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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2004
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 1-13419
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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of July 2, 2004, 11,764,610 shares of the registrant's common stock were
outstanding.
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
INDEX FORM 10-Q
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets, May 31, 2004 and 2003
and August 31, 2003 3
Consolidated Statements of Operations for the
three-months and nine-months ended May 31, 2004 and 2003 4
Consolidated Statements of Cash Flows for the
nine-months ended May 31, 2004 and 2003 5
Notes to Consolidated Financial Statements 6-12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION 13-18
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 19
ITEM 4 - CONTROLS AND PROCEDURES 19
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 20
ITEM 2 - CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER
PURCHASES OF EQUITY SECURITIES 20
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 20-21
SIGNATURE 22
2
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 2004 AND 2003 AND AUGUST 31, 2003
(UNAUDITED) (UNAUDITED)
MAY MAY AUGUST
($ IN THOUSANDS, EXCEPT PAR VALUES) 2004 2003 2003
- ----------------------------------- ---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents ................................ $ 12,055 $ 12,970 $ 15,368
Marketable securities .................................... 12,692 9,288 8,770
Receivables .............................................. 36,427 29,303 22,970
Inventories .............................................. 22,700 20,972 20,019
Deferred income taxes .................................... 2,539 1,220 2,301
Other current assets ..................................... 2,142 953 1,010
--------- --------- ---------
Total current assets ..................................... 88,555 74,706 70,438
Long-term marketable securities ............................ 32,462 31,943 38,674
Property, plant and equipment, net ......................... 14,992 13,956 13,889
Other noncurrent assets .................................... 8,394 8,339 8,219
--------- --------- ---------
Total assets ............................................... $ 144,403 $ 128,944 $ 131,220
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................... $ 9,879 $ 8,967 $ 8,228
Other current liabilities ................................ 20,261 14,327 16,053
--------- --------- ---------
Total current liabilities ................................ 30,140 23,294 24,281
Pension benefits liability ................................. 2,315 1,688 2,315
Other noncurrent liabilities ............................... 179 432 333
--------- --------- ---------
Total liabilities .......................................... 32,634 25,414 26,929
--------- --------- ---------
Shareholders' equity:
Preferred stock, ($1 par value, 2,000,000 shares
authorized, no shares issued and outstanding) .......... -- -- --
Common stock, ($1 par value, 25,000,000 shares authorized,
17,485,679, 17,458,052 and 17,459,561 shares issued in
May 2004 and 2003 and August 2003, respectively) ........ 17,486 17,458 17,460
Capital in excess of stated value ........................ 2,677 2,467 2,484
Retained earnings ........................................ 181,511 173,000 174,333
Less treasury stock (at cost, 5,724,069 shares) .......... (89,898) (89,898) (89,898)
Accumulated other comprehensive (loss) gain .............. (7) 503 (88)
--------- --------- ---------
Total shareholders' equity ................................. 111,769 103,530 104,291
--------- --------- ---------
Total liabilities and shareholders' equity ................. $ 144,403 $ 128,944 $ 131,220
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
3
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTHS AND NINE-MONTHS ENDED MAY 31, 2004 AND 2003
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ------------------------
MAY MAY MAY MAY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003 2004 2003
- ---------------------------------------- ---- ---- ---- ----
Operating revenues ......................... $ 62,286 $ 48,833 $150,274 $130,422
Cost of operating revenues ................. 49,299 36,334 118,323 98,650
-------- -------- -------- --------
Gross profit ............................... 12,987 12,499 31,951 31,772
-------- -------- -------- --------
Operating expenses:
Selling expense .......................... 2,830 2,662 8,588 7,761
General and administrative expense ....... 3,255 2,737 9,527 8,008
Engineering and research expense ......... 762 675 2,198 1,907
-------- -------- -------- --------
Total operating expenses ................... 6,847 6,074 20,313 17,676
-------- -------- -------- --------
Operating income ........................... 6,140 6,425 11,638 14,096
Interest income, net ....................... 341 350 1,126 1,163
Other (expense) income, net ................ (53) 246 437 584
-------- -------- -------- --------
Earnings before income taxes ............... 6,428 7,021 13,201 15,843
Income tax provision ....................... 2,083 2,199 4,260 4,876
-------- -------- -------- --------
Net earnings ............................... $ 4,345 $ 4,822 $ 8,941 $ 10,967
======== ======== ======== ========
Basic net earnings per share ............... $ 0.37 $ 0.41 $ 0.76 $ 0.94
======== ======== ======== ========
Diluted net earnings per share ............. $ 0.36 $ 0.41 $ 0.75 $ 0.92
======== ======== ======== ========
Average shares outstanding ................. 11,760 11,734 11,752 11,727
Diluted effect of stock options ............ 187 144 207 173
-------- -------- -------- --------
Average shares outstanding assuming dilution 11,947 11,878 11,959 11,900
======== ======== ======== ========
Cash dividends per share ................... $ 0.050 $ 0.035 $ 0.150 $ 0.105
======== ======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
4
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTHS ENDED MAY 31, 2004 AND 2003
(UNAUDITED)
MAY MAY
($ IN THOUSANDS) 2004 2003
- ---------------- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ................................................................ $ 8,941 $ 10,967
Adjustments to reconcile net earnings to net cash (used in) provided by
operating activities:
Depreciation and amortization ............................................ 2,242 2,679
Amortization of marketable securities premiums (discounts), net .......... 109 (154)
Gain on sale of property, plant and equipment ............................ (30) (52)
Provision for uncollectible accounts receivable .......................... 178 226
Equity in net loss (earnings) of equity method investments ............... 235 (104)
Deferred income taxes .................................................... (134) 204
Other, net ............................................................... (56) (103)
Changes in assets and liabilities:
Receivables .............................................................. (13,432) (5,800)
Inventories .............................................................. (2,522) (5,389)
Other current assets ..................................................... (1,335) (171)
Accounts payable ......................................................... 1,694 2,899
Other current liabilities ................................................ 3,379 (990)
Current taxes payable .................................................... 661 1,333
Other noncurrent assets and liabilities .................................. (630) 617
-------- --------
Net cash (used in) provided by operating activities ......................... (700) 6,162
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment .................................. (3,308) (2,143)
Proceeds from sale of property, plant and equipment ......................... 90 88
Purchases of marketable securities held to maturity ......................... (2,982) (6,339)
Proceeds from maturities of marketable securities held to maturity .......... 6,676 9,153
Purchases of marketable securities available for sale ....................... (7,371) (5,156)
Proceeds from sale of marketable securities available for sale .............. 5,861 --
-------- --------
Net cash used in investing activities ....................................... (1,034) (4,397)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under stock option plan .............. 225 23
Dividends paid .............................................................. (1,763) (1,232)
-------- --------
Net cash used in financing activities ....................................... (1,538) (1,209)
-------- --------
Effect of exchange rate changes on cash ..................................... (41) (11)
-------- --------
Net (decrease) increase in cash and cash equivalents ........................ (3,313) 545
Cash and cash equivalents, beginning of period .............................. 15,368 12,425
-------- --------
Cash and cash equivalents, end of period .................................... $ 12,055 $ 12,970
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
5
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements are presented in accordance with the
requirements of Form 10-Q and do not include all of the disclosures normally
required by accounting principles generally accepted in the United States of
America for financial statements contained in Lindsay Manufacturing Co.'s (the
"Company") annual Form 10-K filing. Accordingly, these condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's most recent
Form 10-K for the fiscal year ended August 31, 2003.
