LINDSAY CORP
10-Ks and 10-Qs
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended August 31, 2011
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
1-13419
Lindsay Corporation
(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.) | |
| 2222 North 111 th Street, Omaha, Nebraska | 68164 | |
| (Address of principal executive offices) | (Zip Code) |
402-829-6800
Registrant’s telephone number, including area code
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
| Common Stock, $1.00 par value | New York Stock Exchange, Inc. (Symbol LNN) |
Indicate by check mark if the registrant is a well-known seasoned issuer, (as defined in Rule
405 of the Securities Act).
Yes
o
No
þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act.
Yes
o
No
þ
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
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o
No
o
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
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes
o
No
þ
The aggregate market value of Common Stock of the registrant, all of which is voting, held by
non-affiliates based on the closing sales price on the New York Stock Exchange, Inc. on February
28, 2011 was $870,441,668.
As of October 21, 2011, 12,675,101 shares of the registrant’s Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement pertaining to the Registrant’s 2012 annual stockholders’
meeting are incorporated herein by reference into Part III.
TABLE OF CONTENTS
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| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32 | ||||||||
Table of Contents
| ITEM 1 |
—
Business
|
INTRODUCTION
Lindsay Corporation, along with its subsidiaries (collectively called “Lindsay” or the “Company”),
is a global leader in providing a variety of proprietary water management and road infrastructure
products and services. The Company has been involved in the manufacture and distribution of
agricultural equipment since 1955 and has grown from a regional company to an international
agribusiness and highway infrastructure firm with worldwide sales and distribution. Lindsay, a
Delaware corporation, maintains its corporate offices in Omaha, Nebraska. The Company has
operations which are categorized into two major reporting segments. Industry segment information
about Lindsay is included in Note O to the consolidated financial statements.
Irrigation Segment —
The Company’s irrigation segment includes the manufacture and marketing of
center pivot, lateral move, and hose reel irrigation systems which are used principally in the
agricultural industry to increase or stabilize crop production while conserving water, energy, and
labor. The irrigation segment also manufactures and markets repair and replacement parts for its
irrigation systems and controls, and designs, manufactures and services water pumping stations and
controls for the agriculture, golf, landscape and municipal markets. The Company continues to
strengthen irrigation product offerings through innovative technology such as GPS positioning and
guidance, variable rate irrigation, wireless irrigation management, and smartphone application.
The Company’s principal irrigation manufacturing facilities are located in Lindsay, Nebraska and
Hartland, Wisconsin. Internationally, the Company has production operations in France, Brazil and
China as well as distribution operations in South Africa, Australia and New Zealand. The Company
also exports some of its equipment from the U.S. to other international markets.
Infrastructure Segment —
The Company’s infrastructure segment includes the manufacture and
marketing of moveable barriers, specialty barriers, crash cushions and end terminals, road marking
and road safety equipment, large diameter steel tubing, railroad signals and structures, and
outsourced manufacturing services. The principal infrastructure manufacturing facilities are
located in Rio Vista, California, Milan, Italy, and Omaha, Nebraska.
PRODUCTS BY SEGMENT
IRRIGATION SEGMENT
Products
- The Company manufactures and markets its center pivot and lateral move irrigation
systems in the U.S. and internationally under its
Zimmatic
®
brand. The Company also
manufactures and markets separate lines of center pivot and lateral move irrigation equipment for
use on smaller fields under its
Greenfield
®
and
Stettyn
™
brands, and hose
reel travelers under the
Perrot
™
brand (
Greenfield
®
in the United States,
Perrot
™
in Europe, and
Stettyn
™
in South Africa). The Company also produces
or markets irrigation controls, chemical injection systems and remote monitoring and control
systems which it sells under its
GrowSmart
®
brand. In addition to whole systems, the
Company manufactures and markets repair and replacement parts for its irrigation systems and
controls. The Company also designs, manufactures and services water pumping stations and controls
for the agriculture, golf, landscape and municipal markets.
The Company’s irrigation systems are primarily of the standard sized 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.
A typical center pivot for the U.S. market is approximately 1,300 feet long and is designed to
circle within a quarter-section of land, which comprises 160 acres, wherein it irrigates
approximately 130 to 135 acres. A typical center pivot for the international market is somewhat
shorter than that in the U.S. market. A center pivot or lateral move system can also be custom
designed and can irrigate from 25 to 600+ acres. A mini-pivot is a small version of the standard
pivot and is used for smaller fields and/or shorter crops than standard pivots.
A center pivot system represents a significant investment to a farmer. In a dry land
conversion to center pivot irrigation, approximately one-half of the investment is for the pivot
itself and the remainder is attributable to installation of additional equipment such as wells,
pumps, underground water pipes, electrical supply and a concrete pad upon
which the pivot is anchored. The Company’s center pivot and lateral move irrigation systems can be
enhanced with a family of integrated plug-and-play add-ons such as water pumping station controls.
2
Table of Contents
The Company also manufactures and distributes mini-pivots and hose reel travelers. These
systems are considered to be relatively easy to operate, and the hose reel travelers are easily
moved from field to field. They are typically deployed in smaller or irregular fields. Mini-pivots
and hose reel travelers require, on average, a lower investment than a typical standard center
pivot.
The Company also markets pivot monitoring and control systems, which include remote telemetry
and a web or personal computer hosted data acquisition and monitoring application. These systems
allow growers to monitor their pivot system, accumulate data on the operation of the system, and
control the pivot from a remote location by logging onto an internet web site. The pivot
monitoring and control systems are marketed under the
GrowSmart
®
brand and product name
FieldNET
®
.
Other Types of Irrigation —
Center pivot and lateral move irrigation systems compete with three
other types of irrigation: flood, drip, and other mechanical devices such as hose reel travelers.
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 source is moved and
another set of rows are flooded. A significant disadvantage or limitation of flood irrigation is
that it cannot be used to irrigate uneven, hilly, or rolling terrain or fields. In “drip” or “low
flow” irrigation, perforated plastic pipe or tape is installed on the ground or buried underground
at the root level. Several other types of mechanical devices, such as hose reel travelers, irrigate
the remaining irrigated acres.
Center pivot, lateral move, and hose reel traveler irrigation offers significant advantages
when compared with other types of irrigation. It requires less labor and monitoring; can be used
on sandy ground which, due to poor water retention ability, must have water applied frequently; can
be used on uneven ground, thereby allowing previously unsuitable land to be brought into
production; can also be used for the application of fertilizers, insecticides, herbicides, or other
chemicals (termed “chemigation”); and conserves water and chemicals through precise control of the
amount and timing of the application.
Markets —
Water is an essential and critical requirement for crop production, and the extent,
regularity, and frequency of water application can be a critical factor in crop quality and yield.
The fundamental factors which govern the demand for center pivot and lateral move systems are
essentially the same in both the U.S. and international markets. Demand for center pivot and
lateral move systems is determined by whether the value of the increased crop production
attributable to center pivot or lateral move irrigation exceeds any increased costs associated with
purchasing, installing, and operating the equipment. Thus, the decision to purchase a center pivot
or lateral move system, in part, reflects the profitability of agricultural production, which is
determined primarily by the prices of agricultural commodities and other farming inputs.
The current demand for center pivot systems has three sources: conversion to center pivot
systems from less water efficient, more labor intensive types of irrigation; replacement of older
center pivot systems, which are beyond their useful lives or are technologically obsolete; and
conversion of dry land farming to irrigated farming. In addition, demand for center pivots and
lateral move irrigation equipment depends upon the need for the particular operational
characteristics and advantages of such systems in relation to alternative types of irrigation,
primarily flood. More efficient use of the basic natural resources of land, water, and energy
helps drive demand for center pivot and lateral move irrigation equipment. Increasing global
population not only increases demand for agricultural output, but also places additional and
competing demands on land, water, and energy. The Company expects demand for center pivots and
lateral move systems to continue to increase relative to other irrigation methods because center
pivot and lateral move systems are preferred where the soil is sandy, the terrain is not flat, the
land area to be irrigated is sizeable, there is a shortage of reliable labor, water supply is
restricted and conservation is critical, and/or chemigation will be utilized.
United States Market —
In the United States, the Company sells its branded irrigation
systems, including
Zimmatic
®
, to over 200 independent dealer locations, who resell to
their customer, the farmer. Dealers assess their customer’s requirements, assemble and erect the
system in the field, and provide additional system components, primarily relating to water supply
(wells, pumps, pipes) and electrical supply (on-site generation or hook-up to power lines).
Lindsay dealers generally are established local agribusinesses, many of which also deal in related
products, such as well drilling and water pump equipment, farm implements, grain handling and
storage systems, and farm structures.
3
Table of Contents
International Market —
Over the years, the Company has sold center pivot and lateral move
irrigation systems throughout the world. The Company has production and sales operations in
France, Brazil and China as well as distribution and sales operations in South Africa, Australia
and New Zealand and sales operations in Central America and the Middle East serving the key
European, South American, Chinese, African, Australian, New Zealand, Central American and Middle
Eastern markets, respectively. The Company also exports some of its equipment from the U.S. to
other international markets. The majority of the Company’s U.S. export sales is denominated in
U.S. dollars and is shipped against prepayments or U.S. bank confirmed irrevocable letters of
credit or other secured means.
The Company’s international markets differ with respect to the need for irrigation, the
ability to pay, demand, customer type, government support of agriculture, marketing and sales
methods, equipment requirements, and the difficulty of on-site erection. The Company’s industry
position is such that it believes that it will likely be considered as a potential supplier for
most major international agricultural development projects utilizing center pivot or lateral move
irrigation systems.
