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, 2001 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.) 2707 NORTH 108TH STREET, SUITE 102, OMAHA, NEBRASKA 68164 - ---------------------------------------------------- ------ (Address of principal executive offices) (Zip Code) 402-428-2131 - ------------ Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No|_| At April 3, 2001, 11,755,935 shares of common stock, $1.00 par value, of the registrant were outstanding. Total number of pages 13. 1
2 LINDSAY MANUFACTURING CO. AND CONSOLIDATED SUBSIDIARIES INDEX FORM 10-Q Page No. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS Consolidated Balance Sheets, February 28, 2001 and February 29, 2000 and August 31, 2000 3 Consolidated Statements of Operations for the three months and six months ended February 28, 2001 and February 29, 2000 4 Consolidated Statements of Cash Flows for the six months ended February 28, 2001 and February 29, 2000 5 Notes to Consolidated Financial Statements 6-8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 9-11 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS 12 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 13 2
3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS LINDSAY MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS FEBRUARY 28, 2001 AND FEBRUARY 29, 2000 AND AUGUST 31, 2000 <TABLE> <CAPTION> (UNAUDITED) (UNAUDITED) FEBRUARY FEBRUARY AUGUST ($ IN THOUSANDS, EXCEPT PAR VALUES) 2001 2000 2000 - ----------------------------------- ----------- ----------- ----------- <S> <C> <C> <C> ASSETS Current assets: Cash and cash equivalents $ 1,791 $ 5,837 $ 3,105 Marketable securities 9,357 23,982 22,894 Receivables 29,479 23,842 17,589 Inventories 16,690 9,430 11,335 Deferred income taxes 2,747 3,204 3,106 Other current assets 649 541 164 ----------- ----------- ----------- Total current assets 60,713 66,836 58,193 Long-term marketable securities 17,621 20,560 19,780 Property, plant and equipment, net 15,710 15,653 15,938 Other noncurrent assets 3,033 837 1,905 ----------- ----------- ----------- Total assets $ 97,077 $ 103,886 $ 95,816 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, trade $ 4,531 $ 7,482 $ 4,556 Other current liabilities 11,181 13,216 11,914 Current portion of capital lease obligation 0 15 0 ----------- ----------- ----------- Total current liabilities 15,712 20,713 16,470 Other noncurrent liabilities 1,734 781 1,914 ----------- ----------- ----------- Total liabilities 17,446 21,494 18,384 ----------- ----------- ----------- Commitments and Contingencies Shareholders' equity: Preferred stock, ($1 par value, 2,000,000 shares authorized, no shares issued and outstanding in February 2001 and 2000 and August 2000) Common stock, ($1 par value, 25,000,000 shares authorized, 17,322,697, 17,306,593 and 17,310,197 shares issued in February 2001 and 2000 and August 2000) 17,323 17,307 17,310 Capital in excess of stated value 1,910 2,406 2,211 Retained earnings 148,703 139,602 146,216 Less treasury stock, (at cost, 5,615,269, 4,993,837 and 5,615,269 shares in February 2001 and 2000 and August 2000) (88,002) (76,923) (88,002) Accumulated other comprehensive income (303) 0 (303) ----------- ----------- ----------- Total shareholders' equity 79,631 82,392 77,432 ----------- ----------- ----------- Total liabilities and shareholders' equity $ 97,077 $ 103,886 $ 95,816 =========== =========== =========== </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, 2001 AND FEBRUARY 29, 2000 (UNAUDITED) <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED ------------------------ ----------------------- FEBRUARY FEBRUARY FEBRUARY FEBRUARY (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2001 2000 2001 2000 - ---------------------------------------- --------- ---------- --------- --------- <S> <C> <C> <C> <C> Operating revenues $28,275 $34,996 $62,231 $59,499 Cost of operating revenues 21,616 26,058 47,844 44,821 --------- ---------- --------- --------- Gross profit 6,659 8,938 14,387 14,678 --------- ---------- --------- --------- Operating expenses: Selling expense 2,038 1,366 3,711 2,727 General and administrative expense 2,394 1,889 4,735 4,118 Engineering and research expense 625 492 1,182 964 Restructuring charges 899 0 899 0 --------- ---------- --------- --------- Total operating expenses 5,956 3,747 10,527 7,809 --------- ---------- --------- --------- Operating income 703 5,191 3,860 6,869 Interest income, net 413 613 934 1,332 Other (expense) income, net (2) (8) (4) 28 --------- ---------- --------- --------- Earnings before income taxes 1,114 5,796 4,790 8,229 Income tax provision 345 1,739 1,485 2,469 --------- ---------- --------- --------- Net earnings $ 769 $ 4,057 $ 3,305 $ 5,760 ========= ========== ========= ========= Basic net earnings per share $ 0.07 $ 0.33 $ 0.28 $ 0.46 ========= ========== ========= ========= Diluted net earnings per share $ 0.06 $ 0.32 $ 0.28 $ 0.45 ========= ========== ========= ========= Average shares outstanding 11,703 12,380 11,696 12,400 Diluted effect of stock options 270 270 