In the opinion of management, the consolidated financial statements of
the Company reflect all adjustments of a normal recurring nature necessary to
present a fair statement of the financial position and the results of operations
and cash flows for the respective interim periods. The results for interim
periods are not necessarily indicative of trends or results expected by the
Company for a full year. Certain reclassifications have been made to prior
financial statements and notes to conform to the current presentation.
Notes to the consolidated financial statements describe various
elements of the financial statements and the accounting policies, estimates, and
assumptions applied by management. While actual results could differ from those
estimated by management in the preparation of the consolidated financial
statements, management believes that the accounting policies, assumptions, and
estimates applied promote the representational faithfulness, verifiability,
neutrality, and transparency of the accounting information included in the
consolidated financial statements.
(2) STOCK BASED COMPENSATION
The Company maintains a stock option plan and accounts for this plan under the
recognition and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees". Net earnings does not reflect stock-based employee
compensation cost as all options granted under this plan had an exercise price
equal to the market value of the underlying common stock on the date of grant.
The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of SFAS No.
123, "Accounting for Stock-Based Compensation", to stock-based employee
compensation.
FOR THE THREE-MONTHS ENDED FOR THE NINE-MONTHS ENDED
-------------------------- -------------------------
MAY MAY MAY MAY
$ IN THOUSANDS 2004 2003 2004 2003
- -------------- ---- ---- ---- ----
Net earnings, as reported .................................... $ 4,345 $ 4,822 $ 8,941 $ 10,967
Deduct: total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects ................................ 323 286 934 769
--------- --------- --------- ----------
Proforma net earnings ........................................ $ 4,022 $ 4,536 $ 8,007 $ 10,198
========= ========= ========= ==========
Earnings per share:
Basic-as reported ...................................... $ 0.37 $ 0.41 $ 0.76 $ 0.94
Basic-pro forma ........................................ $ 0.34 $ 0.39 $ 0.68 $ 0.87
Diluted-as reported .................................... $ 0.36 $ 0.41 $ 0.75 $ 0.92
Diluted-pro forma ...................................... $ 0.34 $ 0.38 $ 0.67 $ 0.86
6
(3) CASH EQUIVALENTS, MARKETABLE SECURITIES, AND LONG-TERM MARKETABLE SECURITIES
The Company considers all investment securities with original maturities of
three-months or less to be cash equivalents. Marketable securities having
original maturities of one year or less, but more than three months, are
classified as current assets. Investment securities with maturities of more than
one year are classified as long-term marketable securities. Marketable
securities and long-term marketable securities consisted of investment-grade
municipal bonds. Investment securities are further classified as either
held-to-maturity or available-for-sale. Investment securities are classified as
held-to-maturity when the Company has both the ability and intent to hold such
securities to their scheduled maturity dates. All other investment securities
are classified as available-for-sale. The Company has not designated any of its
investment securities as trading securities.
Held-to-maturity securities (including all cash equivalents) are
carried at amortized cost. Available-for-sale securities are carried at fair
value and any unrealized appreciation or depreciation in the fair value of
available-for-sale securities is reported in accumulated other comprehensive
income. The Company monitors its investment portfolio for any decline in fair
value that is other-than-temporary and records any such decline as an impairment
loss. The Company recorded no impairment losses for other-than-temporary
declines in the fair value of investment securities for the three-months and
nine-months ended May 31, 2004 or May 31, 2003. The amortized cost and fair
value of the Company's investment securities classified as held-to-maturity or
available-for-sale are summarized as follows:
$ IN THOUSANDS
- --------------
HELD-TO-MATURITY SECURITIES
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
As of May 31, 2004:
Due within one year ...................... $ 12,692 $ 98 $ -- $ 12,790
Due after one year through five years .... 20,703 122 (78) 20,747
-------- -------- -------- --------
$ 33,395 $ 220 $ (78) $ 33,537
======== ======== ======== ========
As of May 31, 2003:
Due within one year ...................... $ 9,288 $ 67 $ (2) $ 9,353
Due after one year through five years .... 26,785 632 (3) 27,414
-------- -------- -------- --------
$ 36,073 $ 699 $ (5) $ 36,767
======== ======== ======== ========
As of August 31, 2003:
Due within one year ...................... $ 7,453 $ 54 $ (2) $ 7,505
Due after one year through five years .... 29,661 422 (95) 29,988
-------- -------- -------- --------
$ 37,114 $ 476 $ (97) $ 37,493
======== ======== ======== ========
AVAILABLE-FOR-SALE SECURITIES
As of May 31, 2004:
Due within one year ...................... $ -- $ -- $ -- $ --
Due after one year through five years .... 11,825 22 (88) 11,759
-------- -------- -------- --------
$ 11,825 $ 22 $ (88) $ 11,759
======== ======== ======== ========
As of May 31, 2003:
Due within one year ...................... $ -- $ -- $ -- $ --
Due after one year through five years .... 5,127 31 -- 5,158
-------- -------- -------- --------
$ 5,127 $ 31 $ -- $ 5,158
======== ======== ======== ========
As of August 31, 2003:
Due within one year ...................... $ 1,325 $ -- $ (8) $ 1,317
Due after one year through five years .... 9,092 -- (79) 9,013
-------- -------- -------- --------
$ 10,417 $ -- $ (87) $ 10,330
======== ======== ======== ========
7
(4) INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is determined
by the last-in, first-out (LIFO) method for the Company's Lindsay, Nebraska
inventory. Cost is determined by the weighted average method for inventories at
the Company's other operating locations in Washington State, France, Brazil, and
South Africa. At all locations, the Company establishes reserves for obsolete,
slow moving, and excess inventory by estimating the net realizable value based
on the potential future use of such inventory.