Competition —
The U.S. center pivot irrigation system industry has seen significant
consolidation of manufacturers over the years; four primary U.S. manufacturers remain today. The
international market includes participation and competition by the leading U.S. manufacturers as
well as certain regional manufacturers. The Company competes in certain product lines with several
manufacturers, some of whom may have greater financial resources than the Company. The Company
competes by continuously improving its products through ongoing research and development
activities. The Company continues to strengthen irrigation product offerings through innovative
technology such as GPS positioning and guidance, variable rate irrigation, wireless irrigation
management, and smartphone application. The Company’s engineering and research expenses related to
irrigation totaled approximately $6.1 million, $4.1 million, and $3.0 million for fiscal years
2011, 2010, and 2009, respectively. Competition also occurs in areas of price and seasonal
programs, product quality, durability, controls, product characteristics, retention and reputation
of local dealers, customer service, and, at certain times of the year, the availability of systems
and their delivery time. The Company believes it competes favorably with respect to all of these
factors.
INFRASTRUCTURE SEGMENT
Products
—
Quickchange
®
Moveable Barrier
™
— The Company’s
Quickchange
®
Moveable
Barrier
™
(“QMB
®
”) system is composed of
three parts: 1) T-shaped concrete barriers that are connected to form a continuous wall, 2) a
Barrier Transfer Machine
™
(“BTM
™
”) capable of moving the barrier laterally
across the pavement, and 3) the variable length barriers necessary for accommodating curves. A
barrier element is approximately 32 inches high, 13-24 inches wide, 3 feet long and weighs 1,500
pounds. The barrier elements are interconnected by very heavy duty steel hinges to form a
continuous barrier. The BTM
™
employs an inverted S-shaped conveyor mechanism that lifts
the barrier, moving it laterally before setting it back on the roadway surface.
In permanent applications, the
QMB
®
systems increase capacity and reduce congestion
by varying the number of traffic lanes to match the traffic demand. Roadways with fixed medians
have a set number of lanes in each direction and cannot adjust to traffic demands that may change
over the course of a day, or to capacity reductions caused by traffic incidents or road repair and
maintenance. Applications include high volume highways where expansion may not be feasible due to
lack of additional right-of-way, environmental concerns, or insufficient funding. The
QMB
®
system is particularly useful in busy commuter corridors and at choke points such
as bridges and tunnels. QMB
®
systems can also be deployed at roadway or roadside
construction sites to accelerate construction, improve traffic flow and safeguard work crews and
motorists by positively separating the work area and traffic. Examples of types of work completed
with the help of a QMB
®
system include highway reconstruction, paving and resurfacing,
road widening, median and shoulder construction, and repairs to tunnels and bridges.
The Company offers a variety of equipment lease options for QMB
®
systems and
BTM
™
equipment used in construction applications. The leases extend for periods of
three months or more for equipment already existing in inventory. Longer lease periods may be
required for specialty equipment that must be built for specific projects.
These systems have been in use since 1987. Significant progress has been made introducing the
products into international markets in recent years. Typical sales for a highway safety or road
improvement project range from $2.0-$20.0 million, making them significant capital investments.
4
Table of Contents
Crash Cushions and End Terminals —
The Company offers a complete line of redirective and
non-redirective crash cushions which are used to enhance highway safety at locations such as toll
booths, freeway off-ramps, medians and roadside barrier ends, bridge supports, utility poles and
other fixed roadway hazards. The Company’s primary crash
cushion products cover a full range of lengths, widths, speed capacities and application
accessories and include the following brand names: TAU
®
, Universal TAU-II
®
,
TAU-B_NR
™
, ABSORB 350
®
and Walt
™
. In addition to these products
the Company also offers guardrail end terminal products such as the X-Tension
™
and
TESI
®
systems. The crash cushions and end terminal products compete with other vendors
in the world market. These systems are generally sold through a distribution channel that is
domiciled in particular geographic areas.
Specialty Barriers
—
The Company also offers specialty barrier products such as the
SAB
™
, ArmorGuard
™
, PaveGuard
™
and DR46
™
portable
barrier and/or barrier gate systems. These products offer portability and flexibility in setting
up and modifying barriers in work areas and provide quick opening, high containment gates for use
in median or roadside barriers. The gates are generally used to create openings in barrier walls
of various types for both construction and incident management purposes. The DR46
™
is
an energy absorbing barrier to shield motorcyclists from impacting guardrail posts which is
becoming an area of focus for reducing the amount and severity of injuries.
Road Marking and Road Safety Equipment
— The Company also offers preformed tape and a line of road
safety accessory products. The preformed tape is used primarily in temporary applications such as
markings for work zones, street crossings, and road center lines or boundaries. The road safety
equipment consists of mostly plastic and rubber products used for delineation, slowing traffic, and
signaling. The Company also manages an ISO 17025 certified testing laboratory, Safe Technologies,
Inc., that performs full-scale impact testing of highway safety products in accordance with the
National Cooperative Highway Research Program (“NCHRP”) Report 350, the Manual for Assessing Safety
Hardware (“MASH”), and the European Norms (EN1317) for these types of products. The NCHRP Report
350 and MASH guidelines are procedures required by the U.S. Department of Transportation Federal
Highway Administration for the safety performance evaluation of highway features. The EN1317 Norms
are being used to qualify roadway safety products for the European markets.
Other Products
— The Company’s Diversified Manufacturing and Tubing business unit (“Diversified
Manufacturing”) manufactures and markets large diameter steel tubing and railroad signals and
structures, and provides outsourced manufacturing and production services for other companies. The
Company continues to develop new relationships for infrastructure manufacturing in industries
outside of agriculture and irrigation. The Company’s customer base includes certain large
industrial companies and railroads. Each customer benefits from the Company’s design and
engineering capabilities as well as the Company’s ability to provide a wide spectrum of
manufacturing services, including welding, machining, painting, forming, galvanizing and assembling
hydraulic, electrical, and mechanical components.
Markets
— The Company’s primary infrastructure market includes moveable concrete barriers,
delineation systems, guardrails and similar protective equipment. The U.S. roadway infrastructure
market includes projects such as new roadway construction, bridges, tunnels, maintenance and
resurfacing, and the purchase of rights-of-way for roadway expansion and development of
technologies for relief of roadway congestion. Much of the U.S. highway infrastructure market is
driven by government (state and federal) spending programs. For example, the U.S. government funds
highway and road improvements through the Federal Highway Trust Fund Program. This program
provides funding to improve the nation’s roadway system. Matching funding from the various states
may be required as a condition of federal funding. In the long term, the Company believes that the
federal program provides a solid platform for growth in the U.S. market, as it is generally
acknowledged that additional funding will be required for infrastructure development and
maintenance in the future.
The European market is presently very different from country to country, but the
standardization in performance requirements and acceptance criteria for highway safety devices
adopted by the European Committee for Standardization is expected to lead to greater uniformity and
a larger installation program. This will also be influenced by the European Union’s prevention
program which has the goal to lower highway traffic fatalities.
Competition
— The Company competes in certain product lines with several manufacturers, some of
whom may have greater financial resources than the Company. The Company competes by continuously
improving its products through ongoing research and development activities. The Company’s
engineering and research expenses related to infrastructure products totaled approximately $4.3
million, $3.7 million and $3.0 for fiscal years 2011, 2010 and 2009, respectively. The Company
competes with certain products and companies in its crash cushion business, but has limited
competition in its moveable barrier line, as there is not another moveable barrier product today
comparable to the QMB
®
system. However, the Company’s barrier product does compete with
traditional “safety shaped” concrete barriers and other safety barriers.
5
Table of Contents
Distribution methods and channels
— The Company has production and sales operations in Nebraska,
California and Italy. Sales efforts consist of both direct sales and sales programs managed by its
network of distributors and third-party representatives. The sales teams have responsibility for
new business development and assisting distributors and dealers in soliciting large projects and
new customers. The distributor and dealer networks have exclusive territories and are responsible
for developing sales and providing service, including product maintenance, repair and installation.
The typical dealer sells an array of safety supplies, road signs, crash cushions, delineation
equipment and other highway products. Customers include Departments of Transportation, municipal
transportation road agencies, roadway contractors, subcontractors, distributors and dealers. Due
to the project nature of the roadway construction and congestion management markets, the Company’s
customer base changes from year-to-year. Due to the limited life of projects, it is rare that a
single customer will account for a significant amount of revenues in consecutive years. The
customer base also varies depending on the type of product sold. The Company’s moveable barrier
products are typically sold to transportation agencies or the contractors or suppliers serving
those agencies. In contrast, distributors account for a majority of crash cushion sales since
those products have lower price points and tend to have shorter lead times.
GENERAL
Certain information generally applicable to both of the Company’s reportable segments is set
forth below.
The following table describes the Company’s total irrigation and infrastructure revenues for
the past three years. United States export revenue is included in International as the region of
destination. No individual foreign country’s operating revenues were material for separate
disclosure purposes.
| For the years ended August 31, | ||||||||||||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||||||||||||
| % of Total | % of Total | % of Total | ||||||||||||||||||||||
| $ in millions | Revenues | Revenues | Revenues | Revenues | Revenues | Revenues | ||||||||||||||||||
|
United States
|
$ | 307.7 | 64 | $ | 204.5 | 57 | $ | 200.6 | 60 | |||||||||||||||
|
International
|
171.2 | 36 | 153.9 | 43 | 135.6 | 40 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Revenues
|
$ | 478.9 | 100 | $ | 358.4 | 100 | $ | 336.2 | 100 | |||||||||||||||
|
|
||||||||||||||||||||||||
SEASONALITY
Irrigation equipment sales are seasonal by nature. Farmers generally order systems to be delivered
and installed before the growing season. Shipments to U.S. customers usually peak during the
Company’s second and third fiscal quarters for the spring planting period. Sales of infrastructure
products are traditionally higher during prime construction seasons and lower in the winter. The
primary construction season in North America is from March until late September which corresponds
to the Company’s third and fourth fiscal quarters.
CUSTOMERS
The Company is not dependent for a material part of either segment’s business upon a single
customer or upon a limited number of customers. The loss of any one customer would not have a
material adverse effect on the Company’s financial condition, results of operations or cash flow.
ORDER BACKLOG
As of August 31, 2011, the Company has an order backlog of $46.0 million compared with $38.4
million at August 31, 2010. The Company’s backlog can fluctuate from period to period due to the
seasonality, cyclicality, timing and execution of contracts. Typically, the Company’s backlog at
any point in time represents only a portion of the revenue it expects to realize during the
following three month period.
