million) and Long-term marketable securities ($29.3 million). The total amortized cost, gross unrealized holding gains, gross unrealized holding losses, and aggregate fair value for held-to-maturity securities are $44.4 million, $0.2 million, $0.0 million, and $44.6 million, respectively. There have not been any sales of held-to-maturity securities for the first six months of Fiscal 1997. In the held-to-maturity category, $15.1 million in securities mature within one year and $29.3 million have maturities ranging from one to four 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) ------------------------------------- February February August 1997 1996 1996 ---------- ---------- ---------- <S> <C> <C> <C> Total manufactured goods First-in, first-out inventory $14,774 $11,219 $12,060 LIFO reserves (4,211) (2,987) (3,570) Obsolescence reserve ( 681) ( 645) ( 690) --------- -------- -------- Total inventories $ 9,882 $ 7,587 $ 7,800 ========= ======== ======== </TABLE> The estimated percentage distribution between major classes of inventory before reserves is as follows: <TABLE> February February 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) ------------------------------------- February February August 1997 1996 1996 ---------- ---------- ---------- <S> <C> <C> <C> Land $ 70 $ 66 $ 70 Buildings 4,825 4,345 4,756 Equipment 22,553 19,614 22,563 Other 3,175 4,033 1,859 ---------- ---------- --------- 30,623 28,058 29,248 Less accumulated depreciation 19,884 19,097 19,557 ---------- ---------- --------- Property, plant and equipment, net $10,739 $ 8,961 $ 9,691 ========== ========== ========= </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 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 $2.4 million -7-
8 Lindsay Manufacturing Co. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Contingencies - Continued in favor of the insurer for which the Company has not made a provision. Lindsay is in the process of appealing the dismissal of it's case against the insurer and the judgment against Lindsay. In the opinion of management, an unfavorable outcome with respect to any or all of these matters will not result in a material adverse effect on Lindsay's consolidated financial position, results of operations or cash flows. 6. Net Earnings Per Share Primary net earnings per share are calculated by dividing the earnings by the weighted average number of common and common equivalent (stock options) shares outstanding of 10,068,263 for the three months and 10,079,679 for the six months ended February 28, 1997 as compared to 10,144,167 for the three months and 10,132,515 for the six months ended February 29, 1996. The difference between shares for primary and fully diluted earnings per share was not significant in any period. 7. Stock Split On February 7, 1997, the Board of Directors declared a three-for-two split of Lindsay's common stock effective March 10, 1997, to stockholders of record on March 3, 1997. Accordingly, the average number of shares outstanding, and per share information have been adjusted to reflect the stock split. -8-
9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following table provides highlights for the three month and six month periods indicated of Fiscal Year 1997 as compared to the same periods of Fiscal Year 1996. <TABLE> <CAPTION> Three Months Ended Six Months Ended ----------------------------- ------------------------------ Percent Percent Increase Increase ($ in thousands) 2/28/97 2/29/96 (Decrease) 2/28/97 2/29/96 (Decrease) - -------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Consolidated Operating Revenues ....................$45,693 $38,140 19.8% $85,160 $65,466 30.1% Cost of Operating Revenues ............$33,942 $28,336 19.8 $63,945 $49,241 29.9 Gross Profit ..........................$11,751 $ 9,804 19.9 $21,215 $16,225 30.8 Gross Margin ........................... 25.7% 25.7% 24.9% 24.8% Selling, Eng. & Research, and G&A Expense ......................... $ 3,628 $ 3,274 10.8 $ 6,800 $ 6,057 12.3 Operating Income ......................$ 8,123 $ 6,530 24.4 $14,415 $10,168 41.8 Operating Margin ...................... 17.8% 17.1% 16.9% 15.5% Interest Income, net ..................$ 674 $ 708 (4.8) $ 1,448 $ 1,372 5.5 Other Income, net .....................$ 166 $ 285 (41.8) $ 173 $ 305 (43.3) Income Tax Provision ..................$ 2,867 $ 2,258 27.0 $ 5,131 $ 3,554 44.4 Effective Income Tax Rate ............. 32.0% 30.0% 32.0% 30.0% Net Earnings...........................$ 6,096 $ 5,265 15.8% $ 10,905 $ 8,291 31.5% </TABLE> As the above table displays, operating revenues for the three month period ended February 28, 1997 increased 19.8 percent ($7.6 million) from the comparable period of the prior year. The increase in second quarter revenue was the net result of a 21 percent ($6.0 million) increase in North American irrigation equipment revenues and a 36 percent ($2.0 million) increase in diversified manufacturing products and other revenues being partially offset by a 10 percent ($0.4 million) decrease in export irrigation equipment revenues. For the six month period ended February 28, 1997, operating revenues were up 30.1 percent ($19.7 million) from the comparable period of the prior year. North American irrigation equipment and export irrigation equipment revenues were each up 32 percent ($14.2 million and $2.8 million, respectively) as compared to the prior year's comparative six month period. Diversified products and other revenues for the six month period were up 22 percent ($2.6 million). North American irrigation equipment revenues for both the three and six month periods of fiscal 1997 were favorably impacted by the long term demand drivers of continued farmer emphasis on conserving water, energy, and labor. Additionally, strong 1996 farm income and creative fall and winter sales and marketing programs favorably impacted North American activity for the three and six month periods. Export irrigation equipment revenues for both the three and six month periods of fiscal 1997 benefited from active Western European and Latin American markets. Diversified products and other revenues grew during both the three and six month periods of fiscal 1997 due to increased sales of large diameter steel tubing (which suffered from weak demand in fiscal 1996) and increased outsource -9-