MAY MAY AUGUST
$ IN THOUSANDS 2004 2003 2003
- --------------- ---- ---- ----
Inventory:
First-in, first-out (FIFO) inventory..... $ 17,584 $ 16,275 $ 15,821
LIFO reserves ........................... (4,043) (3,153) (2,494)
-------- -------- --------
LIFO inventory .......................... 13,541 13,122 13,327
Weighted average inventory .............. 9,700 8,386 7,258
Obsolescence reserve .................... (541) (536) (566)
-------- -------- --------
Total inventories ....................... $ 22,700 $ 20,972 $ 20,019
======== ======== ========
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
MAY MAY AUGUST
2004 2003 2003
---- ---- ----
Raw materials ........................ 20% 23% 18%
Work in process ...................... 10% 4% 5%
Finished goods and purchased parts.... 70% 73% 77%
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, net of accumulated
depreciation, as follows:
MAY MAY AUGUST
$ IN THOUSANDS 2004 2003 2003
- -------------- ---- ---- ----
Property, plant and equipment:
Land ..................................... $ 336 $ 336 $ 336
Buildings ................................ 9,609 9,338 9,236
Equipment ................................ 37,973 35,172 35,866
Other .................................... 3,339 2,548 2,654
-------- -------- --------
Total property, plant and equipment ........... 51,257 47,394 48,092
Accumulated depreciation and amortization...... (36,265) (33,438) (34,203)
-------- -------- --------
Property, plant and equipment, net ............ $ 14,992 $ 13,956 $ 13,889
======== ======== ========
(6) CREDIT ARRANGEMENTS
The Company has an unsecured revolving line of credit, which expires December
31, 2004, with a commercial bank under which it could borrow up to $10 million
for working capital and general corporate purposes, including stock repurchases.
There were no borrowings made under the revolving line of credit. Under the
terms of the line of credit, borrowings, if any, 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 (3.00% at May 31,
2004).
8
The Company's European subsidiary, Lindsay Europe, has an unsecured
revolving line of credit with a commercial bank under which it could borrow up
to the Euro equivalent of $2.7 million for working capital. As of May 31, 2004,
the Euro equivalent of approximately $2.1 million was outstanding on this line.
Under the terms of the line of credit, borrowings, if any, bear interest at a
floating rate in effect from time to time designated by the commercial bank as
LIBOR+200 basis points. (4.65% at May 31, 2004).
(7) NET EARNINGS PER SHARE
Basic net earnings per share is computed by dividing net earnings by the
weighted average number of shares outstanding during the period. Diluted net
earnings per share includes the incremental dilutive effect of stock options,
which have an exercise price below the market price of the Company's common
shares during the period.
The Company had additional stock options outstanding during the period,
but these options were excluded from the calculation of diluted earnings per
share because they had an exercise price exceeding the average market price of
the Company's common shares during the period, as set forth in the following
table:
MAY 31, 2004 MAY 31, 2003
---------------------------------------------- ----------------------------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES PRICE EXPIRE SHARES PRICE EXPIRE
------ ----- ------ ------ ----- ------
November, 2007- September, 2007-
206,250 $26.48 April, 2014 378,125 $23.75 May, 2013
======= ====== ======= ======
(8) INDUSTRY SEGMENT INFORMATION
The Company manages its business activities in two reportable segments:
IRRIGATION: This segment includes the manufacture and marketing of
center pivot, lateral move, hose reel irrigation systems, and related
control and ancillary equipment.
DIVERSIFIED PRODUCTS: This segment includes providing outsource
manufacturing services and the manufacturing and selling of 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 to the financial
statements included in the Form 10-K for the fiscal year ended August 31, 2003.
The Company evaluates the performance of its operating segments based on segment
sales, gross profit, and operating income. Operating income for segment
reporting purposes includes selling expenses and other overhead charges directly
attributable to the segment but does not include unallocated general and
administrative expenses (which include corporate expenses), engineering and
research expenses, net interest income, other income and expenses and net income
taxes. There are no inter-segment sales. Because the Company utilizes common
operating assets for its irrigation and diversified segments, it is not
practical to identify assets by reportable segment. Similarly, other segment
reporting described by SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", is not shown as this information cannot be
reasonably disaggregated by segment and is not utilized by the Company's
management. The Company has no single major customer representing 10% or more of
its total revenues for any period reported.
