-----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, F4rsTPP9ZgeUrGMBDLlzUnq5USEBdMxjRiviVtEwSjQ2/9sOfb4SGPlV514MlV/t s8nPgiFhdJzdqMTsImTFKQ== 0000950137-97-003918.txt : 19971127 0000950137-97-003918.hdr.sgml : 19971127 ACCESSION NUMBER: 0000950137-97-003918 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971126 SROS: NYSE 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-K SEC ACT: SEC FILE NUMBER: 001-13419 FILM NUMBER: 97729363 BUSINESS ADDRESS: STREET 1: BOX 156 STREET 2: E HIGHWAY 91 CITY: LINDSAY STATE: NE ZIP: 68644 BUSINESS PHONE: 4024282131 MAIL ADDRESS: STREET 1: EAST HIGHWAY 91 POST OFFICE BOX 156 STREET 2: EAST HIGHWAY 91 POST OFFICE BOX 156 CITY: LINDSAY STATE: NE ZIP: 68644 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (MARK ONE) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended August 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to --------- -------- Commission File Number 0-17116 Lindsay Manufacturing Co. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 47-0554096 - -------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Box 156, East Highway 91, Lindsay, Nebraska 68644 - --------------------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 402-428-2131 Securities registered pursuant to Section 12(b) of the Act: Title of Class ----------------------------- Common Stock, $1.00 par value 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ----- As of November 18, 1997, 9,348,856 shares of the registrant's Common Stock were outstanding and the aggregate market value of all Common Stock held by non-affiliates (8,735,531 shares) was $360,340,654 based upon the final sales price on the New York Stock Exchange, Inc. on such date. DOCUMENTS INCORPORATED BY REFERENCE Portions of the 1997 Annual Report to Stockholders are incorporated herein by reference into Parts I, II and IV. Portions of the Proxy Statement pertaining to the January 23, 1998 annual stockholders' meeting are incorporated herein by reference into Part III. Exhibit index is located on page 10-12. -1- 2 ITEM 1 - BUSINESS (a) Lindsay Manufacturing Co. ("Lindsay" or the "Company") is a leading designer, manufacturer and international and domestic marketer, under its "Zimmatic" trademark, of electrically powered automatic continuous move systems for the irrigation of agricultural crops and related products and services. Lindsay also produces and sells large diameter tubing; manufactures and assembles products for other manufacturers (such as corn planters and sub-assemblies for construction equipment). Lindsay was founded in 1955, and incorporated under Nebraska law in 1969. DEKALB Energy Company, ("DEKALB", formerly DEKALB Corporation) acquired Lindsay in 1974 through its merger into Lindsay Manufacturing Co., a wholly-owned Delaware subsidiary of DEKALB. The company was a wholly-owned subsidiary of DEKALB until October 1988. (b) Industry segment information is included in Part II, Item 8, Footnote L. The information required by this item is incorporated by reference from the 1997 Annual Report to Stockholders on page 23. (c) PRODUCT. Lindsay's irrigation systems are primarily of the center pivot type, with a small portion of its products consisting of the lateral move type. Both are automatic continuous move systems consisting of sprinklers mounted on a water carrying pipeline which is supported approximately 11 feet off the ground by a truss system suspended between moving towers. Due to lower price and simplicity of operation, center pivots currently account for over 95 percent of Lindsay's irrigation system sales. A typical center pivot for the North American market is approximately 1,300 feet long and is designed to circle within a standard quarter-section of land, which comprises 160 acres, wherein it irrigates approximately 135 acres. A typical center pivot for the international market is also approximately 1,300 feet long. Center pivot or lateral move systems can also be custom designed and can irrigate from 25 to 500 acres. A center pivot system represents a significant investment to a farmer. A typical center pivot system, fully installed, requires an investment of up to approximately $60,000 to $70,000. Approximately one-half of such expenditure is for the pivot itself and the remainder is attributable to installation of additional equipment such as wells, pumps, underground water pipe, electrical supply and a concrete pad upon which the pivot is anchored. Lindsay estimates that there are approximately 140,000 to 150,000 center pivot irrigation systems in operation worldwide, resulting in a significant replacement parts business. TYPES OF IRRIGATION - Competitive Products. Center pivot and lateral move irrigation systems compete with three other types of irrigation: flood, drip and other mechanical devices. The bulk of the worldwide irrigation is accomplished by the traditional method of flood irrigation. Flood irrigation is accomplished by either flooding an entire field, or by providing a water source (ditches or a pipe) along the side of a field, which is planed and slopes slightly away from the water source. The water is released to the crop rows through gates in the ditch or pipe, or through siphon tubes arching over the ditch wall into some of the crop rows. It runs down through the crop row until it reaches the far end of the row, at which time the water -2- 3 source is moved and another set of rows are flooded. In "drip" or "trickle" irrigation, perforated pipe is installed on the ground or buried underground at the root level. Several other types of mechanical devices irrigate the remaining irrigated acres. These other types of mechanical devices are not generally being replaced and no longer generate significant sales. Center pivot irrigation offers significant advantages when compared with other types of irrigation. It requires less labor and monitoring; it can be used on sandy ground which, due to poor water retention ability must have water applied frequently; it can be used on uneven ground, thereby allowing previously unsuitable land to be brought into production; it can also be used for the application of fertilizers, insecticides, herbicides or other chemicals (termed "chemigation"); and it conserves water and chemicals through precise control of the amount and timing of its application. MARKETS - GENERAL. Water is an essential and critical requirement for crop production, and the extent, regularity and frequency of water application is a critical determinant in crop performance and yield. The fundamental factors which govern the demand for center pivot and lateral move systems are essentially the same in both the domestic and international markets. Demand for center pivot and lateral move systems is determined by whether the increased value of crop production attributable to center pivot or lateral move irrigation exceeds any increased costs associated with installing and operating the equipment. Thus, the decision to install a center pivot or lateral move system reflects the profitability of agricultural production, which is determined primarily by the prices of agricultural commodities and the costs of other farming inputs. In addition, demand for center pivots and lateral moves depends upon the need for the particular operational characteristics and advantages of such systems in relation to alternative types of irrigation, primarily flood. Selection of center pivot or lateral move systems, over competitive types of irrigation, is aided by the fact that agricultural production is continually forced to become more efficient in its use of the basic natural resources of land, water and energy. Increasing global population not only increases demand for agricultural output, but also places additional and competing demands on land, water and energy. As center pivot and lateral move systems are required where the soil is sandy, the terrain is not flat, there is a shortage of reliable labor, water supply is restricted and conservation is critical, and/or chemigation will be utilized, Lindsay expects demand for center pivots and lateral moves to increase relative to other irrigation methods. UNITED STATES MARKET. The information required by this item is incorporated by reference from the 1997 Annual Report to Stockholders under the heading "Operations Review" on pages 6 through 11. INTERNATIONAL MARKET. The information required by this item is incorporated by reference from the 1997 Annual Report to Stockholders under the heading "Operations Review" on pages 6 through 11. -3- 4 COMPETITION. During the 1970's there were over 30 domestic manufacturers of center pivot irrigation systems, while six manufacturers remain today. Lindsay believes that Lindsay and Valmont Industries, Inc. ("Valmont"), the top two manufacturers, represent 75 percent to 85 percent of the market. Although detailed market information is not available, Lindsay believes its portion of the international market is greater than Valmont's, but its domestic market is somewhat smaller than that of Valmont. There is a high level of price competition and utilization of seasonal promotional programs. Competition also occurs in areas of product quality and durability, advanced product technology, product characteristics, retention and reputation of local dealers, post-sale service, and, at certain times of the year, the availability of systems and their delivery time. Lindsay believes it generally competes favorably with respect to these factors. DIVERSIFIED PRODUCTS AND SERVICES The information required by this item is incorporated by reference from the 1997 Annual Report to Stockholders under the heading "Operations Review" on pages 6 through 11. SEASONALITY/CYCLICALITY Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered and installed before the growing season. Shipments to North American customers usually peak during Lindsay's second and third quarters for the spring planting period. Lindsay's expansion into diversified manufacturing complements its irrigation operations by using available capacity and reducing seasonality. ORDER BACKLOG As of September 1, 1997 and 1996, Lindsay had an order backlog of $27.3 million and $25.7 million, respectively. At year end fiscal 1997, Lindsay had a $17.1 million order backlog for irrigation equipment. This was a slight increase from year end fiscal 1996's irrigation equipment order backlog of $16.6 million. At year end fiscal 1997, order backlog for diversifed products totaled $10.2 million, up 12% from $9.1 million at fiscal 1996 year end. Lindsay manufactures a center pivot or lateral move system only upon a firm order. International orders are generally shipped against prepayments or receipt of an irrevocable letter of credit confirmed by a United States bank or other secured means, which call for delivery within time periods negotiated with the customer. North American orders are manufactured to dealer order, accompanied by a down payment. RAW MATERIALS AND COMPONENTS Raw materials used by Lindsay include coil steel, angle steel, plate steel, zinc, tires, gearboxes, fasteners and electrical components (motors, switches, cable and stators). Lindsay has, on occasion, faced shortages of certain such materials. Lindsay believes it currently has ready access to adequate supplies of raw materials and components. -4- 5 CAPITAL EXPENDITURES Capital expenditures for fiscal 1997, 1996 and 1995, were approximately $3.8 million, $4.0 million and $2.8 million, respectively. Fiscal 1997 capital expenditures were used primarily for upgrading plant and computer equipment and includes a capitalized lease of $0.5 million. Over half of the fiscal 1996 capital expenditures were related to Lindsay's installation of a robotic manufacturing process for the manufacture of center pivot irrigation equipment pipeline. The remaining fiscal 1996 capital expenditures were primarily for the general upgrading of the manufacturing plant and equipment. Capital expenditures for fiscal 1998 are expected to be approximately $3.5 to $4.0 million and will be used primarily to improve the Company's existing facilities, expand its manufacturing capabilities, and increase productivity. The Company expects annual capital expenditures for plant expansion over the next several years to approximate fiscal 1998's level. PATENTS, TRADEMARKS, LICENSES The "Zimmatic" and other trademarks are registered in most markets in which Lindsay sells its product. Lindsay follows a policy of applying for patents on all significant patentable inventions. Although Lindsay believes it is important to follow a patent protection policy, Lindsay's business is not dependent, to any material extent, on any single patent or group of patents. EMPLOYEES The number of persons employed by Lindsay at fiscal year end 1997, 1996 and 1995 were 553, 542 and 491, respectively. Lindsay currently employs approximately 600 persons. None of Lindsay's employees are represented by a union. ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS Like other manufacturing concerns, Lindsay is subject to numerous laws and regulations which govern occupational health and safety and the discharge and disposal of materials into the environment. Lindsay believes that its operations are substantially in compliance with all such applicable laws and regulations. Permits are or may be required for some of the operations at the Lindsay, Nebraska facility. Although all currently required permits have been obtained by Lindsay, as with all such permits they are subject to revocation, modification and renewal. Even where regulations or standards have been adopted, they are subject to varying and conflicting interpretations and implementation. In many cases, compliance with environmental regulations or standards can be achieved only through significant capital and operation expenditures. See Item 3 Legal Proceedings. SUBSIDIARIES Since 1996, international sales personnel have been located at the corporate office in Lindsay, Nebraska as part of Lindsay International Sales Corporation, a subsidiary which conducts foreign sales operations for Lindsay. Lindsay Transportation, Inc., a wholly-owned subsidiary, was formed in 1975. It owns approximately 115 trailers and, through lease of tractors, -5- 6 supplies the ground transportation in the United States and Canada for Lindsay's products and the bulk of incoming raw materials, and hauls other products on backhauls. Lindsay also has three non-operational subsidiaries. ITEM 2 - PROPERTIES Lindsay owns and occupies 43 acres in Lindsay, Nebraska. Its manufacturing operation has eight separate buildings, with approximately one-half million square feet of manufacturing area under roof. With the Company's current manufacturing capacity, the Company can increase sales without a major investment in facilities and capital equipment. ITEM 3 - LEGAL PROCEEDINGS Lindsay is a party to a number of lawsuits arising from environmental and other issues in the ordinary course of its business. Management does not believe that these lawsuits, either individually or in the aggregate, are likely to have a material adverse effect on Lindsay's financial condition, results of operations or cash flows. Environmental contamination at Lindsay's manufacturing facility occurred in 1982 when a drill, operated by a sub-contractor installing groundwater monitoring wells, punctured a silt and sand lens and an underlying clay layer beneath a clay-lined lagoon. The 1982 puncture of the clay layer caused acid and solvent leachate to enter the sand and gravel aquifer. Since 1983, Lindsay has worked actively with the Nebraska Department of Environmental Control ("NDEC") to remediate this contamination by purging and treating the aquifer. In October 1989, the Environmental Protection Agency ("EPA") added Lindsay to the list of priority Superfund sites. In 1988, a sampling which was performed in connection with an investigation of the extent of aquifer groundwater contamination revealed solvent contamination (volatile organic compounds) in the soil and shallow groundwater in three locations at and in the vicinity of the plant. Under a 1988 agreement with the EPA and NDEC, Lindsay conducted a Remedial Investigation/Feasibility Study ("RI/FS"). This study was completed in June 1990. Lindsay does not believe that there is any other soil or groundwater contamination at the manufacturing facility. In September 1990, the EPA issued its Record of Decision ("ROD") selecting a plan for completing the remediation of both contaminations. The selected plan implementation was delayed until finalization of the Consent Decree in April 1992. The final remediation plans were approved in 1993 and 1994 and the remediation plans were fully implemented during fiscal 1995. The balance sheet reserve for this remediation was $0.3 million at August 31, 1997 and 1996. Lindsay believes that the current reserve is sufficient to cover the estimated cost for complete remediation of both the aquifer and soil and shallow groundwater contaminations under the final plans. Lindsay believes that its insurer should cover costs associated with the contamination of the aquifer that was caused by the puncture of the clay layer in 1982. However, Lindsay and the insurer are in litigation over the extent of the insurance coverage. In 1987, the insurer agreed to reimburse Lindsay for remediation costs incurred by Lindsay. The insurer reduced its reimbursement of -6- 7 remediation costs in early 1990. In late 1990, Lindsay filed suit against the insurer. The insurer completely stopped reimbursement of remediation costs in 1991 and in 1992 the insurer filed a counterclaim against Lindsay for previously reimbursed remediation costs. In December 1995, the court dismissed Lindsay's suit against the insurer and entered a judgment in the amount of $2.4 million in favor of the insurer. During July 1997 the United States Court of Appeals reversed the judgement of $2.4 million and remanded the case to the district court for futher proceedings. The company has not made a provision for the previously reimbursed remediation costs. If the EPA or the NDEC require remediation which is in addition to or different from the current plan and depending on the success of Lindsay's litigation against the insurer, this reserve could increase or decrease depending on the nature of the change in events. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to the vote of security holders during the fourth quarter of Fiscal 1997. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company, their ages, positions and past five years experience are set forth below. All officers are elected for one year terms, which can be annually renewed at a Board of Directors meeting. This meeting is scheduled for January 23, 1998.
Age Position with the Company --- ----------------------------------------------- Gary D. Parker 52 Chairman, President and Chief Executive Officer Eduardo R. Enriquez 57 Vice President - International Bruce C. Karsk 45 Vice President - Finance, Treasurer and Secretary Clifford P. Loseke 59 Vice President - Manufacturing Charles H. Meis 51 Vice President - Engineering Robert S. Snoozy 51 Vice President - Sales and Marketing
Mr. Gary D. Parker is Chairman, President and Chief Executive Officer of Lindsay, and has held such positions since December 1989. Prior to that time and since 1984, he was President and Chief Executive Officer of Lindsay. He served as Executive Vice President from 1978 to 1984. Mr. Parker has also been a Director since 1978. Mr. Eduardo R. Enriquez is President of Lindsay International Sales Corporation and has served in that capacity and as Vice President - International of Lindsay since May of 1986. Prior to that time, and since 1981, he was Vice President - Sales of Lindsay International Sales Corporation. Mr. Bruce C. Karsk is Vice President - Finance, Treasurer and Secretary of Lindsay and has held such positions since 1984. Prior to that time and since 1981, Mr. Karsk had been the Controller. Mr. Clifford P. Loseke is Vice President - Manufacturing of Lindsay, a position he has held since 1975. Mr. Charles H. Meis is Vice President - Engineering of Lindsay and has held such position since 1975. -7- 8 Mr. Robert S. Snoozy is Vice President - Sales and Marketing of Lindsay and has held such position since 1986. Prior to that time and since 1978, he had been Vice President of Marketing. PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Lindsay Common Stock, began public trading on October 12, 1988. Effective October 21, 1997 Lindsay's common stock began trading on the New York Stock Exchange, Inc. (NYSE) under the ticker symbol "LNN". Prior to trading on the NYSE, Lindsay common stock traded on the Nasdaq National Market. As of November 18, 1997 there were approximately 250 stock holders of record. The following table sets forth for the periods indicated the range of the high and low sales price:
FISCAL YEAR 1997 FISCAL YEAR 1996 ------------------ ------------------- HIGH LOW HIGH LOW --------- -------- ------- ------- First Quarter 31 24-13/16 16-3/16 14-3/8 Second Quarter 36-1/2 26-11/16 21-13/16 15-13/16 Third Quarter 36-3/4 28 26-1/2 19-1/2 Fourth Quarter 39 29 29-11/16 22-11/16
During fiscal 1997 a 3-1/3-cent cash dividend was paid for the first and second quarter, increasing to 3-1/2-cent for the third and fourth quarter, totaling 13-2/3 cents for fiscal year 1997. The 3-1/3-cent quarterly dividend was paid for the second, third and fourth quarters of fiscal 1996, totaling 10 cents for fiscal year 1996. Lindsay initiated a quarterly cash dividend on its common stock on February 7, 1996. ITEM 6 - SELECTED FINANCIAL DATA The information required by this item is incorporated by reference from the 1997 Annual Report to Stockholders under the heading "Selected Financial Data" on page 12. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information required by this item is incorporated by reference from the 1997 Annual Report to Stockholders under the heading "Management's Discussion and Analysis" on pages 13 through 16. CONCERNING FORWARD LOOKING STATEMENTS - This Report on Form 10K, including the Management's Discussion and Analysis and other sections, contains forward looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward looking statements include the information concerning possible or assumed future results of operations of the Company and those statements preceded by, followed by or include the words "future", -8- 9 "position", "anticipate(s)", "expect", "believe(s)", "see", "plan", "further improve", "outlook", "should", or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. Readers of this Report should understand that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in these forward looking statements; availability of and price of raw materials, product pricing, competitive environment and related domestic and international market conditions, operating efficiencies and actions of domestic and foreign governments. Any changes in such factors could result in significantly different results. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and accompanying notes, together with the report of independent accountants are incorporated by reference from the 1997 Annual Report to Stockholders on pages 16 through 23. The information required by Item 302 of Regulation S-K is incorporated by reference from the 1997 Annual Report to Stockholders under the heading "Quarterly Data" on page 12. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Company will file with the Securities and Exchange Commission a definitive Proxy Statement not later than 120 days after the close of its fiscal year ended August 31, 1997. Information required by item 401 of Regulation S-K is incorporated by reference from the proxy statement. Information about Executive Officers is shown on page 7 and 8 of this filing. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE - Item 405 of Regulation S-K calls for disclosure of any known late filing or failure by an insider to file a report required by Section 16 of the Securities Exchange Act. The Company believes that it complied with all section 16 filing requirements during the fiscal year ended August 31, 1997 except for two late filings of Form 4 Statement of Changes to Beneficial Ownership; (1) Eduardo R. Enriquez relating to an exercise of shares on February 14, 1997, due March 10, 1997, filed April 1, 1997 resulting from a clerical error, (2) Howard G. Buffett relating to a purchase of shares May 13-14, 1997, due June 10, 1997, filed June 23, 1997 resulting from inaccessibility due to international travel. -9- 10 ITEM 11 - EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from the Proxy Statement. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated by reference from the Proxy Statement. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Financial Statements The following financial statements of Lindsay Manufacturing Co. are incorporated by reference under Item 8. The 1997 Annual Report to Stockholders is attached as Exhibit 13.
