-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EYbTmfJwS0whRmYChxGt5YpGAVb6PfMbUpRy9r9duW0RzIpKIrqFjfA6GiWf51GC ygIOy/WlfoWsRmkifMyWQw== 0000950137-05-000213.txt : 20050110 0000950137-05-000213.hdr.sgml : 20050110 20050110090326 ACCESSION NUMBER: 0000950137-05-000213 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041130 FILED AS OF DATE: 20050110 DATE AS OF CHANGE: 20050110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINDSAY MANUFACTURING CO CENTRAL INDEX KEY: 0000836157 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 470554096 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13419 FILM NUMBER: 05519627 BUSINESS ADDRESS: STREET 1: 2707 NORTH 108TH STREET STE 102 CITY: OMAHA STATE: NE ZIP: 68644 BUSINESS PHONE: 4024282131 MAIL ADDRESS: STREET 1: 2707 NORTH 108TH STREET STE 102 CITY: OMAHA STATE: NE ZIP: 68644 10-Q 1 c91008e10vq.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 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 December 31, 2004, 11,778,185 shares of the registrant's common stock were outstanding. LINDSAY MANUFACTURING CO. AND SUBSIDIARIES INDEX FORM 10-Q
Page No. -------- PART I - FINANCIAL INFORMATION ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets, November 30, 2004 and 2003 and August 31, 2004 3 Consolidated Statements of Operations for the three-months ended November 30, 2004 and 2003 4 Consolidated Statements of Cash Flows for the three-months ended November 30, 2004 and 2003 5 Notes to Consolidated Financial Statements 6-13 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 14-19 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 19-20 ITEM 4 - CONTROLS AND PROCEDURES 20 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS 21 ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 21 ITEM 3 - DEFAULTS UPON SENIOR SECURITIES 21 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21 ITEM 5 - OTHER INFORMATION 21 ITEM 6 - EXHIBITS 21 SIGNATURE 22
2 PART I - FINANCIAL INFORMATION ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS LINDSAY MANUFACTURING CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 2004 AND 2003 AND AUGUST 31, 2004
(UNAUDITED) (UNAUDITED) NOVEMBER NOVEMBER AUGUST ($ IN THOUSANDS, EXCEPT PAR VALUES) 2004 2003 2004 ----------------------------------- ----- ----- ---- ASSETS Current assets: Cash and cash equivalents ................................ $ 4,354 $ 6,263 $ 8,973 Marketable securities .................................... 11,277 5,730 14,802 Receivables .............................................. 39,314 29,691 34,369 Inventories .............................................. 26,250 21,728 19,780 Deferred income taxes .................................... 1,176 2,398 1,026 Other current assets ..................................... 3,987 1,538 2,422 --------- --------- --------- Total current assets ..................................... 86,358 67,348 81,372 Long-term marketable securities ............................ 27,971 43,971 32,527 Property, plant and equipment, net ......................... 17,127 14,157 16,355 Other noncurrent assets .................................... 8,876 8,259 8,747 --------- --------- --------- Total assets ............................................... $ 140,332 $ 133,735 $ 139,001 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ......................................... $ 9,500 $ 10,172 $ 9,117 Other current liabilities ................................ 15,311 15,020 15,359 --------- --------- --------- Total current liabilities ................................ 24,811 25,192 24,476 Pension benefits liability ................................. 2,247 2,315 2,169 Other noncurrent liabilities ............................... 57 632 172 --------- --------- --------- Total liabilities .......................................... 27,115 28,139 26,817 --------- --------- --------- 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, 17,497,785, 17,475,748 and 17,493,841 shares issued in November 2004 and 2003 and August 2004, respectively) .. 17,498 17,476 17,494 Capital in excess of stated value ........................ 2,978 2,574 2,966 Retained earnings ........................................ 180,748 174,840 181,209 Less treasury stock (at cost, 5,724,069 shares) .......... (89,898) (89,898) (89,898) Accumulated other comprehensive gain ..................... 1,891 604 413 --------- --------- --------- Total shareholders' equity ................................. 113,217 105,596 112,184 --------- --------- --------- Total liabilities and shareholders' equity ................. $ 140,332 $ 133,735 $ 139,001 ========= ========= =========
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 ENDED NOVEMBER 30, 2004 AND 2003 (UNAUDITED)
THREE MONTHS ENDED ------------------ NOVEMBER NOVEMBER (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003 - ---------------------------------------- ---- ---- Operating revenues ......................... $ 39,767 $ 36,513 Cost of operating revenues ................. 33,194 29,159 -------- -------- Gross profit ............................... 6,573 7,354 -------- -------- Operating expenses: Selling expense .......................... 2,747 2,867 General and administrative expense ....... 3,597 2,993 Engineering and research expense ......... 696 760 -------- -------- Total operating expenses ................... 7,040 6,620 -------- -------- Operating (loss) income .................... (467) 734 Interest income, net ....................... 261 424 Other income, net .......................... 384 449 -------- -------- Earnings before income taxes ............... 178 1,607 Income tax provision ....................... 3 514 -------- -------- Net earnings ............................... $ 175 $ 1,093 ======== ======== Basic net earnings per share ............... $ 0.01 $ 0.09 ======== ======== Diluted net earnings per share ............. $ 0.01 $ 0.09 ======== ======== Average shares outstanding ................. 11,772 11,741 Diluted effect of stock options ............ 213 224 -------- -------- Average shares outstanding assuming dilution ........................ 11,985 11,965 ======== ======== Cash dividends per share ................... $ 0.055 $ 0.050 ======== ========
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 THREE-MONTHS ENDED NOVEMBER 30, 2004 AND 2003 (UNAUDITED)