9
ummarized financial information concerning the Company's reportable segments is
shown in the following table:
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------- -------------------------
MAY MAY MAY MAY
$ IN THOUSANDS 2004 2003 2004 2003
- -------------- ---- ---- ---- ----
Operating revenues:
Irrigation .......................................... $ 58,744 $ 45,827 $141,447 $121,830
Diversified products ................................ 3,542 3,006 8,827 8,592
-------- -------- -------- --------
Total operating revenues ................................. $ 62,286 $ 48,833 $150,274 $130,422
======== ======== ======== ========
Operating income:
Irrigation .......................................... $ 10,060 $ 9,536 $ 22,740 $ 23,138
Diversified products ................................ 97 301 623 873
-------- -------- -------- --------
Segment operating income ................................. 10,157 9,837 23,363 24,011
Unallocated general & administrative and engineering &
research expenses .................................... 4,017 3,412 11,725 9,915
Interest and other income, net ........................... 288 596 1,563 1,747
-------- -------- -------- --------
Earnings before income taxes ............................. $ 6,428 $ 7,021 $ 13,201 $ 15,843
======== ======== ======== ========
(9) OTHER NONCURRENT ASSETS
MAY MAY AUGUST
$ IN THOUSANDS 2004 2003 2003
- --------------- ---- ---- ----
Cash surrender value of life insurance policies..... $1,881 $ 1,782 $1,813
Deferred income taxes .............................. 1,495 1,149 1,599
Equity method investments .......................... 1,202 1,415 1,437
Goodwill, net ...................................... 1,251 1,212 1,174
Split dollar life insurance ........................ 916 894 913
Intangible pension assets .......................... 442 511 442
Other intangibles, net ............................. 495 621 574
Other .............................................. 712 755 267
------ ------ ------
Total noncurrent assets ............................ $8,394 $8,339 $8,219
====== ====== ======
Goodwill represents the excess of the allocable purchase price for assets
acquired in certain business acquisitions over the fair value of these assets at
the time of the acquisitions. Other intangible assets include non-compete
agreements, tradenames, patents, and plans and specifications. Goodwill and
intangible assets with indefinite useful lives are not amortized, but instead
are tested for impairment of their values at least annually in accordance with
SFAS No. 142, "Goodwill and Other Intangible Assets." The estimated fair value
of these assets depends on a number of assumptions including forecasted sales
growth and operating expenses of the reporting segment in which the assets are
used. To the extent that the relevant reporting unit is unable to achieve these
assumptions, impairment losses may be recognized. The Company completed its
annual impairment evaluation of these assets at August 31, 2003 and determined
that no impairment losses were indicated. Other intangible assets that have
finite lives are amortized over their realizable lives. Amortization expense for
these assets was $18,000 and $28,000 for the three-months ended May 31, 2004 and
2003, respectively, and $55,000 and $66,000 for the nine-months ended May 31,
2004 and 2003, respectively. The following table summarizes the Company's other
intangible assets:
MAY MAY AUGUST
$ IN THOUSANDS 2004 2003 2003
- --------------- ---- ---- ----
Other intangible assets:
Non-compete agreements .......... $ 333 $ 366 $ 358
Tradenames ...................... 145 163 147
Patent .......................... 100 100 100
Plans and specifications ........ 75 77 77
Other intangibles ............... 31 30 30
Accumulated amortization ........... (189) (115) (138)
---- ---- ----
Total other intangible assets, net.... $ 495 $ 621 $ 574
===== ===== =====
10
(10) COMPREHENSIVE INCOME
The accumulated other comprehensive gain or loss shown in the Company's
consolidated balance sheets includes the unrealized gains on securities and
accumulated foreign currency translation adjustment. The following table shows
the difference between the Company's reported net earnings and its comprehensive
income:
FOR THE THREE-MONTHS ENDED FOR THE NINE-MONTHS ENDED
-------------------------- -------------------------
$ IN THOUSANDS MAY MAY MAY MAY
- -------------- 2004 2003 2004 2003
---- ---- ---- ----
Comprehensive income:
Net earnings ............................ $ 4,345 $ 4,822 $ 8,941 $10,967
Other comprehensive (loss) income:
Unrealized (loss) gains on securities.... (201) 31 21 31
Foreign currency translation ............ (188) 1,116 60 1,386
------- ------- ------- -------
Total comprehensive income ................... $ 3,956 $ 5,969 $ 9,022 $12,384
======= ======= ======= =======
(11) GUARANTEES
The Company is currently party to guarantee arrangements relating to
dealer/customer financing arrangements, the debt for a business in which the
Company holds a minority equity investment, and warranties of the Company's
products.
The following table provides the amount of estimated maximum potential
future payments for each major group of the Company's guarantees:
MAY
$ IN THOUSANDS 2004
- ------------- ----
Guarantees:
Guarantees for customer equipment financing................... $3,900
Guarantees on third party debt of equity investment........... 700
Product warranties............................................ N/A
------
Total guarantees................................................... $4,600
======
CUSTOMER EQUIPMENT FINANCING
In the normal course of its business, the Company has arranged for unaffiliated
financial institutions to make favorable financing terms available to end-user
purchasers of the Company's irrigation equipment. In order to facilitate these
arrangements, the Company provided the financial institutions with limited
recourse guarantees or full guarantees as described below. The Company recorded,
at estimated fair value, deferred revenue of $84,000 at May 31, 2004, classified
with other current liabilities, for guarantees. The estimated fair values of
these guarantees are based, in large part, on the Company's experience with this
agreement and related transactions. The Company recognizes the revenue for the
estimated fair value of the guarantees ratably over the term of the guarantee.
Separately, related to these exposures, the Company has accrued a liability of
$319,000, also classified with other current liabilities, for estimated losses
on such guarantees.
The Company maintains an agreement with a single financial institution
that guarantees the financial institution's pool of financing agreements with
end users. This guarantee is approximately $1.7 million as of May 31, 2004.
Generally, the Company's exposure is limited to unpaid interest and principal
where the first and/or second annual customer payments have not yet been made as
scheduled. The maximum exposure of these limited recourse guarantees is equal to
2.75% of the aggregate amounts originally financed.
Separately, the Company maintains limited, specific customer financing
recourse arrangements with three financial institutions including the
institution referred to above. The original amount of these specific guarantees
is approximately $2.2 million at May 31, 2004. Generally, the Company's exposure
is limited to unpaid interest and principal where customer payments have not yet
been made as scheduled. In some cases, the guarantee may cover all scheduled
payments of a loan.
All of the Company's customer-equipment recourse guarantees are
collateralized by the value of the equipment being financed.
11
GUARANTEES ON THIRD PARTY DEBT RELATED TO EQUITY INVESTMENT
The Company has guaranteed three bank
loans and a standby letter of credit of an irrigation business in which the
Company holds a minority equity investment. The bank loan guarantees continue
until the loan principal, including accrued interest and fees have been paid in
full. The bank loans mature in July 2004, December 2006, and February 2007. The
standby letter of credit expires in December 2004. As of May 31, 2004, the
maximum amount associated with the guarantees and letter of credit was
approximately $700,000. The majority owner of the business provides a separate
personal guarantee of the bank loans.