Generally, the Company manufactures or purchases the components for its irrigation equipment
from a sales forecast and prepares the equipment for shipment upon the receipt of a U.S. or
international dealer’s firm order. Irrigation equipment orders from U.S. dealers are generally
accompanied with a down payment unless they are purchased through one of the Company’s dealer
network preferred vendor financing programs. Irrigation equipment orders being delivered to
international markets from the U.S. are generally shipped against prepayments or receipt of an
irrevocable letter of credit confirmed by a U.S. bank or other secured means, which call for
delivery within time periods negotiated with the customer. Orders delivered from the Company’s
international irrigation manufacturing operations are generally shipped according to payment and/or
credit terms customary to that country or region.
6
Table of Contents
Generally, the Company manufactures or purchases the components for its infrastructure
equipment, excluding QMB
®
systems, from a sales forecast and prepares the equipment for
shipment upon the receipt of a U.S. or international distributor’s firm order. The Company
manufactures or purchases the components for its QMB
®
systems once a contract has been signed. Generally, QMB
®
system contracts require a
down payment before manufacturing of the QMB
®
system will begin.
RAW MATERIALS AND COMPONENTS
Raw materials used by the Company include coil steel, angle steel, plate steel, zinc, tires,
gearboxes, concrete, rebar, fasteners, and electrical and hydraulic components (motors, switches,
cable, valves, hose and stators). The Company has, on occasion, faced shortages of certain such
materials. The Company believes it currently has ready access to adequate supplies of raw
materials and components.
CAPITAL EXPENDITURES
Capital expenditures for fiscal 2011, 2010, and 2009 were $8.4 million, $5.8 million and $10.5
million, respectively. Capital expenditures for fiscal 2012, excluding possible expansion of the
leased barrier and barrier-transfer machine fleet, are estimated to be approximately $9.0 to $11.0
million. The planned expenditures include equipment for manufacturing equipment replacement,
tooling, and facilities for identified efficiency improvements. The Company’s management does
maintain flexibility to modify the amount and timing of some of the planned expenditures in
response to economic conditions.
PATENTS, TRADEMARKS, AND LICENSES
Lindsay’s
Zimmatic
®
,
Greenfield
®
,
GrowSmart
®
,
Quickchange
®
Moveable Barrier
™
,
ABSORB 350
®
,
TAU
®
,
Universal TAU-II
®
,
TAU-B_NR
™
,
X-Tension
™
,
CableGuard
™
,
TESI
™
,
SAB
™
,
ArmourGuard
™
,
PaveGuard
™
,
DR46
™
,
U-MAD
™
,
and other trademarks are registered or applied for in the
major markets in which the Company sells its products. Lindsay follows a policy of applying for
patents on all significant patentable inventions in markets deemed appropriate. Although the
Company 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 the Company and its wholly-owned subsidiaries at fiscal year ends
2011, 2010, and 2009 were 999, 891 and 766, respectively. None of the Company’s U.S. employees are
represented by a union. Certain of the Company’s non-U.S. employees are unionized due to local
governmental regulations.
ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS
Like other manufacturing concerns, the Company is subject to numerous laws and regulations
that govern environmental and occupational health and safety matters. The Company believes that
its operations are substantially in compliance with all such applicable laws and regulations and
that it holds all necessary permits in each jurisdiction in which its facilities are located.
Environmental and health and safety regulations are subject to change and interpretation. In some
cases, compliance with applicable regulations or standards may require the Company to make
additional capital and operational expenditures. The Company, however, is not currently aware of
any material capital expenditures required to comply with such regulations, other than as described
below, and does not believe that these matters, individually or in the aggregate, are likely to
have a material adverse effect on the Company’s consolidated financial condition.
In 1992, the Company entered into a consent decree with the Environmental Protection Agency of
the United States Government (the “EPA”) in which the Company committed to remediate environmental
contamination of the groundwater that was discovered in 1982 through 1990 at and adjacent to its
Lindsay, Nebraska facility (the “site”). The site was added to the EPA’s list of priority
superfund sites in 1989. Between 1993 and 1995, remediation plans for the site were approved by
the EPA and fully implemented by the Company. Since 1998, the primary remaining contamination at
the site has been the presence of volatile organic chemicals in the groundwater. The current
remediation process consists of drilling wells into the aquifer and pumping water to the surface to
allow these contaminants to be removed by aeration. In 2008, the Company and the EPA conducted a
periodic five-year review of the status of the remediation of the contamination of the site. In
response to the review, the Company and its environmental consultants have developed a remedial
action work plan, under which the Company continues to work with the EPA to define and implement
steps to better contain and remediate the remaining contamination.
7
Table of Contents
The Company accrues the anticipated cost of remediation when the obligation is probable and
can be reasonably estimated. Due to the current stage of discussions with the EPA and the
uncertainty of the remediation actions that may be required, the Company believes that meaningful
estimates of costs or range of costs cannot currently be made for all future remediation
requirements. The Company is scheduled to meet with the EPA in fiscal 2012 to discuss options that
could result in more permanent or more clearly defined remediation of the source areas of
contamination at the site.
During fiscal 2011, the Company accrued incremental costs of $1.3 million for additional
environmental monitoring and remediation in connection with the current ongoing remedial action
work plan. Amounts accrued in balance sheet liabilities related to the remediation actions were
$1.5 million and $0.9 million at August 31, 2011 and 2010, respectively. Although the Company has
accrued all reasonably estimable costs of completing the actions defined in the current ongoing
work plan agreed to between the Company and the EPA, it is expected that additional testing and
environmental monitoring and remediation will be required in the future as part of the Company’s
ongoing discussions with the EPA regarding the development and implementation of the remedial
action work plan, which could result in the recognition of additional related expenses. While
these additional expenses could significantly exceed the amount accrued as of August 31, 2011 and
could be material to the operating results of any fiscal quarter or fiscal year, the Company does
not expect that such additional expenses would have a material adverse effect on the liquidity or
financial condition of the Company.
FINANCIAL INFORMATION ABOUT FOREIGN AND U.S. OPERATIONS
The Company’s primary production facilities are located in the United States. The Company has
smaller production and sales operations in France, Brazil, Italy and China as well as distribution
and sales operations in South Africa, Australia and New Zealand. Most of the Company’s financial
transactions are in U.S. dollars, although some export sales and sales from the Company’s foreign
subsidiaries, which are approximately 19% and 20% of total consolidated Company sales in fiscal
2011 and 2010, respectively, are conducted in local currencies.
A portion of the Company’s cash flow is derived from sales and purchases denominated in
currencies other than the designated functional currency. To reduce the uncertainty of foreign
currency exchange rate movements on these sales and purchase commitments, the Company monitors its
risk of foreign currency fluctuations and, at times, may enter into forward exchange or option
contracts for transactions denominated in a currency other than the functional currency for certain
of the Company’s operations.
In addition to the transactional foreign currency exposures mentioned above, the Company also
has translation exposure resulting from translating the financial statements of its international
subsidiaries into U.S. dollars. In order to reduce this translation exposure, the Company, at
times, utilizes foreign currency forward contracts to hedge its net investment exposure in its
foreign operations. For information on the Company’s foreign currency risks, see Item 7A of Part II
of this report.
INFORMATION AVAILABLE ON THE LINDSAY WEBSITE
The Company makes available free of charge on its website homepage, under the tab “Investors — SEC
Filings”, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, Proxy Statements, and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable
after the Company electronically files such material with, or furnishes it to, the SEC. The
Company’s internet address is
http://www.lindsay.com
; however, information posted on its
website is not part of this report on Form 10-K. The following documents are also posted on the
Company’s website homepage, under the tab “Investors — Governance — Committees” and “Investors —
Governance — Ethics”:
Audit Committee Charter
Compensation Committee Charter
Corporate Governance and Nominating Committee Charter
Corporate Governance Principles
Code of Ethical Conduct
Code of Business Conduct and Ethics
Employee Complaint Procedures for Accounting and Auditing Matters
Special Toll-Free Hotline Number and E-mail Address for Making Confidential or Anonymous Complaints
Compensation Committee Charter
Corporate Governance and Nominating Committee Charter
Corporate Governance Principles
Code of Ethical Conduct
Code of Business Conduct and Ethics
Employee Complaint Procedures for Accounting and Auditing Matters
Special Toll-Free Hotline Number and E-mail Address for Making Confidential or Anonymous Complaints
These documents are also available in print to any shareholder upon request, by sending a letter
addressed to the Secretary of the Company.
8
Table of Contents
| ITEM 1A |
—
Risk Factors
|
The following are certain of the more significant risks that may affect the Company’s business,
financial condition and results of operations.
The Company’s U.S. and international irrigation equipment sales are highly dependent on the
agricultural industry.
The Company’s U.S. and international irrigation equipment sales are highly
dependent upon the need for irrigated agricultural crop production which, in turn, depends upon
many factors, including total worldwide crop production, the profitability of agricultural crop
production, agricultural commodity prices, net cash farm income, availability of financing for
farmers, governmental policies regarding the agricultural sector, water and energy conservation
policies, the regularity of rainfall, regional climate change, and foreign currency exchange rates.
As farm income decreases, farmers may postpone capital expenditures or seek less expensive
irrigation alternatives.
The Company’s infrastructure revenues are highly dependent on government funding of transportation
projects
.
The demand for the Company’s infrastructure products depends to a large degree on the
amount of government spending authorized to improve road and highway systems. For example, the
U.S. government funds highway and road improvements through the Federal Highway Trust Fund Program
and matching funding from states may be required as a condition of federal funding. If highway
funding is reduced or delayed, it may reduce demand for the Company’s infrastructure products.
The Company’s profitability may be negatively affected by increases in the cost of raw materials,
as well as in the cost of energy.
Certain of the Company’s input costs, such as the cost of steel,
zinc, and other raw materials, may increase rapidly from time to time. Because there is a level of
price competition in the market for irrigation equipment and certain infrastructure products, the
Company may not be able to recoup increases in these costs through price increases for its
products, which would result in reduced profitability. Whether increased operating costs can be
passed through to the customer depends on a number of factors, including farm income and the price
of competing products. The cost of raw materials can be volatile and is dependent on a number of
factors, including availability, demand, and freight costs.