249 348 --------- ---------- --------- --------- Average shares outstanding assuming dilution 11,973 12,650 11,945 12,748 ========= ========== ========= ========= Cash dividends per share $ 0.035 $ 0.035 $ 0.070 $ 0.070 ========= ========== ========= ========= </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, 2001 AND FEBRUARY 29, 2000 (UNAUDITED) <TABLE> <CAPTION> FEBRUARY FEBRUARY ($ IN THOUSANDS) 2001 2000 - ---------------- ---- ---- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 3,305 $ 5,760 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 1,612 1,431 Non-cash restructuring charges relating to write-down 749 0 Amortization of marketable securities premiums, net (150) 31 Gain on sale of fixed assets (15) (57) Loss on sale of marketable securities held-to-maturity 0 8 Provision for uncollectible accounts receivable 61 (276) Deferred income taxes 359 599 Changes in assets and liabilities: Receivables (11,951) (10,657) Inventories (5,355) (1,771) Other current assets (485) (456) Accounts payable, trade (25) 3,401 Other current liabilities 88 234 Current taxes payable (821) 402 Other noncurrent assets and liabilities (333) (171) -------- -------- Net cash used in operating activities (12,961) (1,522) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (2,133) (1,668) Proceeds from sale of property, plant and equipment 15 57 Purchases of marketable securities held-to-maturity (1,541) (10,256) Proceeds from maturities of marketable securities held-to-maturity 17,387 11,140 Equity investment (975) 0 -------- -------- Net cash provided by (used in) investing activities 12,753 (727) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments under capital lease obligation 0 (80) (Repurchases and cancellations ) proceeds from issuance of common stock under stock option plan, net (288) 521 Dividends paid (818) (866) Purchases of treasury stock 0 (5,721) -------- -------- Net cash used in financing activities (1,106) (6,146) -------- -------- Net decrease in cash and cash equivalents (1,314) (8,395) Cash and cash equivalents, beginning of period 3,105 14,232 -------- -------- Cash and cash equivalents, end of period $ 1,791 $ 5,837 ======== ======== </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, 2000 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 February 28, 2001, Lindsay's cash equivalents were held primarily by one financial institution. Marketable securities and long-term marketable securities are categorized as held-to-maturity and 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 original 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 $26,978,000, $298,000, $0 and $27,276,000, respectively. In the held-to-maturity category at February 28, 2001, $9,357,000 in marketable securities mature within one year and $17,621,000 in long-term marketable securities have maturities ranging from 12 to 36 months. In the opinion of management, 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. FEBRUARY FEBRUARY AUGUST $ IN THOUSANDS 2001 2000 2000 - --------------- ---- ---- ---- First-in, first-out (FIFO) inventory ...... $ 20,394 $14,050 $ 15,374 LIFO reserves ............................. (3,034) (3,685) (3,408) Obsolescence reserve ...................... (670) (935) (631) --------- -------- --------- Total Inventories ......................... $ 16,690 $ 9,430 $ 11,335 ======== ======= ======== The estimated percentage distribution between major classes of inventory before reserves is as follows: FEBRUARY FEBRUARY AUGUST 2001 2000 2000 ---- ---- ---- Raw materials ............................. 13% 12% 13% Work in process ........................... 6% 5% 6% Purchased parts ........................... 33% 38% 33% Finished goods ............................ 48% 45% 48% 6
7 (4) PROPERTY, PLANT AND EQUIPMENT Property, plant, equipment and capitalized lease assets are stated at cost. FEBRUARY FEBRUARY AUGUST $ IN THOUSANDS 2001 2000 2000 - --------------- ---- ---- ----- Plant and equipment: Land .................................... $ 70 $ 70 $ 70 Buildings ............................... 8,574 5,865 8,352 Equipment ............................... 30,169 28,413 30,269 Other.................................... 3,699 5,750 3,300 Capital lease: Equipment ............................... 0 458 0 -------- ------- -------- Total plant, equipment and capital lease ..... 42,512 40,556 41,991 Accumulated depreciation and amortization: Plant and equipment ..................... (26,802) (24,633) (26,053) Capital lease ........................... 