PRODUCT WARRANTIES
The Company generally warrants its products against certain manufacturing and
other defects. These product warranties are provided for specific periods and/or
usage of the product. The accrued product warranty costs are for a combination
of specifically identified items and other incurred, but not identified, items
based primarily on historical experience of actual warranty claims. This reserve
is classified with other current liabilities. The following table provides the
changes in the Company's product warranties:
FOR THE THREE-MONTHS ENDED
---------------------------
MAY MAY
$ IN THOUSANDS 2004 2003
- -------------- ---- ----
Warranties:
Product warranty accrual balance, March 1 ............... $ 1,157 $ 1,186
Liabilities accrued for warranties during the period..... 395 281
Warranty claims paid during the period .................. (187) (333)
------- -------
Product warranty accrual balance, end of period ............. $ 1,365 $ 1,134
======= =======
FOR THE NINE-MONTHS ENDED
---------------------------
MAY MAY
$ IN THOUSANDS 2004 2003
- -------------- ---- ----
Warranties:
Product warranty accrual balance, September 1 ........... $ 1,152 $ 1,266
Liabilities accrued for warranties during the period..... 1,065 890
Warranty claims paid during the period .................. (852) (1,022)
------- -------
Product warranty accrual balance, end of period ............. $ 1,365 $ 1,134
======= =======
(12) RETIREMENT PLAN
The Company has a supplementary non-qualified, non-funded retirement plan for
six current and former executives. Plan benefits are based on the participant's
average total compensation during the three highest compensation years of
employment. This unfunded supplemental retirement plan is not subject to the
minimum funding requirements of ERISA. The Company has purchased life insurance
policies on four of the participants named in this supplemental retirement plan
to provide partial funding for this liability. Components of net periodic
benefit cost for the Company's supplemental retirement plan include:
FOR THE FOR THE
THREE-MONTHS ENDED NINE-MONTHS ENDED
------------------ -----------------
$ IN THOUSANDS MAY MAY MAY MAY
- -------------- 2004 2003 2004 2003
---- ---- ---- ----
Service cost ...................... $ 10 $ 11 $ 30 $ 32
Interest cost ..................... 72 67 217 200
Net amortization and deferral ..... 74 45 222 136
---- ---- ---- ----
Total net periodic benefit cost.... $156 $123 $469 $368
==== ==== ==== ====
(13) COMMITMENTS AND CONTINGENCIES
In the ordinary course of its business operations, the Company is involved, from
time to time, in commercial litigation, employment disputes, administrative
proceedings, and other legal proceedings. These include a consent decree that
the Company entered in 1992 with the U.S. Environmental Protection Agency
concerning groundwater contamination at its Lindsay, Nebraska facility, which is
included as an EPA superfund site. Management does not believe that these
matters, individually or in the aggregate, are likely to have a material adverse
effect on the Company's consolidated financial condition, results of operations,
or cash flows.
12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
CONCERNING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains not only historical information, but
also forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Statements that are not historical are forward-looking and reflect expectations
for future Company conditions or performance. In addition, forward-looking
statements may be made orally or in press releases, conferences, reports, on the
Company's worldwide web site, or otherwise, in the future by or on behalf of the
Company. When used by or on behalf of the Company, the words "expect",
"anticipate", "estimate", "believe", "intend", and similar expressions generally
identify forward-looking statements. The entire section entitled "Fiscal 2004
Outlook" should be considered forward-looking statements. 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.
Forward-looking statements involve a number of risks and uncertainties,
including but not limited to those discussed in the "Risk Factors" section in
the Company's annual report on Form 10-K for the year ended August 31, 2003.
Readers should not place undue reliance on any forward-looking statement and
should recognize that the statements are predictions of future results or
conditions, which may not occur as anticipated. Actual results or conditions
could differ materially from those anticipated in the forward-looking statements
and from historical results, due to the risks and uncertainties described
herein, as well as others not now anticipated. The risks and uncertainties
described herein are not exclusive and further information concerning the
Company and its businesses, including factors that potentially could materially
affect the Company's financial results, may emerge from time to time. Except as
required by law, the Company assumes no obligation to update forward-looking
statements to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements.
ACCOUNTING POLICIES
In preparing the Company's financial statements in conformity with accounting
principles generally accepted in the United States of America, management must
make a variety of decisions, which impact the reported amounts and the related
disclosures. These decisions include the selection of the appropriate accounting
principles to be applied and the assumptions on which to base accounting
estimates. In making these decisions, management applies its judgment based on
its understanding and analysis of the relevant circumstances and the Company's
historical experience.
The Company's accounting policies that are most important to the
presentation of its results of operations and financial condition, and which
require the greatest use of judgments and estimates by management, are
designated as its critical accounting policies. These critical accounting
policies are described in Note A to the Consolidated Financial Statements in the
Company's Form 10-K for fiscal 2003. Management periodically re-evaluates and
adjusts its critical accounting policies as circumstances change. However, there
were no significant changes in the Company's critical accounting policies during
the nine-months ended May 31, 2004.
OVERVIEW
Lindsay Manufacturing Co. is a leading designer and manufacturer of
self-propelled center pivot and lateral move irrigation systems, which are used
principally in the agricultural industry to increase or stabilize crop
production while conserving water, energy, and labor. The Company markets its
standard size center pivot and lateral move irrigation systems domestically and
internationally under its Zimmatic brand. The Company also manufactures and
markets a separate line of "mini" center pivot and lateral move irrigation
equipment for use on smaller fields under its Greenfield brand, and hose reel
travelers under the Perrot brand (Greenfield in the United States). The Company
also produces irrigation controls and chemical injection systems, which it sells
under its GrowSmart brand. In addition to whole systems, the Company
manufactures and markets repair and replacement parts for its irrigation systems
and controls. Lindsay also produces and sells large diameter steel tubing
products and manufactures and assembles diversified agricultural and
construction products on a contract manufacturing basis for certain industrial
companies, including Caterpillar Inc., Deere & Company, New Holland North
America, Inc., and others.