The Company’s international equipment sales are highly dependent on foreign market conditions and
are subject to additional risk and restrictions.
For the fiscal year ended August 31, 2011,
approximately 36% of the Company’s consolidated revenues were generated from international sales
and United States export revenue to international regions. Specifically, international revenues
are primarily generated from Australia, New Zealand, Canada, Central and Western Europe, Mexico,
the Middle East, South Africa, China, and Central and South America. In addition to risks relating
to general economic and political stability in these countries, the Company’s international sales
are affected by international trade barriers, including governmental policies on tariffs, taxes,
import or export licensing requirements, trade sanctions, and foreign currency exchange rates.
International sales are also more susceptible to disruption from political instability and similar
incidents.
Compliance with applicable environmental and health and safety regulations or standards may require
additional capital and operational expenditures.
Like other manufacturing concerns, the Company is
subject to numerous laws and regulations which govern environmental and occupational health and
safety matters. The Company believes that its operations are substantially in compliance with all
such applicable laws and regulations and that it holds all necessary permits in each jurisdiction
in which its facilities are located. Environmental and health and safety regulations are subject
to change and interpretation. Compliance with applicable regulations or standards may require the
Company to make additional capital and operational expenditures.
The Company’s Lindsay, Nebraska site was added to the EPA’s list of priority superfund sites
in 1989. The Company and its environmental consultants have developed a remedial action work plan,
under which the Company continues to work with the EPA to define and implement steps to better
contain and remediate the remaining contamination. Under this review process, the Company is
scheduled to meet with the EPA in fiscal 2012 to discuss options that could result in a more
permanent or more clearly defined remediation of the source area of contamination at the site.
9
Table of Contents
Although the Company has accrued all reasonably estimable costs of completing the actions
defined in the current ongoing work plan agreed to between the Company and the EPA, it is expected
that additional testing and additional environmental monitoring and remediation will be required in
the near future as part of the Company’s ongoing discussions with the EPA regarding the development
and implementation of the remedial action work plan, which could result in the recognition of
additional related expenses. Additional expenses could significantly exceed the amount accrued as
of August 31, 2011 and could be material to the operating results of any fiscal quarter or fiscal
year. The Company’s ongoing remediation activities at its Lindsay, Nebraska facility are described
in Note L to the Company’s consolidated financial statements.
The Company’s sales and access to credit may be negatively affected by current economic conditions.
The ongoing instability in U.S. and international financial and credit markets along with the
resulting global recessionary concerns and the slow economic recovery has adversely affected, and
is expected to continue to adversely affect, the ability of farmers and government agencies to buy
and finance irrigation equipment and highway infrastructure equipment, respectively. It is not
certain how long these factors may affect demand for the Company’s products. Disruptions in the
financial and credit markets could also restrict the Company’s ability to access credit financing
under its existing credit facilities or to obtain additional financing.
The Company’s consolidated financial results are reported in U.S. dollars while certain assets and
other reported items are denominated in the currencies of other countries, creating currency
translation risk.
The reporting currency for the Company’s consolidated financial statements is the
U.S. dollar. Certain of the Company’s assets, liabilities, expenses and revenues are denominated in
other countries’ currencies. Those assets, liabilities, expenses and revenues are translated into
U.S. dollars at the applicable exchange rates to prepare the Company’s consolidated financial
statements. Therefore, increases or decreases in exchange rates between the U.S. dollar and those
other currencies affect the value of those items as reflected in the Company’s consolidated
financial statements. Substantial fluctuations in the value of the U.S. dollar compared to those
other currencies could have a significant impact on the Company’s results.
Expansion of the Company’s business may result in unanticipated adverse consequences.
The Company
routinely considers possible expansions of the business, both domestically and in foreign
locations. Acquisitions, partnerships, joint ventures or other similar major investments require
significant managerial resources, which may be diverted from the Company’s other business
activities. The risks of any expansion of the business through investments, acquisitions,
partnerships or joint ventures are increased due to the significant capital and other resources
that the Company may have to commit to any such expansion, which may not be recoverable if the
expansion initiative to which they were devoted is not fully implemented or is ultimately
unsuccessful. As a result of these risks and other factors, including general economic risk, the
Company may not be able to realize projected returns from any recent or future acquisitions,
partnerships, joint ventures or other investments.
| ITEM 1B |
—
Unresolved Staff Comments
|
None.
10
Table of Contents
| ITEM 2 |
—
Properties
|
The Company believes that each of its owned properties to be well maintained and adequate for
present use. Through planned capital expenditures, the Company expects these properties to remain
adequate for future needs. Leased properties are covered by leases expiring over terms of generally
one to eleven years. The Company does not anticipate any difficulty in retaining occupancy of any
leased facilities, either by renewing leases prior to expiration or by replacing them with
equivalent leased facilities. The following are the Company’s significant properties.
| Geographic | Own/ | Lease | Square | |||||||||||
| Segment | Location (s) | Lease | Expiration | Feet | Property Description | |||||||||
|
Corporate
|
Omaha, Nebraska | Lease | 2019 | 30,000 | The Corporate headquarters includes office space for its executive offices, U.S. and international sales and marketing offices and engineering laboratory space. | |||||||||
|
Irrigation and
Infrastructure
|
Lindsay, Nebraska | Own | N/A | 300,000 | Principal U.S. manufacturing plant consists of eight separate buildings located on 122 acres | |||||||||
|
Infrastructure
|
Omaha, Nebraska | Own | N/A | 83,000 | Manufacturing plant for infrastructure products located on six acres | |||||||||
|
Irrigation
|
Hartland, Wisconsin | Own | N/A | 73,000 | Two commercial buildings on five acres where it designs, manufactures and services water pumping stations and controls for the agriculture, golf, landscape and municipal markets | |||||||||
|
Irrigation
|
La Chapelle, France | Own | N/A | 72,000 | Manufacturing plant for irrigation products for the European markets, consists of three separate buildings situated on 3.5 acres | |||||||||
|
Irrigation
|
Mogi Mirim, Sao Paulo, Brazil | Lease | 2013 | 67,000 | Manufacturing plant for irrigation products for the South American markets, consists of two buildings | |||||||||
|
Irrigation
|
Tianjin, China | Lease | 2013 | 57,000 | Manufacturing plant for irrigation products for the Chinese markets | |||||||||
|
Infrastructure
|
Milan, Italy | Own | N/A | 45,000 | Manufacturing plant for infrastructure products | |||||||||
|
|
||||||||||||||
|
Infrastructure
|
Rio Vista, California | Own | N/A | 30,000 | Manufacturing plant for infrastructure products located on seven acres | |||||||||
|
Irrigation
|
Pasco, Grandview, and Othello, Washington | Lease | 2014 – 2022 | 26,000 | Retail irrigation operations in three leased buildings | |||||||||
|
Irrigation
|
Paarl, South Africa | Lease | 2016 | 20,000 | Warehouse facility for the sub-Saharan Africa markets | |||||||||
|
Irrigation
|
Milford, Nebraska | Lease | 2015 | 14,400 | Manufacturing and engineering locations related to Digitec, Inc. | |||||||||
|
Irrigation
|
Toowoomba, Queensland, Australia; Feilding, New Zealand | Lease | 2014 | 8,000 | Warehouse facilities for the Australian and New Zealand Markets | |||||||||
|
Irrigation
|
Pasco, Washington; Hermiston, Oregon; Portland, Oregon | Lease | 2013 | 6,000 | Office and warehouse locations related to IRZ Consulting, LLC | |||||||||
| ITEM 3 |
—
Legal Proceedings
|
In the ordinary course of its business operations, the Company is involved, from time to time, in
commercial litigation, employment disputes, administrative proceedings, and other legal
proceedings. No such current proceedings, individually or in the aggregate, are expected to have a
material effect on the business or financial condition of the Company.
| ITEM 4 |
— (
Removed and Reserved)
|
11
Table of Contents
| ITEM 5 |
—
Market For the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
Lindsay Common Stock trades on the New York Stock Exchange, Inc. (NYSE) under the ticker symbol
LNN. As of September 30, 2011, there were approximately 177 shareholders of record.
The following table sets forth for the periods indicated the range of the high and low stock prices
and dividends paid per share:
| Fiscal 2011 Stock Price | Fiscal 2010 Stock Price | |||||||||||||||||||||||
| High | Low | Dividends | High | Low | Dividends | |||||||||||||||||||
|
First Quarter
|
$ | 66.48 | $ | 37.22 | $ | 0.085 | $ | 45.08 | $ | 31.20 | $ | 0.080 | ||||||||||||
|
Second Quarter
|
79.56 | 58.00 | 0.085 | 47.45 | 35.02 | 0.080 | ||||||||||||||||||
|
Third Quarter
|
85.87 | 61.85 | 0.085 | 43.92 | 33.00 | 0.080 | ||||||||||||||||||
|
Fourth Quarter
|
73.03 | 47.68 | 0.090 | 38.19 | 30.80 | 0.085 | ||||||||||||||||||
|
Year
|
$ | 85.87 | $ | 37.22 | $ | 0.345 | $ | 47.45 | $ | 30.80 | $ | 0.325 | ||||||||||||
The Company currently expects that cash dividends comparable to those paid historically will
continue to be paid in the future, although there can be no assurance as to future dividends as
they depend on future earnings, capital requirements and financial condition.
Purchases of equity securities by the issuer and affiliated purchases —
The Company made no
repurchases of its Common Stock under the Company’s stock repurchase plan during the fiscal year
ended August 31, 2011; therefore, tabular disclosure is not presented. From time to time, the
Company’s Board of Directors has authorized management to repurchase shares of the Company’s Common
Stock. Under this share repurchase plan, management has existing authorization to purchase,
without further announcement, up to 881,139 shares of the Company’s Common Stock in the open market
or otherwise.