0 (270) 0 -------- -------- -------- Property, plant and equipment, net .......... $ 15,710 $15,653 $ 15,938 ======== ======= ======== (5) CREDIT ARRANGEMENTS Lindsay has an agreement with a commercial bank for a $10.0 million unsecured revolving line of credit through December 30, 2001. Proceeds from this line of credit, if any, are to be used for working capital and general corporate purposes including stock repurchases. There have been no borrowings made under such unsecured revolving line of credit. Borrowings will bear interest at a rate equal to one percent per annum under the rate in effect from time to time and designated by the commercial bank as its National Base Rate. No covenants limit the ability of Lindsay to merge or consolidate, to encumber assets, to sell significant portions of its assets, to pay dividends, or to repurchase common stock. (6) 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 89,625 shares of common stock at a weighted average price of $27.94 per share were outstanding during the second quarter of fiscal year 2001, 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 November 6, 2007. (7) REVENUE RECOGNITION In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The guidance in the SAB is required to be followed no later than the fourth quarter of the fiscal year beginning after December 15, 1999 (the fourth quarter of fiscal year 2001 for Lindsay). Lindsay has complied with the provisions of SAB No. 101 and that compliance did not have a material impact on the Company's consolidated financial position or results of operations. (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. 7
8 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, 2000. The Company evaluates the performance of its operating segments based on segment sales, gross profit and operating income and does not include general or administrative expenses (which include corporate expenses) or engineering and research expenses, interest income net, non-operating income and expenses, income taxes, and assets. Operating income does include selling and other overhead charges directly attributable to the segment. There are no intersegment sales. Summarized financial information concerning the Company's reportable segments is shown in the following table: <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED -------------------------- ------------------------ FEBRUARY FEBRUARY FEBRUARY FEBRUARY $ IN THOUSANDS 2001 2000 2001 2000 - -------------- ---- ---- ---- ---- <S> <C> <C> <C> <C> Operating revenues: Irrigation................................... $ 23,127 $ 31,345 $ 52,108 $53,501 Diversified products......................... 5,148 3,651 10,123 5,998 -------- -------- -------- ------- Total operating revenues........................ $ 28,275 $ 34,996 $ 62,231 $59,499 ======== ======== ======== ======= Operating income: Irrigation................................... $ 2,931 $ 6,912 $ 8,319 $10,870 Diversified products......................... 791 660 1,458 1,081 -------- -------- -------- ------- Segment operating income........................ 3,722 7,572 9,777 11,951 Unallocated general & administrative and engineering & research expenses.............. 3,019 2,381 5,917 5,082 Interest and other (expense) income, net........ 411 605 930 1,360 -------- -------- -------- ------- Earnings before income taxes.................... $ 1,114 $ 5,796 $ 4,790 $ 8,229 ======== ======== ======== ======= Geographic area revenues: United States................................ $ 24,632 $ 29,638 $ 51,905 $49,040 Europe, Africa & Middle East................. 1,805 2,933 5,698 3,730 Mexico & Latin America....................... 897 1,275 1,276 2,942 Other export................................. 941 1,150 3,352 3,787 -------- -------- -------- ------- Total revenues............................... $ 28,275 $ 34,996 $ 62,231 $59,499 ======== ======== ======== ======= </TABLE> (9) OTHER NONCURRENT ASSETS <TABLE> <CAPTION> FEBRUARY FEBRUARY AUGUST $ IN THOUSANDS 2001 2000 2000 - --------------- ---- ---- ----- <S> <C> <C> <C> Equity investment ...................................... $ 975 $ 0 $ 0 Goodwill, net of amortization........................... 404 0 416 Intangible pension assets............................... 649 0 649 Split dollar life insurance............................. 856 837 840 Other noncurrent assets................................. 149 0 0 ------- ----- ------- Total other noncurrent assets........................... $ 3,033 $ 837 $ 1,905 ======= ===== ======= </TABLE> (10) RESTRUCTURING CHARGES During the second quarter of fiscal year 2001, the Company took a non-recurring restructuring charge of $899,000 or $0.05 per share after tax. Of this total restructuring charge, $749,000 is for a write-down to net realizable value, the value of fixed assets associated with a manufacturing process under development since 1998, which was initiated to reduce the cost of the manufacturing process. After limited success the decision has now been made to discontinue the development due to the difficulty in insuring quality consistency that would satisfy our customers' needs. The remaining restructuring charge of $150,000 is for other costs related to manufacturing processes that are being discontinued. The payments relating to such costs are expected to be incurred in the third and fourth quarters of fiscal year 2001. The related liability for these costs is included in other current liabilities in the accompanying consolidated balance sheet at February 28, 2001. 8