NOVEMBER NOVEMBER ($ IN THOUSANDS) 2004 2003 ---------------- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings ................................................................ $ 175 $ 1,093 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization ............................................ 906 774 Amortization of marketable securities premiums, net ...................... 49 40 Gain on sale of property, plant and equipment ............................ - 8 Provision for uncollectible accounts receivable .......................... 31 (60) Equity in net (earnings) loss of equity method investments ............... (233) 7 Deferred income taxes .................................................... (28) (135) Other, net ............................................................... 13 (27) Changes in assets and liabilities: Receivables .............................................................. (4,127) (6,214) Inventories .............................................................. (5,471) (1,186) Other current assets ..................................................... (1,279) (564) Accounts payable ......................................................... (6) 1,080 Other current liabilities ................................................ (378) (935) Current taxes payable .................................................... (139) (201) Other noncurrent assets and liabilities .................................. 29 559 -------- -------- Net cash used in operating activities ....................................... (10,458) (5,761) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment .................................. (1,343) (721) Proceeds from sale of property, plant and equipment ......................... 3 11 Purchases of marketable securities held-to-maturity ......................... - (2,982) Proceeds from maturities or sales of marketable securities held-to-maturity ........................................................ - 2,785 Purchases of marketable securities available-for-sale ....................... - (3,288) Proceeds from maturities or sales of marketable securities available-for-sale ...................................................... 7,740 1,315 -------- -------- Net cash provided by (used in) investing activities ......................... 6,400 (2,880) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock under stock option plan .............. 29 110 Dividends paid .............................................................. (636) (586) -------- -------- Net cash used in financing activities ....................................... (607) (476) -------- -------- Effect of exchange rate changes on cash ..................................... 46 12 -------- -------- Net decrease in cash and cash equivalents ................................... (4,619) (9,105) Cash and cash equivalents, beginning of period .............................. 8,973 15,368 -------- -------- Cash and cash equivalents, end of period .................................... $ 4,354 $ 6,263 ======== ========
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, 2004. 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. 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 -------------------------- NOVEMBER NOVEMBER $ IN THOUSANDS 2004 2003 -------------- ---- ---- Net earnings, as reported ................................. $ 175 $ 1,093 Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects ............................. 361 323 --------- --------- Proforma net (loss) earnings .............................. $ (186) $ 770 ========= ========= Earnings (loss) per share: Basic-as reported ................................... $ 0.01 $ 0.09 Basic-pro forma ..................................... $ (0.02) $ 0.07 Diluted-as reported ................................. $ 0.01 $ 0.09 Diluted-pro forma ................................... $ (0.02) $ 0.06
6 (3) CASH EQUIVALENTS, MARKETABLE SECURITIES, AND LONG-TERM MARKETABLE SECURITIES Cash equivalents are included at cost, which approximates market. At November 30, 2004, primarily one financial institution held the Company's cash equivalents. The Company 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. At the date of acquisition of an investment security, management designates the security as belonging to a trading portfolio, an available-for-sale portfolio, or a held-to-maturity portfolio. Following management's fiscal year 2004 decision to transfer debt securities from the held-to-maturity portfolio, the Company will not designate purchases to the held-to-maturity portfolio for a period of at least two years. Currently, the Company holds no securities designated as held-to-maturity or trading. All investment securities are classified as available-for-sale and carried at fair value. Unrealized appreciation or depreciation in the fair value of available-for-sale securities is reported in accumulated other comprehensive income, net of related income tax effects. 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. No impairment losses for other-than-temporary declines in fair value have been recorded in the three months ended November 30, 2004 and 2003. In the opinion of management, the Company is not subject to material market risks with respect to its portfolio of investment securities because the investment grade quality of the securities and the maturities of these securities are relatively short, making their value less susceptible to interest rate fluctuations. Gross realized gains and losses from sale of available-for-sale securities were a $5,000 gain and $51,000 loss, respectively, for the three-months ended November 30, 2004 and $0 for the three-months ended November 30, 2003. Amortized cost and fair value of investments in marketable securities classified as held-to-maturity or available-for-sale according to management's intent are summarized as follows: $ IN THOUSANDS HELD-TO-MATURITY SECURITIES
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED COST GAINS LOSSES FAIR VALUE ---- ----- ------ ---------- As of November 30, 2004: Due within one year ................. $ - $ - $ - $ - Due after one year through five years ....................... - - - - ------- ------- ------- ------- $ - $ - $ - $ - ======= ======= ======= ======= As of November 30, 2003: Due within one year ................. $ 5,730 $ 61 $ (1) $ 5,790 Due after one year through five years ....................... 31,578 479 (34) 32,023 ------- ------- ------- ------- $37,308 $ 540 $ (35) $37,813 ======= ======= ======= ======= As of August 31, 2004: Due within one year ................. $ - $ - $ - $ - Due after one year through five years ....................... - - - - ------- ------- ------- ------- $ - $ - $ - $ - ======= ======= ======= =======
7 AVAILABLE-FOR-SALE SECURITIES As of November 30, 2004: Due within one year ................. $ 11,232 $ 46 $ (1) $ 11,277 Due after one year through five years ....................... 27,964 90 (83) 27,971 -------- -------- -------- -------- $ 39,196 $ 136 $ (84) $ 39,248 ======== ======== ======== ======== As of November 30, 2003: Due within one year ................. $ - $ - $ - $ - Due after one year through five years ....................... 12,354 74 (35) 12,393 -------- -------- -------- -------- $ 12,354 $ 74 $ (35) $ 12,393 ======== ======== ======== ======== As of August 31, 2004: Due within one year ................. $ 14,678 $ 124 $ - $ 14,802 Due after one year through five years ....................... 32,353 214 (40) 32,527 -------- -------- -------- -------- $ 47,031 $ 338 $ (40) $ 47,329 ======== ======== ======== ========
(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.
