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, 1999 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----- ----- Commission File Number 0-17116 ------- Lindsay Manufacturing Co. ------------------------- (Exact name of registrant as specified in its charter) DELAWARE 47-0554096 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) BOX 156, 214 EAST 2ND STREET, LINDSAY, NEBRASKA 68644 - ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) 402-428-2131 - ------------ Registrant's telephone number, including area code COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE, INC.(SYMBOL LNN) - ----------------------------- ----------------------------------------- Title of Class Name of each exchange on which registered 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, $1.00 PAR VALUE 12,404,498 - ----------------------------- --------------------------------- Title of Class Outstanding as of January 5, 2000 Exhibit index is located on page 2. Total number of pages 34. 1
2 LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES INDEX FORM 10-Q <TABLE> <CAPTION> Page No. -------- <S> <C> PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Consolidated Balance Sheets, November 30, 1999 and 1998 and August 31, 1999 3 Consolidated Statements of Operations for the three months ended November 30, 1999 and 1998 4 Consolidated Statements of Cash Flows for the three months ended November 30, 1999 and 1998 5 Notes to Consolidated Financial Statements 6-8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 9-11 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS 12 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 13 EXHIBIT INDEX 10(a) - Employment Agreement between the Company and Gary D. Parker effective December 1, 1999 14-33 27 - Financial Data Schedule 34 </TABLE> 2
3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS LINDSAY MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 1999 AND 1998 AND AUGUST 31, 1999 <TABLE> <CAPTION> (UNAUDITED) (UNAUDITIED) NOVEMBER NOVEMBER AUGUST ($ IN THOUSANDS, EXCEPT PAR VALUES) 1999 1998 1999 - ----------------------------------- ---- ---- ---- <S> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents ..................................... $ 9,515 $ 1,469 $ 14,232 Marketable securities ......................................... 22,700 16,054 18,236 Receivables ................................................... 15,982 14,925 12,909 Inventories ................................................... 8,731 10,257 7,659 Deferred income taxes ......................................... 3,655 3,563 3,803 Other current assets .......................................... 796 646 85 --------- --------- --------- Total current assets ....................................... 61,379 46,914 56,924 Long-term marketable securities ............................... 24,473 39,773 27,229 Property, plant and equipment, net ............................ 15,673 13,994 15,416 Other noncurrent assets........................................ 837 1,017 820 --------- --------- --------- Total assets ..................................................... $ 102,362 $ 101,698 $ 100,389 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, trade ....................................... $ 4,472 $ 4,663 $ 4,081 Other current liabilities ..................................... 13,182 11,008 12,580 Current portion of capital lease obligation ................... 55 156 95 --------- --------- --------- Total current liabilities .................................. 17,709 15,827 16,756 Other noncurrent liabilities .................................. 1,025 887 935 Obligation under capital lease less current portion ........... 0 68 0 --------- --------- --------- Total liabilities ................................................ 18,734 16,782 17,691 --------- --------- --------- Contingencies Shareholders' equity: Preferred stock, ($1 par value, 2,000,000 shares authorized no shares issued and outstanding in November 1999 and 1998 and August 1999) Common stock, ($1 par value, 25,000,000 shares authorized, 17,058,851, 17,031,345 and 17,074,491 shares issued in November 1999 and 1998 and August 1999) .......... 17,059 17,031 17,074 Capital in excess of stated value ............................. 1,795 1,381 2,118 Retained earnings.............................................. 135,976 124,734 134,708 Less treasury stock, at cost, 4,650,237, 3,884,688 and 4,650,237 shares in November 1999 and 1998 and August 1999............ (71,202) (58,230) (71,202) --------- --------- --------- Total shareholders' equity..................................... 83,628 84,916 82,698 --------- --------- --------- Total liabilities and shareholders' equity .................... $ 102,362 $ 101,698 $ 100,389 ========= ========= ========= </TABLE> The accompanying notes are an integral part of the financial statements. 3