9 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table provides highlights for the three month and six month periods of fiscal year 2001 as compared to the same periods of fiscal year 2000 of Lindsay's consolidated operating results displayed in the accompanying Consolidated Statements of Operations and should be read together with the industry segment information in Note (8) to the consolidated financial statements contained herein. <TABLE> <CAPTION> FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED -------------------------------- ------------------------------- PERCENT PERCENT INCREASE INCREASE ($ IN THOUSANDS) 02/28/01 02/29/00 (DECREASE) 02/28/01 02/29/00 (DECREASE) - ---------------- -------- -------- ---------- -------- -------- --------- <S> <C> <C> <C> <C> <C> <C> Consolidated Operating Revenues.................................. $ 28,275 $ 34,996 (19.2%) $ 62,231 $ 59,499 4.6% Cost of Operating Revenues.......................... $ 21,616 $ 26,058 (17.0) $ 47,844 $ 44,821 6.7 Gross Profit........................................ $ 6,659 $ 8,938 (25.5) $ 14,387 $ 14,678 (2.0) Gross Margin........................................ 23.6% 25.5% 23.1% 24.7% Selling, Eng. & Research, and G&A Expense........... $ 5,057 $ 3,747 35.0 $ 9,628 $ 7,809 23.3 Restructuring Charges............................... $ 899 $ 0 N/A $ 899 $ 0 N/A Operating Income.................................... $ 703 $ 5,191 (86.5) $ 3,860 $ 6,869 (43.8) Operating Margin.................................... 2.5% 14.8% 6.2% 11.6% Interest Income, net................................ $ 413 $ 613 (32.6) $ 934 $ 1,332 (29.9) Other (Expense) Income, net......................... $ (2) $ (8) (75.0) $ (4) $ 28 (114.3) Income Tax Provision................................ $ 345 $ 1,739 (80.2) $ 1,485 $ 2,469 (39.9) Effective Income Tax Rate........................... 31.0% 30.0% 31.0% 30.0% Net Earnings........................................ $ 769 $ 4,057 (81.0) $ 3,305 $ 5,760 (42.6) Irrigation Equipment Segment (See Note (8)) Operating Revenues.................................. $ 23,127 $ 31,345 (26.2) $ 52,108 $ 53,501 (2.6) Operating Income.................................... $ 2,931 $ 6,912 (57.6) $ 8,319 $ 10,870 (23.5) Operating Margin.................................... 12.7% 22.1% 16.0% 20.3% Diversified Products Segment (See Note (8)) Operating Revenues.................................. $ 5,148 $ 3,651 41.0 $ 10,123 $ 5,998 68.8 Operating Income.................................... $ 791 $ 660 19.8% $ 1,458 $ 1,081 34.9% Operating Margin.................................... 15.4% 18.1% 14.4% 18.0% </TABLE> As the above table displays, operating revenues for the three month period ended February 28, 2001 were $28.3 million, $6.7 million less than the prior year's comparable period. Operating revenues for the six month period ended February 28, 2001 were $62.2 million, $2.7 million greater than the first six months of the prior year. Irrigation equipment revenues totaled $23.1 million during the second quarter of the current fiscal year compared to $31.3 million during last fiscal year's second quarter. The U.S. market for automated agricultural irrigation equipment was affected by low agricultural commodity prices and an expectation of higher agricultural input costs, particularly energy and fertilizer costs. Additionally, wet winter weather in many parts of the U.S. hampered the ability of Lindsay's dealers to install center pivot and lateral move irrigation systems in fields during the Company's second quarter. The foreign market for agricultural irrigation equipment was also unfavorably affected by the low agricultural commodity prices and increased agricultural input costs during the quarter. Year-to-date, irrigation equipment revenues totaled $52.1 million in fiscal 2001 compared to $53.5 million in fiscal year 2000. Increased shipments for the Company's U.S. dealer stock inventory program during the first quarter of fiscal 2001 was more than offset by softer end-user demand during the second quarter of the year. Diversified products revenues totaled $5.2 million during the second quarter of this year compared to $3.7 million during the comparable period of fiscal 2000. Six month year-to-date diversified products revenues totaled $10.1 million during fiscal 2001 compared to $6.0 million during the prior year's comparable period. Increased sales to Deere & Company for both the three and six month periods resulted in the majority of the increased revenues. 9