NOVEMBER NOVEMBER AUGUST $ IN THOUSANDS 2004 2003 2004 -------------- ---- ---- ---- Inventory: First-in, first-out (FIFO) inventory ........ $ 20,810 $ 16,423 $ 16,043 LIFO reserves ............................... (5,333) (2,494) (5,333) -------- -------- -------- LIFO inventory .............................. 15,477 13,929 10,710 Weighted average inventory .................. 11,229 8,315 9,597 Obsolescence reserve ........................ (456) (516) (527) -------- -------- -------- Total inventories ........................... $ 26,250 $ 21,728 $ 19,780 ======== ======== ========
The estimated percentage distribution between major classes of inventory before reserves is as follows:
NOVEMBER NOVEMBER AUGUST 2004 2003 2004 ---- ---- ---- Raw materials .......................... 30% 20% 20% Work in process ........................ 5% 10% 10% Finished goods and purchased parts ..... 65% 70% 70%
8 (5) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost, net of accumulated depreciation, as follows:
NOVEMBER NOVEMBER AUGUST $ IN THOUSANDS 2004 2003 2004 -------------- ---- ---- ---- Property, plant and equipment: Land ....................................... $ 336 $ 336 $ 336 Buildings .................................. 10,263 9,393 10,192 Equipment .................................. 39,778 37,548 38,886 Other ..................................... 4,616 3,076 3,954 -------- -------- -------- Total property, plant and equipment ............ 54,993 50,353 53,368 Accumulated depreciation and amortization ...... (37,866) (36,196) (37,013) ======== ======== ======== Property, plant and equipment, net ............. $ 17,127 $ 14,157 $ 16,355 ======== ======== ========
Depreciation expense was $867,000 and $756,000 for the three-months ended November 30, 2004 and 2003, respectively. (6) CREDIT ARRANGEMENTS The Company has an agreement with a commercial bank for a $10.0 million unsecured revolving line of credit through December 28, 2005. 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. Under the terms of the line of credit, borrowings, if any, bear interest at a rate equal to one percent per annum under the rate in effect from time to time and designated by the commercial bank as its National Base Rate (5.00% at November 30, 2004). The Company expects to renew this line of credit on substantially similar terms. The Company's European subsidiary, Lindsay Europe, has an unsecured revolving line of credit with a commercial bank under which it could borrow up to the Euro equivalent of $2.7 million for working capital purposes. As of November 30, 2004, there was a $782,000 outstanding balance on this line. Under the terms of the line of credit, borrowings, if any, bear interest at a floating rate in effect from time to time designated by the commercial bank as LIBOR+200 basis points. (4.65% at November 30, 2004). (7) NET EARNINGS PER SHARE Basic net earnings per share is computed by dividing net earnings by the weighted average number of shares outstanding during the period. Diluted net earnings per share includes the incremental dilutive effect of stock options, which have an exercise price below the average 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:
NOVEMBER 30, 2004 NOVEMBER 30, 2003 ------------------------------------------------- -------------------------------------------- WEIGHTED AVERAGE WEIGHTED AVERAGE SHARES PRICE EXPIRE SHARES PRICE EXPIRE ------ ----- ------ ------ ----- ------ November , 2007- November , 2007- 204,750 $26.49 April, 2014 148,250 $25.84 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, and hose reel irrigation systems. The irrigation segment consists of six operating segments that have similar economic characteristics and meet the aggregation criteria of SFAS No. 131. 9 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 consolidated financial statements contained in the Company's 10-K for the fiscal year ended August 31, 2004. 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, and 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 inter-segment sales. Because the Company utilizes common operating assets for its irrigation and diversified segments, it is not practical to separately identify assets by reportable segment. Similarly, other segment reporting proscribed by FAS 131 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 customer representing 10% or more of its total revenues during the three-months ended November 30, 2004 or 2003. Summarized financial information concerning the Company's reportable segments is shown in the following table:
FOR THE THREE MONTHS ENDED -------------------------- NOVEMBER NOVEMBER $ IN THOUSANDS 2004 2003 -------------- ---- ---- Operating revenues: Irrigation .................................................... $35,402 $33,970 Diversified products .......................................... 4,365 2,543 ------- ------- Total operating revenues............................................ $39,767 $36,513 ======= ======= Operating income: Irrigation .................................................... $ 3,511 $ 4,240 Diversified products .......................................... 315 247 ------- ------- Segment operating income ........................................... 3,826 4,487 Unallocated general & administrative and engineering & research expenses .......................................................... 4,293 3,753 Interest and other income, net...................................... 645 873 ------- ------- Earnings before income taxes ....................................... $ 178 $ 1,607 ======= =======
(9) OTHER NONCURRENT ASSETS
NOVEMBER NOVEMBER AUGUST $ IN THOUSANDS 2004 2003 2004 -------------- ---- ---- ---- Cash surrender value of life insurance policies................. $1,924 $1,836 $1,903 Deferred income taxes .......................................... 1,718 1,637 1,840 Equity method investments ...................................... 1,597 1,430 1,364 Goodwill ....................................................... 1,320 1,194 1,254 Split dollar life insurance .................................... 916 914 916 Intangible pension assets ...................................... 373 442 373 Other intangibles, net ......................................... 717 532 472 Other .......................................................... 311 274 625 ------ ------ ------ Total noncurrent assets ........................................ $8,876 $8,259 $8,747 ====== ====== ======