Reference Page Annual Stockholders Report Report of Independent Accountants 16 Consolidated Statements of Operations for the Years ended August 31, 1997, 1996 and 1995 17 Consolidated Balance Sheets at August 31, 1997 and 1996 18 Consolidated Statements of Stockholders' Equity for the years ended August 31, 1997, 1996 and 1995 17 Consolidated Statements of Cash Flows for the Years ended August 31, 1997, 1996 and 1995 19 Notes to Consolidated Financial Statements 20-23 (a)(2) Financial Statement Schedules
Reference Page Form 10-K Annual Report Report of Independent Accountants 14 Schedules VIII. Valuation and Qualifying Accounts - Years ended August 31, 1997, 1996 and 1995 15
Financial statements and schedules other than those listed are omitted for the reason that they are not required, are not applicable or that equivalent information has been included in the financial statements or notes thereto. -10- 11 a(3) EXHIBIT INDEX
Sequential Exhibit Page Number Description Number - ------- ------------- ---------- 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 incorporated by reference to Amended Exhibit 3(b) of Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 33-23084), filed September 23, 1988. - 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 of Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 33-23084), filed September 23, 1988. - 10(a) Insurance, Liability and Indemnity Agreement between DEKALB Energy Company and the Company, dated October 19, 1988, incorporated by reference to Exhibit 10(c) of the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1988. - 10(b) Employment Agreement between the Company and Gary D. Parker, effective September 1, 1997. 16-28 10(c) Indemnification Agreement between the Company and its directors and officers, dated October 10, 1988, incorporated by reference to Exhibit 10(f) of the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1988. - 10(d) Lindsay Manufacturing Co. Long-Term Incentive Plan, incorporated by reference to amended Exhibit 10(h) of Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 33-23084), filed September 23, 1988. - 10(e) Lindsay Manufacturing Co. Profit Sharing Plan, incorporated by reference to Exhibit 10(i) of the Company's Registration Statement on Form S-1 (Registration No. 33-23084), filed July 15, 1988. -
-11- 12 a(3) EXHIBIT INDEX
Sequential Exhibit Page Number Description Number - ------- ---------------- ---------- 10(f) Lindsay Manufacturing Co. 1991 Long-Term Incentive Plan, incorporated by reference to Exhibit 10(h) of the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1992. - 10(g) Employment Agreement between the Company and Bruce C. Karsk, Eduardo R. Enriquez, Clifford P. Loseke, Charles H. Meis, and Robert S. Snoozy, effective September 1, 1997. 29-36 10(h) Lindsay Manufacturing Co. Supplemental Retirement Plan, incorporated by reference to Exhibit 10(j) of the Company's Annual Report on Form 10K for the fiscal year ended August 31, 1994. - 11 Statement re Computation of Per Share Earnings. 37 13 Lindsay Manufacturing Co. 1997 Annual Report to Stockholders. 38-65 21 Subsidiaries of the Company, incorporated by reference to Exhibit 22 of the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1988. - 23 Consent of Coopers & Lybrand L.L.P. 66 24(a) The Power of Attorney authorizing Gary D. Parker and Bruce C. Karsk and each of them singly to sign the Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Notification of Late Filing on Form 12b-25 on behalf of each other and certain directors. 67 27 Financial Data Schedule 68
(b) Reports on Form 8-K The Registrant has not filed any reports on Form 8-K during the fourth quarter of fiscal 1997. -12- 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LINDSAY MANUFACTURING CO. By: Bruce C. Karsk ---------------------------------- Name: Bruce C. Karsk -------------------------------- Title: Vice President-Finance, Treasurer and Secretary; Principal Financial and Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on this 24th day of November, 1997. Gary D. Parker (1) Chairman, President and Chief Executive Officer --------------------------- Gary D. Parker Bruce C. Karsk Vice President - Finance, Treasurer and --------------------------- Bruce C. Karsk Secretary; Principal Financial and Accounting Officer Ralph J. Kroenke Controller --------------------------- Ralph J. Kroenke Vaughn L. Beals, Jr. (1) Director --------------------------- Vaughn L. Beals, Jr. Howard G. Buffett (1) Director --------------------------- Howard G. Buffett John W. Croghan (1) Director --------------------------- John W. Croghan George W. Plossl (1) Director --------------------------- George W. Plossl
(1) By: Bruce C. Karsk ---------------------------------- Bruce C. Karsk, Attorney-In-Fact. -13- 14 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Lindsay Manufacturing Co. Our report on the consolidated financial statements of Lindsay Manufacturing Co. is incorporated by reference to this Form 10-K from page 16 of the Fiscal 1997 Annual Report to Stockholders of Lindsay Manufacturing Co. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the Index to Financial Statement Schedules on page 10 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Omaha, Nebraska October 2, 1997 -14- 15 Lindsay Manufacturing Co. SCHEDULE VIII - VALUATION and QUALIFYING ACCOUNTS Years ended August 31, 1997, 1996 and 1995 (Dollars in thousands) ----------------------
Column A Column B Column C Column D Column E -------- -------- ------------------------ -------- -------- Additions ------------------------ Balance at Charged to Charged to Balance at Beginning Costs and Other End Description of Period Expenses Accounts Deductions of Period ----------- --------- -------- ---------- ---------- --------- Year ended August 31, 1997: Deducted in the balance sheet from the assets to which they apply: - Allowance for doubtful accounts $ 723 $ 60 $ 0 $ 40 (a) $ 743 ========= =========== ======== ========= ========= - Allowance for inventory obsolescence $ 690 $ 3 $ 0 $ 24 (b) $ 669 ========= =========== ======== ========= ========= Year ended August 31, 1996: Deducted in the balance sheet from the assets to which they apply: - Allowance for doubtful accounts $ 573 $ 260 $ 0 $ 110 (a) $ 723 ========= =========== ======== ========= ========= - Allowance for inventory obsolescence $ 672 $ 89 $ 0 $ 71 (b) $ 690 ========= =========== ======== ========= ========= Year ended August 31, 1995: Deducted in the balance sheet from the assets to which they apply: - Allowance for doubtful accounts $ 513 $ 60 $ 0 $ 0 (a) $ 573 ========= =========== ======== ========= ========= - Allowance for inventory obsolescence $ 760 $ 0 $ 13 $ 101 (b) $ 672 ========= =========== ======== ========= =========
- ------------------------------------------- Notes: (a) Deductions consist of uncollectible items written off, less recoveries of items previously written off. (b) Deductions consist of obsolete items sold or scrapped. -15- EX-10.(B) 2 EMPLOYMENT AGREEMENT 1 EXHIBIT 10(b) EMPLOYMENT AGREEMENT THIS AGREEMENT is effective the 1st day of September, 1996, and is between Gary D. Parker ("PARKER") and Lindsay Manufacturing Co., a Delaware corporation ("LINDSAY"). WHEREAS, PARKER, as President, is a key employee of LINDSAY and his talents and services to LINDSAY are of a special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to LINDSAY; and WHEREAS, LINDSAY desires to obtain assurances that PARKER will remain an employee of LINDSAY and devote his best efforts to such employment; and WHEREAS, PARKER desires to obtain assurances of continued employment and compensation; and WHEREAS, the parties heretofore entered into a written Employment Agreement (hereinafter referred to as the "Former Agreement"), which agreement is still in full force and effect; and WHEREAS, pursuant to Paragraph 18B of the Former Agreement, the parties now wish to modify and amend said Former Agreement and restating it as hereinafter set forth; and WHEREAS, each party is willing, in consideration of PARKER'S continued employment with LINDSAY, and LINDSAY'S specific commitments, to provide the other with the desired assurances, and each is willing to enter into and carry out this Agreement; NOW, THEREFORE, the parties agree as follows: 1. Employment. Upon the terms set out in this Agreement, LINDSAY agrees to employ PARKER, and PARKER agrees to be so employed by LINDSAY. 2. TERM. A. Initial Term. The Initial Term of PARKER's employment with LINDSAY under this Agreement shall be for five (5) years, commencing September 1, 1996, and expiring on August 31, 2001. This Initial Term includes five Fiscal Years; The First Fiscal Year, which shall be from September 1, 1996, to August 31, 1997; the Second Fiscal Year, which shall be from September 1, 1997, to August 31, 1998, the Third Fiscal Year, which shall be from September 1, 1998, to August 31, 1999; the Fourth Fiscal Year, which shall be from September 1, 1999, to August 31, 2000, and the Fifth Fiscal Year, which shall be from September 1, 2000, to August 31, 2001. 1 2 B. Subsequent Term. Prior to the Fifth Fiscal Year, the parties are expected to negotiate and agree regarding PARKER's employment with LINDSAY for the period after the Fifth Fiscal Year. Failing such negotiations and/or agreement, this Agreement will automatically renew for two additional years, commencing September 1, 2001, and ending on August 31, 2003, unless written notice of intent not to renew is provided by one party to the other party at least six (6) months prior to the end of the Fifth Fiscal Year. C. Failure to Renew. (i) If notice not to renew is given by PARKER to LINDSAY, then PARKER's employment shall terminate on August 31, 2001, and PARKER shall be entitled to stock options and benefits covered under Other Agreements, plus salary, Supplemental Compensation, Bonus or Long Term Incentive earned or awarded for the Fiscal Year ending August 31, 2001, or prior. (ii) If notice not to renew is given by LINDSAY to PARKER, then PARKER's employment shall terminate on August 31, 2001, and PARKER shall then be entitled to salary through August 31, 2001, benefits provided for in Paragraph 3F, Bonus awarded or earned as provided for in Paragraph 3B, Supplemental Compensation awarded or earned as provided for in Paragraph 3C and Long Term Incentive awarded or earned as provided for in Paragraph 3G, and shall receive, additional compensation equal to two and one-half (2 1/2) times his average gross compensation. Gross compensation shall mean his annual salary plus Bonuses, Supplemental Compensation and Long Term Incentive awarded or earned for the most recent Five (5) Fiscal Years divided by five (5). In addition, PARKER shall receive Supplemental Compensation equal to the Bonus which he received in Fiscal Year Five. 3. Compensation. As compensation for the services to be rendered by PARKER, LINDSAY agrees to provide PARKER with the following: A. Salary. For each Fiscal Year, PARKER, shall receive Salary at the annual rate of $367,047, which amount shall be reviewed annually by the Board of Directors of LINDSAY, and which amount may be increased at the sole discretion of the Board. 2 3 B. Bonuses. For each Fiscal Year, PARKER shall receive: (i) A Bonus equal to 2% of the pretax earnings provided pretax earnings are greater than 15% of LINDSAY's Average Equity during the Fiscal Year. (ii) In no event shall Bonus exceed $150,000 in any Fiscal Year. (iii) "Average Equity" shall be computed by adding the equity at the beginning of the Fiscal Year to the equity at the end of each of the four quarters of the Fiscal Year, and dividing that number by five (5). C. Supplemental Compensation. As long as PARKER is still employed by LINDSAY or as, otherwise provided in this Agreement, he shall be entitled to the following plus interest on unpaid balance: (i) in Fiscal Year One, Supplemental Compensation equal to the Bonus earned in previous Fiscal Year; and (ii) in Fiscal Year Two, Supplemental Compensation equal to the Bonus earned in Fiscal Year One; and (iii) in Fiscal Year Three, Supplemental Compensation equal to the Bonus earned in Fiscal Year Two; and (iv) in Fiscal Year Four, Supplemental Compensation equal to the Bonus earned in Fiscal Year Three; and (v) in Fiscal Year Five, Supplemental Compensation equal to the Bonus earned in Fiscal Year Four; and (vi) for each year of renewal of this Agreement, Supplemental Compensation equal to the Bonus earned one year prior to such year. (vii) Any unpaid Supplemental Compensation will accrue interest at the highest one-year C.D. rate as published by the First National Bank of Omaha the next business day following August 31st of that Fiscal Year, and said interest will accrue from September 1st until payment is made. D. Anything herein to the contrary notwithstanding, in no event shall the aggregate of Bonus paid and Supplemental Compensation awarded to PARKER, exceed $300,000 for any single Fiscal Year. E. Stock Options. PARKER shall be entitled to stock options in the amount and upon the terms and conditions as shall be granted by the Compensation Committee of the Board of Directors. PARKER understands that, as of 3 4 the date of signing this Agreement, there is no assurance that LINDSAY will have stock which is available for a stock option program, or that stock options, if any, would have any value. F. Other Benefits. PARKER shall also be entitled to receive other fringe benefits and applicable employee benefit programs as LINDSAY may establish from time to time, which currently include the following: - Vacation - Life Insurance - Long Term Disability Insurance - Club Dues - Company Automobile, or $10,000 increase in annual base salary - Annual Physical and Medical Check Up - Medical Insurance - Financial and accounting assistance up to $5,000 annually - Profit Sharing - Salaried severance program - Directors and Officers Liability Insurance - Supplemental Retirement G. Long Term Incentive. Each year the company obtains at least a 20% pretax return on beginning equity, 22,500 shares of Restricted Stock and associated S.I.R.'s will be awarded to PARKER. The Restricted Stock will be at no charge, but must be held by PARKER for a minimum of two years, unless Directors authorize and allow sale earlier. 4. Termination. A. For Cause. 1. Defined. PARKER may be terminated by LINDSAY for cause if: a. he commits a breach of his fiduciary duty of loyalty to LINDSAY; or b. he commits acts or omissions regarding LINDSAY's business and which are not in good faith or which involve intentional misconduct, dishonesty, or a knowing violation of the law; or c. he engages in any transaction involving LINDSAY from which he gains an improper personal benefit, which is not agreed to by the Board of Directors of LINDSAY in advance of the transaction; or d. he refuses to perform or neglects any of the material duties assigned to him; or 4 5 e. he breaches the provisions of this Agreement. 2. Procedure. Prior to such termination for cause, LINDSAY shall notify PARKER in writing of its intent to terminate employment for cause, shall state effective date of termination, shall state the reason and give grounds therefore and shall give PARKER five (5) working days after receipt of such notice to explain his conduct to LINDSAY's reasonable satisfaction, the termination for cause shall be final. 3. If PARKER is terminated for cause, he shall not be entitled to any further compensation, or any Bonus payment past the Fiscal Year termination takes place, but shall be entitled to salary, Bonus, Supplemental Compensation, or Incentive Compensation earned or awarded as of the date of termination. B. Without Cause. LINDSAY may terminate PARKER's employment at anytime, without cause upon at least two (2) weeks advance written notice. If LINDSAY does so, then LINDSAY shall continue to provide and pay PARKER within thirty (30) days of such termination, an amount equal to: (i) the balance of the salary and vacation due until the end of the term of this Agreement, plus (ii) the Bonus for the Fiscal Year which may have been earned in which the termination occurs, plus (iii) all Supplemental Compensation, Bonus and Long Term Incentive as provided for in Paragraph 3 for all remaining years which would be unpaid (iv) or in lieu of (i), (ii) and (iii), a payment by LINDSAY to PARKER as provided for in 2C (ii) whichever shall be greater when LINDSAY would terminate PARKER's employment (v) such payments as stated in (i), (ii), (iii) or (iv) whichever shall be greater, shall be made within 30 days of termination and also be a complete and liquidated payment for damages or claims, if any, PARKER may have against LINDSAY due to LINDSAY's 5 6 termination of PARKER's employment prior to the end of the Agreement. Any payments or benefits due PARKER shall be made regardless of other income or benefits PARKER may be able to obtain by virtue of the termination. (vi) In the event total payments to PARKER under 2C(ii), 4B or 16 are determined to be an "excess parachute payment(s)" subject to any type or form of excise tax, a cash payment will be made by LINDSAY to PARKER to insure that any amount retained by PARKER after payment of any such taxes will be equal to the amount that PARKER was entitled to receive before application of said excise taxes and LINDSAY will hold PARKER harmless from the effects of any such excess tax on payments or entitlements due him. C. PARKER Voluntary Termination. If PARKER breaches this Agreement and terminates his employment with LINDSAY, prior to the end of this Agreement other than due to Death or Disability (Paragraph 4D), or as provided for and allowed under a "Change in Control" (Paragraph 16), PARKER shall be subject to Paragraph 11 and shall not be entitled to, and shall not receive, any further compensation or Bonus not yet paid or earned. D. Death or Disability. (i) If PARKER should die or become disabled and unable to perform his duties, PARKER's employment shall terminate. In such an event, PARKER will be covered by the death and disability policies LINDSAY shall then have in effect, and PARKER (or his estate) shall receive the Bonus equal to the Bonus he would have received had he worked for the entire Fiscal Year, apportioned to the time he ceased employment, plus all awarded Long Term Incentive and unpaid Supplemental Compensation as set forth in Paragraph 3. For purposes of this Agreement disabled shall mean PARKER is unable to carry out the requirements and duties of his current position, and would qualify for full payment under LINDSAY's Long Term Disability policy or Life Insurance policy, and (ii) In such event, payments from LINDSAY due PARKER shall be made within 30 days of death or disability. 5. Best Efforts, Other Employment, Conflict of Interest of PARKER A. PARKER agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that 6 7 may be required or requested of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of LINDSAY. Such duties shall be rendered at Lindsay, Nebraska, and at such other place or places agreeable to Parker within or without the State of Nebraska, as LINDSAY shall in good faith require or as the interest, needs, business or opportunities of LINDSAY shall require. B. PARKER shall devote his normal and regular business time, attention, knowledge and skill to the business and interests of LINDSAY, and LINDSAY shall be entitled to all of the benefits, profits or other issues arising from or incident to all work, services and advice of PARKER performed for LINDSAY. C. PARKER shall have the right to devote such amounts of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not then being engaged in by LINDSAY and which shall not otherwise interfere with the performance of his duties hereunder. D. Absent prior approval from the Board of Directors, PARKER (i) shall not knowingly make investments in businesses which do business with or which are competitive with LINDSAY, and (ii) shall not knowingly engage in any activity which constitutes a conflict of interest with his employment at LINDSAY. 6. Business Opportunities. PARKER will make full and prompt written disclosure to LINDSAY of any business opportunity of which he becomes aware and which relates to the business of LINDSAY or any of its subsidiaries or affiliates. 7. Inventions. A. An "Invention" means any new or useful art, discovery, contribution, finding, or improvement whether or not patentable, and all related know-how; B. "Copyright Works" are materials for which copyright protection may be obtained, including but not limited to: literary works, computer programs, artistic works, (including designs, graphs, drawings, blueprints and other works), recordings, photographs, slides, motion pictures, and audio-visual works; 7 8 C. Upon conception, all inventions and Copyright Works shall become the property of LINDSAY whether or not patent or copyright applications are filed on the subject matter of the conception. PARKER will communicate to LINDSAY promptly and fully all inventions, or suggestions (whether or not patentable), and all Copyright Works made or conceived by PARKER (whether made or conceived solely by PARKER or jointly with others) during the period of PARKER's employment with LINDSAY or in the two years following cessation of employment: (a) which correspond to the business, work or investigations of LINDSAY at the time of conception, or (b) which result from or are suggested by any work which PARKER has done or may do for or on behalf of LINDSAY, or (c) which are developed, tested, improved or investigated either in part or entirely on time for which PARKER was paid by LINDSAY or using any resources of LINDSAY. D. Assign Rights. PARKER will assign to LINDSAY his entire right, title and interest in all inventions and Copyright works: (a) which relate in any way to the actual or anticipated business of LINDSAY, or (b) which relate in any way to the actual or anticipated research or development of LINDSAY, or (c) which is suggested by or results from any task assigned to PARKER on behalf of LINDSAY. PARKER also will execute at any time during or after his employment an assignment for each such invention or Copyright Work as LINDSAY may request and on such documents as LINDSAY may provide. PARKER will promptly and fully assist LINDSAY during and subsequent to PARKER's employment in every lawful way without reimbursement other than his normal compensation as an employee of LINDSAY and other than a reasonable payment for time involved in the event employment with LINDSAY has terminated, but at the expense of LINDSAY, to obtain for the benefit of LINDSAY patents, copyrights, mask work protection or other proprietary rights for inventions or Copyright Works. 8. Confidentiality. A. PARKER will not at any time during or after his employment by LINDSAY, directly or indirectly, divulge, disclose or communicate to any person, firm or corporation in any manner whatsoever, other than in the normal course of performing his duties for LINDSAY, any Confidential Information. While engaged by LINDSAY, PARKER may only use Confidential Information for a purpose which is necessary to the carrying out of PARKER's duties as an employee or director of LINDSAY, 8 9 and PARKER may not make use of any Confidential Information of LINDSAY after he is no longer an employee or director of LINDSAY. B. PARKER agrees that the following shall be considered Confidential Information: all non-public and internal information, whether written or otherwise, regarding LINDSAY's business (or business of any subsidiary or affiliate of LINDSAY), including but not limited to, information regarding customers, customer lists, employees, employee salaries, costs, prices, earnings, and any financial or cost accounting reports, products, services, formulae, compositions, machines, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business arrangements, and sources of supply. C. PARKER agrees that all such information is a trade secret owned exclusively by LINDSAY which shall at all times be kept confidential. D. PARKER further agrees that he will, upon termination of his employment with LINDSAY, return to LINDSAY all books, records, lists and other written, typed or printed materials, whether furnished by LINDSAY or prepared by PARKER, which contain any Confidential Information and PARKER agrees that he will neither make nor retain any copies of such materials after termination of employment. 9. Solicitation of Employees. For a period of two (2) years after he is no longer employed by LINDSAY, PARKER will not, directly, or indirectly, either as an individual, proprietor, stockholder, partner, officer, director, employee or otherwise, solicit any officer, director, employee or other individual: A. to leave his or her employment or position with LINDSAY B. to compete with the business of LINDSAY, C. or to violate the terms of any employment, non-competition or similar agreement with LINDSAY. 10. Non-Competition. For a period of two (2) years after termination of employment with LINDSAY, PARKER will not engage in, work for (directly or indirectly) or contribute his knowledge to any person or entity, company or work which is directly competitive in the irrigation business with the products, processes or business of LINDSAY. 9 10 11. Remedies. A. In the event PARKER's employment shall end with LINDSAY prior to the termination date provided herein, or in the event PARKER shall breach Paragraph 9 or 10 of this Agreement or otherwise breach this Agreement, PARKER shall be subject to any and all of the penalties contained in, or legal and equitable remedies available to LINDSAY resulting from, this Agreement. B. In the event PARKER is required to enforce any of the rights granted under this Agreement through litigation or legal action LINDSAY will pay the costs and all expenses of legal council selected by PARKER. 