SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 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 March 31, 2004, 11,757,810 shares of the registrant's common stock were
outstanding.
1
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
INDEX FORM 10-Q
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets, February 29, 2004, February 28, 2003,
and August 31, 2003 3
Consolidated Statements of Operations for the three-months and
six-months ended February 29, 2004 and February 28, 2003 4
Consolidated Statements of Cash Flows for the six-months
ended February 29, 2004 and February 28, 2003 5
Notes to Consolidated Financial Statements 6-12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION 13-16
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 17
ITEM 4 - CONTROLS AND PROCEDURES 17
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 19
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURE 21
2
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
LINDSAY MANUFACTURING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 2004, FEBRUARY 28, 2003 AND AUGUST 31, 2003
(UNAUDITED) (UNAUDITED)
FEBRUARY FEBRUARY AUGUST
($ IN THOUSANDS, EXCEPT PAR VALUES) 2004 2003 2003
- ---------------------------------------------------------------------- ---------- ---------- ----------
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 1,724 $ 5,431 $ 15,368
Marketable securities............................................... 11,733 7,971 8,770
Receivables......................................................... 39,761 36,657 22,970
Inventories......................................................... 24,829 24,315 20,019
Deferred income taxes............................................... 2,496 1,212 2,301
Other current assets................................................ 1,932 944 1,010
---------- ---------- ----------
Total current assets................................................ 82,475 76,530 70,438
Long-term marketable securities....................................... 36,813 27,813 38,674
Property, plant and equipment, net.................................... 14,348 14,270 13,889
Other noncurrent assets............................................... 8,296 8,319 8,219
---------- ---------- ----------
Total assets.......................................................... $ 141,932 $ 126,932 $ 131,220
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 12,863 $ 12,900 $ 8,228
Other current liabilities........................................... 18,251 13,946 16,053
---------- ---------- ----------
Total current liabilities........................................... 31,114 26,846 24,281
Pension benefits liability............................................ 2,315 1,688 2,315
Other noncurrent liabilities.......................................... 163 426 333
---------- ---------- ----------
Total liabilities..................................................... 33,592 28,960 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,
17,481,879, 17,458,052 and 17,459,561 shares issued in
February 2004 and 2003, and August 2003, respectively)............. 17,482 17,458 17,460
Capital in excess of stated value................................... 2,620 2,467 2,484
Retained earnings................................................... 177,754 168,589 174,333
Less treasury stock (at cost, 5,724,069 shares)..................... (89,898) (89,898) (89,898)
Accumulated other comprehensive gain (loss)......................... 382 (644) (88)
---------- ---------- ----------
Total shareholders' equity............................................ 108,340 97,972 104,291
---------- ---------- ----------
Total liabilities and shareholders' equity............................ $ 141,932 $ 126,932 $ 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 SIX-MONTHS ENDED FEBRUARY 29, 2004
AND FEBRUARY 28, 2003
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- ---------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003 2004 2003
- ---------------------------------------------------------------------- -------- -------- -------- --------
Operating revenues.................................................... $ 51,475 $ 48,127 $ 87,988 $ 81,589
Cost of operating revenues............................................ 39,865 35,865 69,024 62,316
-------- -------- -------- --------
Gross profit.......................................................... 11,610 12,262 18,964 19,273
-------- -------- -------- --------
Operating expenses:
Selling expense..................................................... 2,891 2,459 5,758 5,099
General and administrative expense.................................. 3,279 2,693 6,272 5,271
Engineering and research expense.................................... 676 634 1,436 1,232
-------- -------- -------- --------
Total operating expenses.............................................. 6,846 5,786 13,466 11,602
-------- -------- -------- --------
Operating income...................................................... 4,764 6,476 5,498 7,671
Interest income, net.................................................. 361 390 785 813
Other income, net..................................................... 41 242 490 338
-------- -------- -------- --------
Earnings before income taxes.......................................... 5,166 7,108 6,773 8,822
Income tax provision.................................................. 1,663 2,156 2,177 2,677
-------- -------- -------- --------
Net earnings.......................................................... $ 3,503 $ 4,952 $ 4,596 $ 6,145
======== ======== ======== ========
Basic net earnings per share.......................................... $ 0.30 $ 0.42 $ 0.39 $ 0.52
======== ======== ======== ========
Diluted net earnings per share........................................ $ 0.29 $ 0.42 $ 0.38 $ 0.52
======== ======== ======== ========
Average shares outstanding............................................ 11,756 11,733 11,749 11,723
Diluted effect of stock options....................................... 210 158 217 188
-------- -------- -------- --------
