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, 2002
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
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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 July 10, 2002, 11,706,279 shares of common stock, $1.00 par value, of the
registrant were outstanding.
Total number of pages 15.
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
INDEX FORM 10-Q
Page No.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheets, May 31, 2002 and 2001
and August 31, 2001 3
Consolidated Statements of Operations for the three months and nine
months ended May 31, 2002 and 2001 4
Consolidated Statements of Cash Flows for the nine
months ended May 31, 2002 and 2001 5
Notes to Consolidated Financial Statements 6-9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION 9-13
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 14
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURE 15
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 2002 AND 2001 AND AUGUST 31, 2001
(UNAUDITED) (UNAUDITED)
MAY MAY AUGUST
($ IN THOUSANDS, EXCEPT PAR VALUES) 2002 2001 2001
- ----------------------------------- ---- ---- ----
ASSETS
Cash and cash equivalents $ 15,232 $ 14,133 $ 17,575
Marketable securities 8,915 8,853 6,845
Receivables, net 26,395 28,810 21,316
Inventories, net 16,820 12,251 10,112
Deferred income taxes 2,088 2,817 2,164
Other current assets 603 593 474
--------- --------- ---------
Total current assets 70,053 67,457 58,486
Long-term marketable securities 26,768 16,700 23,299
Property, plant and equipment, net 14,883 15,486 14,893
Other noncurrent assets 5,101 3,337 3,578
--------- --------- ---------
Total assets $ 116,805 $ 102,980 $ 100,256
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 8,721 $ 5,139 $ 5,590
Other current liabilities 15,994 14,245 11,234
--------- --------- ---------
Total current liabilities 24,715 19,384 16,824
Other noncurrent liabilities 1,867 2,086 2,016
--------- --------- ---------
Total liabilities 26,582 21,470 18,840
--------- --------- ---------
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, 17,430,348, 17,372,683 and 17,368,029 shares
issued in May 2002 and 2001 and August 2001) 17,431 17,373 17,368
Capital in excess of stated value 2,203 2,212 2,079
Retained earnings 161,147 152,223 152,541
Less treasury stock, (at cost, 5,724,069 shares) (89,898) (89,898) (89,898)
Accumulated other comprehensive loss (660) (400) (674)
--------- --------- ---------
Total shareholders' equity 90,223 81,510 81,416
--------- --------- ---------
Total liabilities and shareholders' equity $ 116,805 $ 102,980 $ 100,256
========= ========= =========
See accompanying notes to consolidated financial statements.
3
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months and nine months ended May 31, 2002 and 2001
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ---------------------
MAY MAY MAY MAY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2002 2001 2002 2001
- ---------------------------------------- ---- ---- ---- ----
Operating revenues $ 44,133 $ 39,032 $ 113,346 $ 101,263
Cost of operating revenues 32,580 29,580 86,101 77,424
--------- --------- --------- ---------
Gross profit 11,553 9,452 27,245 23,839
--------- --------- --------- ---------
Operating expenses:
Selling expense 2,260 1,726 6,419 5,437
General and administrative expense 2,259 1,829 6,335 6,564
Engineering and research expense 595 541 1,681 1,723
Restructuring charges -- -- -- 899
--------- --------- --------- ---------
Total operating expenses 5,114 4,096 14,435 14,623
--------- --------- --------- ---------
Operating income 6,439 5,356 12,810 9,216
Interest income, net 376 349 1,169 1,283
Other income (expense), net 17 (25) 172 (29)
--------- --------- --------- ---------
Earnings before income taxes 6,832 5,680 14,151 10,470
Income tax provision 2,118 1,749 4,387 3,234
--------- --------- --------- ---------
Net earnings $ 4,714 $ 3,931 $ 9,764 $ 7,236
========= ========= ========= =========
Basic net earnings per share $ 0.40 $ 0.34 $ 0.84 $ 0.62
========= ========= ========= =========
Diluted net earnings per share $ 0.40 $ 0.33 $ 0.82 $ 0.61
========= ========= ========= =========