12. Remedies; Survival of PARKER's Covenants. A. Without limiting the rights of LINDSAY to pursue all other legal and equitable rights available to them for any violation of the covenants of PARKER herein, it is agreed that: (a) the services to be rendered by PARKER under this Agreement are of a special, unique, unusual and extraordinary character which gives them a peculiar value, and the loss of such services can not be reasonably and adequately compensated in damages in an action at law, and (b) remedies other than injunctive relief can not fully compensate LINDSAY for violation of Paragraphs l, 6, 8, 9, 10 and 11 of this Agreement; accordingly, LINDSAY shall be entitled to injunctive relief to prevent violations of such paragraphs or continuing violations thereof. B. All of PARKER's covenants in and obligations under Paragraphs 7, 8, 9 and 10 of this Agreement shall continue in effect notwithstanding any termination of PARKER's employment, whether by LINDSAY or by PARKER, upon expiration or otherwise, and whether or not pursuant to the terms of this Agreement. 13. Life Insurance. LINDSAY shall have the right, at its own expense and for its own benefit, to take out life insurance on PARKER in such amount or amounts as it shall see fit, and PARKER agrees to cooperate with LINDSAY in obtaining such insurance. 14. Designation of Beneficiary. PARKER may, by written instrument delivered to LINDSAY, a beneficiary or beneficiaries to receive any payments to which he may be entitled under LINDSAY fringe benefit programs which become payable following his death, and at any time or from time to time change such designated beneficiary by similar written instrument, and LINDSAY shall be fully protected in making any such payments to such designated beneficiary. In the 10 11 event of PARKER's death when no such beneficiary designation is in effect, LINDSAY shall make payment of any amounts to which PARKER was entitled following PARKER's death to this personal representative, heirs, devises or legatees. 15. PARKER Expenses. LINDSAY shall pay PARKER's reasonable airline fare, hotel bills, and other necessary and proper expenses when traveling on or otherwise performing, LINDSAY's business, provided that PARKER furnishes LINDSAY with appropriate supporting documentation of such expenses. 16. Successor and Assigns: Parties in Interest; Change in Control. This Agreement shall be binding upon LINDSAY, its successors and assigns and upon PARKER, his heirs, executors and administrators. However, if in the opinion of Parker there is a "Change in Control" of LINDSAY through a change in shareholder ownership, merger, Board of Directors, or other such event, and in the opinion of Parker such event shall result in a material negative change in the role, title, responsibility, benefits, or compensation of PARKER, then PARKER shall have the option to terminate this Agreement, and he shall be entitled to the same compensation as if LINDSAY had terminated PARKER without cause, as set forth in Paragraph 4B (i), (ii), and (iii), plus compensation equal to two and one-half (2 1/2) times his average gross compensation for the most recent five (5) Fiscal Years. 17. Notices. Notices contempleted by this Agreement shall be in writing and shall be deemed given when delivered in person or mailed registered first class mail, postage prepaid, to LINDSAY at East Highway 91, Lindsay, Nebraska, 68644, Attention: Chairman of the Compensation Committee, and to PARKER at 2954 North Park Lane, Columbus, NE, 68601, or to such other address as the party so notifies to the other. 18. Integration, Amendment and Modification. A. This Agreement contains the entire Agreement between the parties hereto with respect to the employment contemplated herein, supersedes all prior negotiations and Employment Agreements, both oral and written, including the Former Agreement, between the parties relating to PARKER's employment with LINDSAY. B. This Agreement can be amended, supplemented or modified by the parties only by an instrument in writing signed by both parties. C. If, in any action before any court or agency legally empowered to enforce such covenants, any term, restriction, covenant or promise contained herein is found to be unreasonable, unlawful or otherwise invalid and for that reason unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency. 11 12 19. Headings. The headings in this Agreement are inserted for convenience or reference only and shall not affect the meaning or interpretation of this Agreement. 20. Governing Law. This Agreement shall be construed, interpreted and enforced according to the laws of the State of Nebraska. IN WITNESS WHEREOF, this Agreement is entered into effective as of the date set forth above. GARY D. PARKER LINDSAY MANUFACTURING CO. BY: - -------------------------- -------------------------- Gary D. Parker J. David Dunn, Chairman, Compensation Committee mam 12 13 EMPLOYMENT AGREEMENT Pursuant to Paragraph 18B of the Employment Agreement (Former Agreement) Lindsay and Parker now wish to modify said Former Agreement for FY1998 and all future Fiscal years as follows: 2A The Initial Term of Parker's employment with Lindsay under this Agreement shall be for five (5) years commencing September 1, 1997, and expiring on August 31, 2002. 3B(ii) In no event shall bonus exceed $200,000 in any Fiscal Year 3D Anything herein to the contrary notwithstanding, in no event shall the aggregate of Bonus paid and Supplemental Compensation awarded to Parker, exceed $400,000 for any single Fiscal year. Date: Date: -------------------------- --------------------------- - ------------------------------- -------------------------------- Gary D. Parker Lindsay Compensation Committee Chairman mam EX-10.(G) 3 EMPLOYMENT AGREEMENT 1 EXHIBIT 10(g) EMPLOYMENT AGREEMENT THIS AGREEMENT is effective the 1st day of September, 1997, and is between BRUCE C. KARSK ("KARSK") and Lindsay Manufacturing Co., a Delaware Corporation ("LINDSAY"). WHEREAS, KARSK is a key employee of LINDSAY and his talents and services to LINDSAY are of special, unique, unusual and extraordinary character and are of particular and peculiar benefit and importance to LINDSAY; and WHEREAS, LINDSAY desires to obtain assurances that KARSK will remain an employee of LINDSAY and devote his best efforts to such employment; and WHEREAS, KARSK desires to obtain assurances of continued employment and compensation; and WHEREAS, each party is willing, in consideration of continued employment with LINDSAY, to provide the other with the desired assurances, and each is willing to enter into and carry out this Agreement; NOW, THEREFORE, the parties agree as follows: 1. EMPLOYMENT. Upon the terms set out in the Agreement, LINDSAY agrees to employ KARSK, and KARSK agrees to be so employed by LINDSAY. 2. TERM. A. Initial Term. The Initial Term of KARSK'S employment with LINDSAY under this Agreement shall be for three years, commencing September 1, 1997, and expiring August 31, 2000. B. Subsequent Term. Prior to August 1, 2000, the parties are expected to negotiate and agree regarding KARSK'S employment with LINDSAY for the period after August 31, 2000. 3. COMPENSATION. As compensation for the services to be rendered KARSK; LINDSAY agrees to provide the following: A. Salary and Bonus. 1. For the period through August 31, 1998, the salary and bonus has been agreed as follows: (a) a Salary at the annual rate established by Compensation Committee; and 1 2 (b) a discretionary allocation to KARSK'S account under the Key Employee Incentive Plan ("KEIP"), as in effect, to be paid out pursuant to that Plan; and (c) a Bonus depending upon KARSK'S performance and attainment of goals, as set forth, at LINDSAY's sole discretion, in a written Bonus arrangement applicable to the Fiscal Year. 2. On September 1, 1998, the Compensation Committee will review the salary and bonus of KARSK, and may allow increases in salary and adjustment in bonus for the Fiscal Year following such date. B. Stock Options. Stock options in the amount and terms and conditions may be granted by the Compensation Committee of the Board of Directors. KARSK understands that, as of the date of signing this Agreement, there is no assurance that LINDSAY will grant additional stock options, or that stock options, if any, would have any value. C. Other Benefits. Other fringe benefits and applicable employee benefit programs as LINDSAY may establish from time to time include the following: Profit Sharing and 401(k) Program Vacation Long Term Disability Annual Medical Check Up Life Insurance Health Insurance Directors & Officers Liability Insurance Travel Club Dues Supplemental Retirement Restricted Stock 4. TERMINATION. A. For Cause. 1. Defined. KARSK may be terminated by LINDSAY for cause if: a. he commits a breach of his fiduciary duty of loyalty to LINDSAY; or b. he commits acts or omissions regarding LINDSAY's business and which are not in good faith or which involve intentional misconduct, dishonesty, or a knowing violation of the law; or c. he engages in any transaction involving LINDSAY from which he gains an improper personal benefit, which is not agreed to by the Board of Directors of LINDSAY in advance of the transaction; or 2 3 d. he refuses to perform or neglects any of the material duties assigned to him; or e. he violates Company Policy concerning notice of confidentiality of information/restriction on trading in Lindsay Common Stock; or f. he breaches the provisions of this Agreement. 2. Procedure. Prior to such termination for cause, LINDSAY shall notify KARSK in writing of its intent to terminate this Agreement for cause, shall state the reason and give grounds therefore and shall give KARSK five working days after receipt of such notice to explain his conduct. If KARSK fails to explain his conduct to LINDSAY's reasonable satisfaction, the termination for cause shall be final. 3. If KARSK is terminated for cause, he shall not be entitled to any further compensation, or any Bonus or KEIP allocation payment that might otherwise be owed to him even if he worked for the entire Fiscal Year. B. Without Cause. LINDSAY may terminate this Agreement at any time, without cause, upon at least two weeks advance written notice. If LINDSAY does so, then LINDSAY shall pay within thirty (30) days of such termination an amount equal to the greater of either a. or b. as follows: a. the balance of the salary due until the end of the term of the Agreement; plus accrued KEIP allocation amounts; plus any bonus earned as of date of termination for the Fiscal Year in which the termination occurs, allocated to the date of termination; or b. two and one-half (2 1/2) times average gross compensation paid to KARSK during the most recent five (5) years. Gross compensation shall mean salary, KEIP, and any bonus earned for most recent five (5) years divided by 5 Payment of either a. or b. shall be made regardless of other income or benefit KARSK may be able to obtain by virtue of the termination. Such payment shall also be a complete and liquidated payment for damages or claims, if any, KARSK may have against LINDSAY due to LINDSAY's termination of this Agreement prior to the end of its term. C. KARSK'S Voluntary Termination. If KARSK breaches this Agreement and terminates his employment with LINDSAY, KARSK shall be subject to Paragraphs 11 and 12, shall not be entitled to, and shall not receive, any further compensation, Bonus or KEIP payments not yet paid at date of termination. 3 4 D. Death or Disability. If KARSK should die or become disabled and unable to perform his duties, this Agreement shall terminate. In such an event, KARSK will be covered by the death and disability policies LINDSAY shall then have in effect, and KARSK (or his estate) shall receive his accrued KEIP allocation amounts and the Bonus equal to the Bonus he would have received had he worked for the entire Fiscal Year, apportioned to the time he ceased employment. 5. Best Efforts, Other Employment, Conflict of Interest of KARSK A. KARSK agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required or requested of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of LINDSAY. Such duties shall be rendered at Lindsay, Nebraska, and at such other place or places within or outside the State of Nebraska, as LINDSAY shall in good faith require or as the interest, needs, business, or opportunities of LINDSAY shall require. B. KARSK shall devote his normal and regular business time, attention, knowledge and skill to the business and interests of LINDSAY, and LINDSAY shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of KARSK perfomed for LINDSAY. C. KARSK shall have the right to devote such amounts of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not then being engaged in by LINDSAY and which shall not otherwise interfere with the performance of his duties hereunder. D. Absent prior approval from the Board of Directors, KARSK, (i) shall not make investments in businesses which do business with, or which are competitive with, LINDSAY, and (ii) shall not engage in any activity which constitutes a conflict of interest with his employment at LINDSAY. 6. Business Opportunities. KARSK will make full and prompt written disclosure to LINDSAY of any business opportunity of which he becomes aware and which relates to the business of LINDSAY or any of its subsidiaries or affiliates. 7. Inventions. A. An "Invention" means any new or useful art, discovery, contribution, finding, or improvement whether or not patentable, and all related know-how; B. "Copyright Works" are materials for which copyright protection may be obtained, including but limited to: literary 4 5 works, computer programs, artistic works (including designs, graphs, drawings, blueprints and other works), recordings, photographs, slides, motion pictures, and audio-visual works; C. Upon conception, all Inventions and Copyright Works shall become the property of LINDSAY whether or not patent or copyright applications are filed on the subject matter of the conception. KARSK will communicate to LINDSAY promptly and fully all Inventions, or suggestions (whether or not patentable), and all Copyright Works made or conceived by KARSK (whether made or conceived solely by KARSK or jointly with others) during the period of KARSK'S employment with LINDSAY or in the three years following cessation of employment: (a) which correspond to the business, work or investigations of LINDSAY at the time of conception, or (b) which result from or are suggested by any work which KARSK has done or may do for or on behalf of LINDSAY, or (c) which are developed, tested, improved or investigated either in part or entirely on time for which KARSK was paid by LINDSAY or using any resources of LINDSAY. D. Assign Rights. KARSK will assign to LINDSAY his entire right, title and interest in all Inventions and Copyright Works: (a) which relate in any way to the actual or anticipated business of LINDSAY, or (b) which relate in any way to the actual or anticipated research or development of LINDSAY, or (c) which is suggested by or results from any task assigned to on behalf of LINDSAY. KARSK also will execute at any time during or after his employment an assignment for each such Invention or Copyright Work as LINDSAY may request and on such documents as LINDSAY may provide. KARSK will promptly and fully assist LINDSAY during and subsequent to KARSK'S employment in every lawful way without reimbursement other than his normal compensation as an employee of LINDSAY and other than a reasonable payment for time involved in the event employment with LINDSAY has terminated, but at the expense of LINDSAY, to obtain for the benefit of LINDSAY patents, copyrights, mask work protection or other proprietary rights for Inventions or Copyright Work. 8. Confidentiality. A. KARSK will not at any time during or after his employment by LINDSAY, directly or indirectly, divulge, disclose or communicate to any person, firm or corporation in any manner whatsoever, other than in the normal course of performing his duties for LINDSAY, any Confidential Information. While engaged by LINDSAY, KARSK may only use Confidential Information for a purpose which is necessary to the carrying out of KARSK'S duties as an employee or director of LINDSAY, and KARSK may not make use of any Confidential Information of LINDSAY after he is no longer an employee or director of LINDSAY. 5 6 B. KARSK agrees that the following shall be considered Confidential Information: all non-public and internal information, whether written or otherwise, regarding LINDSAY's business (or business of any subsidiary or affiliate of LINDSAY), including but not limited to, information regarding customers, customer lists, employees, employee salaries, costs, prices, earnings, and any financial or cost accounting reports, products, services, formulae, compositions, machines, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business arrangements, and sources of supply. C. KARSK agrees that all such information is a trade secret owned exclusively by LINDSAY which shall at all times be kept confidential. D. KARSK further agrees that he will, upon termination of his employment with LINDSAY, return to LINDSAY all books, records, lists and other written, typed or printed materials, whether furnished by LINDSAY or prepared by KARSK which contains any Confidential Information and KARSK agrees that he will neither make nor retain any copies of such materials after termination of employment. 9. Solicitation of Employees. For a period of three (3) years after he is no longer employed by LINDSAY, KARSK will not, directly, or indirectly, either as an individual, proprietor, stockholder, partner, officer, director, employee or otherwise, solicit any officer, director, employee or other individual: A. to leave his or her employment of position with LINDSAY, B. to compete with the business of LINDSAY, C. or to violate the terms of any employment, non- competition or similar agreement with LINDSAY. 10. Non-Competition. For a period of two (2) years after termination of Employment with LINDSAY, KARSK will not engage in, work for (directly or indirectly) or contribute his knowledge to any person or entity, company or work which is directly competitive with the products, processes or business of LINDSAY. 11. Remedies. A. In the event KARSK'S employment shall end with LINDSAY prior to the termination date provided herein, or in the event KARSK shall breach Paragraph 9 or 10 of this Agreement or otherwise breach this Agreement, KARSK shall be subject to any and all of the penalties contained in, or legal and equitable remedies available to LINDSAY resulting from, this Agreement. B. In that KARSK is required to enforce any of the rights granted under this Agreement through litigation or legal action LINDSAY will pay the costs and expenses of legal council selected by KARSK. 6 7 12. Remedies; Survival of KARSK Covenants. A. Without limiting the rights of LINDSAY to pursue all other legal and equitable rights available to them for any violation of the covenants of herein, it is agreed that: (a) the services to be rendered by KARSK under this Agreement are of a special, unique, unusual and extraordinary character which give them a peculiar value, and the loss of such services cannot be reasonably and adequately compensated in damages in an action at law, and (b) remedies other than injunctive relief can not fully compensate LINDSAY for violation of Paragraphs 1, 6, 7, 8, 9 and 10 of this Agreement; accordingly, LINDSAY shall be entitled to injunctive relief to prevent violations of such paragraphs or continuing violations thereof. B. All of KARSK'S covenants in and obligations under Paragraphs 7, 8, 9 and 10 of this Agreement shall continue in effect notwithstanding any termination of KARSK'S employment, whether by LINDSAY or by KARSK upon expiration or otherwise, and whether or not pursuant to the terms of this Agreement. 13. Life Insurance. LINDSAY shall have the right, at its own expense and for its own benefit, to take out life insurance on and in such amount or amounts as it shall see fit, and KARSK agrees to cooperate with LINDSAY in obtaining such insurance. 14. Designation of Beneficiary. KARSK may, by written instrument delivered to LINDSAY, designate a beneficiary or beneficiaries to receive any payments to which he may be entitled under LINDSAY's fringe benefit programs which become payable following his death, and may at any time or from time to time change such designated beneficiary by similar written instrument, and LINDSAY shall be fully protected in making such payments to such designated beneficiary designation as in effect, LINDSAY shall make payment of any amounts to which KARSK was entitled following death to his personal representative, heirs, devises or legatees. 15. KARSK'S Expenses. LINDSAY shall pay reasonable airline fare, hotel bills and other necessary and proper expenses when traveling on, or otherwise performing, LINDSAY's business, provided that KARSK furnishes LINDSAY with appropriate supporting documentation of such expenses. 16. Successors and Assigns; Parties in Interest, Change in Control. A. This Agreement shall be binding upon LINDSAY, its successors and assigns and upon KARSK; his heirs, executors and administrators. B. If a "Change in Control" of LINDSAY takes place through a change in shareholder ownership, merger, Board of Directors, or other such event, and it results in a change in title, reduction in benefits or compensation, or termination of KARSK, KARSK shall be entitled to the same compensation as provided for in 4b; a, 7 8 plus compensation equal to two and one-half (2 1/2) times his average gross compensation. Gross compensation shall mean his annual salary plus bonuses, awarded or earned for the most recent five (5) years divided by five (5). 17. Notices. Notices comtemplated by this Agreement shall be in writing and shall be deemed given when delivered in person or mailed registered first class mail, postage prepaid, to LINDSAY at Route 91, Lindsay, Nebraska, 68644, Attention: Chairman of the Board and to KARSK, 3334 34th Street, Columbus, NE, 68601, or to such other address as the party so notifies to the other. 18. Integration, Amendment and Modification. A. This Agreement contains the entire agreement between the parties hereto with respect to the employment contemplated herein, supersedes all prior negotiations and agreements, both oral and written, between the parties relating to KARSK'S employment with LINDSAY. B. This Agreement can be amended, supplemented or modified by the parties only by an instrument in writing signed by both parties. C. If, in any action before any court or agency legally empowered to enforce such covenants, any term, restriction, covenant or promise contained herein is found to be unreasonable, unlawful or otherwise invalid and for that reason unenforceable, then such term, restriction, covenant or promise shall be deemed enforceable by such court or agency. 19. Headings. The headings in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. 20. Governing Law. This Agreement shall be construed, interpreted, and enforced according to the laws of the State of Nebraska. IN WITNESS WHEREOF, this Agreement is entered into effective as of the date set forth above. KEY EMPLOYEE LINDSAY MANUFACTURING CO. BY: BY: ----------------------------------- ------------------------------ Bruce C. Karsk Gary D. Parker 8 EX-11 4 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 Lindsay Manufacturing Co. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS Years ended August 31, 1997, 1996 and 1995 (Dollars in thousands except per share amounts) ---------------------------------------------------------------
COMPUTATION OF PRIMARY PER SHARE EARNINGS 1997 1996 1995 ------------ ----------- ----------- 1. Weighted average shares outstanding........ 9,495,813 9,664,422 10,266,449 2. Net additional shares outstanding assuming dilutive stock options exercised and proceeds used to purchase treasury stock 490,584 486,456 355,761 ----------- ----------- ------------ 3. Average number of common and common equivalent shares outstanding........... 9,986,397 10,150,878 10,622,210 =========== =========== =========== 4. Net earnings for per share computation..... $ 20,052 $ 16,518 $ 11,704 =========== =========== =========== 5. Net earnings per average common and common equivalent shares outstanding........... $ 2.01 $ 1.63 $ 1.10 =========== =========== ===========
COMPUTATION OF PRIMARY PER SHARE EARNINGS 1997 1996 1995 ------------ ----------- ----------- 1. Weighted average shares outstanding........ 9,495,813 9,664,422 10,266,449 2. Net additional shares outstanding assuming dilutive stock options exercised and proceeds used to purchase treasury stock 499,622 549,084 362,856 ----------- ----------- ------------ 3. Average number of common and common equivalent shares outstanding........... 9,995,435 10,213,506 10,629,305 =========== =========== =========== 4. Net earnings for per share computation..... $ 20,052 $ 16,518 $ 11,704 =========== =========== =========== 5. Net earnings per average common and common equivalent shares outstanding........... $ 2.01 $ 1.62 $ 1.10 =========== =========== ===========
-37- EX-13 5 ANNUAL REPORT 1 EXHIBIT 13 / / 1997 / - -------------------------------------------------------- / ANNUAL REPORT / / / / / / PHOTO OF A ZIMMATIC / CENTER PIVOT / / / / / ------------------------------ - -------------------------------------------------------------------------------- PHOTOS OF CORN, VEGETABLES, WHEAT, COTTON, POTATOES, HAY, PEANUTS AND SOYBEANS - -------------------------------------------------------------------------------- Leadership and Strength You Can Depend on Today and Tomorrow - -------------------------------------------------------------| | | | LINDSAY MANUFACTURING CO. 2 LINDSAY MANUFACTURING CO. ******************** * PHOTO OF WHEAT * * * ******************** Leadership and Strength you can depend on Today and Tomorrow As a leading domestic manufacturer and the number-one exporter of center pivot and lateral move irrigation systems, Lindsay Manufacturing Co. is capitalizing on a healthy agricultural economy, favorable farm legislation and lower prevailing interest rates to achieve strong operating results. Fiscal 1997 performance was highlighted by the Company exceeding each of its long-term financial goals. Moreover, Lindsay has demonstrated consistent financial performance. Since the Company's initial public offering in October 1988, shareholders have received a return on original investment of more than 2,350 percent. During the same period, the Standard & Poor's 500 Index, including dividends, has returned approximately 357 percent.