10 Gross margin for the three months ended February 28, 2001 was 23.6 percent compared to 25.5 percent of the prior year's second quarter. For the six month year-to-date period, fiscal 2001's gross margin was 23.1 percent compared to 24.7 percent for the six months ended February 29, 2000. A change in product mix and unfavorable manufacturing variances due to reduced through-put and higher natural gas and energy costs, partially offset by favorable material price variances (particularly lower steel prices), led to the lower gross margin. Selling, engineering and research, and general and administrative expenses during the three month period ended February 28, 2001 totaled $5.1 million compared to $3.7 million during the prior year's second quarter. Fiscal 2001 year-to-date selling, engineering and research, and general and administration expenses totaled $9.6 million compared to $7.8 million for the first six months of fiscal 2000. Investments in several strategic initiatives such as the Company's Greenfield mini-pivot product line, which Lindsay acquired last August, and the opening of company-owned retail stores in Southwestern Kansas contributed to the increase in expenses. Additionally, the Company incurred higher compensation and group health insurance costs compared to the prior year. The Company took a non-recurring restructuring charge of $899,000 during the second quarter of fiscal year 2001 for writing down, to net realizable value, the value of manufacturing equipment and other costs related to manufacturing processes that are being discontinued. This write down totaled $0.05 per share after tax. Operating income and margin for the irrigation equipment segment for the three months ended February 28, 2001 were significantly lower than that of the prior year's comparable period due to the lower irrigation equipment revenues, unfavorable manufacturing variances, higher irrigation equipment selling expenses and the $899,000 restructuring charge. Second quarter fiscal 2001 interest income, net, totaled $0.4 million compared to $0.6 million during the second quarter of the prior year. Year-to-date fiscal 2001 interest income totaled $0.9 million compared to $1.3 million during the first six months of fiscal 2000. The lower interest income is due to a reduction in funds invested and maturities in the Company's short and intermediate-term municipal bond portfolio. The effective tax rate for both the three and six month periods ended February 28, 2001 was 31.0 percent, slightly higher then the effective rate of 30.0 percent for the comparable periods of fiscal 2000. 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 35.8 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 $13.0 million for the first six months of fiscal year 2001 compared to cash flows used in operations of $1.5 million for the first six months of fiscal year 2000. The use of cash flows in operating activities for fiscal year 2001 was primarily due to increased receivables and increased inventories partially offset by net earnings. Fiscal year 2000 cash flows used in operating activities were principally due to increased receivables and increased inventories partially offset by net earnings and increased payables. Receivables of $29.5 million at February 28, 2001 increased $11.9 million from $17.6 million at August 31, 2000 and increased $5.7 million from $23.8 million at February 29, 2000. The majority of increase in receivables resulted from increased shipments for the Company's U.S. dealer stock inventory program and customers taking advantage of an interest-free delayed payment financing program. Inventories at February 28, 2001 totaled $16.7 million, up from $11.3 million at August 31, 2000 and $9.4 million at February 29, 2000. Inventory increased due to Lindsay's planned build of inventory for quicker delivery and response times in conjunction with softer end-user demand during January and February. Lindsay is focusing on reducing inventory and expects year-end levels to be comparable to August 31, 2000. Current liabilities of $15.7 million at February 28, 2001 are lower than the $16.5 million balance at August 31, 2000 and the $20.7 million balance at February 29, 2000. The decrease from August 31, 2000 is principally due to a lower accrual for taxes payable. The decrease from February 29, 2000 is primarily due to lower trade payables and a lower accrual for taxes payable. Cash flows provided by investing activities of $12.8 million for the first six months of fiscal year 2001 compared to cash flows used in investing activities of $0.7 million for the first six months of fiscal year 2000. The cash flows provided by investing activities in fiscal year 2001 were attributable to proceeds from maturities of marketable securities partially offset by capital expenditures, purchases of marketable securities and an equity investment. Fiscal year 2000 cash flows used in investing activities was primarily due to purchases of marketable securities and capital expenditures, partially offset by proceeds from maturities of marketable securities. 10