Weighted average shares outstanding 11,704 11,698 11,663 11,696
Diluted effect of stock options 210 194 180 231
--------- --------- --------- ---------
Weighted average shares outstanding assuming dilution 11,914 11,892 11,843 11,927
========= ========= ========= =========
Cash dividends per share $ 0.035 $ 0.035 $ 0.105 $ 0.105
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
4
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended May 31, 2002 and 2001
(Unaudited)
MAY MAY
($ IN THOUSANDS) 2002 2001
- ---------------- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 9,764 $ 7,236
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 2,738 2,559
Non-cash restructuring charges relating to write-down -- 749
Amortization of marketable securities premiums, net (156) (233)
Gain on sale of fixed assets (23) (68)
Provision for uncollectible accounts receivable (180) 42
Deferred income taxes 76 289
Other, net -- 89
Changes in assets and liabilities:
Receivables (2,079) (10,058)
Inventories (3,957) 650
Other current assets (129) (366)
Accounts payable, trade 476 (931)
Other current liabilities 2,658 310
Current taxes payable 1,767 1,235
Other noncurrent assets and liabilities (751) (201)
-------- --------
Net cash provided by operating activities 10,204 1,302
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,746) (2,693)
Acquisitions of businesses (4,516) (945)
Proceeds from sale of property, plant and equipment 209 44
Purchases of marketable securities held-to-maturity (11,583) (1,541)
Proceeds from maturities of marketable securities held-to-maturity 6,200 18,895
Equity investment (78) (975)
-------- --------
Net cash (used in) provided by investing activities (11,514) 12,785
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under stock option
plan, net of repurchases and cancellations 187 64
Dividends paid (1,221) (1,229)
Purchases of treasury stock -- (1,896)
-------- --------
Net cash used in financing activities (1,034) (3,061)
-------- --------
Effect of foreign exchange rate changes on cash 1 2
Net (decrease) increase in cash and cash equivalents (2,343) 11,028
Cash and cash equivalents, beginning of period 17,575 3,105
-------- --------
Cash and cash equivalents, end of period $ 15,232 $ 14,133
======== ========
See accompanying notes to the consolidated financial statements.
5
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
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 accounting principles generally
accepted in the United States of America for annual reporting purposes or those
made in the Company's annual Form 10-K filing. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Lindsay Manufacturing Co. (Lindsay)
August 31, 2001 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 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 for
a full year.
(2) CASH EQUIVALENTS, MARKETABLE SECURITIES AND LONG-TERM MARKETABLE SECURITIES
Cash equivalents are included at cost, which approximates market. At May 31,
2002, 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
$35,683,000, $436,000, $44,000 and $36,075,000 respectively. On the total
amortized cost basis, $8,915,000 in marketable securities mature within one year
and $26,768,000 in long-term marketable securities have maturities ranging from
12 to 42 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.
MAY MAY AUGUST
$ IN THOUSANDS 2002 2001 2001
- --------------- ---- ---- ----
First-in, first-out (FIFO) inventory ................. $ 19,956 $15,890 $13,292
LIFO reserves ........................................ (2,551) (3,034) (2,551)
Obsolescence reserve ................................. (585) (605) (629)
-------- ------- -------
Total inventories .................................... $ 16,820 $12,251 $10,112
======== ======= =======
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
MAY MAY AUGUST
2002 2001 2001
---- ---- ----
Raw materials ........................................ 12% 13% 12%
Work in process ...................................... 5% 6% 5%
Finished goods and purchased parts.................... 83% 81% 83%
6
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant, equipment and capitalized lease assets are stated at cost.