Fiscal Fiscal Year Year 5-year Goal 1997 1996 Average - ----------------------------------------------------------------------------- Annual Sales Growth......................... 5-10% 16.2% 21.8% 11.6% Gross Margin................................ 22-24% 25.8% 24.0% 24.0% Operating Margin............................ 10-13% 16.7% 14.2% 14.0% Return on Beginning Equity.................. 20-25% 26.1% 24.0% 22.6%
Even more compelling than Lindsay's track record of results, are the Company's prospects for future success. Over the next 40 years, the world's farmers will be challenged to produce enough food to feed as many as 10 billion people--approximately twice today's population. And, they will need to do it on roughly the same amount of farmland as today, but using less water, fertilizer and pesticides. As a leading manufacturer of one of the only pieces of capital equipment that can increase yields through higher crop production, Lindsay is in prime position to benefit from these powerful market forces--both in the North American market and in the Company's export markets. Worldwide demand for agricultural products also bodes well for Lindsay's Diversified Products segment, through which the Company produces large diameter steel tubing and provides outsourced manufacturing services for a customer base that includes several leading farm equipment manufacturers. Management's commitment to maximizing shareholder value doesn't stop with strong operating performance, as evidenced by the Company's cash dividend, history of stock splits and share repurchase program. During fiscal 1997, Lindsay declared its fourth three-for-two stock split in seven years and repurchased 312,300 shares (split-adjusted) of its stock. Additionally, on October 21, 1997, the Company moved to the New York Stock Exchange. The Company's unleveraged balance sheet and strong cash position provide the means for management to continue to transform growth opportunities into shareholder value. To maintain its leadership position, Lindsay will continue to execute the Company's proven growth strategy, which entails: * increasing North American market share, primarily at the expense of second-tier players; * expanding Lindsay's presence in current and developing export markets by adapting the Company's products and marketing to local customs, growing conditions and agricultural policies; * building diversified products revenue to 25 percent of total sales from the 17 percent attained in fiscal 1997; and * identifying and executing selective acquisitions that would be accretive in the long-term and provide a proprietary product utilizing Lindsay's manufacturing expertise.
TABLE OF CONTENTS Letter to Shareholders................................2 Operations Review.....................................6 Selected Financial Data and Analysis.................12 Financial Statements.................................17 Notes................................................20 Directors and Officers...............................24 Investor Information..................Inside Back Cover
3 1997 Annual Report FINANCIAL HIGHLIGHTS ====================
($ in thousands, except per share amounts) ==================================================================================================== 1997 1996 % Change - ---------------------------------------------------------------------------------------------------- INCOME DATA for the fiscal years ended August 31 Operating revenues.......................................... $ 158,327 $ 136,233 16.2% Gross profit................................................ 40,920 32,747 25.0 Operating expenses.......................................... 14,444 13,363 8.1 Operating income............................................ 26,476 19,384 36.6 Interest and other income, net.............................. 3,453 4,556 (24.2) Pre-tax earnings............................................ 29,929 23,940 25.0 Net earnings................................................ $ 20,052 $ 16,518 21.4 Weighted average common and common equivalent shares........ 9,986,397 10,150,878 (1.6%) BALANCE SHEET DATA at August 31 Current assets.............................................. $ 49,827 $ 57,855 (13.9%) Total assets................................................ 107,983 96,823 11.5 Current liabilities......................................... 19,479 18,697 4.2 Stockholders' equity........................................ $ 86,968 $ 76,834 13.2% PER SHARE DATA Net earnings................................................ $ 2.01 $ 1.63 23.3% Book value.................................................. $ 9.24 $ 8.08 14.4% PERFORMANCE RATIOS Operating margin............................................ 16.7% 14.2% Net margin.................................................. 12.7% 12.1% Return on beginning equity.................................. 26.1% 24.0% ====================================================================================================
BAR CHARTS GRAPHS REVENUES NET MARGIN NET EARNINGS PER SHARE ($ in millions) (Percentage) (Dollars) Net Earnings Year Revenues Year Net Margin Year Per Share 1989 92.6 1989 8.0 1989 0.70 1990 102.7 1990 8.2 1990 0.80 1991 98.7 1991 9.0 1991 0.85 1992 108.9 1992 10.1 1992 1.01 1993 102.1 1993 10.5 1993 0.98 1994 112.7 1994 10.6 1994 1.03 1995 111.8 1995 10.5 1995 1.10 1996 136.2 1996 12.1 1996 1.63 1997 158.3 1997 12.7 1997 2.01 Since 1989, revenues have Strong operating efficiencies Earnings per share increased 71.0% from $92.6 have allowed the Company to have risen 187% from million to $158.3 million increase net margin from 8% $0.70 in 1989 to in 1997. in 1989 to 12.7% in 1997. $2.01 in 1997. 1 4 LINDSAY MANUFACTURING CO. * * * PHOTO OF COTTON * * * * * DEAR FELLOW SHAREHOLDERS: ========================= ********************* Leadership and strength you can depend on today and tomorrow. It's the slogan for Lindsay's Zimmatic irrigation systems, but it applies to more than our products. Lindsay is a market leader and we have positioned ourselves for continued strength and leadership through ongoing investment in our products, our dealer network and our operations. It is with pleasure and gratitude that I share with you Lindsay's operating results for fiscal 1997 and our prospects for future growth arising from the world's need to feed its growing population. Fiscal 1997 was another year of strong operating performance for Lindsay Manufacturing Co. Although agricultural commodity pricing was off 1996's record highs, they remained profitable for efficient operators, and farmers continue to be in good financial shape. By continuing to employ our proven growth strategy, Lindsay was able to again capitalize on favorable market conditions. Our success is evidenced by full-year performance having exceeded each of our long-term financial goals. Moreover, we continued our efforts to maximize shareholder value beyond operating performance. Last February, we declared Lindsay's fourth three-for-two stock split in seven years and, on October 21, 1997, Lindsay's common stock began trading on the New York Stock Exchange (NYSE) under the symbol LNN. We expect the move to the NYSE to enhance visibility and improve liquidity through more efficient pricing, lower share price volatility and increased trading volume. REVIEW OF RESULTS--STRENGTH TODAY Despite challenging comparisons, Lindsay reported higher earnings and revenues for the fiscal year ended August 31, 1997, with each segment contributing to our growth. For fiscal 1997, revenues rose 16 percent to $158.3 million from $136.2 million reported in fiscal 1996. Net earnings grew 21 percent to $20.1 million compared with last year's $16.5 million. Earnings per share gained 23 percent, rising to $2.01 from $1.63 a year ago, adjusted for the three-for-two stock split. At 16 percent, Lindsay's consolidated revenue growth rate exceeded our average annual target of 5 to 10 percent and was in line with expectations of the lower end of a 15- to 20-percent range. As anticipated, each segment contributed to that growth. North American irrigation equipment revenues were up 8 percent year-over-year having benefited from the favorable agricultural cycle as well as from farmers' perennial need to conserve water, energy and labor while stabilizing or improving yields. Export irrigation achieved another strong showing, posting revenue growth of 41 percent compounding fiscal 1996's 79 percent gain. At 32 percent, growth in diversified products revenue was stronger than expected, with both large diameter steel tubing and outsource manufacturing services experiencing gains. Revenues from each of Lindsay's three principal outsource manufacturing customers were up, led by Deere & Company. We began fiscal 1998 with a 6 percent increase in our order backlog, which was $27.3 million versus $25.7 million posted a year ago, and cash and marketable securities totaling $62.1 million. At fiscal year-end, shareholders' equity stood at $87.0 million, or $9.24 per share, up from $76.8 million, or $8.08 per share, on a post-split basis. Management's effective utilization of your capital was highlighted by our 26.1 percent return on beginning equity, an increase over the 24.0 percent achieved a year ago and above our 20- to 25-percent goal. Lindsay used approximately $9.9 million of our balance sheet cash to repurchase 312,300 shares (split adjusted) in fiscal 1997, bringing the total number of shares repurchased during the past three years to 1.6 million (split adjusted) at a total cost of $30.0 million. We intend to continue to buy back stock during fiscal 1998 and have authorization to repurchase approximately one million additional shares. [FY97 BUSINESS SEGMENTS PIE CHART] Domestic Export Diversified Irrigation Irrigation Manufacturing Other 63% 18% 17% 2% Each of Lindsay's three business segments contributed to fiscal 1997's record revenue, and, more importantly, each has continued long-term growth potential. CAPITALIZING ON GLOBAL DYNAMICS-- As beneficial as the healthy North American farm economy has been for our Company in recent years, our most compelling demand drivers are global and long-term. Since 1960, the world's population has doubled, growing to approximately six billion people. During that same period, the world's farmers tripled food production without expanding cultivated acreage. Roughly the same 5.8 million square 2 5 1997 Annual Report As a leading domestic manufacturer and the number-one exporter of one of the only pieces of capital equipment that increases yields through higher crop production, Lindsay is well positioned to benefit from global dynamics. **************************** * * * PHOTO OF GARY PARKER * * * * * * * **************************** Gary D. Parker Chairman, President and Chief Executive Officer miles that were used to feed three billion people 40 years ago, now feed six billion and--most important--will be relied on to feed as many as 10 billion 40 years from now. This growing demand for food will challenge farmers to maximize yields on every acre of their land. At the same time, conservation and environmental concerns increasingly press farmers to reduce water usage and chemical inputs. Today, over 60 percent of the earth's fresh water is used for agriculture, and it is frequently provided without volume restrictions at below-market rates or even free of charge. Given demands placed on water supplies by a growing population and rapid economic expansion, I question whether that luxury will continue. As a leading domestic manufacturer and the number-one exporter of one of the only pieces of capital equipment that increases yields through higher crop production, Lindsay is well positioned to benefit from these global dynamics. To capitalize on both present and future opportunities, Lindsay continually invests in: 1.) our products--to provide farmers with both superior reliability and leading-edge technology, 2.) our dealer network--to help ensure first-rate sales and service worldwide, and 3.) our manufacturing facility--to optimize manufacturing efficiency and capacity and maximize margins. SUPERIOR PRODUCTS THROUGH TECHNOLOGY LEADERSHIP At Lindsay, we pride ourselves on being irrigation equipment technology leaders, and we have the track record to prove it. For the past 15 years, Lindsay's Zimmatic center pivot and lateral move irrigation systems have been the most energy efficient in the industry, featuring a unique drive train design that requires up to 40 percent less energy to operate than competing models. We now back our confidence with an extended drive train warranty. At eight years or 8,000 hours, it is the longest in the industry, giving Lindsay a competitive advantage over the typical six-year/6,000-hour warranty. We also broke new ground by now offering a 20-year guarantee on our Zimmatics' sprinkler outlets. This unprecedented promise of superior reliability was made possible by our pipeline production automation and is the culmination of a $3.5-million research, development and automation investment. Today, instead of using 30-year-old technology to individually punch a hole then weld a coupling to form each sprinkler position, Lindsay uses a robotic manufacturing cell that we designed to form the outlet and weld other components on the pipe in one automated step. Referred to as the formed outlet process, this innovation not only substantially enhances product uniformity, quality and service life, it also increases manufacturing capacity through greater efficiency. In addition to industry-leading reliability, we offer farmers a variety of leading-edge product features that help them save even more time and money. Rather than having to manually adjust each system, farmers can pre-program pivot functions using our Automated Irrigation Management System (AIMS) Advance control panel. Further efficiency is provided by our Remote Monitor Alarm and Control (R-MAC) feature, which enables farmers to monitor and control their Zimmatics remotely from almost any place in the world using a business band radio, cellular or land line phone. Most advanced of all is Lindsay's AIMS Telemetry Network. Using it, farmers can program and monitor multiple center pivot systems using their personal computer. In addition, the Network can collect, store and manipulate valuable planting, irrigation and environmental data, making their center pivots a powerful tool for overall farm management, supporting site-specific farming and helping farmers conserve their resources of soil, water, chemicals and labor. As pressure to reduce water usage and chemical inputs mounts, we believe this data collection and reporting feature will become increasingly valuable as more farmers will be required to not only document the amount of water, fertilizers and pesticides they use, but also potentially record where in their fields each was applied. 3 6 LINDSAY MANUFACTURING CO. ******************************** * * * * * PHOTO INSIDE OF * * TECH VAN * * * * * * * ******************************** Tech Vans are Lindsay's latest addition to its dealer-support arsenal. These mobile training and simulation units are equipped with each of Zimmatics' advanced technology features to allow for hands-on service training as well as to promote sales of add-ons. By staying ahead of the technology curve, we strengthen our leadership position. The adoption of site-specific farming is accelerating as farmers are increasingly drawn to its potential for increasing efficiency and productivity. We believe precision irrigation will become a necessary and integral part of site-specific operations and can envision a future generation of Zimmatics that would be integrated with Global Positioning Systems. A recent product innovation offering more immediate benefits is Lindsay's redesigned and newly patented Zimmatic Pendulum Steerable Corner System. Our corner system swings in and out from the outer-most tower of a center pivot, following radio frequency transmissions from underground cable to irrigate the corners of square or rectangular fields or follow irregular boundaries. Through the addition of corner pivots, farmers maximize the return on their investments in land and equipment by putting more acres into production. VALUE-ADDED DEALER NETWORK THROUGH SUPPORT AND INNOVATION Given the increasingly sophisticated nature of farming, it's no surprise that growers today prefer to do business with agri-equipment dealers who are capable of providing, not only full product support, but also advice on integrating irrigation systems into their overall operations for the best possible return on investment. Lindsay has always provided its dealers with a full range of sales and service training, marketing materials and cooperative advertising programs. Additionally, through innovative dealer support and incentive programs we seek to continually upgrade and expand the capabilities of our dealer network. Recently, we introduced Tech Vans into our arsenal. Tech Vans are mobile training and simulation units, fully equipped with each of Lindsay's advanced technology features for hands-on learning. Using the Tech Vans, Lindsay personnel assist dealers in getting their service and technical staff up-to-speed on AIMS, R-MAC and other Zimmatic features. Additionally, dealers are encouraged to invite their Zimmatic customers in for instruction on routine system operation, preventive maintenance and other topics designed to help growers fully utilize their Zimmatic systems. The Tech Vans also enable customers to simulate the operation and impact of adding an advanced feature to their existing system. Such hands-on exposure helps shorten the sales cycle for add-ons by promoting a greater comfort level with the technology. We are excited about the potential this unique and powerful resource represents. Through continued innovation, we maintain our competitive advantage, help current dealers better sell and service our systems, and expand the capabilities of our dealer network. EFFICIENT OPERATIONS THROUGH AUTOMATION AND PROCESS IMPROVEMENT Over the past three years, Lindsay has invested almost $10 million in manufacturing equipment upgrades, automation and process improvements. The results are dramatic. In 1979 it took 500 man-hours to produce a center pivot; in 1997 it took 140. Through continued incremental improvement, we plan to further reduce required man-hours and believe that, with continual focus and investment in automation, we can obtain an additional 15- to 20-percent reduction in the number of man-hours per unit by the year 2000. During the past fiscal year alone, we invested $3.8 million in capital improvements. Enhanced efficiency was evident in our fiscal 1997 gross margin, which was 25.8 percent, better than the 24.0 percent margin achieved in fiscal 1996 and above our goal of 22 to 24 percent. Lindsay's operating margin reached 16.7 percent in fiscal 1997, up from 14.2 percent in fiscal 1996 and higher than our goal of 10 to 13 percent. Moreover, the investment in robotics and automation helped boost Lindsay's manufacturing capacity by approximately 25 percent, allowing us to more readily meet anticipated fiscal 1998 peak-season demand. Shifting demand management to manufacturing through automation should enable Lindsay to further improve our gross margin as well as our market share. 