Average shares outstanding assuming dilution.......................... 11,966 11,891 11,966 11,911
======== ======== ======== ========
Cash dividends per share.............................................. $ 0.050 $ 0.035 $ 0.100 $ 0.070
======== ======== ======== ========
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 SIX-MONTHS ENDED FEBRUARY 29, 2004 AND FEBRUARY 28, 2003
(UNAUDITED)
FEBRUARY FEBRUARY
($ IN THOUSANDS) 2004 2003
- --------------------------------------------------------------------------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................................ $ 4,596 $ 6,145
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization........................................ 1,506 1,759
Amortization of marketable securities premiums (discounts), net ..... 81 (97)
Loss on sale of property, plant and equipment........................ 6 -
Provision for uncollectible accounts receivable...................... 129 141
Equity in net (earnings) loss of equity method investments .......... 196 (157)
Deferred income taxes................................................ (150) 218
Other, net........................................................... (52) (70)
Changes in assets and liabilities:
Receivables.......................................................... (16,715) (13,413)
Inventories.......................................................... (4,869) (8,732)
Other current assets................................................. (969) (162)
Accounts payable..................................................... 4,603 6,832
Other current liabilities............................................ 685 (1,105)
Current taxes payable................................................ 1,287 1,411
Other noncurrent assets and liabilities ............................. 40 (428)
---------- ----------
Net cash used in operating activities................................... (9,626) (7,658)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment.............................. (2,047) (1,553)
Proceeds from sale of property, plant and equipment..................... 11 52
Purchases of marketable securities held to maturity..................... (2,982) (6,135)
Proceeds from maturities of marketable securities held to maturity...... 4,496 9,153
Purchases of marketable securities available for sale................... (3,790) -
Proceeds from maturities of marketable securities available for sale ... 1,315 -
---------- ----------
Net cash (used in) provided by investing activities..................... (2,997) 1,517
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under stock option plan.......... 164 23
Dividends paid.......................................................... (1,175) (821)
---------- ----------
Net cash used in financing activities................................... (1,011) (798)
---------- ----------
Effect of exchange rate changes on cash................................. (10) (55)
---------- ----------
Net decrease in cash and cash equivalents............................... (13,644) (6,994)
Cash and cash equivalents, beginning of period.......................... 15,368 12,425
---------- ----------
Cash and cash equivalents, end of period................................ $ 1,724 $ 5,431
========== ==========
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 SIX-MONTHS ENDED
------------------------- -------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
$ IN THOUSANDS 2004 2003 2004 2003
- --------------------------------------------------------------------- ---------- ---------- ---------- ----------
Net earnings, as reported............................................. $ 3,503 $ 4,952 $ 4,596 $ 6,145
Deduct: total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects......................................... 305 279 628 558
---------- ---------- ---------- ----------
Proforma net earnings................................................. 3,198 4,673 3,968 5,587
========== ========== ========== ==========
Earnings per share:
Basic-as reported............................................... $ 0.30 $ 0.42 $ 0.39 $ 0.52
Basic-pro forma................................................. $ 0.27 $ 0.40 $ 0.34 $ 0.48
Diluted-as reported............................................. $ 0.29 $ 0.42 $ 0.38 $ 0.52
Diluted-pro forma............................................... $ 0.27 $ 0.39 $ 0.33 $ 0.47
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 impairment 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 six months ended February 29, 2004 or February 28, 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:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
$ IN THOUSANDS COST GAINS LOSSES FAIR VALUE
-------------- ---------- ---------- ---------- ----------
HELD-TO-MATURITY SECURITIES
As of February 29, 2004:
Due within one year................................................... $ 11,733 $ 161 $ - $ 11,894
Due after one year through five years................................. 23,850 373 (7) 24,216
---------- ---------- ---------- ----------
$ 35,583 $ 534 $ (7) $ 36,110
========== ========== ========== ==========
As of February 28, 2003:
Due within one year................................................... $ 7,971 $ 110 $ (3) $ 8,078
Due after one year through five years................................. 27,813 607 (3) 28,417
---------- ---------- ---------- ----------
$ 35,784 $ 717 $ (6) $ 36,495
========== ========== ========== ==========
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 February 29, 2004:
Due within one year.................................................. $ - $ - $ - $ -
Due after one year through five years............................... 12,828 144 (9) 12,963
---------- ---------- ---------- ----------
$ 12,828 $ 144 $ (9) $ 12,963
========== ========== ========== ==========
As of February 28, 2003:
Due within one year................................................... $ - $ - $ - $ -
Due after one year through five years................................ - - - -
---------- ---------- ---------- ----------
$ - $ - $ - $ -
========== ========== ========== ==========
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.