MAY MAY AUGUST
$ IN THOUSANDS 2002 2001 2001
- -------------- ---- ---- ----
Property, plant and equipment:
Land ............................................... $ 70 $ 70 $ 70
Buildings .......................................... 8,809 8,624 8,628
Equipment .......................................... 34,850 31,722 32,416
Other............................................... 3,371 2,777 2,339
-------- ------- --------
Total property, plant and equipment...................... 47,100 43,193 43,453
Accumulated depreciation................................. (32,217) (27,707) (28,560)
-------- ------- --------
Property, plant and equipment, net ..................... $ 14,883 $15,486 $ 14,893
======== ======= ========
(5) CREDIT ARRANGEMENTS
Lindsay has an agreement with a commercial bank for a $10.0 million unsecured
revolving line of credit through December 29, 2002. 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. The interest rate
will never be less than 4.5 percent. 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.
At May 31, 2002, options to purchase 203,562 shares of common stock at a
weighted average price of $25.97 per share were outstanding, 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 May 3, 2012.
At May 31, 2001, options to purchase 99,750 shares of common stock at a
weighted average price of $27.13 per share were outstanding, but were not
included in the computation of diluted EPS because the options' exercise price
was greater than the average market price of the common shares. These options
expire between September 3, 2007 and September 3, 2008.
(7) ACQUISITIONS
During the quarter ended November 30, 2001, the Company acquired the business of
Injection Systems, Inc. through an acquisition of assets for $255,000 in cash.
This product line will be marketed as injection systems under the GrowSmart
brand. The assets acquired in this acquisition consisted of inventory of
$41,000, fixed assets of $17,000, and intellectual property valued at $197,000.
The intangible assets related to intellectual property are being amortized over
an estimated life up to 20 years. There was no goodwill associated with this
acquisition.
During the quarter ended May 31, 2002, the Company formed a wholly owned
subsidiary, Irrigation Specialists, Inc. a Delaware Corporation, which acquired
the business including certain assets and liabilities of Irrigation Specialists,
Incorporated, a Washington Corporation, for $3.4 million in cash. This
irrigation dealership based in Pasco, Washington has been established for more
than 30 years and provides the Company a strategic distribution channel in a key
regional market. The purchase price allocated to assets and liabilities
consisted of trade accounts receivable of $2.8 million, inventory of $2.5
million, fixed assets of $823,000, other assets of $8,000, other intangibles
valued at $300,000, trade payables of $2.7 million and other liabilities of
$335,000. The intangible assets related to covenants for non-competes with the
prior owners and are being amortized over 5 years. There was no goodwill
associated with this acquisition. The acquisition may require the payment of
additional consideration totaling approximately $125,000 which is contingent
upon the achievement of certain provisions included under the asset purchase
7
agreement. Any adjustment requiring additional payment by the Company would
result in the establishment of other intangible assets, including customer lists
and tradename, to be valued and amortized over an estimated realizable life of
no more than 10 years.
During the quarter ended May 31, 2002, the Company formed a wholly owned
subsidiary, Lindsay South America, Inc (LSA), which acquired a portion of the
assets of Hidro Power Industria E Comercio De Equipamentos for $818,000 in cash.
This irrigation equipment production and sales operation provides the Company an
important base in a key international market. The assets acquired in this
acquisition consisted of inventory of $230,000, fixed assets of $265,000, and
intangible assets, including customer lists and intellectual property, valued at
$323,000.
In accordance with the transitional requirements of FAS 141, "Business
Combinations" and FAS 142, "Goodwill and Other Intangible Assets", the Company
does not amortize any goodwill arising from acquisitions occurring on or after
July 1, 2001.
The following unaudited pro forma data summarizes the combined results of
operations of the Company for the periods indicated as if the acquisition of
Irrigation Specialists, Inc. had been completed on September 1, 2000. The pro
forma data gives effect to the actual operating results prior to the
acquisition, amortization of acquisition related intangibles and income taxes.
The pro forma amounts due not purport to be indicative of the results that would
have actually been obtained if the acquisition had occurred on September 1,
2000, or that may be obtained in the future. Pro forma data is not presented for
other acquisitions as these amounts are considered immaterial.