4 7 1997 Annual Report We expect fiscal 1998 capital expenditures to approximate last year's level. Budgeted investments include completing the integration of new management information system software. This software is a key to achieving continuous operational improvements. It will enhance virtually every aspect of Lindsay's business by providing access to more timely and thorough data, which in turn will facilitate better decisions and planning. More timely information also contributes to more responsive dealer and customer relations. As of this writing, integration is 30 to 40 percent complete; full implementation is expected in the last half of fiscal 1998. MAINTAINING EXPORT LEADERSHIP For over a decade, Lindsay has been the leading exporter of center pivot and lateral move irrigation equipment. Our ability to succeed in the international marketplace is a result of carefully selecting our dealers and adeptly adapting our products and marketing to local customs, growing conditions and agricultural policies. For instance, we recently developed a high-clearance version of our Zimmatic system to better address the needs of sugar cane growers in several Latin American and Southern African countries. Other product adaptations include configurations making center pivot irrigation systems more economical for the smaller fields typical of markets in Western Europe. Because the need for increased crop yields is global, the export market represents growth potential for Lindsay. As evidence of our commitment to the international market, as well as our belief in its revenue potential, we are reprogramming our AIMS systems and R-MAC feature to work with the metric system and in Spanish, French and German. In addition, we have initiated a process that will lead to ISO 9001 Quality Certification. This designation will further demonstrate that Lindsay adheres to the internationally recognized ISO standards and will be additional testimony to the exceptional quality of our products and operations. Another recent development, which is intended to benefit all of Lindsay's constituencies, but especially our international dealers, is the introduction of Lindsay's Website. By logging on to "www.Zimmatic.com," prospective customers from anywhere in the world can research information on Zimmatic equipment prior to visiting their local dealer or supplement information they have received from their local dealer. OUTLOOK--FUTURE STRENGTH AND SUCCESS Net farm income is still very healthy, land values remain strong and low interest rates continue to prevail. With the lowest debt to asset ratio since 1962, farmers are relatively liquid and in a position to invest in capital equipment, particularly equipment that will increase productivity and improve operating efficiency. This indirect evidence of a favorable market for Lindsay's irrigation equipment is supported by our North American dealers, who are indicating higher-than-expected rates of pre-season inquiries. We believe we have the product and offer the sales and service support that can turn that interest into revenue. We expect continued favorable demand in exports to Mexico and Latin America in fiscal 1998; however, as anticipated, we are beginning to feel the effects of a stronger U.S. dollar relative to Western European and other currencies. To leverage global opportunities while limiting our downside risk, Lindsay's product sales are always in U.S. dollars, so foreign currency translation does not impact our earnings. Rather, pricing may be an issue as our products become more expensive for our international customers. We are currently working with our international dealers to create incentives and programs to continue the progress we have made in these markets. We remain confident in the growth potential of our diversified products business; although we expect fiscal 1998 revenue growth to moderate from the 32 percent achieved this past year. By broadening the range of products Lindsay manufactures for our existing OEM customers, we hope to leverage the stronger product demand being experienced by Deere & Company, Caterpillar, Inc., New Holland North America, Inc. and other customers as they too benefit from a healthy farm economy and growing global agricultural demand. As promising as our near-term prospects are, Lindsay's long-term outlook is even more so. The world will have to find ways to feed its growing population, using less water, fewer chemicals and the same amount of farmland. Lindsay Manufacturing Co. is a leading domestic manufacturer and the number-one exporter of one of the only pieces of capital equipment that increases yields through higher crop production. We are in prime position to benefit from global dynamics, and we are continually investing in our products, dealer network and operations to maintain our leadership and ensure our future success. Dedicated employees, motivated dealers, loyal customers and confident shareholders continue to be the keys to realizing our potential. Once again, we thank each of you for helping to make fiscal 1997 a success and we look forward to working with you to make the most of the opportunities that lie before us. Sincerely, Gary D. Parker Chairman, President and Chief Executive Officer 5 8 * * LINDSAY MANUFACTURING CO. * * * * * PHOTO OF CORN * * * * OPERATIONS REVIEW * ========================== ************************ [GRAPH] World Population/ Land in Ag Production Year World population Square miles in billions in Ag Production in millions 1960 3.0 billion 5.8 million 1997 5.9 billion 5.8 million 2040 Projected 10.0 billion 5.8 million "If we stopped the population today, we'd still have to roughly double the world's farm output over the next 20 to 30 years as we brought all of the consumers in China, India, Indonesia, Brazil, and Nigeria up to twenty-first century living standards." Hudson Institute Global Food Quarterly THE CHALLENGE - - The world population is expected to almost double over the next 40 years, adding another five billion people to feed. - - Economic expansion, particularly in Latin America, China and the rest of Southeast Asia, and Eastern and Central Europe, increases the demand, not just for food, but for better and more diverse diets. - - Yet, the amount of farmland is not projected to increase and, according to some estimates, may even shrink by 1 to 2 percent annually as acreage is lost to industrial and residential use. - - Compounding the situation is a declining per capita water supply. According to a report by the World Bank, projected world population growth will result in a 650 percent rise in the demand for water over the next 30 years. As a consumer of approximately 63 percent of the earth's fresh water supply--only about 45 percent of which is actually used by crops--agricultural use is a prime candidate for conservative measures. A recipe for global disaster? Probably not, thanks in part to the ability of modern farming techniques to dramatically increase agricultural production. Several yield-enhancing advances will play key roles in feeding the world's growing population, including: seeds genetically engineered to resist insects and disease; farm equipment designed to customize farming based on growing conditions and optimize harvests; improved fertilizers and ag chemicals; and precision irrigation developed to conserve water, energy and labor, while allowing the precise application of chemical inputs. THE IRRIGATION SOLUTION According to a report by the World Bank, half the growth in food supply in the past 30 years has come from the expansion of irrigated agriculture. Moreover, an estimated half to two-thirds of future incremental food production will come from irrigated land. The majority of today's irrigated land is irrigated utilizing methods which are water inefficient. However, as water supplies are stretched ever thinner, the preferred methods of irrigation will be those that achieve higher crop yields while using less water. How can farmers increase irrigation yet reduce water use? The answer is through the use of center pivot and lateral move technology. ************************** * * * AERIAL PHOTO OF IRRI- * * GATED CROP CIRCLES* * * * ************************** Each center pivot covers approximately 135 productive acres. In many areas, center pivot irrigation improves crop yields by up to 100% over dry land farming. 6 9 1997 Annual Report Center pivot systems are comprised of sprinklers on spans of large diameter pipe that draw water from a central supply. One center pivot irrigates, on average, 135 acres in a circular pattern. The precise application of water, and optionally chemicals, creates several advantages over the oldest and most common method--traditional "surface," or "flood," irrigation. Center pivot and lateral move systems cut water usage by 40 to 60 percent, use 90 percent less labor and significantly reduce the risk of environmental contamination resulting from chemical leaching and runoff. In addition, center pivot and lateral move irrigation can double the yields realized through dry land farming. Yields are increased through uniform and timely water and chemical application. And, center pivots can be installed on a variety of terrains--an advantage that opens up millions of previously unirrigated acres. Through cost savings and better crop yields, a center pivot system, which has a useful life of 15 to 20 years, can often pay for itself in only four to six years. LINDSAY --A LEADING SUPPLIER OF THE SOLUTION As a domestic market leader and the number-one exporter of center pivot and lateral move irrigation systems, Lindsay is poised to benefit from market dynamics arising from the need to feed a growing world population. The Company's Zimmatic irrigation systems are sold worldwide through a network of over 350 independent dealer outlets. Currently, Lindsay and its dealers support systems operating in 86 countries irrigating over 11 million acres. DOMESTIC MARKET EVOLUTION While global market dynamics clearly indicate significant export opportunity, perhaps even more compelling is its effect on Lindsay's domestic sales potential. Nowhere are farmers in a better position to incorporate leading-edge farming techniques than in the United States. The U.S., with its exceptional farmland, transportation and production methods, is the world's low-cost producer of many agricultural products. Indeed, U.S. exports of agricultural commodities are expected to grow to $80 billion by 2005 from today's $60 billion. Fueling U.S. farming's evolution is ongoing consolidation. While the number of farms has dropped by over 40 percent since the early 1960s, the total acres cultivated has remained roughly constant while total farm output has risen over 50 percent in just the last ten years. The economies of scale inherent in larger operations not only make U.S. agricultural goods more competitive in the world market, but put U.S. growers in a better position to incorporate advanced farming techniques. [NORTH AMERICAN MARKET POTENTIAL PIE CHART] 400 Million Total 60 Million Total 15 Million Center Cultivated Acres Irrigated Acres Pivot Irrigated Acres Conversion of an additional 20% of the 60 million irrigated acres to center pivot irrigation represents approximately $2.5 billion in domestic sales potential. [SOURCE OF CENTER PIVOT SALES PIE CHART] Conversion of Conversion of Replacement Irrigated Land 50% Dry Land 25% Market 25% Replacement sales provide further momentum as half of the over 120,000 existing center pivot and lateral move irrigation systems have been in service for more than a decade. 7 10 LINDSAY MANUFACTURING CO. *************************************************************************** * * * PHOTO OF PIPELINE ROBOTIC WELDING * * * *************************************************************************** 8 11 1997 Annual Report SITE-SPECIFIC FARMING FOR MAXIMUM YIELDS The most highly publicized advanced farming technique is site-specific farming. Also called precision farming, prescription farming and variable rate technology, it refers to an information- and technology-based management system allowing growers to customize farming to conditions within each field. Site-specific farming is the marriage of several technologies, including Global Positioning Systems (GPS), Geographic Information Systems (GIS), yield monitoring devices, soil, plant and pest sensors, remote sensing and variable rate technologies for application of inputs. The development and adoption of site-specific farming on a large scale will be an evolutionary process. Currently, a common application entails farmers using combines equipped with a yield recording system to collect data as crops are harvested. At the same time, the combine interfaces with the satellite-based Global Positioning System to correlate yield data with field location. This data is later processed through a Geographic Information System, which renders a series of computerized maps that might include soil type, topography and crop cover. Farmers can analyze the maps and other resulting information to identify variations and determine how to improve yields throughout the field. Eventually, through the use of site-specific farming, growers will be able to adjust seeding rates, fertilizers, pesticides, tillage and irrigation to maximize yields on each acre of their farm. Moreover, data will be collected automatically, in real-time, and likely processed through a management information system that will track and integrate each aspect of the entire farm operation. The opportunity for precision irrigation to become an integral part of site-specific farming is obvious. - -------------------------------------------------------------------------------- Lindsay's investment in robotics and automation helped boost manufacturing capacity by approximately 25%. Moreover, thanks to Lindsay's innovative formed outlet process, benefits of the Company's pipeline automation extend beyond manufacturing efficiency to include superior product reliability. ---------------------------------- | | | | | PHOTO OF | | CNC MACHINING CENTER | | | | | ---------------------------------- Process enhancements, such as this recently added CNC Machining Center, enabled Lindsay to achieve a fiscal 1997 gross margin of 25.8%, surpassing the Company's goal of 22 to 24%. LEADERSHIP THROUGH INNOVATION As an industry technology leader, Lindsay is again poised to benefit from market dynamics. The Company has already taken steps toward creating a precision farming product line with the development of several leading-edge product features, including Lindsay's Automated Irrigation Management System (AIMS) Advance control panels, which allow growers to tailor application rates. In addition, the Company's AIMS Telemetry Network provides today's farmers with the type of capability that will be central to tomorrow's precision farming operations. The Network's Windows-based software, not only collects, stores and manipulates irrigation and environmental data, but also is capable of tracking a variety of other operational information for each field, such as on planting, chemical use, fertilizer use, irrigation use and crop yield. The type of data collection and documentation capability offered by the Network is becoming increasingly sought after as a growing number of farmers are required to report how much water, fertilizer and pesticides they use, as well as where they applied them. Lindsay's Network eases the burden of data collection and incorporates reporting functions specifically designed to meet these documentation requirements. The Company also continually demonstrates its ability to innovate through product enhancements, including the industry's most efficient drive train now backed by the industry's best drive train warranty. A recent innovation about which the Company is particularly enthused is its redesigned and newly patented Zimmatic Pendulum Steerable Corner System. This add-on feature allows farmers to irrigate the majority of each corner of their fields with their Zimmatic center pivots, adding valuable acres to irrigated crop land. Lindsay's inventiveness does not stop with its products. The Company has consistently demonstrated its ability to innovate its operations and dealer network. The growing sophistication of the business of farming is evidenced by the proliferation of agricultural consulting services. Always in the vanguard, Lindsay has long recognized the benefits of selling and servicing through a dealer network that is highly professional and very 9 12 LINDSAY MANUFACTURING CO. value-added. Through incentives, materials, seminars and an array of marketing tools, Lindsay ensures that its dealers are kept abreast of Zimmatic technology and are experts on optimal implementation. The Company's recently deployed Tech Vans exemplify Lindsay's commitment to dealer excellence as well as the Company's creative approach to its business. Robotics, just-in-time inventory management, statistical process control, cellular manufacturing and employee education and involvement programs--Lindsay has harnessed and integrated each technique with impressive results. In 1979, it took 500 man-hours to produce an average center pivot; in 1997, it took 140 man-hours. Benefits of the Company's latest engineering feat, its formed outlet process, extend beyond manufacturing efficiency to include superior product reliability. Drawing on employee talent, dealer motivation and management's commitment to maintaining a leadership position, Lindsay will continue to leverage market dynamics and stay ahead of the technology curve. EXPORT SUCCESS THROUGH LOCAL FLAVOR Having experienced fiscal 1997 revenue growth of 41 percent, following fiscal 1996's 79 percent gain, Lindsay's export business has clearly thrived. Although year-to-year performance of this segment will be affected by exchange rates, weather, government programs, politics and other variables outside of Lindsay's control, the long- ----------------------------- | | | | | | | PHOTO OF ZIMMATIC | | PENDULUM STEERABLE | | CORNER SYSTEM | | | | | | | ----------------------------- Lindsay's redesigned and newly patented Zimmatic Pendulum Steerable Corner System offers farmers the opportunity to maximize the return on their investments in land and equipment by putting more acres into production. - ------------------------------------------------------------------------------- | | | | | Lindsay's Zimmatic irrigation | | systems are sold worldwide | | through a network of over 350 | | independent dealer outlets. Lindsay and its dealers | | MAP OF THE WORLD SHOWING support systems operating in | | DEALER OUTLETS 86 countries irrigating over | | 11 million acres. | | | | | | | | | - ------------------------------------------------------------------------------- 10 13 1997 Annual Report term growth trend should be favorable given the need for farmers throughout the world to maximize yields as they rise to the challenge of feeding a growing population. The same strategy that has worked so well for Lindsay domestically is also delivering success abroad. The Company capitalizes on its superior brand recognition, reputation for product reliability and technology leadership, as well as a well-trained, fully supported dealer network. Though the strategy is the same, tactics are adjusted to fit local customs and other variables for maximum impact. Key to Lindsay's adaptability and export success is its international network of dealers, which is comprised of local firms, carefully selected for their ability to give Lindsay the access it needs to each market. To gain a foothold in new international markets, Lindsay frequently works through government agencies and private groups to identify agricultural initiatives by foreign governments seeking to modernize their farm economies. By continuing to apply its proven strategy, seasoned for local flavor, Lindsay expects to maintain its status as the number-one exporter of center pivot and lateral move irrigation systems. GLOBAL DYNAMICS STRENGTHEN DIVERSIFIED PRODUCTS International agricultural demand also bodes well for Lindsay's diversified products segment, through which the Company produces large diameter steel tubing and provides outsourced manufacturing services. The tubing Lindsay produces is used by its customers to manufacture grain handling equipment, combine reels, conveyor rolls, pneumatic tubes, hay conditioner roll cores and other agricultural and non-agricultural equipment. The Company's outsource manufacturing operations provide sophisticated design and engineering capabilities and a full spectrum of manufacturing services for a customer base that includes leading agricultural and construction equipment manufacturers such as Deere & Company, Caterpillar Inc. and New Holland North America, Inc. An outgrowth of the Company's 1987 efforts to more fully utilize its manufacturing capacity, the Company's diversified products segment now constitutes approximately 17 percent of Lindsay's annual revenues. The Company's long-term goal is to expand this segment to about 25 percent of sales, primarily by broadening the range of products manufactured for its existing customer base. In summary, as attention-getting as the rapidly escalating demand for food is, agriculture around the world is evolving to meet the challenge. And Lindsay has the product to help farmers grow more food on their existing land and the dealer network to maximize the chances that product will bear the Zimmatic label. By continuing to anticipate market dynamics and seize the resulting opportunities, Lindsay expects to turn global challenges into long-term shareholder value. ----------------------------------- | | | | | | | | | | | | | | | PHOTO OF | | ZIMMATIC AD | | | | | | | | | | | | | | | ----------------------------------- Through ongoing investment in its products and manufacturing facility, Lindsay is able to meet the demands of farmers requiring superior reliability as well as leading-edge irrigation technology. 11 14 Lindsay Manufacturing Co.
SELECTED FINANCIAL DATA ($ in millions, except per share amounts) For the years ended August 31, ==================================================================================================================================== 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------------------------------------------------------------------------------------------------------------------------ Operating revenues........................ $158.3 $136.2 $111.8 $112.7 $102.1 $108.9 $98.7 $102.7 $92.6 $76.1 $54.1 Gross profit.............................. 40.9 32.7 25.9 25.7 23.8 23.8 21.5 20.0 18.6 11.8 8.9 Selling, general and administrative, and engineering and research expenses................................. 14.4 13.4 11.9 11.6 10.7 10.9 10.5 9.6 8.2 7.0 6.7 Earnings before cumulative effect of accounting change..................... 20.1 16.5 11.7 11.2 10.7 11.0 8.9 8.4 7.4 3.8 1.6 Net earnings.............................. 20.1 16.5 11.7 11.9 10.7 11.0 8.9 8.4 7.4 3.8 1.6 Earnings before cumulative effect of accounting change per share(1)........ 2.01 1.63 1.10 1.03 0.98 1.01 0.85 0.80 0.70 0.35 0.15 Net earnings per share(1)................. 2.01 1.63 1.10 1.09 0.98 1.01 0.85 0.80 0.70 0.35 0.15 Cash dividends per share(1)............... 0.137 0.10 0 0 0 0 0 0 0 0 0 Property, plant and equipment, net........ 11.3 9.7 7.2 5.6 5.6 6.0 5.4 4.7 4.4 4.6 3.4 Total assets.............................. 108.0 96.8 86.1 88.4 79.9 71.4 60.4 46.9 31.7 24.0 19.0 Long-term obligation...................... $ 0.3 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Return on sales........................... 12.7% 12.1% 10.5% 10.6% 10.5% 10.1% 9.0% 8.2% 8.0% 5.0% 2.9% Return on beginning assets................ 20.7% 19.2% 13.2% 14.9% 15.0% 18.2% 19.0% 26.4% 30.8% 19.9% 6.7% ====================================================================================================================================
(1) For 1997, 1996, 1995, 1994, 1993 and 1992 per share amounts are calculated by dividing the earnings by the weighted average number of common and common equivalent (stock options) shares outstanding of 9,986,397, 10,150,878, 10,622,210, 10,945,139, 10,905,527 and 10,873,031. For 1991, 1990 and 1989, per share amounts are calculated on Lindsay's 10,459,807, 10,421,157 and 10,479,609 weighted average outstanding shares, respectively. For 1988 and 1987, per share amounts are calculated based on Lindsay's 10,479,375 outstanding shares as of October 12, 1988, the date of the initial public offering, since at that time all of the outstanding shares of Lindsay were owned by DEKALB Energy Company. Per share amounts and number of shares reflect the three-for-two stock split in March 1997.