Lindsay, a Delaware corporation, maintains its corporate offices in
Omaha, Nebraska, USA. The Company's principal manufacturing facilities are
located in Lindsay, Nebraska, USA. The Company also has foreign sales and
production facilities in France, Brazil, and South Africa, which provide it with
important bases of operations in key international markets. Lindsay Europe SA,
located in France, which was acquired in March 2001, manufactures and markets
irrigation equipment for the European market. Lindsay America do Sul Ltda.,
located in Brazil, which was acquired in April 2002, manufactures and markets
irrigation equipment for the South American market. Lindsay Manufacturing
Africa, which is located in South Africa and organized in September 2002,
manufactures and markets irrigation equipment in markets in southern Africa.
13
Lindsay has three additional operating subsidiaries including
Irrigation Specialists, Inc., which is a retail irrigation dealership based in
Washington State that operates at four locations ("Irrigation Specialists").
Other operating subsidiaries are Lindsay Transportation, Inc. and Lindsay
International Sales Corporation.
RESULTS OF OPERATIONS
The following section presents an analysis of the Company's consolidated
operating results displayed in the consolidated statements of operations for the
three-months and nine-months ended May 31, 2004 and 2003. It should be read
together with the industry segment information in Note 8 to the consolidated
financial statements:
FOR THE THREE-MONTHS ENDED FOR THE NINE-MONTHS ENDED
------------------------------------------ ----------------------------------------
PERCENT PERCENT
MAY MAY INCREASE MAY MAY INCREASE
($ IN THOUSANDS) 2004 2003 (DECREASE) 2004 2003 (DECREASE)
- ---------------- ---- ---- ---------- ----- ---- ----------
Consolidated
Operating revenues ............... $ 62,286 $ 48,833 27.5% $150,274 $130,422 15.2%
Cost of operating revenues........ $ 49,299 $ 36,334 35.7 $118,323 $ 98,650 19.9
Gross profit ..................... $ 12,987 $ 12,499 3.9 $ 31,951 $ 31,772 0.6
Gross margin ..................... 20.9% 25.6% 21.3% 24.4%
Operating expenses ............... $ 6,847 $ 6,074 12.7 $ 20,313 $ 17,676 14.9
Operating income ................. $ 6,140 $ 6,425 (4.4) $ 11,638 $ 14,096 (17.4)
Operating margin ................. 9.9% 13.2% 7.7% 10.8%
Interest income, net ............. $ 341 $ 350 (2.6) $ 1,126 $ 1,163 (3.2)
Other (expense) income, net....... $ (53) $ 246 (121.5) $ 437 $ 584 (25.2)
Income tax provision ............. $ 2,083 $ 2,199 (5.3) $ 4,260 $ 4,876 (12.6)
Effective income tax rate ........ 32.4% 31.3% 32.3% 30.8%
Net earnings ..................... $ 4,345 $ 4,822 (9.9) $ 8,941 $ 10,967 (18.5)
Irrigation Equipment Segment
Operating revenues ............... $ 58,744 $ 45,827 28.2 $141,447 $121,830 16.1
Operating income ................. $ 10,060 $ 9,536 5.5 $ 22,740 $ 23,138 (1.7)
Operating margin ................. 17.1% 20.8% 16.1% 19.0%
Diversified Products Segment
Operating revenues ............... $ 3,542 $ 3,006 17.8 $ 8,827 $ 8,592 2.7
Operating income ................. $ 97 $ 301 (67.8)% $ 623 $ 873 (28.6)%
Operating margin ................. 2.7% 10.0% 7.1% 10.2%
FOR THE THREE-MONTHS ENDED MAY 31, 2004
REVENUES
Operating revenues for the three-months ended May 31, 2004 increased by $13.5
million or 28% over the same prior year period. This increase was primarily
attributable to improved irrigation equipment revenues, which increased by $12.9
million or 28% over the same prior year period.
Domestic irrigation equipment revenues for the three-months ended May
31, 2004 increased by $8.3 million or 23% compared to the same prior year
period. Conditions have been generally favorable in the Company's domestic
markets due to higher prices for many farm commodities (including corn,
soybeans, wheat, and cotton). Other factors, such as low interest rates,
additional first-year depreciation for capital investments, and higher land
values also contributed to increased revenues from domestic irrigation sales. In
addition, approximately 25% of the domestic irrigation revenue increase reflects
higher customer pricing to mitigate the impact of significantly higher steel
cost.
14
International irrigation equipment revenues for the three-months ended
May 31, 2004 increased by $4.6 million or 45% over the same prior year period.
These revenues include both the export sales of equipment manufactured in the
United States and the sales of the Company's manufacturing operations in France,
Brazil, and South Africa. Revenues were stronger in the European and South
American markets as the Company's operations in France and Brazil continued to
develop. The European market is reflecting higher demand after the drought that
was experienced there in the prior year. The South American market reflects the
impact in Brazil of strong demand due to the continued expansion of agricultural
production in Brazil. International revenues were favorably impacted by an
increase in export sales to Australia and Mexico. Export sales to the Middle
East region remain low due to continuing conflict and instability in that
region.
Diversified manufacturing revenues for the three-months ended May 31,
2004 of $3.5 million were $536,000 higher than the same prior year period.
Revenues in this segment depend to a large degree on orders from a relatively
small number of customers. To a large degree, the diversified manufacturing
revenues utilize and leverage the same Lindsay, Nebraska physical plant
resources as those used for irrigation equipment.
GROSS MARGIN
The Company's gross margin decreased to 20.9% in the three-months ended May 31,
2004 from 25.6% for the same prior year period. Margins were lower due to
significantly higher steel costs incurred by the Company. The cost of certain
key steel inventory items has increased approximately 75-125% from the same
prior year period. The Company has passed some of the cost increase to its
customers in the form of sales price increases and surcharges, but not enough to
fully cover the increased steel costs. The Company's ability to fully pass steel
cost increases to its customers was impacted because the sales price is set at
the time of order acceptance.
OPERATING MARGIN
The Company's operating margin decreased to 9.9% during the three-months ended
May 31, 2004, from 13.2% for the same prior year period. This decrease is a
direct result of the gross margin impact discussed above and a $773,000 (13%)
increase in the Company's operating expenses during the three months ended May
31, 2004. This increase in operating expenses reflects a $518,000 (19%) increase
in general and administrative expenses reflecting higher legal and other
professional services costs associated with the Sarbanes-Oxley Act compliance
and higher general insurance costs. Selling expense increased $168,000 (6%)
compared to the same prior period.