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------- -------------------------
MAY MAY MAY MAY
2002 2001 2002 2001
---- ---- ---- ----
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues ............................................ $ 48,235 $ 44,441 $123,147 $110,428
Net income........................................... 4,730 4,378 9,466 6,740
Net income per share - basic......................... 0.40 0.37 0.81 0.58
Net income per share - diluted....................... 0.40 0.37 0.80 0.57
(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 and hose reel irrigation systems.
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. of the financial
statements included in the Form 10-K for the fiscal year ended August 31, 2001.
The Company evaluates the performance of its operating segments based on segment
sales, gross profit and operating income, with operating income for segment
purposes excluding general and administrative expenses (which include corporate
expenses), engineering and research expenses, interest income net, other income
and expenses net, income taxes, and assets. Operating income for segment
purposes does include selling expenses and other overhead charges directly
attributable to the segment. There are no intersegment sales.
8
Summarized 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 2002 2001 2002 2001
- -------------- ---- ---- ---- ----
Operating revenues:
Irrigation................................................. $ 41,501 $ 33,904 $ 103,369 $ 86,012
Diversified products....................................... 2,632 5,128 9,977 15,251
-------- -------- --------- --------
Total operating revenues...................................... $ 44,133 $ 39,032 $ 113,346 $101,263
======== ======== ========= ========
Operating income:
Irrigation................................................. $ 8,876 $ 6,782 $ 19,383 $ 15,101
Diversified products....................................... 417 944 1,443 2,402
-------- -------- --------- --------
Segment operating income...................................... 9,293 7,726 20,826 17,503
Unallocated general & administrative and
engineering & research expenses............................ 2,854 2,370 8,016 8,287
Interest and other income, net................................ 393 324 1,341 1,254
-------- -------- --------- --------
Earnings before income taxes.................................. $ 6,832 $ 5,680 $ 14,151 $ 10,470
======== ======== ========= ========
(9) OTHER NONCURRENT ASSETS
MAY MAY AUGUST
$ IN THOUSANDS 2002 2001 2001
- --------------- ---- ---- ----
Goodwill, net............................................................ $ 830 $ 621 $ 737
Intellectual property, net............................................... 206 - -
Intangible pension assets................................................ 580 649 580
Split dollar life insurance.............................................. 878 859 858
Other ................................................................... 2,607 1,208 1,403
------ ------ ------
Total other noncurrent assets............................................ $5,101 $3,337 $3,578
====== ====== ======
(10) COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------- -------------------------
MAY MAY MAY MAY
$ IN THOUSANDS 2002 2001 2002 2001
- -------------- ---- ---- ---- ----
Comprehensive Income:
Net earnings............................................... $ 4,714 $ 3,931 $ 9,764 $ 7,236
Other comprehensive income:
Foreign currency translation.................................. - (97) 14 (97)
-------- --------- -------- --------
Total comprehensive income.................................... $ 4,714 $ 3,834 $ 9,778 $ 7,139
======== ======== ======== =======
The difference between our reported net earnings and comprehensive income for
each period presented is primarily the change in the foreign currency
translation adjustment. Accumulated other comprehensive loss included in our
consolidated balance sheets represents the accumulated foreign currency
translation adjustment.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are described in Note A to the consolidated
financial statements in our Form 10-K and our Annual Report to Shareholders for
the fiscal year ended August 31, 2001. Of these policies, we have identified two
to be critical accounting policies: Revenue Recognition, including the allowance
for doubtful accounts, and Inventories. These accounting policies were selected
as critical accounting policies because they are the most important to the
presentation of the Company's consolidated results of operations and financial
condition and they require the greatest use of judgments and
9
estimates by management in preparing the consolidated financial statements.
Management periodically re-evaluates and adjusts the estimates that are used as
circumstances change.
REVENUE RECOGNITION
Revenues from the sale of our products to our dealers or customers are
generally recognized upon the delivery of the product to our dealers or
customers. The costs related to revenues, including the allowance for doubtful
accounts, are recognized in the same period in which the specific revenues are
recognized. Estimates used in the Company's revenue recognition and cost
recognition processes include, but are not limited to, estimates for rebates
payable, cash discounts expected to be allowed, and the allowance for doubtful
or uncollectible accounts. The Company does not record any revenue that is
contingent or that is dependent upon future performance.