Quarterly Data ($ in thousands, except per share amounts) For the three months ended the last day of ==================================================================================================================================== November February May August - ------------------------------------------------------------------------------------------------------------------------------------ FISCAL 1997............................................................... OPERATING REVENUES....................................................... $39,467 $45,693 $41,663 $31,504 COST OF OPERATING REVENUES............................................... 30,003 33,942 30,370 23,092 EARNINGS BEFORE INCOME TAXES............................................. 7,073 8,963 8,902 4,991 NET EARNINGS............................................................. 4,809 6,096 6,053 3,094 NET EARNINGS PER SHARE................................................... 0.48 0.61 0.61 0.31 MARKET PRICE (NASDAQ NATIONAL MARKET)(1) HIGH.................................................................... $ 31 $ 36-1/2 $ 36-3/4 $ 39 LOW..................................................................... 24-13/16 26-11/16 28 29 Fiscal 1996 Operating revenues....................................................... $27,326 $38,140 $41,139 $29,628 Cost of operating revenues............................................... 20,905 28,336 30,534 23,711 Earnings before income taxes............................................. 4,322 7,523 8,170 3,925 Net earnings............................................................. 3,026 5,265 5,719 2,508 Net earnings per share................................................... 0.30 0.52 0.56 0.25 Market price (Nasdaq National Market)(1) High.................................................................... $ 16-3/16 $ 21-13/16 $ 26-1/2 $ 29-11/16 Low..................................................................... 14-3/8 15-13/16 19-1/2 22-11/16 ====================================================================================================================================
1997: Fourth-quarter adjustments resulting in a net increase in pre-tax earnings of $1,445,000 were made to inventory accounts (due to physical inventory), the LIFO inventory reserve and the obsolete inventory reserve. Additional fourth-quarter accrual adjustments decreased pre-tax earnings $440,000 for compensation costs including bonus earnouts and vacation pay. 1996: Fourth-quarter adjustments resulting in a net decrease in pre-tax earnings of $1,229,000 were made to inventory accounts (due to physical inventory), the LIFO inventory reserve and the obsolete inventory reserve. Additional fourth-quarter accrual adjustments decreased pre-tax earnings $581,000 for compensation costs including bonus earnouts, vacation pay, and retirement and $200,000 for bad debt allowance. Partially offsetting this, a $278,000 accrual reduction was made for dealer related items and a $138,000 accrual reduction for insurance. During the fourth-quarter refunds received with interest resulting from state economic development tax credits increased pre-tax earnings $1,223,000 for other income and $185,000 for interest income. Per share and market price amounts reflect the three-for-two stock split in March 1997. (1) Lindsay common stock began trading October 21, 1997 on the New York Stock Exchange, Inc. (NYSE) under the ticker symbol LNN. 12 15 Lindsay Manufacturing Co. MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW Both the North American and export center pivot and lateral move irrigation equipment markets registered sales growth in fiscal 1997 as did Lindsay's diversified products segment. This growth in revenues lead to a 21% growth in net earnings for the year. Lindsay undertook a three-for-two stock split in March, 1997 -- the Company's fourth three-for-two stock split since 1989 -- and continued its share repurchase program, repurchasing 312,300 shares for $9.9 million during the year. The Company continues to have a solid balance sheet with no debt (other than a capitalized lease for computer hardware) and strong financial ratios. RESULTS OF OPERATIONS FISCAL YEAR 1997 COMPARED TO 1996 The following table provides highlights for fiscal 1997 compared with fiscal 1996.
==================================================================================================================================== For the Years Ended Percent Increase August 31, (Decrease) ---------------------------------------------------------------------------------------------------- ($ in thousands) 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Consolidated Operating Revenues......................... $158,327 $136,233 16.2% Cost of Operating Revenues................. $117,407 $103,486 13.5 Gross Profit............................... $ 40,920 $ 32,747 25.0 Gross Margin............................... 25.8% 24.0% Selling, Eng. & Research, and G&A Expense............................... $ 14,444 $ 13,363 8.1 Operating Income........................... $ 26,476 $ 19,384 36.6 Operating Margin........................... 16.7% 14.2% Interest Income, net....................... $ 2,998 $ 2,936 2.1 Other Income, net.......................... $ 455 $ 1,620 (71.9) Income Tax Provision....................... $ 9,877 $ 7,422 33.1 Effective Income Tax Rate.................. 33.0% 31.0% Net Earnings............................... $ 20,052 $ 16,518 21.4 Irrigation Equipment Segment (See Note L) - ----------------------------------------------- Operating Revenues......................... $131,583 $115,908 13.5 Operating Income........................... $ 29,895 $ 24,013 24.5 Operating Margin........................... 22.7% 20.7% Diversified Products Segment (See Note L) - ----------------------------------------------- Operating Revenues......................... $ 26,744 $ 20,325 31.6 Operating Income........................... $ 6,055 $ 4,181 44.8% Operating Margin........................... 22.6% 20.6% ====================================================================================================================================
REVENUES Operating revenues grew 16.2% to $158.3 million in fiscal 1997, compared to $136.2 million in fiscal 1996. Fiscal 1997 North American irrigation equipment revenues totaled $100.6 million, an 8% increase from $93.3 million in fiscal 1996. Fiscal 1997 export irrigation equipment revenues grew 41% to $27.9 million as compared to $19.8 million in fiscal 1996. Diversified products revenues also grew during the year, increasing 32% to $26.7 million compared to $20.3 million in fiscal 1996. Other revenues, primarily consisting of revenues from freight services, are included with irrigation equipment in the above table and totaled $3.1 million in fiscal 1997. The market for center pivot and lateral move irrigation equipment in North America continued to grow in fiscal 1997, but at a rate somewhat lower than in fiscal 1996 when Lindsay recorded a 25% increase in North American irrigation equipment revenues. Through expanded automation and process improvements, Lindsay was able to increase its manufacturing productivity and capacity. These factors along with the Company's use of creative sales and marketing programs enabled Lindsay to continue to grow the revenues and profitability of its North American irrigation equipment business. Fiscal 1997 export irrigation equipment revenues grew by 41% over fiscal 1996. The Mexican and Latin American, African and Australian markets each continued their growth during the year. The Company expects several of these export markets to continue to grow during fiscal 1998. However, we expect that the strong value of the U.S. dollar may negatively impact pricing and/or volume in the Western European market. At August 31, 1997, Lindsay had a $17.1 million order backlog for irrigation equipment, a slight increase from fiscal 1996's year end irrigation equipment order backlog of $16.6 million. Diversified product revenues resumed their growth during fiscal 1997. The Company recorded increased revenues from both the large diameter steel tubing and the outsource manufacturing components of its diversified products segment. Caterpillar Inc., Deere & Company, and New Holland North America, Inc. each contributed to the outsource manufacturing revenue growth. At year end fiscal 1997, Lindsay's order backlog for diversified products totaled $10.2 million, up 12% from $9.1 million at the end of fiscal 1996. GROSS MARGIN Fiscal 1997 gross margin of 25.8% was up from 24.0% in fiscal 1996 and 23.1% in fiscal 1995. Gross margin for fiscal 1997 was favorably impacted by continued improvements in manufacturing productivity and efficiencies and by continued strong demand in both the North American and export markets for irrigation equipment. OPERATING EXPENSES Selling, engineering and research, and general administrative expenses grew 8.1% in fiscal 1997, totaling $14.4 million as compared to $13.4 million in fiscal 1996. The increase is primarily due to increases in professional fees, travel, advertising and salary and benefit costs partially offset by lower bad debt expenses. INTEREST INCOME, OTHER INCOME AND TAXES Lindsay's interest income is primarily generated from its investments in short-term (0 to 12 months) and intermediate-term (12 to 36 months) investment grade municipal bonds, on which interest earnings are exempt from federal taxes, and short term investment grade commercial paper. Fiscal 1997 interest income of $3.0 million is up slightly from $2.9 million in fiscal 1996. Fiscal 1997 other income of $0.5 million is down significantly from $1.6 million in fiscal 1996 which included $1.4 million from the State of Nebraska for the growth of jobs and investment at the Lindsay facility during the years 1989 through 1994. Lindsay's fiscal 1997 effective tax rate grew to 33% from 31% for fiscal 1996. The Company currently benefits, and expects to continue to benefit from the foreign sales corporation federal tax provisions as they relate to export sales, the federal tax free status of interest earned from its municipal investments and State of Nebraska economic development tax credits. 13 16 RESULTS OF OPERATIONS FISCAL YEAR 1996 COMPARED TO 1995 The following table provides highlights for fiscal 1996 compared with fiscal 1995.
========================================================================================================== For the Years Ended Percent Increase August 31, (Decrease) -------------------------------------------------------------------------- ($ in thousands) 1996 1995 - ---------------------------------------------------------------------------------------------------------- Consolidated Operating Revenues......................... $136,233 $111,843 21.8% Cost of Operating Revenues................. $103,486 $ 85,986 20.4 Gross Profit............................... $ 32,747 $ 25,857 26.7 Gross Margin............................... 24.0% 23.1% Selling, Eng. & Research, and G&A Expense............................... $ 13,363 $ 11,937 12.0 Operating Income........................... $ 19,384 $ 13,920 39.3 Operating Margin........................... 14.2% 12.5% Interest Income, net....................... $ 2,936 $ 2,728 7.6 Other Income, net.......................... $ 1,620 $ 438 269.9 Income Tax Provision....................... $ 7,422 $ 5,382 37.9 Effective Income Tax Rate.................. 31.0% 31.5% Net Earnings............................... $ 16,518 $ 11,704 41.1 Irrigation Equipment Segment (See Note L) Operating Revenues......................... $115,908 $ 88,837 30.5 Operating Income........................... $ 24,013 $ 16,386 46.6 Operating Margin........................... 20.7% 18.4% Diversified Products Segment (See Note L) Operating Revenues......................... $ 20,325 $ 23,006 (11.7) Operating Income........................... $ 4,181 $ 5,181 (19.3)% Operating Margin........................... 20.6% 22.5% ====================================================================================================================================
REVENUES Operating revenues grew 22% to $136.2 million in fiscal 1996, compared to $111.8 million in fiscal 1995. Fiscal 1996 North American irrigation equipment revenues totaled $93.3 million, a 25% increase from $74.8 million in fiscal 1995. Fiscal 1996 export irrigation equipment revenues were also up, totaling $19.8 million as compared to $11.1 million in fiscal 1995. Revenues from diversified products were off 12% in fiscal 1996, totaling $20.3 million compared to $23.0 million in fiscal 1995. Total demand for irrigation equipment grew in the North American market in fiscal 1996. Lindsay was able to capitalize on this growth and increase both revenues and gross margin by using creative sales and marketing programs to encourage dealers and growers to order equipment early and by further improving the Company's manufacturing productivity through automation and process improvements. Fiscal 1996 export irrigation equipment revenues grew by 79% over fiscal 1995. The Western European, Mexican and Latin American, Australian, and South African markets each grew during the year. Lindsay expects these same markets to continue to grow during fiscal 1997. At the year end fiscal 1996, Lindsay had a $16.6 million order backlog for irrigation equipment, an increase of almost 125% from fiscal 1995's year end irrigation equipment order backlog of $7.4 million. Lindsay believes that the farmers' confidence level during July and August of 1996 was higher than in 1995 -- due to stronger agricultural commodity prices -- resulting in the increase in order backlog. Diversified product revenues contracted during fiscal 1996, primarily due to a reduction in demand for and sales of large diameter steel tubing, but also due to a slight decrease (less then 5%) in Lindsay's outsource manufacturing sales. Caterpillar Inc., Deere & Company, and New Holland North American, Inc. continue to be Lindsay's major outsource manufacturing customers. At year end fiscal 1996, Lindsay's order backlog for diversified products totaled $9.1 million, up 28% from $7.1 million at the end of fiscal 1995. GROSS MARGIN Fiscal 1996 gross margin of 24.0% was up from 23.1% in fiscal 1995 and 22.9% in fiscal 1994. 1996 gross margin was favorably impacted by continued improvements made in manufacturing productivity and efficiencies and by a strong pricing environment in both the North American and export markets for irrigation equipment. OPERATING EXPENSES Selling, engineering and research, and general and administrative expenses increased 12% in fiscal 1996 to $13.4 million as compared to $11.9 million in fiscal 1995. The increase is primarily due to increases in advertising and salaries and benefit costs partially offset by lower office rental, professional and legal fees and insurance costs. INTEREST INCOME, OTHER INCOME AND TAXES Fiscal 1996 interest income of $2.9 million was up slightly from $2.7 million in fiscal 1995. Fiscal 1996 other income of $1.6 million was up significantly from $0.4 million in fiscal 1995, primarily due to the Company's receipt of $1.4 million in benefits during fiscal 1996 from the State of Nebraska for the growth of jobs and investment at Lindsay's manufacturing plant during the years 1989 through 1994. Lindsay's effective tax rate of 31% for fiscal 1996 compares to an effective tax rate of 31.5% for fiscal 1995. FINANCIAL POSITION AND LIQUIDITY The discussion of financial position and liquidity focuses on the balance sheet and statement of cash flows. Lindsay requires cash for financing its receivables, inventories, capital expenditures, stock repurchases and dividends. Over the years, Lindsay has financed its growth through funds provided by operations. Cash flows provided by operations of $21.3 million for fiscal 1997 increased from $9.8 million in fiscal 1996. The increase in cash flows provided by operating activities in fiscal 1997 was primarily due to net earnings. Fiscal 1996 cash flows provided by operating activities was principally due to net earnings partially offset by increased receivables. Receivables of $18.9 million at August 31, 1997, were comparable to $20.1 million at August 31, 1996. Inventories at August 31, 1997 totaled $10.0 million, higher than their $7.8 million balance at August 31, 1996. May and June 1997 North American irrigation sales did not develop to the degree anticipated, resulting in increased inventory at August 31, 1997. Current liabilities of $19.5 million at August 31, 1997, are higher than their $18.7 million balance at August 31, 1996. The increase from August 31, 1996, is principally due to higher accruals for payroll and vacation, insurance and current state and federal income taxes, partially offset by decreased trade payables. Cash flows used in investing activities of $9.2 million for fiscal 1997 increased from $3.5 million in fiscal 1996 and for both periods was primarily attributable to purchases of marketable securities and capital expenditures, partially offset by proceeds from marketable securities. 14 17 Lindsay's cash and short-term marketable securities totaled $16.3 million at August 31, 1997, as compared to $26.3 million at August 31, 1996. At August 31, 1997, Lindsay had $45.8 million invested in long-term marketable securities which represent intermediate term (one to three and one-third year maturities) municipal debt, as compared to $28.1 million at August 31, 1996 Cash flows used in financing activities of $10.2 million for fiscal 1997 increased from $8.5 million in fiscal 1996 and for both periods was primarily attributable to dividends paid and to purchases of treasury stock partially offset by proceeds from the issuance of common stock under the Company's stock option plan. Capital expenditures of $3.3 million (excluding a capitalized lease of $0.5 million) during fiscal 1997 decreased from $4.0 in fiscal 1996 and were used primarily for upgrading manufacturing plant and computer equipment. Lindsay expects its fiscal 1998 capital expenditures to be approximately $3.5 to $4.0 million which will be used primarily to improve Lindsay's existing facilities and expand its manufacturing capabilities. Depreciation totaled $2.0 million in fiscal 1997 and is expected to increase to the $2.5 million range in fiscal 1998. Lindsay expended $9.9 million in fiscal 1997 to repurchase 312,300 shares of its common stock. In fiscal 1996, Lindsay repurchased 413,250 shares of its common stock using $8.5 million. Lindsay believes its capitalization (including cash and marketable securities balances) and operating cash flow are sufficient to cover expected working capital needs, planned capital expenditures, dividends and repurchases of common stock. FISCAL 1998 OUTLOOK IRRIGATION EQUIPMENT The North American market for irrigation equipment continued its growth in fiscal 1997, but at a more modest pace than the 25% growth of fiscal 1996. Lindsay believes that the desire of North American farmers to reduce variable input costs, increase or stabilize crop yields, reduce labor input and conserve water and energy will continue to drive demand for center pivot and lateral move irrigation equipment. The Company believes that these demand drivers will result in long-term growth in North American demand for its irrigation equipment to average in the 6% to 8% per annum range. Our current outlook for the fiscal 1998 North American center pivot and lateral move irrigation equipment market is for growth at this 6% to 8% per annum range. Grain prices, although on average lower than their peaks of last year, have stabilized at levels which still generate profits for farmers. Net cash farm income for 1997 is currently projected at $54 billion as compared to $57 billion in 1996 and $49 billion in 1995. Farmers continue to be in a strong financial condition with an average debt to asset ratio of under 15%. Additionally, prevailing interest rates are relatively low and are stable. Lindsay believes these factors will lead to continued demand growth in fiscal 1998. Export sales of center pivot and lateral move irrigation equipment should increase again in fiscal 1998, but at a rate less than the 41% increase recorded in fiscal 1997. The Mexican and Latin American, Australian and African markets should continue to expand during the year. Lindsay believes that the Western European market could be negatively impacted by the strength of the U.S. dollar. Lindsay's domestic and international irrigation equipment sales are highly dependent upon the need for irrigated agricultural production which, in turn, depends upon many factors including total worldwide crop production, the profitability of agricultural production, commodity prices, aggregate net farm income, governmental policies regarding the agricultural sector, water and energy conservation policies and the regularity of rainfall. Approximately 18%, 15% and 10% of Lindsay's revenues were generated from export sales in fiscal 1997, 1996 and 1995, respectively. Lindsay does not believe it has significant exposure to foreign currency translation risks because its export sales are all in U.S. dollars and are generally all shipped against prepayments or irrevocable letters of credit which are confirmed by a U.S. bank or other secured means. DIVERSIFIED PRODUCTS Lindsay's diversified products segment consists of two major products: large-diameter thin-wall round steel tubing and outsource manufacturing services.Diversified products customers for both products primarily consist of agricultural and industrial capital goods manufacturers. The Company expects diversified products revenue to grow in excess of 10% in fiscal 1998. Lindsay's long-term goal has been, and continues to be to build its diversified products segment to total 25% of total annual revenues. SEASONALITY Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered and installed before the growing season. Shipments to North American customers usually peak during Lindsay's second and third quarters for the spring planting period. Lindsay's expansion into diversified products complements its irrigation operations by using available capacity and reducing seasonality. OTHER FACTORS Environmental contamination at Lindsay's manufacturing facility occurred in 1982 when a drill, operated by a sub-contractor installing groundwater monitoring wells, punctured a silt and sand lens and an underlying clay layer beneath a clay-lined waste lagoon. The 1982 puncture of the clay layer caused acid and solvent leachate to enter the sand and gravel aquifer. Since 1983, Lindsay has worked actively with the Nebraska Department of Environmental Control (NDEC) to remediate this contamination by purging and treating the aquifer. In October 1989, the Environmental Protection Agency (EPA) added Lindsay to the list of priority Superfund sites. In 1988, a sampling which was performed in connection with an investigation of the extent of aquifer groundwater contamination, revealed solvent contamination (volatile organic compounds) in the soil and shallow groundwater in three locations at and in the vicinity of the plant. Under a 1988 agreement with the EPA and NDEC, Lindsay conducted a Remedial Investigation/ Feasibility Study (RI/FS). This study was completed in June 1990. Lindsay does not believe that there is any other soil or groundwater contamination at the manufacturing facility. In September 1990, the EPA issued its Record of Decision (ROD) selecting a plan for completing the remediation of both contaminations. The selected plan implementation was delayed until finalization of the Consent Decree in April 1992. The final remediation 15 18 plans were approved in 1993 and 1994 and the remediation plans were fully implemented during fiscal 1995. The balance sheet reserve for this remediation was $0.3 million at August 31, 1997 and 1996. Lindsay believes that the current reserve is sufficient to cover the estimated cost for complete remediation of both the aquifer and soil and shallow groundwater contaminations under the final plans. Lindsay believes that its insurer should cover costs associated with the contamination of the aquifer that was caused by the puncture of the clay layer in 1982. However, Lindsay and the insurer are in litigation over the extent of the insurance coverage. In 1987, the insurer agreed to reimburse Lindsay for remediation costs incurred by Lindsay. The insurer reduced its reimbursement of remediation costs in early 1990. In late 1990, Lindsay filed suit against the insurer. The insurer completely stopped reimbursement of remediation costs in 1991 and in 1992 the insurer filed a counterclaim against Lindsay for previously reimbursed remediation costs. In December 1995, the court dismissed Lindsay's suit against the insurer and entered a judgment in the amount of $2.4 million in favor of the insurer. During July 1997 the United States Court of Appeals reversed the judgment of $2.4 million and remanded the case to the district court for further proceedings. The Company has not made a provision for the previously reimbursed remediation costs. If the EPA or NDEC require remediation which is in addition to or different from the current plan and depending on the success of Lindsay's litigation against the insurer, this reserve could increase or decrease, depending on the nature of the change in events. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting standards ("SFAS") No. 128, "Earnings per Share" which, when adopted, will replace the current methodology for calculating and presenting earnings per share. Under SFAS No. 128, primary and fully diluted earnings per share will be replaced with basic and diluted earnings per share. The statement will be effective beginning in the Company's second quarter ending February 28, 1998, and accordingly, the financial statements for such quarter will include a restatement of historical earnings per share to conform to the requirements of SFAS No. 128. The impact of implementation of SFAS No. 128 is not expected to be material. STATEMENT OF MANAGEMENT RESPONSIBILITY The consolidated financial statements and notes to the consolidated financial statements of Lindsay Manufacturing Co. have been prepared by management, which has the responsibility for their integrity and objectivity. The statements have been prepared in accordance with generally accepted accounting principles to reflect, in all material aspects, the substance of financial events and transactions occurring during the respective periods. /s/ Gary D. Parker /s/ Bruce C. Karsk - ----------------------- ----------------------- Gary D. Parker Bruce C. Karsk Chairman, President and Vice President-Finance, Chief Executive Officer Treasurer and Secretary REPORT OF INDEPENDENT ACCOUNTANTS TO the Stockholders and Board of Directors of Lindsay Manufacturing Co.: We have audited the accompanying consolidated balance sheets of Lindsay Manufacturing Co. as of August 31, 1997 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended August 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lindsay Manufacturing Co. as of August 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended August 31, 1997 in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. ----------------------------- Omaha, Nebraska Coopers & Lybrand L.L.P. October 2, 1997 16 19