INTEREST INCOME, OTHER INCOME, AND TAXES
Interest income during the three-months ended May 31, 2004 of $341,000 was
comparable to the same prior year period.
Other net expense of $53,000 during the three-months ended May 31, 2004
reflects a decrease by $299,000 compared to other net income of $246,000 for the
same prior year period, primarily reflecting foreign currency losses compared to
foreign currency gains in the same prior year period.
The effective tax rate during the three-months ended May 31, 2004 was
32.4% compared to 31.3% for the same prior year period. The increased effective
tax rate reflects primarily a higher mix of foreign based income and related
foreign statutory rates compared to U.S. based income and related U.S. effective
rate. Overall, the Company benefits from a U.S. effective tax rate which is
lower than the combined federal and state statutory rates primarily due to the
federal tax-exempt interest income from its municipal bond investments.
15
FOR THE NINE-MONTHS ENDED MAY 31, 2004
REVENUES
Operating revenues for the nine-months ended May 31, 2004 increased by $19.9
million or 15% over the same prior year period. This increase was primarily
attributable to improved irrigation equipment revenues, which increased by $19.6
million or 16% over the same prior year period.
Domestic irrigation equipment revenues for the nine-months ended May
31, 2004 increased by $12.4 million or 13% compared to the same prior year
period due to the favorable domestic markets. In addition, approximately 50% of
the domestic irrigation revenue increase reflects higher customer pricing.
International irrigation equipment revenues increased by $7.2 million
or 25% over the same prior year period reflecting stronger European and South
American markets and an increase in export sales to Australia and Mexico offset
by lower sales to the Middle East.
Diversified manufacturing revenues for the nine-months ended May 31,
2004 increased $235,000 or 3% over the same prior year period.
GROSS MARGIN
The Company's gross margin decreased to 21.3% in the nine-months ended May 31,
2004 from 24.3% for the same prior year period due to steel cost increases.
OPERATING MARGIN
The Company's operating margin decreased to 7.7% during the nine-months ended
May 31, 2004, from 10.8% for the same prior year period. This decrease is a
direct result of the gross margin impact discussed above and a $2.6 million
(15%) increase in the Company's operating expenses during the nine months ended
May 31, 2004. This increase in operating expenses reflects a $1.5 million (19%)
increase in general and administrative expenses and an $827,000 (11%) increase
in selling expenses compared to the prior period. In addition, engineering and
research expense increased by $291,000.
INTEREST INCOME, OTHER INCOME, AND TAXES
Interest income during the nine-months ended May 31, 2004 of $1.1 million was
comparable to the same prior year period.
Other income during the nine-months ended May 31, 2004 decreased by
$147,000 compared to the same prior year period primarily reflecting lower
foreign currency gains.
The effective tax rate during the nine-months ended May 31, 2004 was
32.3% compared to 30.8% for the same prior year period. The increased effective
tax rate reflects primarily a higher mix of foreign based income and related
foreign statutory rates compared to U.S. based income and related U.S. effective
rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires cash for financing its receivables and inventories, paying
operating costs and capital expenditures, and for dividends. Historically, the
Company has met its liquidity needs and financed all capital expenditures
exclusively from its available cash and funds provided by operations.
The Company's cash and marketable securities totaled $57.2 million at
May 31, 2004, $62.8 million at August 31, 2003 and $54.2 million at May 31,
2003. The Company's marketable securities consist primarily of tax-exempt
high-grade municipal debt.
Cash flows used in operations totaled $700,000 during the nine-months
ended May 31, 2004 compared to $6.2 million provided by operations during the
same prior year period. Cash flows used in operations includes increases of
$13.4 million for accounts receivable and $2.5 million for inventories, offset
partially by an increase in other current liabilities of $3.4 million and
16
net earnings of $8.9 million. Accounts receivable increased primarily due to
higher revenues occurring during the nine-months ended May 31, 2004 compared to
the same prior year period. Capital expenditures were $3.3 million during the
nine-months ended May 31, 2004 compared to $2.1 million during the same prior
year period. Capital expenditures were used primarily for updating manufacturing
plant and equipment and further automating the Company's facilities. Capital
expenditures for fiscal 2004 are expected to be approximately $3.5 to $4.5
million and will be used to improve the Company's facilities and expand its
manufacturing capacity. The Company may also use cash to finance business
acquisitions and stock repurchases from time to time.
The Company made no repurchases of its common stock under the Company's
stock repurchase plan during the three and nine-month periods ended May 31,
2004. From time to time, the Company's Board of Directors has authorized
management to repurchase shares of the Company's common stock. Most recently,
during August 2000, the Company announced a 1.0 million share increase in the
number of shares authorized for repurchase. Under this share repurchase plan,
management has existing authorization to purchase, without further announcement,
up to 1.2 million shares of the Company's common stock in the open market or
otherwise.
The Company has an unsecured revolving line of credit, which expires
December 31, 2004, with a commercial bank under which it could borrow up to $10
million for working capital and general corporate purposes, including stock
repurchases. There were no borrowings made under the revolving line of credit.
Under the terms of the line of credit, borrowings, if any, 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 (3.00% at May
31, 2004).
The Company's European subsidiary, Lindsay Europe, has an unsecured
revolving line of credit with a commercial bank under which it could borrow up
to the Euro equivalent of $2.7 million for working capital. As of May 31, 2004,
the Euro equivalent of approximately $2.1 million was outstanding on this line.
Under the terms of the line of credit, borrowings, if any, bear interest at a
floating rate in effect from time to time designated by the commercial bank as
LIBOR+200 basis points. (4.65% at May 31, 2004).
The Company believes its current cash resources (including cash and
marketable securities balances), projected operating cash flow, and prospective
bank line of credit are sufficient to cover all of its expected working capital
needs, planned capital expenditures, dividends, and other cash needs.