INVENTORIES
Inventories are stated at the lower of cost or market. For the majority
of our inventory, cost is determined by the last in, first out (LIFO) method
using a standard cost system. Labor and overhead variances from standard are
written off as they are incurred. We reserve for obsolete, slow moving and
excess inventory by estimating the net realizable value based on the potential
future use of such inventory.
RESULTS OF OPERATIONS
The following table provides highlights for the three months and nine months
ended May 31, 2002 as compared to the same periods of fiscal year 2001 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.
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
----------------------------- --------------------------
PERCENT PERCENT
MAY MAY INCREASE MAY MAY INCREASE
($ IN THOUSANDS) 2002 2001 (DECREASE) 2002 2001 (DECREASE)
- ---------------- ---- ---- ---------- ---- ---- ---------
Consolidated
Operating revenues.................................. $ 44,133 $39,032 13.1% $ 113,346 $ 101,263 11.9%
Cost of operating revenues.......................... $ 32,580 $29,580 10.1 $ 86,101 $ 77,424 11.2
Gross profit....................................... $ 11,553 $ 9,452 22.2 $ 27,245 $ 23,839 14.3
Gross margin........................................ 26.2% 24.2% 24.0% 23.5%
Selling, engineering & research and
general & administrative expense.............. $ 5,114 $ 4,096 24.9 $ 14,435 $ 13,724 5.2
Restructuring charges............................... $ - $ - N/A $ - $ 899 N/A
Operating income ................................... $ 6,439 $ 5,356 20.2 $ 12,810 $ 9,216 39.0
Operating margin ................................... 14.6% 13.7% 11.3% 9.1%
Interest income, net $ 376 $ 349 7.7 $ 1,169 $ 1,283 (8.9)
Other income (expense), net........................ $ 17 $ (25) 168.0 $ 172 $ (29) 693.1
Income tax provision................................ $ 2,118 $ 1,749 21.1 $ 4,387 $ 3,234 35.7
Effective income tax rate........................... 31.0% 30.8% 31.0% 30.9%
Net earnings........................................ $ 4,714 $ 3,931 19.9 $ 9,764 $ 7,236 34.9
Irrigation Equipment Segment (See Note (8))
Operating revenues.................................. $ 41,501 $33,904 22.4 $ 103,369 $ 86,012 20.2
Operating income.................................... $ 8,876 $ 6,782 30.9 $ 19,383 $ 15,101 28.4
Operating margin.................................... 21.4% 20.0% 18.8% 17.6%
Diversified Products Segment (See Note (8))
Operating revenues................................. $ 2,632 $ 5,128 (48.7) $ 9,977 $ 15,251 (34.6)
Operating income.................................... $ 417 $ 944 (55.8%) $ 1,443 $ 2,402 (39.9%)
Operating margin.................................... 15.8% 18.4% 14.5% 15.7%
</Table>
10
Operating revenues for the quarter ended May 31, 2002 were $44.1
million as compared to $39.0 million for the same prior year period. For the
nine month period ended May 31, 2002, operating revenues were $113.3 million as
compared to $101.3 million for the same prior year period.
Irrigation equipment revenues totaled $41.5 million during the quarter
ended May 31, 2002 as compared to $33.9 million for the same prior year period.
Revenues increased due to new operations and products, effective sales and
marketing programs and dry weather conditions. New acquisitions during the
quarter ended May 31, 2002 contributed $3.2 million in new irrigation revenues.
Irrigation equipment revenues totaled $103.4 million during the nine
month period ended May 31, 2002 as compared to $86.0 million for the same prior
year period. Again, revenues increased due to new operations and products,
effective sales and marketing programs and dry weather conditions. New
acquisitions during the nine month period ended May 31, 2002 contributed $3.2
million in new irrigation revenues.