FEBRUARY FEBRUARY AUGUST
$ IN THOUSANDS 2004 2003 2003
-------------- ---- ---- ----
Inventory:
First-in, first-out (FIFO) inventory ...................... $ 18,151 $ 20,143 $ 15,821
LIFO reserves ............................................. (2,644) (3,154) (2,494)
--------- --------- ---------
LIFO inventory ................................................. 15,507 16,989 13,327
Weighted average inventory ................................ 9,929 7,900 7,258
Obsolescence reserve ...................................... (607) (574) (566)
--------- --------- ---------
Total inventories .............................................. $ 24,829 $ 24,315 $ 20,019
========= ========= =========
The estimated percentage distribution between major classes of inventory before
reserves is as follows:
FEBRUARY FEBRUARY AUGUST
2004 2003 2003
---- ---- ----
Raw materials ......................................... 20% 15% 18%
Work in process ....................................... 10% 5% 5%
Finished goods and purchased parts .................... 70% 80% 77%
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, net of accumulated
depreciation, as follows:
FEBRUARY FEBRUARY AUGUST
$ IN THOUSANDS 2004 2003 2003
-------------- ---- ---- ----
Property, plant and equipment:
Land ................................................ $ 336 $ 336 $ 336
Buildings ........................................... 9,626 9,221 9,236
Equipment ........................................... 36,769 35,506 35,866
Other ............................................... 3,471 2,443 2,654
--------- -------- --------
Total property, plant and equipment ...................... 50,202 47,506 48,092
Accumulated depreciation and amortization ................ (35,854) (33,236) (34,203)
--------- -------- --------
Property, plant and equipment, net ....................... $ 14,348 $ 14,270 $ 13,889
========= ======== ========
(6) CREDIT ARRANGEMENTS
The Company had an unsecured revolving line of credit, which expired January 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 expired line of credit, borrowings, if any, would bear interest at
a rate equal to the greater of 4.00% or one percent per annum under the rate in
effect from time to time and designated by the commercial bank as its National
Base Rate (4.00% at February 29, 2004).
8
(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:
FEBRUARY 29, 2004
- -------------------------------------------------
WEIGHTED AVERAGE
SHARES PRICE EXPIRE
- ------ ----- ------
54,000 $28.17 November, 2007
====== ======
FEBRUARY 28, 2003
- --------------------------------------------------
WEIGHTED AVERAGE
SHARES PRICE EXPIRE
- ------ ----- ------
September, 2007-
196,062 $25.89 May, 2012
======= ======
(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, interest income net, 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 proscribed 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
Summarized financial information concerning the Company's reportable segments is
shown in the following table:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
-------------------------- ------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
$ IN THOUSANDS 2004 2003 2004 2003
-------------- ---- ---- ---- ----
Operating revenues:
Irrigation................................................. $48,733 $45,372 $ 82,703 $76,003
Diversified products....................................... 2,742 2,755 5,285 5,586
------- ------- -------- -------
Total operating revenues........................................ $51,475 $48,127 $ 87,988 $81,589
======= ======= ======== =======
Operating income:
Irrigation................................................. $ 8,452 $ 9,371 $ 12,692 $13,451
Diversified products....................................... 267 432 514 723
------- ------- -------- -------
Segment operating income........................................ 8,719 9,803 13,206 14,174
Unallocated general & administrative and engineering & research
expenses...................................................... 3,955 3,327 7,708 6,503
Interest and other income, net.................................. 402 632 1,275 1,151
------- ------- -------- -------
Earnings before income taxes.................................... $ 5,166 $ 7,108 $ 6,773 $ 8,822
======= ======= ======== =======
(9) OTHER NONCURRENT ASSETS
FEBRUARY FEBRUARY AUGUST
$ IN THOUSANDS 2004 2003 2003
-------------- ---- ---- ----
Cash surrender value of life insurance policies.................. $ 1,858 $1,764 $ 1,813
Deferred income taxes............................................ 1,554 1,143 1,599
Equity method investments........................................ 1,241 1,468 1,437
Goodwill, net.................................................... 1,242 1,113 1,174
Split dollar life insurance...................................... 913 894 913
Intangible pension assets........................................ 442 511 442