12
Table of Contents
Peer Performance Table —
The graph below compares the cumulative 5-year total return attained by
shareholders on the Company’s Common Stock relative to the cumulative total returns of the S&P
Small Cap 600 Index and the S&P 600 Construction, Farm Machinery and Heavy Truck index for the
five-year period ended August 31, 2011. An investment of $100 (with the reinvestment of all
dividends) is assumed to have been made in the Company’s Common Stock and in each of the indexes on
August 31, 2006 and the graph shows its relative performance through August 31, 2011.
| 8/31/2006 | 8/31/2007 | 8/31/2008 | 8/31/2009 | 8/31/2010 | 8/31/2011 | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Lindsay Corporation
|
100.00 | 143.20 | 290.54 | 148.49 | 133.09 | 225.76 | ||||||||||||||||||
|
S&P Smallcap 600
|
100.00 | 114.27 | 107.18 | 84.96 | 91.60 | 113.98 | ||||||||||||||||||
|
S&P SmallCap 600 Construction, Farm
Machinery and Heavy Truck
|
100.00 | 153.55 | 131.99 | 90.13 | 101.67 | 127.29 | ||||||||||||||||||
13
Table of Contents
| ITEM 6 |
—
Selected Financial Data
|
| For the Years Ended August 31, | ||||||||||||||||||||
| in millions, except per share amounts | 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||
|
Operating revenues (1)
|
$ | 478.9 | $ | 358.4 | $ | 336.2 | $ | 475.1 | $ | 281.9 | ||||||||||
|
Gross profit
|
129.8 | 98.9 | 80.6 | 123.8 | 69.7 | |||||||||||||||
|
Operating expenses
|
73.2 | 61.1 | 58.2 | 61.6 | 46.0 | |||||||||||||||
|
Operating income
|
56.6 | 37.8 | 22.4 | 62.2 | 23.8 | |||||||||||||||
|
Net earnings
|
36.8 | 24.9 | 13.8 | 39.4 | 15.6 | |||||||||||||||
|
Net diluted earnings per share
|
2.90 | 1.98 | 1.11 | 3.20 | 1.31 | |||||||||||||||
|
Cash dividends per share
|
0.345 | 0.325 | 0.305 | 0.285 | 0.265 | |||||||||||||||
|
Property, plant and equipment, net
|
58.5 | 57.6 | 59.6 | 57.6 | 44.3 | |||||||||||||||
|
Total assets
|
381.1 | 325.5 | 307.9 | 325.9 | 242.2 | |||||||||||||||
|
Long-term obligations
|
4.3 | 8.6 | 19.5 | 25.6 | 31.8 | |||||||||||||||
|
Return on sales
|
7.7 | % | 6.9 | % | 4.1 | % | 8.3 | % | 5.5 | % | ||||||||||
|
Return on beginning assets (2)
|
11.3 | % | 8.1 | % | 4.2 | % | 16.3 | % | 8.1 | % | ||||||||||
|
Diluted weighted average shares
|
12.692 | 12.585 | 12.461 | 12.324 | 11.964 | |||||||||||||||
| (1) |
Fiscal 2011 includes the operating results of Digitec, Inc. acquired in fourth quarter of
fiscal 2010 and WMC Technology Limited acquired in first quarter of fiscal 2011.
|
|
|
Fiscal 2010 includes the operating results of the railroad signals and structures business
acquired from GE Transportation Systems Global Signaling, LLC in the fourth quarter of fiscal
2009.
|
||
|
Fiscal 2008 includes the operating results of Watertronics, LLC, which was acquired in the
second quarter of fiscal 2008.
|
||
|
Fiscal 2007 includes the operating results of Snoline S.P.A.,
which was acquired in the second quarter of fiscal 2007.
|
||
| (2) |
Defined as net earnings divided by beginning of period total assets.
|
| ITEM 7 |
—
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Concerning Forward-Looking Statements
— This Annual Report on Form 10-K contains not only
historical information, but also forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements that
are not historical are forward-looking and reflect expectations for future Company performance. In
addition, forward-looking statements may be made orally or in press releases, conferences, reports,
on the Company’s worldwide web site, or otherwise, in the future by or on behalf of the Company.
When used by or on behalf of the Company, the words “expect,” “anticipate,” “estimate,” “believe,”
“intend” and similar expressions generally identify forward-looking statements. The entire section
entitled Market Conditions and Fiscal 2012 Outlook should be considered forward-looking statements.
For these statements, the Company claims the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve a number of risks and uncertainties, including but not
limited to those discussed in the “Risk Factors” section contained in Item 1A. Readers should not
place undue reliance on any forward-looking statement and should recognize that the statements are
predictions of future results which may not occur as anticipated. Actual results could differ
materially from those anticipated in the forward-looking statements and from historical results,
due to the risks and uncertainties described herein, as well as others not now anticipated. The
risks and uncertainties described herein are not exclusive and further information concerning the
Company and its businesses, including factors that potentially could materially affect the
Company’s financial results, may emerge from time to time. Except as required by law, the Company
assumes no obligation to update forward-looking statements to reflect actual results or changes in
factors or assumptions affecting such forward-looking statements.
14
Table of Contents
Overview
The Company manufactures and markets
Zimmatic
®
, Greenfield
®
,
Stettyn
™
,
and
Perrot
™
center pivot, lateral move, and hose reel irrigation
systems. The Company also produces irrigation controls, chemical injection systems and remote
monitoring and control systems which it sells under its
GrowSmart
®
brand. These
products are used by farmers to increase or stabilize crop production while conserving water,
energy, and labor. Through its acquisitions, the Company has been able to enhance its capabilities
in providing innovative, turn-key solutions to customers through the integration of its proprietary
pump stations, controls and designs. The Company sells its irrigation products primarily to a
world-wide independent dealer network, who resell to their customer, the farmer. The Company’s
primary production facilities are located in the United States. The Company has smaller production
and sales operations in France, Brazil, Italy and China as well as distribution and sales
operations in South Africa, Australia and New Zealand. The Company also manufactures and markets
various infrastructure products, including moveable barriers for traffic lane management, crash
cushions, preformed reflective pavement tapes and other road safety devices, through its production
facilities in Omaha, Nebraska, Rio Vista, California and Milan, Italy. In addition, the Company’s
infrastructure segment produces large diameter steel tubing and railroad signals and structures,
and provides outsourced manufacturing and production services for other companies.
Key factors which impact demand for the Company’s irrigation products include agricultural
commodity prices, net cash farm income, crop yields, weather, environmental regulations,
availability of financing and interest rates. A key factor which impacts demand for the Company’s
infrastructure products is the amount of spending authorized by governments to improve road and
highway systems. Much of the U.S. highway infrastructure market is driven by government spending
programs. For example, the U.S. government funds highway and road improvements through the Federal
Highway Trust Fund Program. This program provides funding to improve the nation’s roadway system.
Matching funding from the various states may be required as a condition of federal funding.
The Company will continue to focus on opportunities for growth both organically and through
acquisitions. The Company’s recent business combinations include IRZ Consulting, LLC on August 26,
2011, WMC Technology Limited on November 3, 2010, Digitec, Inc. (“Digitec”) on August 31, 2010 and
Watertronics, LLC on January 24, 2008. These acquisitions reflect the execution of the Company’s
strategy to grow its irrigation business with additional proprietary irrigation products. In
addition, on August 28, 2009, the Company completed the acquisition of certain assets of GE
Transportation Systems Global Signaling, LLC. The Company sees opportunities to create shareholder
value through the acquisition of product line extensions that will enhance the Company’s highway
safety product offering, globally.
Since 2001, the Company has added the operations in Europe, South America, South Africa,
Australia, New Zealand and China. The addition of those operations has allowed the Company to
strengthen its market position in those regions, yet they remain relatively small in scale. As a
result, none of the international operations has achieved the operating margin of the United States
based irrigation operations.
Recently Issued Accounting Pronouncements
In December 2010, the FASB issued ASU No. 2010-29,
Disclosure of Supplementary Pro Forma
Information for Business Combinations
, which requires a public entity presenting comparative
financial statements to disclose revenue and earnings of the combined entity as though the business
combination occurring during the current year had occurred as of the beginning of the comparable
prior annual reporting period. Additionally, the standard expands the supplemental pro forma
disclosures to include a description of the nature and amount of material, nonrecurring pro forma
adjustments directly attributable to the business combination included in the reported pro forma
revenue and earnings. The standard is effective prospectively for business combinations for which
the acquisition date is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2010. The Company does not expect the adoption of this standard to impact the
consolidated financial statements except for the requirement of additional pro forma disclosures.
In May 2011, the FASB issued ASU No. 2011-04,
Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in U.S. GAAP and IFRSs
, which requires the categorization
by level for items that are only required to be disclosed at fair value and information about
transfers between Level 1 and Level 2. In addition, the ASU provides guidance on measuring the fair
value of financial instruments managed within a portfolio and the application of premiums and
discounts on fair value measurements. The ASU requires additional disclosure for Level 3
measurements regarding the sensitivity of fair value to changes in unobservable inputs and any
interrelationships between those inputs. The guidance is effective for fiscal years beginning after
December 15, 2011. The Company does not expect the adoption of this standard to impact the
consolidated financial statements.
15
Table of Contents
In June 2011, the FASB issued ASU No. 2011-05,
Presentation of Comprehensive Income
, which
amends ASC 220,
Comprehensive Income
, by requiring all nonowner changes in shareholders’ equity be
presented either in a single continuous statement of comprehensive income or in two separate but
consecutive statements. The guidance is effective retrospectively for fiscal years and interim
periods within those years beginning after December 15, 2011. The Company is currently evaluating
the impact of the adoption of the guidance on its consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08,
Intangibles — Goodwill and Other
. ASU No.
2011-08 allows entities to first assess qualitatively whether it is necessary to perform the
two-step goodwill impairment test. If an entity believes, as a result of its qualitative
assessment, that it is more likely than not that the fair value of a reporting period is less than
its carrying amount, the quantitative two-step goodwill impairment test is required. An entity has
the unconditional option to bypass the qualitative assessment and proceed directly to performing
the first step of the goodwill impairment test. The guidance is effective for annual and interim
impairment tests for fiscal years beginning after December 15, 2011. The Company does not expect
the adoption of this standard to impact the consolidated financial statements.