Lindsay Manufacturing Co. CONSOLIDATED STATEMENTS OF OPERATIONS ($ in thousands, except per share amounts) Years ended August 31, ==================================================================================================================================== 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Operating revenues .................................................................. $158,327 $136,233 $111,843 Cost of operating revenues .......................................................... 117,407 103,486 85,986 -------- -------- -------- Gross profit ........................................................................ 40,920 32,747 25,857 -------- -------- -------- Operating expenses: Selling expense .................................................................... 4,970 4,553 4,290 General and administrative expense ................................................. 7,898 7,380 6,264 Engineering and research expense ................................................... 1,576 1,430 1,383 -------- -------- -------- Total operating expenses ............................................................ 14,444 13,363 11,937 -------- -------- -------- Operating income .................................................................... 26,476 19,384 13,920 Interest income, net ................................................................ 2,998 2,936 2,728 Other income, net ................................................................... 455 1,620 438 -------- -------- -------- Earnings before income taxes ........................................................ 29,929 23,940 17,086 Income tax provision ................................................................ 9,877 7,422 5,382 -------- -------- -------- Net earnings ........................................................................ $ 20,052 $ 16,518 $ 11,704 ======== ======== ======== Net earnings per share: Primary ............................................................................ $ 2.01 $ 1.63 $ 1.10 ======== ======== ======== Fully diluted ...................................................................... $ 2.01 $ 1.62 $ 1.10 ======== ======== ======== Cash dividends per share ........................................................... $ 0.137 $ 0.10 $ 0.00 ======== ======== ======== ====================================================================================================================================
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ($ in thousands) =================================================================================================================================== Shares of Capital ------------------------------ in excess Total Common Treasury Common of stated Retained Treasury stockholders' stock stock stock value earnings stock equity - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT AUGUST 31, 1994 4,819,358 105,630 $ 4,819 $ 3,841 $ 60,743 $ (1,319) $68,084 Net earnings -- -- -- -- 11,704 -- 11,704 Net shares issued under stock option plan 23,447 -- 24 550 -- -- 574 Stock option tax benefits -- -- -- 21 -- -- 21 Acquisitions of common stock -- 369,250 -- -- -- (11,640) (11,640) ----------- ----------- -------- -------- -------- --------- -------- BALANCE AT AUGUST 31, 1995 4,842,805 474,880 4,843 4,412 72,447 (12,959) 68,743 Net earnings -- -- -- -- 16,518 -- 16,518 Cash dividends ($.10 per share) -- -- -- -- (963) -- (963) Net shares issued under stock option plan 58,170 -- 58 934 -- -- 992 Stock option tax benefits -- -- -- 35 -- -- 35 Acquisitions of common stock -- 230,200 -- -- -- (8,489) (8,489) Three-for-two stock split 2,427,038 282,740 2,427 (2,427) -- -- -- Fractional shares paid in cash in conjunction with the three-for-two stock split (52) -- -- (2) -- -- (2) ----------- ----------- -------- -------- -------- --------- -------- BALANCE AT AUGUST 31, 1996 7,327,961 987,820 7,328 2,952 88,002 (21,448) 76,834 NET EARNINGS -- -- -- -- 20,052 -- 20,052 CASH DIVIDENDS ($0.137 PER SHARE) -- -- -- -- (1,298) -- (1,298) NET SHARES ISSUED UNDER STOCK OPTION PLAN 147,790 -- 148 855 -- -- 1,003 STOCK OPTION TAX BENEFITS -- -- -- 255 -- -- 255 ACQUISITIONS OF COMMON STOCK -- 280,000 -- -- -- (9,876) (9,876) THREE-FOR-TWO STOCK SPLIT 3,727,560 526,210 3,727 (3,610) (117) -- -- FRACTIONAL SHARES PAID IN CASH IN CONJUNCTION WITH THE THREE-FOR-TWO STOCK SPLIT (55) -- -- (2) -- -- (2) ----------- ----------- -------- -------- -------- --------- -------- BALANCE AT AUGUST 31, 1997 11,203,256 1,794,030 $ 11,203 $ 450 $106,639 $ (31,324) $86,968 =========== =========== ======== ======== ======== ========= ======= ====================================================================================================================================
The accompanying notes are an integral part of the financial statements. 17 20 Lindsay Manufacturing Co. CONSOLIDATED BALANCE SHEETS
($ in thousands, except par values) At August 31, ======================================================================================================= 1997 1996 - ------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents ....................................................... $ 4,231 $ 2,362 Marketable securities ........................................................... 12,077 23,926 Receivables ..................................................................... 18,900 20,128 Inventories ..................................................................... 9,995 7,800 Deferred income taxes ........................................................... 4,547 3,369 Other current assets ............................................................ 77 270 -------- -------- Total current assets ........................................................... 49,827 57,855 Long-term marketable securities .................................................. 45,802 28,146 Property, plant and equipment, net ............................................... 11,294 9,691 Other noncurrent assets .......................................................... 1,060 1,131 -------- -------- Total assets ..................................................................... $107,983 $96,823 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, trade ......................................................... $ 4,993 $ 5,915 Other current liabilities ....................................................... 14,337 12,782 Current portion of capital lease obligation ..................................... 149 0 -------- -------- Total current liabilities ...................................................... 19,479 18,697 Other noncurrent liabilities ..................................................... 1,274 1,292 Obligation under capital lease less current portion .............................. 262 0 -------- -------- Total liabilities ................................................................ 21,015 19,989 -------- -------- Contingencies Stockholders' equity: Preferred stock, ($1 par value, 2,000,000 shares authorized, no shares issued and outstanding in 1997 and 1996) Common stock, ($1 par value, 25,000,000 shares authorized, 11,203,256 and 7,327,961 shares issued in 1997 and 1996) ...................................... 11,203 7,328 Capital in excess of stated value ............................................... 450 2,952 Retained earnings ............................................................... 106,639 88,002 Less treasury stock, (at cost, 1,794,030 shares in 1997 and 987,820 shares in 1996) ........................................................ (31,324) (21,448) -------- -------- Total stockholders' equity ....................................................... 86,968 76,834 -------- -------- Total liabilities and stockholders' equity ....................................... $107,983 $96,823 ======== ======= ====================================================================================================================================
The accompanying notes are an integral part of the financial statements. 18 21 Lindsay Manufacturing Co. CONSOLIDATED STATEMENTS OF CASH FLOWS
($in thousands) Years ended August 31, ================================================================================================================ 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings .......................................................... $20,052 $16,518 $11,704 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization ........................................ 2,015 1,486 1,254 Amortization of marketable securities premiums, net .................. 213 325 390 Loss (gain) on sale of fixed assets .................................. 13 (83) (101) Loss on sale of marketable securities held-to-maturity ............... 0 0 2 Gain on maturities of marketable securities held-to-maturity ......... (14) (14) 0 Gain on sale of marketable securities available-for-sale ............. 0 (8) 0 Provision for uncollectible accounts receivable ...................... 20 150 60 Deferred income taxes ................................................ (1,178) (565) 739 Stock option tax benefits ............................................ 255 35 21 Changes in assets and liabilities: Receivables .......................................................... 1,208 (9,925) 667 Inventories .......................................................... (2,195) (2,416) 864 Other current assets ................................................. 193 1,621 (20) Accounts payable ..................................................... (922) 1,620 7 Other current liabilities ............................................ 1,891 1,808 (3,192) Current taxes payable ................................................ (336) (662) 131 Other noncurrent assets and liabilities .............................. 53 (70) (55) ------- ------- ------- Net cash flows provided by operating activities ....................... 21,268 9,820 12,471 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment ............................ (3,335) (4,038) (2,840) Proceeds from sale of property, plant and equipment ................... 162 108 119 Purchases of marketable securities held-to-maturity ................... (30,910) (19,880) (10,260) Proceeds from sale of marketable securities held-to-maturity .......... 0 0 2,998 Proceeds from maturities of marketable securities held-to-maturity .... 24,904 16,775 7,630 Purchases of marketable securities available-for-sale ................. 0 0 (2,500) Proceeds from sale of marketable securities available-for-sale ........ 0 3,525 3,500 Proceeds from maturities of marketable securities available-for-sale .. 0 0 2,750 ------- ------- ------- Net cash flows (used in) provided by investing activities ............. (9,179) (3,510) 1,397 ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments under capital lease obligation ..................... (47) 0 0 Proceeds from issuance of common stock under stock option plan ........ 1,003 992 574 Three-for-two stock split fractional shares paid in cash .............. (2) (2) 0 Dividends paid ........................................................ (1,298) (963) 0 Purchases of treasury stock ........................................... (9,876) (8,489) (11,640) ------- ------- ------- Net cash flows (used in) financing activities ......................... (10,220) (8,462) (11,066) ------- ------- ------- Net increase (decrease) in cash and cash equivalents .................. 1,869 (2,152) 2,802 Cash and cash equivalents, prior year ................................. 2,362 4,514 1,712 ------- ------- ------- Cash and cash equivalents, current year ............................... $ 4,231 $ 2,362 $ 4,514 ======= ======= ======= SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid ..................................................... $11,421 $ 8,649 $ 4,608 Interest paid ......................................................... $ 17 $91 $8 ================================================================================================================
The accompanying notes are an integral part of the financial statements. 19 22 Lindsay Manufacturing Co. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. ACCOUNTING POLICIES Lindsay Manufacturing Co. (the "Company" or "Lindsay") manufactures and distributes irrigation systems and manufactures other special metal products serving both domestic and international markets. Principal facilities are located within the United States. The principal accounting policies of the Company are as follows: (1) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany balances and transactions are eliminated in consolidation. (2) REVENUE RECOGNITION Revenues and related cost of revenues for all irrigation and diversified products are recognized when title passes. Generally this occurs at the time of shipment of product to dealers or customers. (3) WARRANTY COSTS Cost of operating revenues included warranty costs of $796,000, $1,073,000 and $538,000 for the years ended August 31, 1997, 1996 and 1995, respectively. Provision for the estimated warranty costs is made in the period in which such costs become probable and is periodically adjusted to reflect actual experience. (4) CASH EQUIVALENTS, MARKETABLE SECURITIES AND LONG-TERM MARKETABLE SECURITIES Cash equivalents are included at cost, which approximates market. At August 31, 1997, Lindsay's cash equivalents were held primarily by one financial institution. Marketable securities and long-term marketable securities are categorized as held-to-maturity or available-for-sale. Investments in the held-to-maturity category are carried at amortized cost. Investments in the available-for-sale category are carried at fair value with unrealized gains and losses as a separate component of stockholders' equity. The carrying amounts of the securities used in computing unrealized and realized gains and losses are determined by specific identification. Lindsay considers all highly liquid investments with original maturities of three months or less to be cash equivalents, while those having 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. On November 15, 1995, the Financial Accounting Standards Board Staff issued a special report on statement 115 "Accounting for Certain Investments in Debt and Equity Securities" that includes special transition provisions for the one-time reassessment and reclassification of securities from the held-to-maturity category during the period November 15, 1995 to December 31, 1995. Lindsay transferred securities maturing July 1, 1996 and August 1, 1996 from the held-to-maturity classification to the available-for-sale classification on December 20, 1995. The total amortized cost, gross unrealized holding gains, gross unrealized holding losses and the aggregate fair value for the securities transferred are $3,518,687, $8,233, $0.0 and $3,526,920, respectively. There are no investments in the available-for-sale category included in marketable securities at August 31, 1997. Investments in the held-to-maturity category are included in marketable securities ($12,077,000) and long-term marketable securities ($45,802,000). The total amortized cost, gross unrealized holding gains, gross unrealized holding losses, and aggregate fair value for held-to-maturity securities are $57,879,000, $284,000, $22,000 and $58,141,000, respectively. In the held-to-maturity category, $12,077,000 in securities mature within one year and $45,802,000 have maturities ranging from one to three and one-third years. (5) INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for all inventories. (6) PROPERTY, PLANT AND EQUIPMENT Property, plant, equipment and capitalized lease assets are stated at cost. The Company's policy is to capitalize expenditures for major renewals and betterments and to charge to operating expenses the cost of current maintenance and repairs. Provisions for depreciation and amortization have been computed principally on the straight-line method for buildings and equipment. Rates used for depreciation are based principally on the following expected lives: buildings -- 20 to 30 years; equipment -- three to 10 years; other -- two to 20 years; and leasehold improvements -- term of lease. All of the Company's long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the asset, a loss is recognized. The cost and accumulated depreciation relating to assets retired or otherwise disposed of are eliminated from the respective accounts at the time of disposition. The resultant gain or loss is included in the consolidated statements of operations. (7) EXPORT SALES Revenues included export sales of $27,847,000, $19,736,000, and $11,098,000 for the years ended August 31, 1997, 1996 and 1995, respectively. Lindsay's export sales are all in U.S. dollars and are essentially all shipped against prepayments or backed by irrevocable letters of credit which are confirmed by U.S. banks or other secured means. GEOGRAPHIC AREA EXPORT REVENUES
---------------------------------------------------------- Mexico Europe & Latin Other Totals $ in thousands & Africa America ---------------------------------------------------------- August 31, 1997 .... $9,781 $15,108 $2,958 $27,847 August 31, 1996 .... 9,364 8,168 2,204 19,736 August 31, 1995 .... $3,654 $ 4,470 $2,974 $11,098 ----------------------------------------------------------
(8) EARNINGS PER SHARE Primary earnings per share are calculated by dividing the earnings by the weighted average number of common and common equivalent (stock options) shares outstanding of 9,986,397, 10,150,878 and 10,622,210 for the years ended August 31, 1997, 1996 and 1995. The difference between shares for primary and fully diluted earnings per share was not significant in any period. 20 23 In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" which, when adopted, will replace the current methodology for calculating and presenting earnings per share. Under SFAS No. 128, primary and fully diluted earnings per share will be replaced with basic and diluted earnings per share. The statement will be effective beginning in the Company's second quarter ending February 28, 1998, and accordingly, the financial statements for such quarter will include a restatement of historical earnings per share to conform to the requirements of SFAS No. 128. The impact of implementation of SFAS No. 128 is not expected to be material. (9) STOCK SPLIT On February 7, 1997, the Board of Directors declared a three-for-two split of Lindsay's common stock effective March 10, 1997, to stockholders of record on March 3, 1997. Accordingly, the average number of shares outstanding, per share information and stock option data have been adjusted to reflect the stock split. (10) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. B. NON-OPERATING ITEMS
================================================================================ For the years ended August 31, ------------------------------ $in thousands 1997 1996 1995 ================================================================================ Other income, net: Royalty income ..................... $ 0 $ 0 $272 (Loss) gain on sales of fixed assets (13) 83 101 State economic development tax credits ....................... 387 1,433 0 Finance charges .................... 24 77 45 All other, net ..................... 57 27 20 - -------------------------------------------------------------------------------- Total other income, net ............. $455 $1,620 $438 ================================================================================
C. INCOME TAX PROVISION
================================================================================ For the years ended August 31, ------------------------------- $in thousands 1997 1996 1995 ================================================================================ Current taxes ..................... $11,055 $7,987 $4,643 Deferred taxes .................... (1,178) (565) 739 - -------------------------------------------------------------------------------- Total income tax provision ........ $ 9,877 $7,422 $5,382 ================================================================================
Total tax provisions resulted in effective tax rates differing from that of the statutory federal income tax rates. The reasons for these differences are:
================================================================================ For the years ended August 31, ------------------------------------------- 1997 1996 1995 ================================================================================ $in thousands AMOUNT % Amount % Amount % ================================================================================ U.S. statutory rate ........ $10,475 35.0 $8,379 35.0 $5,860 34.3 State and local taxes ...... 292 1.0 157 0.7 594 3.5 Qualified export activity... (347) (1.2) (195) (0.8) (86) (0.5) Municipal bonds ............ (806) (2.7) (793) (3.3) (822) (4.8) Other ...................... 263 0.9 (126) (0.6) (164) (1.0) - -------------------------------------------------------------------------------- Total ...................... $9,877 33.0 $7,422 31.0 $5,382 31.5 ================================================================================
Significant components of the Company's deferred tax assets and liabilities are as follows:
================================================================================ For the years ended August 31, ---------------------------------- $in thousands 1997 1996 ================================================================================ Book depreciation in excess of tax ......... $ 131 $ 89 Employee benefits .......................... 2,092 1,412 Inventory adjustments ...................... 161 158 Changes in accruals not currently deductible for taxes ................................ 2,163 1,710 - -------------------------------------------------------------------------------- Net deferred tax assets .................... $4,547 $3,369 ================================================================================
Management does not believe there are uncertainties surrounding realization of the net deferred tax assets. D. RECEIVABLES