Diversified products revenues were $2.6 million during the quarter
ended May 31, 2002, $2.5 million lower than prior year's comparable period
revenues of $5.1 million. Diversified products revenues were $10.0 million for
the nine month period ended May 31, 2002 as compared to $15.3 million for the
same prior year period. The expected decreases in diversified product revenues
for both the three and nine month periods of fiscal 2002 were primarily due to
contract manufacturing customers relying less on outsourced manufacturing. We
expect diversified products revenues to continue at these lower levels.
Gross margin for the quarter ended May 31, 2002 was 26.2 percent as
compared to 24.2 percent of the prior year's comparable period. For the nine
month period ended May 31, 2002 gross margin was 24.0 percent as compared to
23.5 percent for the same prior year period. The increase in gross margin, for
both the three and nine month periods, was the result of an increase in
manufacturing productivity, tight control of manufacturing costs, increased
throughput and a favorable product mix.
Selling, general and administrative and engineering and research
expenses during the quarter ended May 31, 2002 totaled $5.1 million as compared
to $4.1 million for the same prior year period. Selling, general and
administrative and engineering and research expenses totaled $14.4 million for
the nine month period ended May 31, 2002 as compared to $13.7 million for the
same prior year period. The increase for both the three and nine month periods
was due to greater advertising and promotional expenditures required to support
increased sales coupled with additional personnel costs primarily related to
acquisitions.
During the prior year's second quarter, the Company took a
non-recurring restructuring charge of $899,000 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 reduced
net earnings by $0.05 per share after tax for the quarter ended February 28,
2001.
Interest Income, net during the quarter ended May 31, 2002 totaled
$376,000 as compared to $349,000 for the same prior year period. Interest
Income, net totaled $1.2 million for the nine month period ended May 31, 2002 as
compared to $1.3 million for the same prior year period.
The effective tax rates during the quarter ended May 31, 2002 was 31.0%
as compared to 30.8% for the same prior year period. The effective tax rates for
the nine month period ended May 31, 2002 was 31.0% as compared to 30.9% for the
same prior year period. Lindsay benefits from an effective tax rate which is
lower than the combined federal and state statutory rate primarily due to the
federal income tax exempt status of interest income from its municipal bond
investments.
Long term, the Company believes that the agricultural irrigation
equipment demand drivers remain solidly in place; farmers need to conserve
water, energy and labor while at the same time improve and stabilize crop yields
and increase food production for a growing world population. At May 31, 2002,
Lindsay's order backlog totaled $12.6 million as compared with $11.9 million at
May 31, 2001. Irrigation equipment backlog grew approximately 60 percent while
diversified products backlog declined approximately 40 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.
Historically, Lindsay has financed its growth through funds provided by
operations. Cash flows from operations totaled $10.2 million for the nine month
period ended May 31, 2002 as compared to $1.3 million for the same prior year
period. The cash flows provided by operating activities were primarily due to
net earnings, depreciation and increased receivables and inventories.
Receivables, net of acquisition related amounts of $2.8 million, at May
31, 2002 increased $2.1 million from August 31, 2001. The increase in
receivables is due primarily to the higher sales levels partially offset by
reduced use of an interest free delayed payment financing program.
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Inventories, net of acquisition related amounts of $2.8 million, at May
31, 2002, increased $4.0 million as compared to August 31, 2001. Inventory
increased due to the expanded mix of products available for sale by the Company.
August 31, 2002 inventory balances, net of acquisition related inventory, are
expected to be lower than the current level but greater than the prior year
level.
Current liabilities of $24.7 million at May 31, 2002 are higher than
the $16.8 million balance at August 31, 2001 and the $19.4 million balance at
May 31, 2001. The increase from August 31, 2001 and May 31, 2001 is principally
due to higher trade payables and a higher accrual for taxes payable.
Cash flows used in investing activities were $12.6 million for the
first nine months ended May 31, 2002 as compared to $12.8 million provided by
investing activities for the same prior year period. The cash flows used in
investing activities during the nine months ended May 31, 2002 were attributable
to capital expenditures, acquisitions and purchases of marketable securities,
net of proceeds from maturities of marketable securities. The cash flows
provided by investing activities during the nine months ended May 31, 2001 were
attributable to proceeds from maturities of marketable securities partially
offset by capital expenditures, purchases of marketable securities, an
acquisition and an equity investment.