10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) manufacturing revenues, in total, from Caterpillar Inc., Deere & Company, and New Holland North American, Inc., as compared to the prior year's comparative periods. Gross margin for the three months ended February 28, 1997, as a percent of operating revenues, was 25.7 percent - equal to that of the prior year's comparative period. For the six months ended February 28, 1997, gross margin as a percent of operating revenues was 24.9 percent as compared to 24.8 percent for the six months ended February 29, 1996. Strong demand for irrigation equipment in the North American market for both the three and six month periods resulted in a continued favorable pricing environment. Additionally, raw material costs were, in total, stable during both the three and six month period of the current year. Significantly higher energy costs, however, prevented growth in second quarter gross margins. Selling, general and administrative, and engineering and research expenses for the three month period ended February 28, 1997, were $3.6 million as compared to $3.3 million during the prior year's comparative period. For the six month period, fiscal 1997 selling, general and administrative, and engineering and research expenses totaled $6.8 million as compared to $6.1 million in fiscal 1996. Higher wage, salary and benefit costs and increased advertising expenditures, offset partially by lower professional fees and telephone costs, comprise the majority of the increased expenses for both the three and six month periods. The effective tax rate for both the three month and six month periods ended February 28, 1997 was 32.0 perent. This compares to an effective tax rate of 30.0 percent for both the comparable three month and six month periods of the prior year. Due to the federal income tax exempt status of interest income from its municipal bond investments, 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 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 used in operations of $2.9 million for the first six months of fiscal 1997 was comparable to $2.3 million for the first six months of fiscal 1996. The decrease in cash flows from operating activities for both periods is due primarily to increased receivables and inventories partially offset by higher net earnings and decreased accounts payable. Receivables of $33.7 million at February 28, 1997 increased $13.5 million from $20.1 million at August 31, 1996 and $8.4 million from $25.3 million at February 29, 1996 due to the higher level of North American irrigation equipment sales activity during February 1997 and marketing programs that offered extended payment terms to our dealers and customers, primarily due to short-term interest free financing offered by Lindsay. Inventories at February -10-
11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) 28, 1997 totaled $9.9 million, higher than their $7.8 million balance at August 31, 1996 and $7.6 million balance at February 29, 1996. Inventory was increased to adequately service the higher level of sales activity the Company was projecting. Current liabilities of $20.0 million at February 28, 1997 are higher than their $18.7 million balance at August 31, 1996 but lower than their $22.4 million balance at February 29, 1996. The increase from August 31, 1996 is principally due to increased trade payables and a higher accrual for taxes payable partially offset by lower accruals for international dealership payments and payroll and vacation pay. The decrease from February 29, 1996 is primarily due to decreased trade payables and lower accruals for taxes payable partially offset by a higher accrual for international dealer prepayments. Cash flows provided by investing activities of $5.5 million for the first six months of fiscal 1997 was comparable to $5.3 million for the first six months of fiscal 1996 and for both periods was primarily attributable to proceeds from marketable securities, partially offset by purchases of marketable securities and capital expenditures. Lindsay's cash and short-term marketable securities totaled $17.2 million at February 28, 1997, as compared to $26.3 million at August 31, 1996, and $27.8 million at February 29, 1996. At February 28, 1997, Lindsay had $29.3 million invested in long-term marketable securities which represent intermediate term (one to four year maturities) municipal debt. This is comparable to $28.1 million at August 31, 1996 and an increase from $22.0 million at February 29, 1996. Cash flows used in financing activities of $2.9 million for the first six months of fiscal 1997 was comparable to $2.4 million for the first six months of fiscal 1996 and for both periods was primarily attributable to purchases of treasury stock partially offset by proceeds from the issuance of common stock under the stock option plan. Additionally, during fiscal 1997 dividends were paid. Lindsay's equity increased to $84.9 million at February 28, 1997 from $76.8 million at August 31, 1996, due to its net earnings of $10.9 million, less $3.0 million used to repurchase 96,900 (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 127,139 shares of common stock under Lindsay's employee stock option plan, less dividends paid of $0.6 million. Lindsay's equity at February 29, 1996 was $74.3 million. Capital expenditures totaling $2.1 million for the first six 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 and repurchase of common stock. -11-
12 ITEM 2. 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. Shipments to North American customers usually peak during March and April for the spring planting period. Lindsay's expansion into diversified products complements its irrigation operations by using available capacity and reducing seasonality. OTHER FACTORS Lindsay's domestic and international irrigation equipment sales are highly dependent upon the need for irrigated agricultural production, which, in turn, depends upon many factors, including total worldwide crop production, 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 13 percent of Lindsay's operating revenues for the first six 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". -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 February 28, 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 is in the process of appealing the dismissal of its 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 - 3(a) - Restated Certificate of Incorporation of Lindsay Manufacturing Co. dated October 12, 1988. 3(b) - Certificate of Amendment of the Restated Certificate of Incorporation of Lindsay Manufacturing Co. dated February 7, 1997. 4 - Specimen Form of Common Stock Certificate to Exhibit 4 of incorporated by reference 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 February 28, 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: March 25, 1997 Bruce C. Karsk ------------------------------ Bruce C. Karsk Vice President - Finance, Treasurer and Secretary; Principal Financial and Accounting Officer Date: March 25, 1997 Ralph J. Kroenke ------------------------------ Ralph J. Kroenke Controller -15-