10 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, 2004 and determined that no impairment losses were indicated. Other intangible assets that have finite lives are amortized over their realizable lives. During the first quarter of fiscal year 2005, the Company capitalized costs of $279,000 for software rights purchased from a development company, which will be marketed to customers. The amortization method for this software is the greater of the ratio of current sales to forecasted sales or a 3-year straight-line method. Amortization expense for other intangible assets was $39,000 and $42,000 for the three-months ended November 30, 2004 and 2003, respectively. The following table summarizes the Company's other intangible assets:
NOVEMBER NOVEMBER AUGUST $ IN THOUSANDS 2004 2003 2004 -------------- ---- ---- ---- Other intangible assets: Non-compete agreements ............ $ 392 $ 358 $ 385 Tradenames ........................ 145 147 145 Patent ............................ 100 100 100 Plans and specifications .......... 75 77 75 Software .......................... 279 - - Other ............................. 34 30 31 Accumulated amortization ............. (308) (180) (264) ----- ----- ----- Total other intangibles assets, net .... $ 717 $ 532 $ 472 ===== ===== =====
(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 -------------------------- NOVEMBER NOVEMBER $ IN THOUSANDS 2004 2003 -------------- ---- ---- Comprehensive income: Net earnings ............................... $ 175 $ 1,093 Other comprehensive (loss) income: Unrealized gains on securities, net of taxes ............................. (153) 126 Foreign currency translation ............... 1,631 566 ------- ------- Total comprehensive income ...................... $ 1,653 $ 1,785 ======= =======
11 (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 held 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:
NOVEMBER NOVEMBER AUGUST $ IN THOUSANDS 2004 2003 2004 -------------- ---- ---- ---- Guarantees: Guarantees for customer equipment financing ........... $3,900 $3,900 $3,700 Guarantees on third party debt of equity investment ... 250 700 700 Product warranties .................................... N/A N/A N/A ------ ------ ------ Total guarantees ........................................... $4,150 $4,600 $4,400 ====== ====== ======
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 $70,000 at November 30, 2004, compared to $78,000 at November 30, 2003 and $83,000 at August 31, 2004, classified with other current liabilities, for guarantees. The estimated fair values of these guarantees are based, in large part, on the Company's experience with this agreement and related transactions. The Company recognizes the revenue for the estimated fair value of the guarantees ratably over the term of the guarantee. Separately, related to these exposures, the Company has accrued a liability of $339,000, $302,000, and $290,000 at November 30, 2004 and 2003 and August 31, 2004, respectively, 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 November 30, 2004 and 2003 and August 31, 2004. Generally, the Company's exposure is limited to unpaid interest and principal where the first and/or second annual customer payments have not yet been made as scheduled. The maximum exposure of these limited recourse guarantees is equal to 2.75% of the aggregate amounts originally financed. Separately, the Company maintains limited, specific customer financing recourse arrangements with three financial institutions including the institution referred to above. The original amount of these specific guarantees is approximately $2.2 million at November 30, 2004 and 2003 and August 31, 2004. Generally, the Company's exposure is limited to unpaid interest and principal where customer payments have not yet been made as scheduled. In some cases, the guarantee may cover all scheduled payments of a loan. All of the Company's customer-equipment recourse guarantees are collateralized by the value of the equipment being financed. GUARANTEES ON THIRD PARTY DEBT RELATED TO EQUITY INVESTMENT The Company has guaranteed three bank loans and a standby letter of credit on behalf of the irrigation dealership based in Kansas in which the Company previously held a minority equity investment position. The guarantees continue until the loans, including accrued interest and fees, have been paid in full. The bank loans have been declared to be in default by the bank due to the insolvency of the dealership. As of November 30, 2004, the maximum aggregate amount associated with the guarantees and letter of credit was approximately $250,000. The Company has recorded a current liability as of November 30, 2004 for $250,000 based upon its best estimate of expected aggregate liability associated with the bank loan guarantees. The majority owner of the business provides a separate personal guarantee of the bank notes, although the likelihood of recovery from the majority owner guarantee is uncertain. 12 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 NOVEMBER NOVEMBER $ IN THOUSANDS 2004 2003 -------------- ---- ---- Warranties: Product warranty accrual balance, September 1 .......... $ 1,339 $ 1,152 Liabilities accrued for warranties during the period ... 190 425 Warranty claims paid during the period ................. (406) (434) ------- ------- Product warranty accrual balance, end of period ............ $ 1,123 $ 1,143 ======= =======
(12) RETIREMENT PLAN The Company has a supplementary non-qualified, non-funded retirement plan for six current and former executives. Plan benefits are based on the participant's average total compensation during the three highest compensation years of employment. This unfunded supplemental retirement plan is not subject to the minimum funding requirements of ERISA. The Company has purchased life insurance policies on four of the participants named in this supplemental retirement plan to provide partial funding for this liability. Components of net periodic benefit cost for the Company's supplemental retirement plan include:
FOR THE THREE-MONTHS ENDED -------------------------- NOVEMBER NOVEMBER $ IN THOUSANDS 2004 2003 -------------- ---- ---- Net periodic benefit cost: Service cost ........................................... $ 9 $ 10 Interest cost .......................................... 67 73 Net amortization and deferral .......................... 76 74 ---- ---- Total net periodic benefit cost ............................ $152 $157 ==== ====
(13) COMMITMENTS AND CONTINGENCIES In the ordinary course of its business operations, the Company is involved, from time to time, in commercial litigation, employment disputes, administrative proceedings, and other legal proceedings. These include a consent decree that the Company entered in 1992 with the U.S. Environmental Protection Agency concerning groundwater contamination at its Lindsay, Nebraska facility, which is included as an EPA superfund site. Management does not believe that these matters, individually or in the aggregate, are likely to have a material adverse effect on the Company's consolidated financial condition, results of operations, or cash flows. The Company holds a minority position in an irrigation dealership based outside of the United States. The Company has an obligation to purchase the remaining shares of this company for an amount of approximately $1.5 million by August 31, 2005. 13 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 "Market Conditions and Fiscal 2005 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, 2004. 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 2004. 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 three-months ended November 30, 2004. INTERNAL CONTROLS OVER FINANCIAL REPORTING Beginning in fiscal 2005, Section 404 of the Sarbanes-Oxley Act of 2002 requires the Company to include in the annual report on Form 10-K a report on management's assessment of the effectiveness of the Company's internal controls over financial reporting and a statement that the Company's independent auditor has issued an attestation report on management's assessment of the Company's internal controls over financial reporting. The Company believes it is progressing on the project plan generally as expected to meet this requirement, and has not identified material weaknesses in internal controls over financial reporting, to-date. There are no assurances however, that the Company will not discover deficiencies in its internal controls as it implements new documentation and testing procedures to comply with the new Section 404 reporting requirement. If the Company discovers deficiencies or is unable to complete the work necessary to properly evaluate its internal controls over financial reporting, there is a risk that management and or the Company's independent auditor may not be able to conclude that the Company's internal controls over financial reporting are effective. 14 OVERVIEW Lindsay Manufacturing Co. ("Lindsay" or the "Company") is a leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems which are used principally in the agricultural industry to increase or stabilize crop production while conserving water, energy, and labor. The Company has been in continuous operation since 1955, making it one of the pioneers in the automated irrigation industry. The Company markets its standard size center pivot and lateral move irrigation systems domestically and internationally under its Zimmatic brand. The Company also manufactures and markets separate lines of center pivot and lateral move irrigation equipment for use on smaller fields under its Greenfield and Stettyn brands, and hose reel travelers under the Perrot brand (Greenfield in the United States). The Company also produces irrigation controls and chemical injection systems which it sells under its GrowSmart brand. In addition to whole systems, the Company manufactures and markets repair and replacement parts for its irrigation systems and controls. Lindsay also produces and sells large diameter steel tubing products and manufactures and assembles diversified agricultural and construction products on a contract manufacturing basis for certain large industrial companies. Industry segment information about Lindsay is included in Note 8 to the consolidated financial statements. Lindsay, a Delaware corporation, maintains its corporate offices in Omaha, Nebraska, USA. The Company's principal manufacturing facilities are located in Lindsay, Nebraska, USA. The Company also has foreign sales and production facilities in France, Brazil, and South Africa which provide it with important bases of operations in key international markets. Lindsay Europe SA, located in France, was acquired in March 2001 and manufactures and markets irrigation equipment for the European market. Lindsay America do Sul Ltda., located in Brazil, was acquired in April 2002 and manufactures and markets irrigation equipment for the South American market. Lindsay Manufacturing Africa, (PTY) Ltd, located in South Africa, was organized in September 2002 and manufactures and markets irrigation equipment in markets in southern Africa. Lindsay has two additional operating subsidiaries including Irrigation Specialists, Inc., which is a retail irrigation dealership based in Washington State that operates at four locations ("Irrigation Specialists"). Irrigation Specialists was acquired by the Company in March 2002 and provides a strategic distribution channel in a key regional irrigation market. The other operating subsidiary is Lindsay Transportation, Inc. 15 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 ended November 30, 2004 and 2003. It should be read together with the industry segment information in Note 8 to the consolidated financial statements:
FOR THE THREE-MONTHS ENDED -------------------------- PERCENT NOVEMBER NOVEMBER INCREASE ($ IN THOUSANDS) 2004 2003 (DECREASE) ---------------- ---- ---- ---------- Consolidated Operating revenues ................ $ 39,767 $ 36,513 8.9% Cost of operating revenues ........ $ 33,194 $ 29,159 13.8 Gross profit ...................... $ 6,573 $ 7,354 (10.6) Gross margin ...................... 16.5% 20.1% Operating expenses ................ $ 7,040 $ 6,620 6.3 Operating (loss) income ........... $ (467) $ 734 (163.6) Operating margin .................. (1.2)% 2.0% Interest income, net .............. $ 261 $ 424 (38.4) Other income, net ................. $ 384 $ 449 (14.5) Income tax provision .............. $ 3 $ 514 (99.4) Effective income tax rate ......... 1.7% 32.0% Net earnings ...................... $ 175 $ 1,093 (84.0) Irrigation Equipment Segment (1) Operating revenues ................ $ 35,402 $ 33,970 4.2 Operating income .................. $ 3,511 $ 4,240 (17.2) Operating margin .................. 9.9% 12.5% Diversified Products Segment (1) Operating revenues ................ $ 4,365 $ 2,543 71.6 Operating income .................. $ 315 $ 247 27.6 Operating margin .................. 7.2% 9.7%
(1) Excludes unallocated general & administrative and engineering & research expenses FOR THE THREE-MONTHS ENDED NOVEMBER 30, 2004 REVENUES Operating revenues for the three months ended November 30, 2004 rose 9 percent to $39.8 million from $36.5 million for the year-ago period. This increase was attributable to both irrigation and diversified products improvements. Domestic irrigation revenues declined $.4 million or 2 percent, from the same prior year period. The decline in revenue was due to a slightly more than 20% decline in unit volume, which was offset by price increases implemented primarily in the second half of fiscal 2004. The Company believes pricing policies, equipment prices, and commodity prices all contributed to the decline in unit volume. The Company implemented a change to its pricing policies during the rapid steel cost increases of 2004 which reduced the protected price period to 30 days. Domestic irrigation equipment prices are approximately 20% higher than the same period last year while agriculture commodity prices have declined. International irrigation equipment revenues for the three months ended November 30, 2004 increased $1.9 million or 19% over the same prior year period. These revenues include both the export sales of equipment manufactured in the United States and sales of the Company's manufacturing operations in France, Brazil, and South Africa. Export shipments to Australia and New Zealand were significantly above the same period last year. Exports to the Middle East increased but remain at historically low levels. Europe and South Africa revenues were up significantly, and include the revenues of Stettyn, the irrigation manufacturing company acquired in South Africa during the fourth quarter of fiscal 2004. South American revenues were lower due in part to the lower agricultural commodity prices. 16 Diversified manufacturing revenues for the three months ended November 30, 2004 of $4.4 million increased $1.8 million or 72% from the same prior year period. Revenues in this segment depend to a large degree on orders from a relatively small number of customers. However, a significant portion of the new business in this segment is from industrial customers, which are outside the traditional agricultural equipment base. This segment utilizes and leverages the equipment in the Lindsay, Nebraska plant. GROSS MARGIN Gross margin declined to 16.5 percent from 20.1 percent a year ago. Gross selling margins in the domestic market were near the prior-year levels; however, they were negatively impacted by higher overhead allocations per unit due to lower production levels and higher factory spending. While margins in foreign facilities continued to improve, they remain lower than domestic irrigation. OPERATING EXPENSES Operating expenses rose 6 percent to $7.0 million from $6.6 million, due to increases in insurance, audit and tax preparation costs, and incremental operating expenses of Stettyn, the South African business acquired in the fourth quarter of fiscal 2004. However, operating leverage continued to improve, with operating expenses at 17.7 percent of revenue compared with 18.1 percent of revenue in the fiscal 2004 period. INTEREST INCOME, OTHER INCOME, AND TAXES Net interest income during the three-months ended November 30, 2004 of $261,000 was comparable to $424,000 the same prior year period. This $163,000 decrease reflects a reduction of interest income from securities and interest bearing checking accounts and an increase in interest expense. Other income, net of $384,000 during the three-months ended November 30, 2004 reflects a decrease of $65,000 compared to other income, net of $449,000 for the same prior year period, primarily reflecting lower foreign currency net gains compared to the same prior year period. The income tax provision for the three months ended November 30, 2004 was reduced by adjustments identified during the period primarily related to the tax effect of inter-company inventory profit eliminations and a change in the extraterritorial income credit. The effective tax rate expected for fiscal 2005 is 33.15% compared with 32.5% for fiscal 2004. This higher rate is due to higher expected operating income in relation to the tax-exempt interest income from the Company's municipal bond investments. Overall, the Company benefits from a U.S. effective tax rate which is lower than the combined federal and state statutory rates primarily due to the federal tax-exempt interest income on this portfolio. The American Jobs Creation Act of 2004 (the Act) which was signed into law on October 22, 2004 includes provisions which phase out the extraterritorial income deduction over a two year period beginning January 1, 2005. The first year phase out of 20% will impact the Company's tax rates for the eight months of 2005, which are in the fiscal year. This phase out has been included in the effective tax rate calculation. The Act also includes provisions for a one-time deduction for qualifying repatriations of foreign earnings during fiscal 2005. The Company does not intend to repatriate earnings of its foreign subsidiaries during fiscal 2005. The incentive for U.S. production activities included in the Act, effective for fiscal years beginning after December 31, 2004, will not impact the Company's tax rate in fiscal 2005. 