Other intangibles, net........................................... 507 642 574
Other............................................................ 539 784 267
------- ------ -------
Total noncurrent assets.......................................... $ 8,296 $8,319 $ 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 $19,000 and $22,000 for the three-months ended February 29,
2004 and February 28, 2003, respectively, and $37,000 and $50,000 for the
six-months ended February 29, 2004 and February 28, 2003, respectively. The
following table summarizes the Company's other intangible assets:
FEBRUARY FEBRUARY AUGUST
$ IN THOUSANDS 2004 2003 2003
-------------- ---- ---- ----
Other intangible assets:
Non-compete agreements........................... $ 343 $ 358 $ 358
Tradenames....................................... 145 163 147
Patent........................................... 100 100 100
Plans and specifications ........................ 75 77 77
Other intangibles................................ 15 30 30
Accumulated amortization............................ (171) (87) (138)
------ ----- -----
Total other intangible assets, net.................... $ 507 $ 642 $ 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 SIX-MONTHS ENDED
-------------------------- ------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
$ IN THOUSANDS 2004 2003 2004 2003
-------------- ---- ---- ---- ----
Comprehensive Income:
Net earnings................................ $3,503 $4,952 $4,596 $6,145
Other comprehensive income:
Unrealized gains on securities.............. 95 - 222 -
Foreign currency translation................ (317) 197 248 270
------ ------ ------ ------
Total comprehensive income....................... $3,281 $5,149 $5,066 $6,415
====== ====== ====== ======
(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:
FEBRUARY
$ IN THOUSANDS 2004
-------------- ----
Guarantees:
Guarantees for customer equipment financing.................. $3,800
Guarantees on third party debt of equity investment.......... 700
Product warranties........................................... N/A
------
Total guarantees.................................................. $4,500
======
Effective January 1, 2003, the Company adopted FASB Interpretation No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Other (the "Interpretation"). The
Interpretation requires the guarantor to recognize a liability for the estimated
value of such guarantee.
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 $69,000 at February 29, 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 February 29, 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 original loan amount financed or the total equipment cost related
to a lease.
Separately, the Company maintains limited, specific customer financing
recourse arrangements with three financial institutions including the
institution referred to above. The original amount of existing specific
guarantees is approximately $2.1 million at February 29, 2004. Generally, the
Company's exposure is limited to unpaid interest and principal where the
11
first and/or second annual 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.
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 February 29, 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
--------------------------
FEBRUARY FEBRUARY
$ IN THOUSANDS 2004 2003
-------------- ---- ----
Warranties:
Product warranty accrual balance, December 1............... $1,143 $1,274
Liabilities accrued for warranties during the period....... 245 216
Warranty claims paid during the period..................... (231) (304)
------ ------
Product warranty accrual balance, end of period................ $1,157 $1,186
====== ======
FOR THE SIX-MONTHS ENDED
------------------------
FEBRUARY FEBRUARY
$ IN THOUSANDS 2004 2003
-------------- ---- ----
Warranties:
Product warranty accrual balance, September 1............. $1,152 $1,266
Liabilities accrued for warranties during the period...... 670 609
Warranty claims paid during the period.................... (665) (689)
------ ------
Product warranty accrual balance, end of period............... $1,157 $1,186
====== ======
(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 funding for this liability. Components of net periodic benefit cost
for the Company's supplemental retirement plan include:
FOR THE THREE-MONTHS ENDED FOR THE SIX-MONTHS ENDED
-------------------------- ------------------------
FEBRUARY FEBRUARY FEBRUARY FEBRUARY
$ IN THOUSANDS 2004 2003 2004 2003
-------------- ---- ---- ---- ----
Service cost............................................ $ 10 $ 11 $ 20 $ 21
Interest cost........................................... 72 67 145 133
Net amortization and deferral........................... 74 45 148 91
------ ------ ------ ------
Total net periodic benefit cost......................... $ 156 $ 123 $ 313 $ 245
====== ====== ====== ======
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 six-months ended February 29, 2004.