Critical Accounting Policies and Estimates
In preparing the consolidated financial statements in conformity with U.S. generally accepted
accounting principles (“GAAP”), management must make a variety of decisions which impact the
reported amounts and the related disclosures. Such decisions include the selection of the
appropriate accounting principles to be applied and the assumptions on which to base accounting
estimates. In reaching such decisions, management applies judgment based on its understanding and
analysis of the relevant facts and circumstances. Certain of the Company’s accounting policies are
critical, as these policies are most important to the presentation of the Company’s consolidated
results of operations and financial condition. They require the greatest use of judgments and
estimates by management based on the Company’s historical experience and management’s knowledge and
understanding of current facts and circumstances. Management periodically re-evaluates and adjusts
the estimates that are used as circumstances change.
Following are the accounting policies management considers critical to the Company’s
consolidated results of operations and financial condition:
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the last-in,
first-out (LIFO) method for the Company’s Lindsay, Nebraska inventory and two warehouses in Idaho
and Texas. Cost is determined by the first-in, first-out (FIFO) method for inventory at the
Company’s Omaha, Nebraska warehouse, and at operating locations in California, Wisconsin, China and
Australia. Cost is determined by the weighted average cost method for inventory at the Company’s
other operating locations in Washington State, France, Brazil, Italy and South Africa. At all
locations, the Company reserves for obsolete, slow moving, and excess inventory by estimating the
net realizable value based on the potential future use of such inventory.
Valuation of Goodwill, Identifiable Intangible Assets and Other Long-Lived Assets
Assessment of the potential impairment of goodwill, intangible assets and other long-lived
assets is an integral part of the Company’s normal ongoing review of operations. Testing for
potential impairment of these assets is significantly dependent on numerous assumptions and
reflects management’s best estimates at a particular point in time. The dynamic economic
environments in which the Company’s businesses operate and key economic and business assumptions
related to projected selling prices, market growth, inflation rates and operating expense ratios,
can significantly affect the outcome of impairment tests. Estimates based on these assumptions may
differ significantly from actual results. Changes in factors and assumptions used in assessing
potential impairments can have a significant impact on the existence and magnitude of impairments,
as well as the time in which such impairments are recognized.
Goodwill represents the excess of the purchase price over the fair value of net assets
acquired in a business combination. Acquired intangible assets are recognized separately from
goodwill. Goodwill and intangible assets with indefinite useful lives are tested for impairment at
least annually at August 31 and whenever triggering events or changes in circumstances indicate its
carrying value may not be recoverable. The Company performs the impairment analysis at the
reporting unit level using a two-step impairment test. Fair value is typically estimated using a
discounted cash flow analysis, which requires the Company to estimate the future cash flows
anticipated to be generated by the particular assets being tested for impairment as well as to
select a discount rate to measure the
present value of the anticipated cash flows. When determining future cash flow estimates, the
Company considers historical results adjusted to reflect current and anticipated operating
conditions. Estimating future cash flows requires significant judgment and assumptions by
management in such areas as future economic conditions, industry-specific conditions, product
pricing, and necessary capital expenditures. To the extent that the reporting unit is unable to
achieve these assumptions, impairment losses may emerge. The Company updated its impairment
evaluation of goodwill and intangible assets with indefinite useful lives at August 31, 2011.
16
Table of Contents
While the fair value of most of the Company’s reporting units exceeded the respective carrying
values by a substantial margin, one international reporting unit, which has goodwill of $6.1
million, had an estimated fair value less than 10% in excess of carrying value. Accordingly, no
impairment losses were indicated as a result of the annual impairment testing for fiscal years
2011, 2010, and 2009. If assumptions on discount rates and future cash flows change as a result
of events or circumstances, and the Company believes that the long-term profitability may have
declined in value, then the Company may record impairment charges, resulting in lower profits.
Sales and profitability of each of the Company’s reporting units may fluctuate from year to year
and within a year. In the evaluation of the fair value of reporting units, the Company looks at the
long-term prospects for the reporting unit and recognizes that current performance may not be the
best indicator of future prospects or value, which requires management judgment.
Indefinite life intangible assets primarily consist of tradenames/trademarks. The fair value
of these assets are determined using a “relief from royalty” analysis that determines the fair
value of each trademark through use of a discounted cash flow model that incorporates an estimated
“royalty rate” the Company would be able to charge a third party for the use of the particular
trademark. When determining the future cash flow estimates, the Company must estimate future net
sales and a fair market royalty rate for each applicable tradename at an appropriate discount rate
to measure the present value of the anticipated cash flows. Estimating future net sales requires
significant judgment by management in such areas as future economic conditions, industry-specific
conditions, product pricing, and consumer trends.
Revenue Recognition
The Company’s basic criteria necessary for revenue recognition are: 1) evidence of a sales
arrangement exists, 2) delivery of goods has occurred, 3) the seller’s price to the buyer is fixed
or determinable, and 4) collectability is reasonably assured. The Company recognizes revenue when
these criteria have been met and when title and risk of loss transfers to the customer. The
Company generally has no post delivery obligations to its independent dealers other than standard
warranties. Revenues and gross profits on intercompany sales are eliminated in consolidation.
Revenues from the sale of the Company’s irrigation products to its U.S. independent dealers,
international locations, and sales by its international locations are recognized based on the
delivery terms in the sales contract. If an arrangement involves multiple deliverables, the
delivered items are considered separate units of accounting if the items have value on a
stand-alone basis and there is objective and reliable evidence of their fair values. Revenues from
the arrangement are allocated to the separate units of accounting based on their objectively
determined fair value. Revenues for retail sales of irrigation products are recognized when the
product or service is delivered to the end-user customers. A small portion of the Company’s
revenues relate to subscription revenue of wireless management services and are recognized on a
straight-line basis over the contract term.
Revenues from the sale of infrastructure products are usually recognized when the product is
delivered to the customer; however, they are dependent on the specific delivery terms in the sales
contract. The Company leases certain infrastructure property held for lease to customers such as
moveable concrete barriers and QMB
®
systems. Revenues for the lease of infrastructure
property held for lease are recognized on a straight-line basis over the lease term. If an
infrastructure project is completed ahead of schedule and prior to the lease term end date, the
Company accelerates the lease term and the timing of recognized revenue once the Company is no
longer required to perform under the lease contract.
The costs related to revenues are recognized in the same period in which the specific revenues
are recorded. Shipping and handling fees billed to customers are reported in revenue. Shipping and
handling costs incurred by the Company are included in cost of sales. Customer rebates, cash
discounts and other sales incentives are recorded as a reduction of revenues at the time of the
original sale. Estimates used in the recognition of operating revenues and cost of operating
revenues include, but are not limited to, estimates for product warranties, product rebates, cash
discounts and fair value of separate units of accounting on multiple deliverables.
17
Table of Contents
Results of Operations
The following “Fiscal 2011 Compared to Fiscal 2010” and the “Fiscal 2010 Compared to Fiscal 2009”
sections present an analysis of the Company’s consolidated operating results displayed in the
Consolidated Statements of Operations and should be read together with the industry segment
information in Note O to the consolidated financial statements.
Fiscal 2011 Compared to Fiscal 2010
The following table provides highlights for fiscal 2011 compared with fiscal 2010:
| For the Years Ended | Percent | |||||||||||
| August 31, | Increase | |||||||||||
| $ in thousands | 2011 | 2010 | (Decrease) | |||||||||
|
Consolidated
|
||||||||||||
|
Operating revenues
|
$ | 478,890 | $ | 358,440 | 33.6 | % | ||||||
|
Cost of operating revenues
|
$ | 349,105 | $ | 259,540 | 34.5 | % | ||||||
|
Gross profit
|
$ | 129,785 | $ | 98,900 | 31.2 | % | ||||||
|
Gross margin
|
27.1 | % | 27.6 | % | ||||||||
|
Operating expenses (1)
|
$ | 73,199 | $ | 61,058 | 19.9 | % | ||||||
|
Operating income
|
$ | 56,586 | $ | 37,842 | 49.5 | % | ||||||
|
Operating margin
|
11.8 | % | 10.6 | % | ||||||||
|
Interest expense
|
$ | (762 | ) | $ | (1,557 | ) | (51.1 | )% | ||||
|
Interest income
|
$ | 315 | $ | 352 | (10.5 | )% | ||||||
|
Other income (expense), net
|
$ | 375 | $ | 145 | 158.6 | % | ||||||
|
Income tax provision
|
$ | 19,712 | $ | 11,920 | 65.4 | % | ||||||
|
Effective income tax rate
|
34.9 | % | 32.4 | % | ||||||||
|
Net earnings
|
$ | 36,802 | $ | 24,862 | 48.0 | % | ||||||
|
Irrigation
Equipment Segment (See Note O)
|
||||||||||||
|
Operating revenues
|
$ | 369,930 | $ | 258,666 | 43.0 | % | ||||||
|
Operating income (2)
|
$ | 59,703 | $ | 40,869 | 46.1 | % | ||||||
|
Operating margin (2)
|
16.1 | % | 15.8 | % | ||||||||
|
Infrastructure Products Segment (See Note O)
|
||||||||||||
|
Operating revenues
|
$ | 108,960 | $ | 99,774 | 9.2 | % | ||||||
|
Operating income (2)
|
$ | 11,901 | $ | 11,083 | 7.4 | % | ||||||
|
Operating margin (2)
|
10.9 | % | 11.1 | % | ||||||||
| (1) |
Includes $15.0 million and $14.1 million of unallocated general and administrative
expenses for fiscal 2011 and fiscal 2010, respectively.
|
|
| (2) |
Excludes unallocated corporate general and administrative expenses.
|
Revenues
Operating revenues for fiscal 2011 increased by $120.5 million to $478.9 million compared
with $358.4 million in fiscal 2010. The increase is attributable to a $111.3 million increase in
irrigation equipment revenues and a $9.2 million increase in infrastructure segment revenues.