4 LINDSAY MANUFACTURING CO. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998 (UNAUDITED) <TABLE> <CAPTION> NOVEMBER NOVEMBER (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998 - ---------------------------------------- ---- ---- <S> <C> <C> Operating revenues............................................ $24,503 $21,642 Cost of operating revenues.................................... 18,763 16,964 ------- ------- Gross profit.................................................. 5,740 4,678 ------- ------- Operating expenses: Selling expense............................................ 1,361 1,261 General and administrative expense......................... 2,229 1,822 Engineering and research expense........................... 472 395 ------- ------- Total operating expenses...................................... 4,062 3,478 ------- ------- Operating income.............................................. 1,678 1,200 Interest income, net.......................................... 719 741 Other income, net............................................. 36 162 ------- ------- Earnings before income taxes.................................. 2,433 2,103 Income tax provision.......................................... 730 673 ------- ------- Net earnings.................................................. $ 1,703 $ 1,430 ======= ======= Basic net earnings per share.................................. $ 0.14 $ .11 ======= ======= Diluted net earnings per share................................ $ 0.13 $ .10 ======= ======= Average shares outstanding.................................... 12,421 13,354 Diluted effect of stock options............................... 426 401 ------- ------- Average shares outstanding assuming dilution.................. 12,847 13,755 ======= ======= Cash dividends per share...................................... $ 0.035 $ 0.035 ======= ======= </TABLE> The accompanying notes are an integral part of the financial statements. 4
5 LINDSAY MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998 (UNAUDITIED) <TABLE> <CAPTION> NOVEMBER NOVEMBER ($ IN THOUSANDS) 1999 1998 - ---------------- ---- ---- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net earnings................................................................ $ 1,703 $ 1,430 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization............................................ 713 637 Amortization of marketable securities premiums, net...................... 24 50 (Gain) on sale of fixed assets........................................... (47) (18) Loss (gain) on maturities of marketable securities held-to-maturity...................................................... 8 (5) Provision for uncollectible accounts receivable.......................... (276) 0 Deferred income taxes.................................................... 148 298 Changes in assets and liabilities: Receivables.............................................................. (2,797) (859) Inventories.............................................................. (1,072) (59) Other current assets..................................................... (711) (554) Accounts payable......................................................... 391 (273) Other current liabilities................................................ (72) (1,863) Current taxes payable.................................................... 674 1,148 Other noncurrent assets and liabilities.................................. 73 (291) -------- ------- Net cash used in operating activities.................................... (1,241) (359) -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment.................................. (970) (582) Proceeds from sale of property, plant and equipment......................... 47 40 Purchases of marketable securities held-to-maturity......................... (5,480) 0 Proceeds from maturities of marketable securities held-to-maturity.......... 3,740 5,996 -------- ------- Net cash (used in) provided by investing activities......................... (2,663) 5,454 -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments under capital lease obligation........................... (40) (26) (Repurchases and cancellations) proceeds from issuance of common stock under stock option plan ........................................... (338) 563 Dividends paid.............................................................. (435) (460) Purchases of treasury stock................................................. 0 (7,497) -------- ------- Net cash used in financing activities....................................... (813) (7,420) -------- ------- Net decrease in cash and cash equivalents................................... (4,717) (2,325) Cash and cash equivalents, beginning of period.............................. 14,232 3,794 -------- ------- Cash and cash equivalents, end of period.................................... $ 9,515 $ 1,469 ======== ======= SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid........................................................... $ (23) $ (1) Interest paid............................................................... $ 1 $ 2 </TABLE> The accompanying notes are an integral part of the financial statements. 5
6 LINDSAY MANUFACTURING CO. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) GENERAL The consolidated financial statements included herein are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the registrant's annual Form 10-K filing. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Lindsay Manufacturing Co., (Lindsay) August 31, 1999 Annual Report to Shareholders. In the opinion of management the unaudited consolidated financial statements of Lindsay reflect all adjustments of a normal recurring nature necessary to present a fair statement of the results of operations for the respective interim periods. The results for interim periods are not necessarily indicative of trends or results expected for a full year. (2) CASH EQUIVALENTS, MARKETABLE SECURITIES AND LONG-TERM MARKETABLE SECURITIES Cash equivalents are included at cost, which approximates market. At November 30, 1999, Lindsay's cash equivalents were held primarily by one financial institution. Marketable securities and long-term marketable securities are categorized as held-to-maturity. Investments in the held-to-maturity category are carried at amortized cost. Lindsay considers all highly liquid