13
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 six-months ended February 29, 2004 compared to the three-months
and six-months ended February 28, 2003. It should be read together with the
industry segment information in Note 8 to the financial statements:
FOR THE THREE-MONTHS ENDED FOR THE SIX-MONTHS ENDED
------------------------------------- ----------------------------------
PERCENT PERCENT
FEBRUARY FEBRUARY INCREASE FEBRUARY FEBRUARY INCREASE
($ IN THOUSANDS) 2004 2003 (DECREASE) 2004 2003 (DECREASE)
---------------- ---- ---- ---------- ---- ---- ----------
Consolidated
Operating revenues........................ $ 51,475 $48,127 7.0% $87,988 $81,589 7.8%
Cost of operating revenues................ $ 39,865 $35,865 11.2 $69,024 $62,316 10.8
Gross profit.............................. $ 11,610 $12,262 (5.3) $18,964 $19,273 (1.6)
Gross margin.............................. 22.6% 25.5% 21.6% 23.6%
Operating expenses........................ $ 6,846 $ 5,786 18.3 $13,466 $11,602 16.1
Operating income.......................... $ 4,764 $ 6,476 (26.4) $ 5,498 $ 7,671 (28.3)
Operating margin.......................... 9.3% 13.5% 6.2% 9.4%
Interest income, net...................... $ 361 $ 390 (7.4) $ 785 $ 813 (3.4)
Other income, net......................... $ 41 $ 242 (83.1) $ 490 $ 338 45.0
Income tax provision...................... $ 1,663 $ 2,156 (22.9) $ 2,177 $ 2,677 (18.7)
Effective income tax rate................. 32.2% 30.3% 32.1% 30.3%
Net earnings.............................. $ 3,503 $ 4,952 (29.3) $ 4,596 $ 6,145 (25.2)
Irrigation Equipment Segment
Operating revenues........................ $ 48,733 $45,372 7.4 $82,703 $76,003 8.8
Operating income.......................... $ 8,452 $ 9,371 (9.8) $12,692 $13,451 (5.6)
Operating margin.......................... 17.3% 20.7% 15.3% 17.7%
Diversified Products Segment
Operating revenues........................ $ 2,742 $ 2,755 (0.5) $ 5,285 $ 5,586 (5.4)
Operating income.......................... $ 267 $ 432 (38.2)% $ 514 $ 723 (28.9)%
Operating margin.......................... 9.7% 15.7% 9.7% 12.9%
FOR THE THREE-MONTHS ENDED FEBRUARY 29, 2004
REVENUES
Operating revenues for the three-months ended February 29, 2004 increased by
$3.3 million or 7% over the same prior year period. This increase was primarily
attributable to improved irrigation equipment revenues, which increased by $3.4
million or 7% over the same prior year period.
International irrigation equipment revenues for the three-months ended
February 29, 2004 increased by $2.3 million or 24% 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. Approximately 40% of the increase in
international revenues reflects the strengthening of the Euro, South African
rand, and Brazilian real against the U.S. dollar. 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 a
continuation of the expansion of agricultural production in Brazil.
International revenues were favorably impacted by an increase in export sales to
Australian, Mexican, and Canadian markets offset by lower sales to the Middle
East region due to the conflict in Iraq and general political unrest in the
region.