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. 17 The Company's cash and marketable securities totaled $43.6 million at November 30, 2004, $56.3 million at August 31, 2003, and $56.0 million at November 30, 2003. The Company's marketable securities consist primarily of tax-exempt high-grade municipal debt. Cash flows used in operations totaled $10.5 million during the three-months ended November 30, 2004 compared to $5.8 million provided by operations during the same prior year period. Cash flows used in operations increased $4.7 million compared to the same prior year period primarily due to higher inventory builds of $4.3 million, a $1.1 million higher change in accounts payable, and a $918,000 decrease in net earnings offset partially by a lower $2.1 million change in accounts receivable. The inventory change was primarily due to unit sales volumes which were lower than planned and the accounts receivable change was primarily due to timing of dealer programs. Capital expenditures were $1.3 million during the three-months ended November 30, 2004 compared to $721,000 during the same prior year period. Capital expenditures were used primarily for updating manufacturing plant and equipment, expanding manufacturing capacity, and further automating the Company's facilities. Capital expenditures for fiscal 2005 are expected to be approximately $4 to $5 million and will be used to improve the Company's facilities and expand its manufacturing capacity. The Company may also use cash to finance business acquisitions and stock repurchases from time to time. The Company made no repurchases of its common stock under the Company's stock repurchase plan during the three-months ended November 30, 2004. From time to time, the Company's Board of Directors has authorized management to repurchase shares of the Company's common stock. Most recently, during August 2000, the Company announced a 1.0 million share increase in the number of shares authorized for repurchase. Under this share repurchase plan, management has existing authorization to purchase, without further announcement, up to 1.2 million shares of the Company's common stock in the open market or otherwise. The Company has an agreement with a commercial bank for a $10.0 million unsecured revolving line of credit through December 28, 2005. 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. Under the terms of the line of credit, borrowings, if any, bear interest at a rate equal to one percent per annum under the rate in effect from time to time and designated by the commercial bank as its National Base Rate (5.00% at November 30, 2004). The Company expects to renew this line of credit on substantially similar terms. The Company's European subsidiary, Lindsay Europe, has an unsecured revolving line of credit with a commercial bank under which it could borrow up to the Euro equivalent of $2.7 million for working capital purposes. As of November 30, 2004, there was a $782,000 outstanding balance on this line. Under the terms of the line of credit, borrowings, if any, bear interest at a floating rate in effect from time to time designated by the commercial bank as LIBOR+200 basis points. (4.65% at November 30, 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. During the three-months ended November 30, 2004, the Company had $7.7 million of securities that matured or were sold; these funds were used for working capital needs. OFF-BALANCE SHEET ARRANGEMENTS There have been no material changes in our off balance sheet arrangements as described on page 18 in our Form 10-K for the fiscal year ended August 31, 2004. CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS There have been no material changes in our contractual obligations and financial commitments as described on page 18 in our Form 10-K for the fiscal year ended August 31, 2004. 18 MARKET CONDITIONS AND FISCAL 2005 OUTLOOK For fiscal 2005, the Company expects unit volume growth in the international markets for irrigation equipment, but the Company remains uncertain as to the effect of price and pricing policy changes on the demand in our domestic markets. While many of the major agriculture commodity prices have declined, net cash farm income domestically is projected to be high, creating favorable conditions for growers to invest in income producing equipment, such as irrigation equipment. In addition, demand can be favorably or unfavorably impacted by weather conditions during the primary selling season, which begins mid-way through the Company's second quarter. International market demand remains relatively strong and the weak U.S. dollar results in conditions favorable for exporting equipment. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS FASB 123R, (revised December 2004), "Share-Based Payment" sets accounting requirements for "share-based" compensation to employees, including employee-stock-purchase-plans (ESPPs) and provides guidance on accounting for awards to non-employees. This Statement will require the Company to recognize in the income statement the grant-date fair value of stock options and other equity-based compensation issued to employees, but expresses no preference for a type of valuation model. For public entities, this Statement is effective for the first interim period beginning after June 15, 2005. The Company will adopt this Statement in the fourth quarter of fiscal 2005 and is evaluating this pronouncement's effect on the Company's financial position and net income. FASB 151, "Inventory Costs" eliminates the "so abnormal" criterion in ARB 43 "Inventory Pricing". This Statement no longer permits a company to capitalize inventory costs on their balances sheets when the production defect rate varies significantly from the expected rate. The Statement reduces the differences between U.S. and international accounting standards. This Statement is effective for inventory cost incurred during annual periods beginning after June 15, 2005. The Company will adopt this Statement