investments with original maturities of three months or less to be cash equivalents, while those having maturities in excess of three months are classified as marketable securities or as long-term marketable securities when maturities are in excess of one year. Marketable securities and long-term marketable securities consist of investment-grade municipal bonds. The total amortized cost, gross unrealized holding gains, gross unrealized holding losses, and aggregate fair value for held-to-maturity securities are $47,173,000, $79,000, $90,000 and $47,162,000, respectively. In the held-to-maturity category at November 30, 1999, $22,700,000 in marketable securities mature within one year and $24,473,000 in long term marketable securities have maturities ranging from 12 to 42 months. The Company is not subject to material market risks with respect to its marketable securities. (3) INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for all inventories. <TABLE> <CAPTION> NOVEMBER NOVEMBER AUGUST $ IN THOUSANDS 1999 1998 1999 - --------------- ---- ---- ---- <S> <C> <C> <C> First-in, first-out (FIFO) inventory .................................... $ 13,054 $14,565 $ 11,983 LIFO reserves ........................................................... (3,388) (3,373) (3,389) Obsolescence reserve .................................................... (935) (935) (935) -------- ------- -------- Total Inventories ....................................................... $ 8,731 $10,257 $ 7,659 ======== ======= ======== </TABLE> The estimated percentage distribution between major classes of inventory before reserves is as follows: <TABLE> <CAPTION> NOVEMBER NOVEMBER AUGUST 1999 1998 1999 ---- ---- ---- <S> <C> <C> <C> Raw materials ........................................................... 12% 18% 12% Work in process ......................................................... 5% 6% 5% Purchased parts ......................................................... 38% 35% 38% Finished goods .......................................................... 45% 41% 45% </TABLE> 6
7 (4) PROPERTY, PLANT AND EQUIPMENT Property, plant, equipment and capitalized lease assets are stated at cost. <TABLE> <CAPTION> NOVEMBER NOVEMBER AUGUST $ IN THOUSANDS 1999 1998 1999 - --------------- ---- ---- ----- <S> <C> <C> <C> Plant and equipment: Land ............................................................... $ 70 $ 70 $ 70 Buildings .......................................................... 5,866 5,043 5,781 Equipment .......................................................... 28,251 26,164 27,841 Other............................................................... 5,437 4,520 5,004 Capital lease: Equipment .......................................................... 458 458 458 -------- ------- -------- Total plant, equipment and capital lease ................................ 40,082 36,255 39,154 Accumulated depreciation and amortization: Plant and equipment ................................................ (24,165) (22,121) (23,520) Capital lease ...................................................... (244) (140) (218) -------- ------- -------- Property, plant and equipment, net ..................................... $ 15,673 $13,994 $ 15,416 ======== ======= ======== </TABLE> (5) CREDIT ARRANGEMENTS Lindsay entered into an agreement with a commercial bank in December 1999 for a $10.0 million unsecured revolving line of credit through December 31, 2000. Proceeds from this line of credit, if any, are to be used for working capital and general corporate purposes including stock repurchases. Borrowings will bear interest at a rate equal to one percent per annum under the rate in effect from time to time and designated by the commercial bank as its National Base Rate. No covenants limit the ability of Lindsay to merge or consolidate, to encumber assets, to sell significant portions of its assets, to pay dividends, or to repurchase common stock. (6) CONTINGENCIES The Company and its subsidiaries are defendants in various legal actions arising in the ordinary course of their business activities. In the opinion of management, resolution of these legal actions will not result in a material adverse effect on Lindsay's consolidated financial position, results of operations or cash flows. (7) NET EARNINGS PER SHARE Basic net earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding. Diluted net earnings per share includes the dilutive effect of stock options. Options to purchase 140,250 shares of common stock at a weighted average price of $26.41 per share were outstanding during the first quarter of fiscal year 2000, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. These options expire between September 3, 2007 and September 3, 2008. 7
8 (8) INDUSTRY SEGMENT INFORMATION The Company adopted SFAS No. 131 "Disclosures About Segments of an Enterprise and Related Information" in fiscal year 1999 which changes the way the Company reports information about its operating segments. The Company manages its business activities in two reportable segments: Irrigation: This segment includes the manufacture and marketing of center pivot and lateral move irrigation equipment. Diversified Products: This segment includes providing outsource manufacturing services and selling large diameter steel tubing. The accounting policies of the two reportable segments are the same as those described in the "Accounting Policies" in Note A. of the financial statements included in the Form 10-K for the fiscal year ended August 31, 1999. The Company evaluates the performance of its operating segments based on segment sales, gross profit and operating income and does not include general or administrative expenses (which include corporate expenses) or engineering and research expenses, interest income net, non-operating income and expenses, income taxes, and assets. Operating income does include selling and other overhead charges directly attributable to the segment. There are no intersegment sales. Summarized financial information concerning the Company's reportable segments is shown in the following table: <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED -------------------------- NOVEMBER NOVEMBER $ IN THOUSANDS 1999 1998 - -------------- ---- ---- <S> <C> <C> Operating revenues: Irrigation......................................................... $ 22,156 $ 17,711 Diversified products............................................... 