U.S. irrigation equipment revenues of $227.6 million increased $74.8 million or 49% compared
to fiscal 2010. The increase in U.S. irrigation equipment revenues is primarily due to an increase
in the number of irrigation systems sold compared to the prior fiscal year. Favorable economic
conditions in U.S. agriculture markets continued to drive strong demand for irrigation equipment.
Relatively high commodity prices, with corn increasing 27% and soybeans increasing 11% from the
same period last year, continued to support improved irrigation equipment demand. In August 2011,
the USDA increased its projected 2011 net farm income to be the highest on record and 31% higher
than 2010, creating positive economic conditions for U.S. farmers.
18
Table of Contents
International irrigation revenues of $142.3 million increased $36.5 million from fiscal 2010
revenues of $105.8 million. Operating revenues increased in nearly all international markets, most
significantly in China, Brazil, Australia, New Zealand and the Middle East. Long-term market
drivers of improving diets in a growing world-wide population combined with the water use
efficiencies available from mechanized irrigation systems continue to be positive drivers for
global irrigation equipment demand.
Infrastructure products segment revenues of $109.0 million increased by $9.2 million or 9%
compared to the prior fiscal year. The increase in infrastructure revenues was driven primarily by
higher QMB
®
system revenue and from railroad signals and structures, commercial tubing
and contract manufacturing businesses.
Gross Margin
Gross profit was $129.8 million for fiscal 2011, an increase of $30.9 million compared to fiscal
2010. Gross margin was 27.1% for fiscal 2011 compared to 27.6% for the prior fiscal year. Gross
margins were lower primarily due to regional sales mix, product mix, and factory inefficiencies
during the implementation of a new enterprise resource planning system in the Nebraska-based
operations.
Operating Expenses
The Company’s operating expenses of $73.2 million for fiscal 2011 increased $12.1 million compared
to fiscal 2010 operating expenses of $61.1 million. The increase in operating expenses for fiscal
2011 was primarily attributable to investments in sales and marketing, higher research and
development expenses, higher incentive compensation, and inclusion of operating expenses from
acquisitions completed in fiscal 2010. Operating expenses were 15.3% of sales for fiscal 2011
compared to 17.0% of sales for fiscal 2010.
Income Taxes
Income tax expense of $19.7 million for fiscal 2011 increased $7.8 million compared to fiscal 2010
income tax expense of $11.9 million. The increase in income tax expense was primarily due to
increases in pretax income. The effective income tax rate increased to 34.9% in fiscal 2011
compared to 32.4% in fiscal 2010. The increase in the effective income tax rate is primarily due to
a reduction in state income tax credits of $1.4 million compared to fiscal 2010.
Net Earnings
Net earnings for fiscal 2011 were $36.8 million or $2.90 per diluted share for fiscal 2011 compared
to $24.9 million, or $1.98 per diluted share for the prior fiscal year. The Company’s operating
income increased to $56.6 million in fiscal 2011 compared to $37.8 million during the prior fiscal
year primarily due to an increase in revenues partially offset by higher operating expenses.
19
Table of Contents
Fiscal 2010 Compared to Fiscal 2009
The following table provides highlights for fiscal 2010 compared with fiscal 2009:
| For the Years Ended | Percent | |||||||||||
| August 31, | Increase | |||||||||||
| $ in thousands | 2010 | 2009 | (Decrease) | |||||||||
|
Consolidated
|
||||||||||||
|
Operating revenues
|
$ | 358,440 | $ | 336,228 | 6.6 | % | ||||||
|
Cost of operating revenues
|
$ | 259,540 | $ | 255,597 | 1.5 | % | ||||||
|
Gross profit
|
$ | 98,900 | $ | 80,631 | 22.7 | % | ||||||
|
Gross margin
|
27.6 | % | 24.0 | % | ||||||||
|
Operating expenses (1)
|
$ | 61,058 | $ | 58,214 | 4.9 | % | ||||||
|
Operating income
|
$ | 37,842 | $ | 22,417 | 68.8 | % | ||||||
|
Operating margin
|
10.6 | % | 6.7 | % | ||||||||
|
Interest expense
|
$ | (1,557 | ) | $ | (2,030 | ) | (23.3 | )% | ||||
|
Interest income
|
$ | 352 | $ | 934 | (62.3 | )% | ||||||
|
Other income (expense), net
|
$ | 145 | $ | (782 | ) | 118.5 | % | |||||
|
Income tax provision
|
$ | 11,920 | $ | 6,716 | 77.5 | % | ||||||
|
Effective income tax rate
|
32.4 | % | 32.7 | % | ||||||||
|
Net earnings
|
$ | 24,862 | $ | 13,823 | 79.9 | % | ||||||
|
Irrigation
Equipment Segment (See Note O)
|
||||||||||||
|
Operating revenues
|
$ | 258,666 | $ | 255,507 | 1.2 | % | ||||||
|
Operating income (2)
|
$ | 40,869 | $ | 35,504 | 15.1 | % | ||||||
|
Operating margin (2)
|
15.8 | % | 13.9 | % | ||||||||
|
Infrastructure Products Segment (See Note O)
|
||||||||||||
|
Operating revenues
|
$ | 99,774 | $ | 80,721 | 23.6 | % | ||||||
|
Operating income (2)
|
$ | 11,083 | $ | (36 | ) | N/A | ||||||
|
Operating margin (2)
|
11.1 | % | 0.0 | % | ||||||||
| (1) |
Includes $14.1 million and $13.1 million of unallocated general and administrative
expenses for fiscal 2010 and fiscal 2009, respectively.
|
|
| (2) |
Excludes unallocated corporate general and administrative expenses.
|
Revenues
Operating revenues for fiscal 2010 increased by $22.2 million or 7% from fiscal 2009.
The increase was attributable to a 24% increase in infrastructure product revenues and a 1%
increase in irrigation equipment revenues.
U.S. irrigation revenues decreased $3.3 million or 2% compared to fiscal 2009. This decrease
in revenues was primarily due to a decrease of $20.9 million in U.S. irrigation revenues in the
first quarter of fiscal 2010 as compared to the same prior year period due to record backlog from
the end of fiscal 2008. Offsetting this decrease was an increase in the number of irrigation
systems sold in the remaining fiscal quarters of fiscal 2010 compared to the same prior year
periods. This was tempered by a decrease in the average selling price per unit. Commodity prices
rose during the fourth quarter of fiscal 2010 with corn up approximately 70%, soybeans up
approximately 26% and wheat up over 60% since early June 2010. The August update to the USDA for
2010 net farm income indicated a 28% increase compared to 2009. International irrigation revenues
increased $6.4 million or 6% compared to fiscal 2009. The Company’s international irrigation
business units in South America, South Africa and Europe, as well as exports to Mexico, all
achieved solid growth in fiscal 2010, partially offset by lower revenues in other regions.
Infrastructure products segment revenues of $99.8 million increased by $19.1 million or 24%
compared to the prior fiscal year. The increase in infrastructure revenues is attributable to
revenues increasing primarily from sales of quick-change moveable barrier systems. The Company saw
strong interest in its moveable barrier products which are a very cost effective way to add lane
capacity. This increase was partially offset by smaller decreases at the Company’s business unit
in Milan, Italy.
20
Table of Contents
Gross Margin
Gross profit was $98.9 million for fiscal 2010, an increase of $18.3 million compared to fiscal
2009. Gross margin was 27.6% for fiscal 2010 compared to 24.0% for the prior fiscal year. Gross
margin on irrigation products was favorably impacted by improved factory efficiencies at the
Company’s Lindsay, Nebraska facility and a favorable regional sales mix. Gross margin on
infrastructure products improved due to increased revenues of higher margin moveable barrier
product.
Operating Expenses
The Company’s operating expenses of $61.1 million for fiscal 2010 increased $2.8 million compared
to fiscal 2009. The increase in operating expenses for fiscal 2010 was primarily attributable to
increased investments in product development and higher incentive compensation resulting from
improved financial performance. This was partially offset by lower personnel related costs.
Operating expenses were 17.0% of sales for fiscal 2010 compared to 17.3% of sales for fiscal 2009.
Income Taxes
Income tax expense of $11.9 million for fiscal 2010 increased $5.2 million compared to fiscal 2009
income tax expense of $6.7 million. The increase in income tax expense was primarily due to
increases in pretax income. The effective income tax rate decreased to 32.4% in fiscal 2010
compared to 32.7% in fiscal 2009. The decrease in the effective income tax rate is primarily due to
an increase in state income tax credits compared to fiscal 2009.
Net Earnings
Net earnings were $24.9 million or $1.98 per diluted share for fiscal 2010 compared with $13.8
million or $1.11 per diluted share for the same prior year period. The Company’s operating income
increased to $37.8 million for fiscal 2010 compared to $22.4 million for fiscal 2009 due primarily
to an increase in revenues and in gross margin, which were partially offset by higher operating
expenses.
Liquidity and Capital Resources
The Company requires cash for financing its receivables and inventories, paying operating
expenses and capital expenditures, and for dividends. The Company meets its liquidity needs and
finances its capital expenditures from its available cash and funds provided by operations along
with borrowings under three credit arrangements that are described below.
The Company believes its current cash resources, projected operating cash flow, and remaining
capacity under its bank lines of credit are sufficient to cover all of its expected working capital
needs, planned capital expenditures, dividends, and other cash requirements, excluding potential
acquisitions. The Company has permanently reinvested cash and cash equivalents in foreign
operations of $10.2 million and $6.4 million as of August 31, 2011 and 2010, respectively, and does
not expect these balances to have a significant impact on the Company’s overall liquidity.
Cash flows provided by operations totaled $43.1 million for fiscal 2011 compared to $23.8
million provided by operations during the prior year. Cash provided by operations increased
primarily due to an $11.9 million increase in net earnings and a $6.1 million decrease in cash used
for working capital items.
Cash flows used in investing activities totaled $15.6 million for fiscal 2011 compared to cash
flows used in investing activities of $9.7 million during fiscal 2010. The increase in cash used
for investing activities was primarily due to an increase in purchases of property, plant and
equipment, the acquisition of the assets of WMC Technology Limited in November 2010, the
acquisition of IRZ Consulting, LLC in August 2011, and the settlement of net investment hedges.