FISCAL 2004 OUTLOOK
For fiscal 2004, management now expects revenue growth of approximately 14 to 16
percent, excluding acquisitions. U.S. and international farmers are enjoying
stronger commodity prices, which is helping to drive demand for the Company's
products. The Company's sales order backlog remains strong. In addition, revenue
growth will continue to reflect higher sales prices. The Company anticipates
that improved pricing practices being implemented will also result in improving
margins. However, given the increases in steel cost during fiscal 2004,
management anticipates fiscal 2004 earnings per share will be slightly above the
level achieved in fiscal 2002, which was $0.90 per share. Management believes it
has actions in place to tightly control operating expenses company-wide and
expects to improve the leverage of operating expenses for fiscal 2004 compared
to the prior year.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). A
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that does not have equity investors
with voting rights, or has equity investors that do not provide sufficient
financial resources for the entity to support its activities. FIN 46 requires a
variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns,
or both. In December 2003, the FASB issued Interpretation No. 46R, a revision of
Interpretation No. 46. The Company has adopted FIN 46 and FIN 46R during fiscal
2004. The adoption of this standard did not have a material impact on the
Company's financial position or net income.
SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity" establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). For public entities, this Statement is effective
for financial instruments entered into or modified after May 31, 2003, and
17
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. Certain components of SFAS No. 150 are deferred. The
adoption of this standard did not have a material impact on the Company's
financial position or net income.
In March 2003, the Emerging Issues Task Force ("EITF") reached
consensus on EITF 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables". This guidance addresses the determination of whether an
arrangement involving multiple deliverables contains more than one unit of
accounting. EITF 00-21 is effective for revenue arrangements entered into in
fiscal periods beginning after June 15, 2003. The implementation of EITF 00-21
did not have a material impact on the Company's consolidated financial
statements.
In November 2003, the EITF reached consensus on EITF 03-1, "The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments".
EITF 03-1 provides guidance on the new requirements for other-than-temporary
impairment and its application to debt and marketable equity investments that
are accounted for under SFAS No. 115. The new requirements are effective for
fiscal years ending after December 15, 2003. The implementation of EITF 03-1 is
not anticipated to have a material impact on the Company's consolidated
financial statements.
18
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market value of the Company's investment securities fluctuates inversely
with movements in interest rates because all of these investment securities bear
interest at fixed rates. Accordingly, during periods of rising interest rates,
the market value of these securities will decline. However, the Company does not
consider itself to be subject to material market risks with respect to its
portfolio of investment securities because the average maturity of these
securities is relatively short making their value less susceptible to interest
rate fluctuations.
The Company has manufacturing operations in the United States, France,
Brazil, and South Africa. The Company has sold products in over 90 countries
throughout the world and purchases certain of its components from third-party
foreign suppliers. Export sales made from the United States are principally U.S.
dollar denominated. Accordingly, these sales are not subject to significant
currency translation risk. However, a majority of the Company's revenue
generated from operations outside the United States is denominated in the
currency of the customer location. The Company's most significant transactional
foreign currency exposures are the Euro, Brazilian real, and the South African
rand in relation to the U.S. dollar. Fluctuations in the value of foreign
currencies create exposures, which can adversely affect the Company's results of
operations. The Company attempts to manage its transactional foreign exchange
exposure by monitoring foreign currency cash flow forecasts and commitments
arising from the settlement of receivables and payables, and from future
purchases and sales.
The Company's translation exposure resulting from translating the
financial statements of foreign subsidiaries into U.S. dollars is not hedged.
The most significant translation exposures are the Euro, Brazilian real, and the
South African rand in relation to the U.S. dollar.
ITEM 4 - CONTROLS AND PROCEDURES
Based upon their evaluation of the effectiveness of the Company's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e), management, including the Chief Executive Officer and Chief
Financial Officer, concluded that the Company's disclosure controls and
procedures were effective as of May 31, 2004.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
May 31, 2004 through the date of this Quarterly Report on Form 10-Q, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
19
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In the ordinary course of its business operations, the Company is involved, from
time to time, in commercial litigation, employment disputes, administrative
proceedings, and other legal proceedings. These include a consent decree that
the Company entered in 1992 with the U.S. Environmental Protection Agency
concerning groundwater contamination at its Lindsay, Nebraska facility, which is
included as an EPA superfund site. Management does not believe that these
matters, individually or in the aggregate, are likely to have a material adverse
effect on the Company's consolidated financial condition, results of operations,
or cash flows.
ITEM 2 - CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
The Company made no repurchases of its common stock under the Company's stock
repurchase plan during the three and nine-month periods ended May 31, 2004;
therefore tabular disclosure is not presented. From time to time, the Company's
Board of Directors has authorized management to repurchase shares of the
Company's common stock. Most recently, during August 2000, the Company announced
a 1.0 million share increase in the number of shares authorized for repurchase.
Under this share repurchase plan, management has existing authorization to
purchase, without further announcement, up to 1.2 million shares of the
Company's common stock in the open market or otherwise.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(a) Restated Certificate of Incorporation of the Company,
incorporated by reference to Exhibit 3(a) to the Company's
Report on Form 10-Q for the fiscal quarter ended February 28,
1997.
3(b) By-Laws of the Company amended and restated by the Board of
Directors on April 28, 2000, incorporated by reference to
Exhibit 3(b) of the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 2000.
3(c) Certificate of Amendment of the Restated Certificate of
Incorporation of Lindsay Manufacturing Co. dated February 7,
1997, incorporated by reference to Exhibit 3(b) to the
Company's Report on Form 10-Q for the fiscal quarter ended
February 28, 1997.
4(a) 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.
31(a) Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350.
31(b) Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350.
32(a) Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 18 U.S.C. Section 1350.
20
(b) Reports on Form 8-K
On March 23, 2004, the Company furnished a report on Form 8-K reporting
its results of operations for the second fiscal quarter and six-months ended
February 29, 2004 under Item 12, Results of Operations and Financial Condition.
On June 4, 2004, the Company filed a report on Form 8-K reporting a
press release announcement of the acquisition of assets and a related business
under Item 7, Financial Statements and Exhibits.
On June 22, 2004, the Company furnished a report on Form 8-K reporting
its results of operations for the third fiscal quarter and nine-months ended May
31, 2004 under Item 12, Results of Operations and Financial Condition.
21
SIGNATURE
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 2nd day of
July, 2004.
LINDSAY MANUFACTURING CO.
By: /s/ BRUCE C. KARSK
-------------------------------
Name: Bruce C. Karsk
Title: Executive Vice President,
Chief Financial Officer, Treasurer
and Secretary (Principal Financial
Officer)
22