2,347 3,931 --------- -------- Total operating revenues.............................................. $ 24,503 $ 21,642 ========= ======== Operating income: Irrigation......................................................... $ 3,958 $ 2,351 Diversified products............................................... 421 1,066 --------- -------- Segment operating income.............................................. 4,379 3,417 Unallocated general & administrative and engineering & research expenses.................................... 2,701 2,217 Interest and other income, net........................................ 755 903 --------- -------- Earnings before income taxes.......................................... $ 2,433 $ 2,103 ========= ======== Geographic area revenues: Europe & Africa.................................................... $ 689 $ 1,188 Mexico & Latin America............................................. 1,667 1,917 Other export....................................................... 2,745 1,905 United States...................................................... 19,402 16,632 --------- -------- Total revenues..................................................... $ 24,503 $ 21,642 ========= ======== </TABLE> 8
9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table provides highlights of the first quarter of fiscal year 2000 compared with the first quarter of fiscal year 1999 of Lindsay's consolidated operating results displayed in the Consolidated Statements of Operations and should be read together with the industry segment information in Note (8) to the consolidated financial statements. <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED ------------------------------------------------- PERCENT INCREASE ($ IN THOUSANDS) 11/30/99 11/30/98 (DECREASE) - ---------------- -------- -------- ---------- <S> <C> <C> <C> Consolidated Operating Revenues....................................... $24,503 $ 21,642 13.2% Cost of Operating Revenues............................... $18,763 $ 16,964 10.6 Gross Profit............................................. $ 5,740 $ 4,678 22.7 Gross Margin............................................. 23.4% 21.6% Selling, Eng. & Research, and G&A Expense................ $ 4,062 $ 3,478 16.8 Operating Income......................................... $ 1,678 $ 1,200 39.8 Operating Margin......................................... 6.8% 5.5% Interest Income, net..................................... $ 719 $ 741 (3.0) Other Income, net........................................ $ 36 $ 162 (77.8) Income Tax Provision..................................... $ 730 $ 673 8.5 Effective Income Tax Rate................................ 30.0% 32.0% Net Earnings............................................. $ 1,703 $ 1,430 19.1 Irrigation Equipment Segment (See Note (8)) Operating Revenues....................................... $22,156 $ 17,711 25.1 Operating Income......................................... $ 3,958 $ 2,351 68.4 Operating Margin......................................... 17.9% 13.3% Diversified Products Segment (See Note (8)) Operating Revenues....................................... $ 2,347 $ 3,931 (40.3) Operating Income......................................... $ 421 $ 1,066 (60.5%) Operating Margin......................................... 17.9% 27.1% </TABLE> As the above table displays, operating revenues for the three month period ended November 30, 1999, were 13.2 percent ($2.9 million) higher than the first quarter of fiscal year 1999. This increase was the net result of 38 percent ($4.5 million) increase in U.S. irrigation equipment revenues, a 2 percent ($0.1 million) increase in export irrigation equipment revenues, a 40 percent ($1.6 million) reduction in diversified products revenues and a 13 percent ($0.1 million) reduction in other revenues. Lindsay believes that the long-term demand drivers for center pivot irrigation equipment consisting of the need for farmers to conserve water, energy and labor while at the same time improving crop yields and increasing crop production remain in place in its U.S. market and in its markets outside the U.S. Results for Lindsay's first quarter of fiscal year 2000 reflect a favorable comparison with the first quarter of fiscal year 1999 when uncertainty due to lower agricultural commodity prices caused many farmers to postpone capital equipment purchases. The Company believes that the comparatively stronger first quarter fiscal year 2000 performance reflects the U.S. farmers' adjustment to lower agricultural commodity prices, as well as to their ability to leverage government programs and crop marketing strategies. Although prices for crops including corn, wheat and soybeans are forecasted to continue at levels lower than their historical averages, the USDA projects 1999's net cash farm income to total $57.9 billion, approximately $3 billion higher than 1998's $54.9 billion. Export irrigation equipment revenues during the first quarter of fiscal year 2000 were slightly higher primarily due to increased whole unit sales to our irrigation equipment dealers or their customers in Australia and New Zealand. Revenues from sales to our Canadian dealers were only slightly greater than that of the first quarter of the fiscal year 1999. Revenues from sales to our Latin American and European and South and Central African markets were lower during the quarter as compared to the first quarter of fiscal year 1999. 9