================================================================================ August 31, --------------------- $in thousands 1997 1996 ================================================================================ Trade accounts and notes ................................ $19,643 $20,851 Less allowance for doubtful accounts .................... 743 723 - -------------------------------------------------------------------------------- Net receivables ......................................... $18,900 $20,128 ================================================================================
E. INVENTORIES
================================================================================ August 31, --------------------------- $in thousands 1997 1996 ================================================================================ First-in, first-out (FIFO) inventory .. $14,164 $12,060 LIFO reserves .......................... (3,500) (3,570) Obsolescence reserve .................. (669) (690) - -------------------------------------------------------------------------------- Total Inventories ..................... $9,995 $7,800 ================================================================================
The estimated percentage distribution between major classes of inventory before reserves is as follows:
================================================================================ August 31, ---------------------- 1997 1996 ================================================================================ Raw materials ............................... 19% 16% Work in process ............................. 6% 8% Purchased parts ............................. 30% 32% Finished goods .............................. 45% 44% ================================================================================
F. PROPERTY, PLANT & EQUIPMENT
================================================================================ August 31, ------------------------------- $in thousands 1997 1996 ================================================================================ Plant and equipment: Land ..................................... $ 70 $ 70 Buildings ................................ 5,033 4,756 Equipment ................................ 23,769 22,563 Other .................................... 2,135 1,859 Capital lease: Equipment ................................ 458 0 - -------------------------------------------------------------------------------- Total plant, equipment and capital lease ... 31,465 29,248 Accumulated depreciation and amortization: Plant and equipment ...................... (20,145) (19,557) Capital lease ............................ (26) 0 - -------------------------------------------------------------------------------- Property, plant and equipment, net ......... $11,294 $9,691 ================================================================================
21 24 G. OTHER CURRENT LIABILITIES
======================================================================= August 31, --------------------- $in thousands 1997 1996 ======================================================================= Current state and federal income taxes ..... $ 342 $ 707 Payroll and vacation ....................... 3,858 3,150 Retirement plans ........................... 1,635 1,442 Taxes, other than income ................... 238 209 Insurance .................................. 1,997 1,557 Dealer service, commission and related items....................................... 2,660 2,913 Export freight ............................. 222 237 Warranty ................................... 607 580 Legal settlements .......................... 350 300 Environmental .............................. 322 322 Other ...................................... 2,106 1,365 - ----------------------------------------------------------------------- Total other current liabilities ............ $14,337 $12,782 =======================================================================
H. LEASE During the fourth quarter of fiscal 1997, the Company recorded a three year capital lease for computer equipment in the amount of $457,850, at interest of approximately 4% with a one dollar end-of-lease purchase option. Future minimum lease payments at August 31, 1997, under this capital lease together with the present value of the minimum lease payments are as follows:
======================================================================= Twelve months ending August 31 $in thousands ======================================================================= 1998 ............................... $162 1999 ............................... 162 2000 ............................... 109 - ----------------------------------------------------------------------- Total miminum payments ............. 433 Amount representing interest ....... (22) - ----------------------------------------------------------------------- Present value of minimum payments .. 411 Current portion .................... (149) - ----------------------------------------------------------------------- Total .............................. $262 =======================================================================
I. CONTINGENCIES The Company and its subsidiaries are defendants in various legal actions arising in the course of their business activities. During fiscal 1996, Lindsay substantially completed certain environmental remediation efforts at its manufacturing facility. Lindsay believes that its insurer should cover the costs of remediation. The insurer reduced its reimbursement of remediation costs in early 1990. In late 1990, Lindsay filed suit against the insurer. The insurer completely stopped reimbursement of remediation costs in 1991 and in 1992, the insurer filed a counterclaim against Lindsay for previously reimbursed remediation costs. In December 1995, the district court dismissed Lindsay's suit against the insurer and entered a judgment in the amount of $2.4 million in favor of the insurer. During July 1997, the United States Court of Appeals reversed the judgment of $2.4 million and remanded the case to the district court for further proceedings. The Company has not made a provision for the previously reimbursed remediation costs. In the opinion of management, an unfavorable outcome with respect to any or all of these matters will not result in a material adverse effect on Lindsay's consolidated financial position, results of operations or cash flows. J. RETIREMENT PLANS During 1996, Lindsay adopted an amended and restated defined contribution profit-sharing plan to include a 401(k) provision covering all employees. Participants may voluntarily contribute a percentage of compensation, but not in excess of the maximum allowed under the Internal Revenue Code. The plan provides for a matching contribution by Lindsay. Additionally, the plan provides for Lindsay to contribute a discretionary amount when warranted by results of operations. The contribution is allocated to participants based upon their respective percentage of wages to total wages of all participants in the plan. Lindsay's total contributions charged to expense under this plan were $800,000 for the year ended August 1997 and $750,000 for each of the years ended August 1996 and 1995. A supplementary non-qualified, non-funded retirement plan for certain key executives is also maintained. Plan benefits are based on the executive'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. Cost and the assumptions for the Company's supplemental retirement plan includes the following components:
======================================================================= For the year ended August 31, $in thousands 1997 1996 1995 ======================================================================= Service cost ............................ $ 74 $ 69 $ 66 Interest cost ........................... 113 101 100 Net amortization and deferral ........... 69 69 69 - ---------------------------------------------------------------------- Net cost ................................ $ 256 $ 239 $ 235 - ---------------------------------------------------------------------- Discount rate ........................... 7.00% 7.00% 7.00% Assumed rates of compensation increases 3.50% 3.50% 3.50% ======================================================================= The funded status and the amounts recognized in the Company's consolidated balance sheet are as follows: ======================================================================= August 31, --------------------------- $in thousands 1997 1996 1995 ======================================================================= Actuarial present value of benefit obligations Vested benefit obligation .............. $1,179 $1,021 $ 950 Non-vested benefit obligation .......... 147 123 108 Accumulated benefit obligation ......... 1,326 1,144 1,058 Projected benefit obligation ............. 1,820 1,612 1,438 Fair value of plan assets ................ 0 0 0 Unrecognized net gain (loss) ............. (15) 6 10 Unrecognized prior year service cost ..... 0 0 0 Unrecognized net obligation/(asset) at transition 857 926 995 Adjustment to recognize minimum liability ............................... 378 452 605 Liability recognized in the consolidated balance sheet ........................... $1,326 $1,144 $1,058 =======================================================================
K. STOCK OPTIONS The Company adopted a Long-Term Incentive Plan in October 1988, (1988 Plan) which provides for awards of stock options, stock appreciation rights, stock indemnification rights and restricted stock (collectively stock awards) to officers and key employees. Options may be granted at, above or below the fair market value of the stock at the date of the grant and are exercisable within periods specified by the Company's Compensation Committee. In February 1992, the shareholders approved the 1991 Long-Term Incentive Plan (1991 Plan) which is similar in most material respects to the 1988 Plan. Additionally, the 1991 Plan provides for non-qualified stock options to directors who are not officers or employees of the Company or its subsidiaries. Options currently vest ratably over five years and expire ten years from the grant dates. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123 (SFAS No. 22 25 123), "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option shares. Had compensation cost for the Company's stock option shares been determined based on the fair value at the grant date for awards in fiscal 1997 and 1996 consistent with the provisions of SFAS No. 123, net income and net income per share would have been reduced to the pro forma amounts indicated below:
======================================================================= August 31, ------------------ $ in thousands, except per share amounts 1997 1996 ======================================================================= Net income - as reported .............. $20,052 $16,518 Net income - pro forma ................ $19,996 $16,486 Net income per share - as reported .... 2.01 1.63 Net income per share - pro forma ...... 2.00 1.62 =======================================================================
The pro forma effect on net income for fiscal 1997 and 1996 is not fully representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to the vesting of grants made prior to fiscal 1996. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for all grants in fiscal 1997 and 1996; dividend yield of 0.5%; expected volatility of 34.5% to 36.6%; risk-free interest rates ranging from 6.3% to 6.9%; and expected lives of the options of 8 years. A summary of the status of the Company's stock plans is presented below:
============================================================================ Restricted shares For the years ended August 31, --------------------------------- $ in thousands, except per share amounts 1997 1996 1995 ============================================================================ Number of shares issued ................... 44,850 42,750 42,750 Average price ............................. $27.87 $12.47 $13.01 Total value of shares issued .............. $1,250 $ 747 $ 556 Total compensation cost recognized in the statements of operations ................ $1,749 $1,101 $ 643 ============================================================================ ============================================================================ Option shares Number of Shares Average Price ============================================================================ Officers, Directors and Key Employees: Outstanding at August 31, 1994 ......... 785,626 $ 7.58 Granted .............................. 96,750 12.59 Exercised ............................ (13,815) 4.96 Outstanding at August 31, 1995 ......... 868,561 8.18 Exercisable at August 31, 1995 ......... 567,398 6.70 Outstanding at August 31, 1995 ......... 868,561 8.18 Granted .............................. 30,375 15.33 Exercised ............................ (69,897) 8.53 Cancelled ............................ (24,187) 13.43 Outstanding at August 31, 1996 ......... 804,852 8.26 Exercisable at August 31, 1996 ......... 651,402 7.04 Weighted average fair value of options granted during fiscal 1996 ............ 17.74 Outstanding at August 31, 1996 ......... 804,852 8.26 Granted .............................. 13,500 25.83 Exercised ............................ (216,193) 6.11 Cancelled ............................ (10,125) 18.08 Outstanding at August 31, 1997 ......... 592,034 9.28 Exercisable at August 31, 1997 ......... 486,959 8.16 Weighted average fair value of options granted during fiscal 1997............. $19.96 ============================================================================
The number of stock awards available for grant under the 1988 and 1991 plans are 332,472, 399,912 and 501,622 shares as of August 31, 1997, 1996 and 1995, respectively. The following table summarizes information about the Company's Common Stock options outstanding at August 31, 1997:
================================================================================ Options Outstanding Options Exercisable - -------------------------------------------------------------------------------- Weighted Average Range of Number Remaining Weighted Number Weighted Exercise Outstanding Contractural Average Exercisable Average Prices at 8/31/97 Life Price at 8/31/97 Price ================================================================================ $ 2.08- 4.37 256,554 3.01 years $4.12 256,554 $4.12 6.89- 9.26 55,755 3.52 years 8.25 55,755 8.25 12.56-15.78 269,600 6.04 years 13.77 174,650 14.06 25.83-25.83 10,125 9.01 years 25.83 0 25.83 - -------------------------------------------------------------------------------- 592,034 486,959 ================================================================================
L. INDUSTRY SEGMENT INFORMATION
================================================================================ For the years ended August 31, ------------------------------ $ in millions 1997 1996 1995 ================================================================================ Operating revenues: Irrigation ............................ $131.6 $115.9 $ 88.8 Diversified products .................. 26.7 20.3 23.0 - -------------------------------------------------------------------------------- Total operating revenues ................ $158.3 $136.2 $111.8 - -------------------------------------------------------------------------------- Operating earnings: Irrigation ............................ $ 29.9 $ 24.0 $ 16.4 Diversified products .................. 6.1 4.2 5.2 - -------------------------------------------------------------------------------- Segment operating earnings .............. 36.0 28.2 21.6 Unallocated general & administrative and engineering & research expenses ....... (9.5) (8.8) (7.7) Interest and other income, net .......... 3.4 4.5 3.2 - -------------------------------------------------------------------------------- Earnings before income taxes............. $ 29.9 $ 23.9 $ 17.1 - -------------------------------------------------------------------------------- Identifiable assets: Irrigation ............................ $ 33.1 $ 32.1 $ 18.8 Diversified products .................. 5.8 4.9 5.2 Corporate ............................. 69.0 59.8 62.1 - -------------------------------------------------------------------------------- Total identifiable assets ............. $107.9 $ 96.8 $ 86.1 ================================================================================
Segment operating earnings are based on net sales less identifiable operating expenses. Identifiable operating expenses do not include general and administrative expenses (which include corporate expenses) or engineering and research expenses. Corporate assets are principally cash and cash equivalents, short- and long-term marketable securities, deferred income taxes and certain property, plant and equipment. Capital expenditures and depreciation have not been allocated to industry segments due to the arbitrary and inexact nature of the allocation process for Lindsay which operates out of a single manufacturing facility. For the same reasons, general and administrative and engineering and research expenses, and interest and other income, net have not been allocated. 23 26 DIRECTORS VAUGHN L. BEALS, JR. Director since 1997 Chairman - Emeritus Harley-Davidson, Inc. HOWARD G. BUFFETT Director since 1995 Chairman of the Board, The GSI Group; Director: The GSI Group; Berkshire Hathaway, Inc.; Coca-Cola Enterprises, Inc. JOHN W. CROGHAN Director since 1989 President of Lincoln Partners, A partnership of Lincoln Capital Management Company; Director: St. Paul Bancorp, Inc.; Morgan Stanley public closed end funds (13 funds) GARY D. PARKER Director since 1978 President, Chief Executive Officer and Chairman of the Board Joined Lindsay in 1971; Vice President-Marketing 1975; Executive Vice President 1978; President & CEO 1984; Chairman of the Board 1989 GEORGE W. PLOSSL Director since 1989 President, G.W. Plossl & Co., Inc. OFFICERS EDUARDO R. ENRIQUEZ Vice President-International Joined Lindsay in 1981; Vice President-International 1986 BRUCE C. KARSK Vice President-Finance, Treasurer and Secretary Joined Lindsay in 1979 as Corporate Accounting Manager; Controller 1981; Vice President-Finance, Treasurer and Secretary 1984 CLIFFORD P. LOSEKE Vice President-Manufacturing Joined Lindsay in 1971 as Plant Manager; Vice President-Manufacturing 1975 CHARLES H. MEIS Vice President-Engineering Joined Lindsay in 1971 as a Product Engineer; Director of Engineering 1972; Vice President-Engineering 1975 ROBERT S. SNOOZY Vice President-Sales and Marketing Joined Lindsay in 1973 as a Research Engineer; Vice President-Marketing 1978; Vice President-Sales and Marketing 1986 24 27 INVESTOR INFORMATION ANNUAL MEETING All shareholders are invited to attend our annual meeting, which will be held on January 23, 1998, at 1:00 p.m. at The Cornhusker Hotel 333 South 13th Street, Lincoln, Nebraska. We look forward to meeting shareholders and answering questions at the meeting. Any shareholder who will be unable to attend is encouraged to send questions and comments, in writing, to Gary D. Parker, President, Chief Executive Officer and Chairman of the Board, at Lindsay's corporate offices. QUARTERLY CALENDAR The Company operates on a fiscal year ending August 31. Fiscal 1998 quarter-end dates are November 30, 1997, February 28, 1998, May 31, 1998 and August 31, 1998. Quarterly earnings are announced approximately three weeks after the end of each quarter and audited results are announced four to five weeks after year end. FORM 10-K Shareholders who wish to obtain, free of charge, a copy of Lindsay Manufacturing Co.'s annual report on Form 10-K for the year ended August 31, 1997, as filed with the Securities and Exchange Commission, may do so by writing Bruce C. Karsk, Vice President-Finance, Treasurer and Secretary, at Lindsay's corporate offices. TRANSFER AGENT AND REGISTRAR Norwest Bank Minnesota N.A. Shareowner Services Post Office Box 64854 St. Paul, Minnesota 55164-0854 Phone: (612) 450-4064 FAX: (612) 450-4033 RESEARCH REPORTS ISSUED BY Barrington Research Associates George K. Baum & Company Dain Bosworth Incorporated Standard & Poors Value Line Investment Survey STOCK MARKET INFORMATION Lindsay's common stock began trading October, 21, 1997, on the New York Stock Exchange, Inc. (NYSE) under the ticker symbol LNN. Prior to trading on the NYSE Lindsay common stock traded on the Nasdaq National Market. Stock price quotations are printed daily in major newspapers. As of August 31, 1997, there were 9,409,226 shares of common stock outstanding, held by approximately 250 shareholders of record and an estimated 2,500 shareholders for whom securities firms acted as nominees. CONCERNING FORWARD-LOOKING STATEMENTS This Annual Report, including the President's letter, Management's Discussion and Analysis and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of our Company and those statements preceded by, followed by or include the words "future," "position," "anticipate(s)," "expect," "believe(s)," "see," "plan," "further improve," "outlook," "should" or similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You should understand that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in our forward-looking statements; availability of and price of raw materials, product pricing, competitive environment and related domestic and international market conditions, operating efficiencies and actions of domestic and foreign governments. Any changes in such factors could result in significantly different results. INDEPENDENT AUDITORS Coopers & Lybrand L.L.P. Omaha, Nebraska EMPLOYEES Linsday had 553 employees at the end of fiscal 1997, the majority of whom work at the Company's facility in Lindsay, Nebraska. FOR FURTHER INFORMATION Shareholders and prospective investors are welcome to call or write Lindsay Manufacturing Co. with questions or requests for additional information. Please direct inquiries to: Bruce C. Karsk Vice President-Finance, Treasurer and Secretary Lindsay Manufacturing Co. East Highway 91 P.O. Box 156 Lindsay, Nebraska 68644 (402) 428-2131 28 LINDSAY LINDSAY MANUFACTURING CO. Eash Highway 91 Lindsay, Nebraska 68644 (402) 428-2131 EX-23 6 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this registration statement of Lindsay Manufacturing Co. on Form S-8 (File No. 333-00769) of our report dated October 2, 1997 on our audits of the consolidated financial statements and financial statement schedule of Lindsay Manufacturing Co., as of August 31, 1997 and 1996 and for each of the three years in the period ended August 31, 1997, which report is incorporated by reference in the Company's Annual Report on Form 10-K for the year ended August 31, 1997. COOPERS & LYBRAND L.L.P. Omaha, Nebraska November 26, 1997 -66- EX-24.(A) 7 POWER OF ATTORNEY 1 EXHIBIT 24(a) POWER OF ATTORNEY Each person whose signature appears below hereby constitutes Gary D. Parker and Bruce C. Karsk, and each of them singly, such person's true and lawful attorney-in-fact, with full power to them and each of them to sign for such person and in such person's name and capacity indicated below any and all instruments, reports and amendments which said attorney-in-fact or any one of them may deem necessary or advisable to enable Lindsay Manufacturing Co., (the "Company") to comply with the Securities Exchange Act of 1934, as amended (the "1934 Act"), and any rules, regulations and requirements of the Securities and Exchange Commission under the 1934 Act, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all of the Company's Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Notification of Late Filing on Form 12b-25; and we do hereby ratify and confirm all that said attorneys-in-fact, or any of them, shall do or cause to be done by virtue of this Power of Attorney. Executed below by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE -------------- ---------------- ------------ Gary D. Parker Chairman of the Board November 20, 1997 -------------- of Directors, President Gary D. Parker Chief Executive Officer, (Principal Executive Officer) Vaughn L. Beals, Jr. Director November 20, 1997 -------------------- Vaughn L. Beals, Jr. Howard G. Buffett Director November 20, 1997 -------------------- Howard G. Buffett John W. Croghan Director November 20, 1997 -------------------- John W. Croghan George W. Plossl Director November 20, 1997 -------------------- George W. Plossl Bruce C. Karsk Vice President of November 20, 1997 -------------------- Finance, Secretary and Bruce C. Karsk Treasurer (Principal Financial and Accounting Officer)
-67- EX-27 8 FINANCIAL DATA SCHEDULE
5 12-MOS AUG-31-1997 SEP-01-1996 AUG-31-1997 4,231 12,077 18,900 0 9,995 49,827 31,465 20,171 107,983 19,479 0 0 0 11,203 75,765 107,983 158,327 158,327 117,407 117,407 0 0 0 29,929 9,877 0 0 0 0 20,052 2.01 2.01
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