11 Lindsay's cash and short-term marketable securities totaled $11.1 million at February 28, 2001, as compared to $26.0 million at August 31, 2000 and $29.8 million at February 29, 2000. At February 28, 2001, Lindsay had $17.6 million invested in long-term marketable securities which represent intermediate term (12 to 36 months maturities) municipal debt, as compared to $19.8 million at August 31, 2000 and from $20.6 million at February 29, 2000. Cash flows used in financing activities of $1.1 million for the first six months of fiscal year 2001 decreased from $6.1 million for the six months of fiscal year 2000. The cash flows used in financing activities during the first six months of fiscal year 2001 were primarily attributable to dividends paid and cancellations of common stock to pay for the exercise price or required taxes on common stock under Lindsay's employee stock option plan. Lindsay's equity increased to $79.6 million at February 28, 2001 from $77.4 million at August 31, 2000 due to its net earnings of $3.3 million, less $0.3 million from the net cancellations of common stock under Lindsay's employee stock option plan, less dividends paid of $0.8 million. Lindsay's equity at February 29, 2000 was $82.4 million. Capital expenditures of $2.1 million during the first six months of fiscal year 2001 compared to $1.7 million during the first six months of fiscal year 2000. Fiscal year 2001 capital expenditures were used primarily for upgrading manufacturing plant and equipment and to further automate Lindsay's manufacturing facilities. Capital expenditures for fiscal year 2001 are expected to be approximately $3.0 to $4.0 million and will be used to improve the company's existing facilities, expand its manufacturing capabilities and increase productivity. Lindsay believes its capitalization (including cash and marketable securities balances), operating cash flow and line of credit ($10.0 million) are sufficient to cover expected working capital needs, planned capital expenditures, dividends and continued repurchases of common stock. SEASONALITY Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered and installed before the growing season. Shipments to U.S. customers usually peak during Lindsay's second and third quarters for the spring planting period. Lindsay's 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 17% and 18% of Lindsay's operating revenues for the first six months of fiscal year 2001 and 2000 were generated from export sales. For the full year of 2000, approximately 17% of Lindsay's operating revenues were generated from export sales. Lindsay does not believe it has significant exposure to foreign currency translation risks because the majority of its sales are in U.S. dollars. Concerning Forward-Looking Statements - This Report on Form 10-Q, including the Management's Discussion and Analysis and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company and those statements preceded by, followed by or including the words "future", "position", "anticipate(s)", "expect", "believe(s)", "see", "plan", "further improve", "outlook", "should", or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should understand that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in these forward-looking statements: availability of and price of raw materials, product pricing, competitive environment and related domestic and international market conditions, operating efficiencies and actions of domestic and foreign governments. Any changes in such factors could result in significantly different results. 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 because of their relatively short maturity (0-36 months) and because the Company intends to hold the investments in these marketable securities to maturity. Lindsay does not believe that it is subject to material foreign exchange risk with respect to export sales because the majority of its sales are U.S. dollar denominated. 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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Lindsay's annual shareholder's meeting was held on January 30, 2001. The shareholders voted to elect a director, to approve the Lindsay Manufacturing Co. 2001 Long-Term Incentive Plan, and to ratify the appointment of PricewaterhouseCoopers LLP as independent accountants for the fiscal year ending August 31, 2001. In addition to the election of Mr. Buffett as a director, the following directors will continue in office: Mr. Croghan, Mr. Christodolou, Mr. Cunningham and Mr. Parod. There were 11,695,619 shares of common stock entitled to vote at the meeting and a total of 11,056,414 shares (94.53%) were represented at the meeting. 1. Election of Director: Howard G. Buffett For - 10,739,896 Against - 4,889 Withheld - 311,629 2. Approval of the Lindsay Manufacturing Co. 2001 Long-Term Incentive Plan: For - 5,777,780 Against - 3,636,217 Abstain - 79,312 Broker non-vote - 1,563,105 3. Auditors. Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for the fiscal year ended August 31, 2001. For - 11,016,474 Against - 32,876 Abstain - 7,064 Broker non-vote - 0 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 (b) Reports on Form 8-K - No Form 8-K was filed during the quarter ended February 28, 2001. 12
13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 12th day of April, 2001. LINDSAY MANUFACTURING CO. By: /s/ BRUCE C. KARSK -------------------------------------------- Name: Bruce C. Karsk Title: Executive Vice President, Treasurer and Secretary; Principal Financial and Accounting Officer By: /s/RALPH J. KROENKE -------------------------------------------- Name: Ralph J. Kroenke Title: Controller 13