10 First quarter fiscal year 2000 diversified products revenues were lower primarily due to reduced sales of agricultural related outsource manufacturing products to Deere & Company and New Holland North America, Inc. Large diameter tubing revenues during the first quarter of fiscal year 2000 were only slightly lower than that of the prior year's first quarter. Gross margin for the three months ended November 30 1999, was 23.4 percent as compared to 21.6 percent for the first quarter of last year. Fiscal year 2000's gross margin was favorably impacted by overhead rate variances that were less negative as the result of an increased level of manufacturing as compared to the first quarter of fiscal year 1999. Raw material prices were largely stable or only slightly higher (i.e., steel and zinc) during the quarter. First quarter fiscal year 2000's selling, engineering and research and general and administrative (SG&A) expenses of $4.1 million (16.6% as a percent of sales) were higher than the first quarter of fiscal year 1998's SG&A expenses of $3.5 million (16.1% as a percent of sales). Increased SG&A salary and wage costs (due primarily to higher bonus earnout accruals), depreciation, professional and legal fees, and group insurance expenses were partially offset by reduced product advertising costs. The $0.1 million decline in other income during the first quarter of fiscal year 2000 as compared to the prior year's comparative period was due to a reduction of the State of Nebraska economic development sales tax credit. The effective tax rate for the first quarter of fiscal year 2000 was 30.0 percent as compared to 32.0 percent rate for the comparative period of fiscal year 1999. Due to the federal income tax exempt status of interest income from its municipal bond investments and the foreign sales corporation federal tax provisions as they relate to export sales, Lindsay benefits from an effective tax rate which is lower than the combined federal and state statutory rates, currently estimated at 36.4 percent. FINANCIAL POSITION AND LIQUIDITY The discussion of financial position and liquidity focuses on the balance sheet and statement of cash flows. Lindsay requires cash for financing its receivables, inventories, capital expenditures, stock repurchases and dividends. Over the years, Lindsay has financed its growth through funds provided by operations. Cash flows used in operations totaled $1.2 million for the first three months of fiscal year 2000 compared to $0.4 million for the first three months of fiscal year 1999. The use of cash flows in operating activities for fiscal year 2000 were primarily due to increased receivables and increased inventories. Fiscal year 1999 cash flows used in operating activities were principally due to decreased other current liabilities partially offset by increased current taxes payable. Receivables of $16.0 million at November 30, 1999 increased $3.1 million from $12.9 million at August 31, 1999 and increased $1.1 million from $14.9 million at November 30, 1998. The increases were principally due to the higher level of U.S. irrigation equipment sales activity during November 1999 as compared to August 1999 and November 1998. Inventories at November 30, 1999 totaled $8.7 million, higher than their $7.7 million balance at August 31, 1999 and lower than their $10.3 million balance at November 30, 1998. Inventory was reduced from November 1998 by using improved inventory planning systems and criteria. Current liabilities of $17.7 million at November 30, 1999 are higher than their $16.8 million balance at August 31, 1999 and their $15.8 million balance at November 30, 1998. The increase from August 31, 1999 is principally due to increased trade payables and a higher accrual for taxes payable. The increase from November 30, 1998 is primarily due to higher accruals for payroll and vacation, and taxes payable. Cash flows used in investing activities of $2.7 million for the first three months of fiscal year 2000 compared to cash flows provided by investing activities of $5.5 million for the first three months of fiscal year 1999. The cash flows used in investing activities in fiscal year 2000 were attributable to capital expenditures and purchases of marketable securities partially offset by proceeds from maturities of marketable securities. Fiscal year 1999 cash flows provided by investing activities was primarily due to proceeds from maturities of marketable securities, partially offset by capital expenditures. Lindsay's cash and short-term marketable securities totaled $32.2 million at November 30, 1999, as compared to $32.5 million at August 31, 1999 and $17.5 million at November 30, 1998. At November 30, 1999, Lindsay had $24.5 million invested in long-term marketable securities which represent intermediate term (12 to 42 months maturities) municipal debt, as compared to $27.2 million at August 31, 1999 and from $39.8 million at November 30, 1998. Cash flows used in financing activities of $0.8 million for the first three months of fiscal year 2000 decreased from $7.4 million for the three months of fiscal year 1999. The cash flows used in financing activities in fiscal year 2000 was primarily attributable to cancellations to pay for the exercise price or required taxes of common stock under Lindsay's employee stock option plan. Fiscal year 1999 cash flows used in financing activities were primarily attributable to 10