Domestic irrigation equipment revenues for the three-months ended
February 29, 2004 increased by $1.1 million or 3% compared to the same prior
year period. Conditions have been generally favorable in the Company's domestic
markets due to increasing prices for many farm commodities (including corn,
soybeans, wheat, and cotton) and anticipated continued strength in prices for
these commodities. Other factors, such as low interest rates, additional
first-year depreciation for capital
14
investments, and higher land values also contributed to increased revenues from
domestic irrigation sales. The Company owned dealer based in Washington State
experienced a significant drop in revenues during the quarter due to winter
weather conditions in that region.
Diversified manufacturing revenues for the three-months ended February
29, 2004 of $2.7 million were comparable to the same prior year period. Revenues
in this segment depend to a large degree on orders from a relatively small
number of customers. In most cases, 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 22.6% in the three-months ended February
29, 2004 from 25.5% for the same prior year period. Margins were lower due to
due to significantly higher steel costs realized by the Company. Steel costs
incurred by the Company have risen approximately 50% 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 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 for nearly all of its order backlog. Revenue mix change also
had some effect on gross margins as revenues from the Company's foreign
operations, which currently have lower gross margins than its U.S. operations,
increased to 14% of total sales for the quarter compared with 11% of sales in
the same prior year period.
OPERATING MARGIN
The Company's operating margin decreased to 9.3% during the three-months ended
February 29, 2004, from 13.5% for the same prior year period. This decrease is a
direct result of the gross margin impact discussed above and a $1.1 million
(18%) increase in the Company's operating expenses during the three months ended
February 29, 2004. This increase in operating expenses reflects a $586,000 (22%)
increase in general and administrative expenses and a $432,000 (18%) increase in
selling expenses compared to the prior period. Higher health and general
insurance costs, legal and other professional services costs associated with the
Sarbanes-Oxley Act compliance, and a more mature operating level for the
Company's South African subsidiary were major contributors to these cost
increases. In addition, engineering and research expense increased by $42,000
reflecting higher investments by the Company in new product development.
INTEREST INCOME, OTHER INCOME, AND TAXES
Interest income during the three-months ended February 29, 2004 of $361,000 was
comparable to the same prior year period.
Other income during the three-months ended February 29, 2004 decreased
by $201,000 compared to the same prior year period, primarily reflecting losses
attributable to minority equity investments held by the Company.
The effective tax rate during the three-months ended February 29, 2004
was 32.2% compared to 30.3% 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 status of interest income from its municipal bond
investments.
FOR THE SIX-MONTHS ENDED FEBRUARY 29, 2004
REVENUES
Operating revenues for the six-months ended February 29, 2004 increased by $6.4
million or 8% over the same prior year period. This increase was primarily
attributable to improved irrigation equipment revenues, which increased by $6.7
million or 9% over the same prior year period.
Domestic irrigation equipment revenues for the six-months ended
February 29, 2004 increased by $4.1 million or 7% compared to the same prior
year period due to the generally favorable domestic markets including increasing
prices for many farm commodities.
15
International irrigation equipment revenues increased by $2.6 million
or 14% over the same prior year period reflecting the strengthening of the Euro,
South African rand, and Brazilian real against the U.S. dollar, stronger
European and South American markets and an increase in export sales to
Australian, Mexican, and Canadian markets offset by lower sales to the Middle
East.
Diversified manufacturing revenues for the six-months ended February
29, 2004 of $5.3 million were 5% lower than the same prior year period.
GROSS MARGIN
The Company's gross margin decreased to 21.6% in the six-months ended February
29, 2004 from 23.6% for the same prior year period due to steel cost increases
and the mix of revenues. Revenues from the Company's foreign operations
increased to 14% of total sales for the quarter compared with 11% of sales in
the same prior year period.
OPERATING MARGIN
The Company's operating margin decreased to 6.2%, during the six-months ended
February 29, 2004, from 9.4% for the same prior year period. This decrease is a
direct result of the gross margin impact and a $1.9 million (16%) increase in
the Company's operating expenses during the six months ended February 29, 2004.
This increase in operating expenses reflects a $1.0 million (19%) increase in
general and administrative expenses and a $659,000 (13%) increase in selling
expenses compared to the prior period. In addition, engineering and research
expense increased by $204,000.
INTEREST INCOME, OTHER INCOME, AND TAXES
Interest income during the six-months ended February 29, 2004 of $785,000 was
comparable to the same prior year period.