in the first quarter of fiscal 2006 and is evaluating this pronouncement's effect on the Company's financial position and net income. FASB 153, "Exchanges of Productive Assets" eliminates the exception to the fair-value principle for exchanges of "similar productive assets," which had been accounted for based on the book value of the asset surrendered with no gain recognition. Nonmonetary exchanges have to be accounted for at fair-value, recognizing any gain or loss, if the transactions meet the commercial-substance criterion and fair-value determinable. The Statement reduces the differences between U.S. and international accounting standards. This Statement is effective for nonmonetary transactions occurring in fiscal periods after June 15, 2005. The Company will adopt this Statement in the first quarter of fiscal 2006 and is evaluating this pronouncement's effect on the Company's financial position and net income. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market value of the Company's investment securities fluctuates inversely with movements in interest rates because all of these investment securities bear interest at fixed rates. Accordingly, during periods of rising interest rates, the market value of these securities will decline. However, the Company does not consider itself to be subject to material market risks with respect to its portfolio of investment securities because the maturity of these securities is relatively short, making their value less susceptible to interest rate fluctuations. The Company has manufacturing operations in the United States, France, Brazil, and South Africa. The Company has sold products 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 local currency. 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. 19 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 November 30, 2004. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to November 30, 2004 through the date of this Quarterly Report on Form 10-Q, including any corrective actions with regard to significant deficiencies and material weaknesses. 20 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS In the ordinary course of its business operations, the Company is involved, from time to time, in commercial litigation, employment disputes, administrative proceedings, and other legal proceedings. These include a consent decree that the Company entered in 1992 with the U.S. Environmental Protection Agency concerning groundwater contamination at its Lindsay, Nebraska facility, which is included as an EPA superfund site. Management does not believe that these matters, individually or in the aggregate, are likely to have a material adverse effect on the Company's consolidated financial condition, results of operations, or cash flows. ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The Company made no repurchases of its common stock under the Company's stock repurchase plan during the three months ended November 30, 2004; therefore, tabular disclosure is not presented. From time to time, the Company's Board of Directors has authorized management to repurchase shares of the Company's common stock. Most recently, during August 2000, the Company announced a 1.0 million share increase in the number of shares authorized for repurchase. Under this share repurchase plan, management has existing authorization to purchase, without further announcement, up to 1.2 million shares of the Company's common stock in the open market or otherwise. ITEM 3 - DEFAULTS UPON SENIOR SECURITIES None ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5- OTHER INFORMATION None ITEM 6 - 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 December 16, 2004, incorporated by reference to Exhibit 3(b) of the Company's Report on Form 8-K filed on December 22, 2004. 3(c) Certificate of Amendment of the Restated Certificate of Incorporation of Lindsay Manufacturing Co. dated February 7, 1997, incorporated by reference to Exhibit 3(b) to the Company's Report on Form 10-Q for the fiscal quarter ended February 28, 1997. 4(a) Specimen Form of Common Stock Certificate incorporated by reference to Exhibit 4 to the Company's report on Form 10-Q for the fiscal quarter ended November 30, 1997. 31(a) Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350. 31(b) Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350. 32(a) Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350. 21 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 10th day of January 2005. LINDSAY MANUFACTURING CO. By: /s/ DAVID B. DOWNING ------------------------------- Name: David B. Downing Title: Vice President, Chief Financial Officer (Principal Financial Officer) 22 EX-31.(A) 2 c91008exv31wxay.txt 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 31(a) CERTIFICATION I, Richard W. Parod, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lindsay Manufacturing Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ RICHARD W. PAROD President and Chief Executive Officer ----------------------- Richard W. Parod January 10, 2005 23 EX-31.(B) 3 c91008exv31wxby.txt 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 31(b) CERTIFICATION I, David B. Downing, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lindsay Manufacturing Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ DAVID B. DOWNING Vice President and Chief Financial Officer --------------------------- David B. Downing January 10, 2005 24 EX-32.(A) 4 c91008exv32wxay.txt SECTION 906 CERTIFICATION OF CEO AND CFO EXHIBIT 32(a) CERTIFICATION In connection with the accompanying Quarterly Report on Form 10-Q (the "Report") of Lindsay Manufacturing Co. (the "Company") for the quarter ended November 30, 2004, I, Richard W. Parod, Chief Executive Officer of the Company and I, David B. Downing, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ RICHARD W. PAROD -------------------------------- President and Chief Executive Officer Richard W. Parod /s/ DAVID B. DOWNING -------------------------------- Vice President and Chief Financial Officer David B. Downing January 10, 2005 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 25 -----END PRIVACY-ENHANCED MESSAGE-----