Lindsay's cash and short-term marketable securities totaled $24.1
million at May 31, 2002, as compared to $24.4 million at August 31, 2001 and
$23.0 million at May 31, 2001. At May 31, 2002, Lindsay had $26.8 million
invested in long-term marketable securities which represent intermediate term
(12 to 42 months maturities) municipal debt, as compared to $23.3 million at
August 31, 2001 and $16.7 million at May 31, 2001. Management believes that the
Company has both the ability and intends to hold investments classified as
held-to-maturity until the scheduled maturities of these securities.
Cash flows used in financing activities of $1.0 million for the nine
months ended May 31, 2002 decreased from $3.1 million for the same prior year
period. The cash flows used in financing activities during the nine months ended
May 31, 2002 were primarily attributable to dividends paid. No purchases of
treasury stock were made during the nine months ended May 31, 2002. $1.9 million
of treasury stock was purchased during prior year's comparable period.
Lindsay's equity increased to $90.2 million at May 31, 2002 from $81.4
million at August 31, 2001 due to its net earnings of $9.8 million, plus $0.2
million from the net proceeds of common stock under Lindsay's employee stock
plan, less dividends paid of $1.2 million. Lindsay's equity at May 31, 2001 was
$81.5 million.
Capital expenditures, without acquisitions, were $1.7 million during
the nine months ended May 31, 2002 as compared to $2.7 million for the same
prior year period. Fiscal year 2002 capital expenditures were used primarily for
upgrading manufacturing plant and equipment and to further automate Lindsay's
manufacturing facilities. Capital expenditures for fiscal year 2002 are expected
to total approximately $2.5 to $3.0 million and will be used to improve the
company's existing facilities, expand its manufacturing capabilities and
increase productivity.
Lindsay believes that its capitalization (including cash and marketable
securities balances), operating cash flow and line of credit of $10.0 million
are sufficient to cover expected working capital needs, planned capital
expenditures, identified acquisitions, dividends and, from time to time,
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.
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
and foreign currency exchange rates.
Approximately 19% and 17% of Lindsay's operating revenues for the first
nine months of fiscal year 2002 and 2001 were generated from international
sales. For the full year of 2001, approximately 20% of Lindsay's operating
revenues were generated from international sales.
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets", replacing SFAS No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". The provisions of Statement No. 144 are effective for financial statements
issued for fiscal years beginning after December 15, 2001. The Company's
adoption of SFAS 144 during fiscal 2003 is not expected to have a material
impact on the Company's consolidated financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". The provisions of Statement No. 143 are effective for
financial statements issued for fiscal years beginning after June 15, 2002. The
Company's adoption of SFAS 143 during fiscal 2003 is not expected to have a
material impact on the Company's consolidated financial position or results of
operations.
In July 2001, the FASB issued SFAS No. 141 "Business Combinations" and
SFAS No. 142 "Goodwill and Other Intangible Assets". The provisions of Statement
No. 141 require that the purchase method be used for business combinations
initiated after June 30, 2001, and the provisions of Statement No. 142 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001. Under the transition requirements of SFAS No. 141 and No.
142, the Company does not amortize goodwill (aggregating $0) resulting from
acquisitions occurring after June 30, 2001. Statement No. 142 replaces the
requirement to amortize goodwill and intangible assets with indefinite lives
with a requirement for an impairment test on a periodic basis. The Company will
complete its initial transitional impairment testing of goodwill in fiscal year
2003. Neither statement is expected to have a material impact on the Company's
consolidated financial position or results of operations.
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.
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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 (0-42 months)
and because the Company has the ability and intends to hold the investments in
these marketable securities to maturity. Lindsay's export sales are principally
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 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 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 May 31, 2002.
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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 15th day of
July, 2002.
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)
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