Other income during the six-months ended February 29, 2004 increased by
$152,000 compared to the same prior year period, primarily reflecting foreign
currency transaction gains by the Company's European and South African
subsidiaries.
The effective tax rate during the six-months ended February 29, 2004
was 32.1% compared to 30.3% for the same prior year period.
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 $50.3 million at
February 29, 2004, $62.8 million at August 31, 2003 and $41.2 million at
February 28, 2003. The Company's marketable securities consist primarily of
tax-exempt high-grade municipal debt.
Cash flows used in operations totaled $9.6 million during the
six-months ended February 29, 2004 compared to $7.7 million during the same
prior year period. Cash flows used in operations includes increases of $16.5
million for accounts receivable and $4.9 million for inventories, offset
partially by an increase in accounts payable of $4.6 million and net earnings of
$4.6 million. Capital expenditures were $2.0 million during the six-months ended
February 29, 2004 compared to $1.6 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, expand its manufacturing
capabilities, and increase productivity. The Company may also use cash to
finance business acquisitions and stock repurchases from time to time. Under the
Company's 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. Any such purchases may
be made from time to time depending on market conditions and other
considerations.
16
The Company had an unsecured revolving line of credit, which expired
January 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 expired line of credit, borrowings, if any, would bear
interest at a rate equal to the greater of 4.00% or one percent per annum under
the rate in effect from time to time and designated by the commercial bank as
its National Base Rate (4.00% at February 29, 2004). Although the line of credit
has lapsed, the Company expects to renew this line of credit on substantially
similar terms during its fiscal quarter ending 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
In total, for fiscal 2004, management continues to anticipate revenue growth of
approximately 8 to 10 percent, excluding acquisitions. U.S. and international
farmers are enjoying strong commodity prices, which is helping to drive demand
for the Company's products. The Company's sales order backlog remains strong.
However, given the continued increases in steel cost, growth in earnings over
fiscal 2003 is no longer expected. Earnings are now projected to be between
earnings achieved during fiscal 2003 and 2002. 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 will adopt FIN 46 and FIN 46R during fiscal
2004 and is currently evaluating the potential impact of adopting this standard
on the Company's consolidated financial statements.
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
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 an effect 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.
17
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 for two reasons. First, the average maturity
of these securities is relatively short and this makes the value of these
securities less susceptible to interest rate fluctuations. Second, approximately
75% of the securities held by the Company are classified as "held to maturity"
marketable securities because the Company intends, and has the ability, to hold
these securities until they are paid off at face value at maturity. Since the
Company does not anticipate selling these securities, the fluctuations in the
market value of these securities does not affect the Company's earnings or
assets.
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 February 29, 2004.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
February 29, 2004 through the date of this Quarterly Report on Form 10-Q,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
18
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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual shareholders' meeting was held on January 21, 2004. The
shareholders voted to elect three directors and to ratify the appointment of
KPMG LLP as independent accountants for the fiscal year ending August 31, 2004.
In addition to the election of Mr. Buffett, Mr. Nahl, and Mr. Welsh as
directors, the following were directors at the time of the annual meeting and
will continue in office: Mr. Christodolou, Mr. Cunningham, Mr. McIntosh, and Mr.
Parod. There were 11,752,044 shares of common stock entitled to vote at the
meeting and 11,063,031 shares (94.1%) were represented at the meeting.
1. Election of Directors:
Howard G. Buffett For - 6,215,214 Withheld - 4,847,817
Michael C. Nahl For - 10,642,388 Withheld - 420,643
William F. Welsh II For - 10,844,241 Withheld - 218,790
2. Auditors: Ratification of the appointment of KPMG LLP as
independent auditors for the fiscal year ended August 31, 2004.
For - 11,027,066 Against - 29,901 Abstain - 6,064
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.
19
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.
(b) Reports on Form 8-K
On December 23, 2003, the Company furnished a report on Form 8-K
reporting its results of operations for the three-months ended November 30, 2003
under Item 12, Results of Operations and Financial Condition.
On February 9, 2004, the Company furnished a report on Form 8-K
announcing an update of its outlook for fiscal 2004 under Item 7, Financial
Statements and Exhibits and Item 12, Results of Operations and Financial
Condition.
20
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
April 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)
21