11 purchases of treasury stock and dividends paid partially offset by proceeds from the issuance of common stock under Lindsay's employee stock option plan. Lindsay's equity increased to $83.6 million at November 30, 1999 from $82.7 million at August 31, 1999 due to its net earnings of $1.7 million, less $0.4 million from the cancellations- (net) of common stock under Lindsay's employee stock option plan, less dividends paid of $0.4 million. Lindsay's equity at November 30, 1998 was $84.9 million. Capital expenditures of $1.0 million during the first three months of fiscal year 2000 increased from $0.6 million during the first three months of fiscal year 1999. Fiscal year 2000 capital expenditures were used primarily for upgrading manufacturing plant and equipment and to further automate Lindsay's facility. Capital expenditures for fiscal year 2000 are expected to be approximately $3.0 to $4.0 million and will be used to improve the company's existing facilities, expand its manufacturing capabilities and increase productivity. Lindsay believes its capitalization (including cash and marketable securities balances), operating cash flow and potential line of credit are sufficient to cover expected working capital needs, planned capital expenditures, dividends and continued repurchases of common stock. SEASONALITY Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered and installed before the growing season. Shipments to U.S. customers usually peak during Lindsay's second and third quarters for the spring planting period. Lindsay's expansion into diversified products complements its irrigation operations by using available capacity and reducing seasonality. OTHER FACTORS Lindsay's domestic and international irrigation equipment sales are highly dependent upon the need for irrigated agricultural production which, in turn, depends upon many factors including total worldwide crop production, the profitability of agricultural production, agricultural commodity prices, aggregate net cash farm income, governmental policies regarding the agricultural sector, water and energy conservation policies and the regularity of rainfall. Approximately 21% and 23% of Lindsay's operating revenues for the first quarter of fiscal year 2000 and 1999 respectively, were generated from export sales. For the full year of 1999 approximately 19% of Lindsay's operating revenues were generated from export sales. Lindsay does not believe it has significant exposure to foreign currency translation risks because its export sales are all in U.S. dollars and are generally all shipped against prepayments or U.S. bank confirmed irrevocable letters of credit or other secured means. YEAR 2000 ISSUES As of January 10, 2000 Lindsay has had no problems associated with Year 2000 issues for its mission critical components of the Company's Information Technology ("IT") software and non-IT systems, or the Company's critical suppliers and third-party providers. Lindsay does not expect problems associated with Year 2000 mission critical issues in the future. Concerning Forward-Looking Statements - This Report on Form 10-Q, including the Management's Discussion and Analysis, Year 2000 and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company and those statements preceded by, followed by or including the words "future", "position", "anticipate(s)", "expect", "believe(s)", "see", "plan", "further improve", "outlook", "should", or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should understand that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in these forward-looking statements: availability of and price of raw materials, product pricing, competitive environment and related domestic and international market conditions, operating efficiencies and actions of domestic and foreign governments. Any changes in such factors could result in significantly different results. 11
12 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is not subject to material market risks with respect to its marketable securities. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS Lindsay is a party to a number of lawsuits in the ordinary course of its business. Management does not believe that these lawsuits, either individually or in the aggregate, are likely to have a material adverse effect on Lindsay's consolidated financial condition, results of operations or cash flows. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - 4 - Specimen Form of Common Stock Certificate incorporated by reference to Exhibit 4 to the Company's Report on Form 10-Q for the fiscal quarter ended November 30, 1997 10(a) - Employment Agreement between the Company and Gary D. Parker, effective December 1, 1999. 27 - Financial Data Schedule (b) Reports on form 8-K - No Form 8-K was filed during the quarter ended November 30, 1999. 12
13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 11th day of January, 2000. LINDSAY MANUFACTURING CO. By: /s/ BRUCE C. KARSK ------------------------------------ Name: Bruce C. Karsk Title: Director, Vice President-Finance, Treasurer and Secretary; Principal Financial and Accounting Officer By: /s/ RALPH J. KROENKE ------------------------------------ Name: Ralph J. Kroenke Title: Controller 13