Cash flows used in financing activities totaled $3.4 million for fiscal 2011 compared to cash
flows used in financing activities of $16.2 million during the same prior year period. The
decrease in cash used in financing activities compared to fiscal 2010 was primarily due to
principal payments on long-term debt that were $8.5 million lower in fiscal 2011, a $2.4 million
increase in excess tax benefits from stock-based compensation in fiscal 2011, and a $2.2 million
increase in Common Stock issuances under the Company’s equity compensation plans in fiscal 2011.
The Company has an unsecured $30.0 million Revolving Credit Note and Credit Agreement, as
amended on January 23, 2011, with Wells Fargo Bank, N.A. (the “Amended Revolving Credit Agreement”)
which has a termination date of January 23, 2014. As of August 31, 2011 and 2010, there were no
outstanding balances on the Amended Revolving Credit Agreement.
21
Table of Contents
Borrowings under the Amended Revolving Credit Agreement bear interest at a rate equal to LIBOR
plus 105 basis points, subject to adjustment as set forth in the Amended Revolving Credit
Agreement. Interest is paid on a monthly or quarterly basis depending on loan type. The Company
also pays an annual commitment fee of 0.25% on the unused portion of the Amended Revolving Credit
Agreement. Unpaid principal and interest is due by January 23, 2014, which is the termination date
of the Amended Revolving Credit Agreement.
The Company’s wholly-owned European subsidiary, Lindsay Europe, has an unsecured revolving
line of credit with Societe Generale, a European commercial bank, under which it could borrow for
working capital purposes up to 2.3 million Euros, which equates to approximately $3.3 million as of
August 31, 2011 (the “Euro Line of Credit”). At August 31, 2011 and 2010, there were no borrowings
outstanding under the Euro Line of Credit. Under the terms of the Euro Line of Credit, borrowings,
if any, bear interest at a floating rate in effect from time to time designated by the commercial
bank as the Euro Interbank Offered Rate plus 110 basis points (all inclusive, 2.13% at August 31,
2011). Unpaid principal and interest is due by January 31, 2012, which is the termination date of
the Euro Line of Credit. The Company’s management expects to obtain a similar line of credit prior
to termination.
The Company entered into an unsecured $30.0 million Term Note and Credit Agreement, each
effective as of June 1, 2006, with Wells Fargo Bank, N.A. (collectively, the “BSI Term Note”) to
partially finance the acquisition of Barrier Systems, Inc. (“BSI”). Borrowings under the BSI Term
Note originally bore interest at a rate equal to LIBOR plus 50 basis points. However, this variable
interest rate was converted to a fixed rate of 6.05% through an interest rate swap agreement with
the lender. Principal is repaid quarterly in equal payments of $1.1 million over a seven-year
period that commenced in September, 2006. The BSI Term Note is due on June 10, 2013.
The BSI Term Note and the Amended Revolving Credit Agreement (collectively, the “Notes”) each
contain the same covenants, including certain covenants relating to the Company’s financial
condition. These include maintaining a funded debt to EBITDA ratio, a fixed charge coverage ratio,
a current ratio and a tangible net worth requirement (all as defined in the Notes) at specified
levels. Upon the occurrence of any event of default of these covenants specified in the Notes,
including a change in control of the Company (as defined in the Notes), all amounts due under the
Notes may be declared to be immediately due and payable. At August 31, 2011 and 2010, the Company
was in compliance with all loan covenants.
Inflation
The Company is subject to the effects of changing prices. During fiscal 2011, the Company realized
pricing volatility for purchases of certain commodities, in particular steel and zinc products,
used in the production of its products. While the cost outlook for commodities used in the
production of the Company’s products is not certain, management believes it can manage these
inflationary pressures by introducing appropriate sales price adjustments and by actively pursuing
internal cost reduction efforts, while further refining the Company’s inventory and raw materials
risk management system. However, competitive market pressures may affect the Company’s ability to
pass price adjustments along to its customers.
Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements
In the normal course of business, the Company enters into contracts and commitments which
obligate the Company to make future payments. The Company uses off-balance sheet arrangements, such
as leases accounted for as operating leases, standby letters of credit and performance bonds, where
sound business principles warrant their use. The table below sets forth the Company’s significant
future obligations by time period. Where applicable, information included in the Company’s
consolidated financial statements and notes is cross-referenced in this table.
| More | ||||||||||||||||||||||||
| $ in thousands | Note | Less than | 2-3 | 4-5 | than 5 | |||||||||||||||||||
| Contractual Obligations | Reference | Total | 1 Year | Years | Years | Years | ||||||||||||||||||
|
Leases
|
L | $ | 9,718 | $ | 2,295 | $ | 3,125 | $ | 1,845 | $ | 2,453 | |||||||||||||
|
Term Note Obligation
|
J | 8,571 | 4,286 | 4,285 | — | — | ||||||||||||||||||
|
Interest Expense
|
J | 583 | 421 | 162 | — | — | ||||||||||||||||||
|
Unrecognized Tax Benefits (1)
|
D | 1,565 | — | — | — | 1,565 | ||||||||||||||||||
|
Supplemental Retirement Plan
|
M | 6,787 | 557 | 1,079 | 1,058 | 4,093 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
|
$ | 27,224 | $ | 7,559 | $ | 8,651 | $ | 2,903 | $ | 8,111 | ||||||||||||||
|
|
||||||||||||||||||||||||
| (1) |
Future cash flows for unrecognized tax benefits reflect the recorded liability, including
interest and penalties, in accordance with FIN 48 as of August 31, 2011. Amounts for which the
year of settlement cannot be reasonably estimated have been included in the “More than 5
years” column.
|
The Company does not have any additional off-balance sheet arrangements that have or are
reasonably likely to have a material current or future effect on the Company’s financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
22
Table of Contents
Market Conditions and Fiscal 2012 Outlook
Strong sales in the fourth fiscal quarter of 2011 completed a year in which the Company
experienced significant growth in nearly all irrigation markets and the highest revenues in Company
history.
Agricultural commodity prices, which are subject to a variety of external factors historically
driving significant fluctuation, remained relatively high at the end of fiscal 2011, continuing to
support improved irrigation equipment demand. In August 2011, the USDA increased its projected
2011 net farm income to be the highest on record and 31% higher than 2010, creating positive
economic conditions for U.S. farmers. The Company believes that the positive economic conditions
for farmers, the Section 179 deduction for the write-off for accelerated depreciation of equipment
purchases in the U.S., and the global drive for food security will support continued strong demand
in fiscal 2012. The Company believes the most significant opportunities for growth over the next
several years are in international markets, where irrigation use is significantly less developed,
and demand is driven by food security, water scarcity and population growth.
In the near-term, the governmental debt environment will likely lead to additional examination
of farm subsidies and tax credits, such as the Volumetric Ethanol Excise Tax Credit for ethanol and
the extension of the Section 179 deduction for accelerated depreciation on equipment purchased,
which could impact demand in the U.S. market.
In the infrastructure segment the Company has recently experienced stable sales in an
environment that is supported primarily by highway and railroad spending. The Company continues
to experience global interest in its QMB
®
systems as a cost effective method for
managing traffic congestion by safely adding lane capacity; however, the timing of orders for these
projects is uncertain and difficult to forecast in the present economic environment. Demand for the
Company’s transportation safety products continues to be driven by population growth and the need
for improved road safety. The outlook for general government funded infrastructure spending remains
challenging due to global governmental budget constraints and uncertainty on timing of a multi-year
U.S. highway bill.
As of August 31, 2011, the Company has an order backlog of $46.0 million compared with $43.3
million at May 31, 2011 and $38.4 million at August 31, 2010. The Company’s backlog can
fluctuate from period to period due to the seasonality, cyclicality, timing and execution of
contracts. Typically, the Company’s backlog at any point in time represents only a portion of the
revenue it expects to realize during the following three month period.
For the business overall, the global, long-term drivers of water conservation, population
growth, increasing importance of biofuels, and the need for safer, more efficient transportation
solutions remain positive. In addition, Lindsay continues to have an on-going, structured, acquisition
process that will generate additional growth opportunities throughout the world in water and
infrastructure. The Company’s strong balance sheet has positioned the Company to invest in growth
initiatives both organically and through acquisitions. Lindsay is committed to achieving earnings
growth through global market expansion, improvements in margins, and strategic acquisitions.
23
Table of Contents
| ITEM 7A |
—
Quantitative and Qualitative Disclosures About Market Risk
|
The Company uses certain financial derivatives to mitigate its exposure to volatility in interest
rates and foreign currency exchange rates. The Company uses these derivative instruments to hedge
exposures in the ordinary course of business and does not invest in derivative instruments for
speculative purposes. The credit risk under these interest rate and foreign currency agreements is
not considered to be significant.
The Company has manufacturing operations in the United States, France, Brazil, Italy and
China. The Company has sold products throughout the world and purchases certain of its components
from third-party international suppliers. Export sales made from the United States are principally
U.S. dollar denominated. At times, export sales may be denominated in a currency other than the
U.S. dollar. A majority of the Company’s revenue generated from operations outside the United
States is denominated in local currency. Accordingly, these sales are not typically subject to
significant foreign currency transaction risk. The Company’s most significant transactional
foreign currency exposures are the Euro, the Brazilian real, the South African rand and the Chinese
renminbi in relation to the U.S. dollar. Fluctuations in the value of foreign currencies create
exposures, which can adversely affect the Company’s results of operations.
In order to reduce exposures related to changes in foreign currency exchange rates, the
Company, at times, may enter into forward exchange or option contracts for transactions denominated
in a currency other than the functional currency for certain of our operations. This activity
primarily relates to economically hedging against foreign currency risk in purchasing inventory,
sales of finished goods, and future settlement of foreign denominated assets and liabilities. At
August 31, 2011, the Company had outstanding forward exchange contracts with cash flow hedging
relationships totaling less than $0.1 million included in other current liabilities.
In order to reduce translation exposure resulting from translating the financial statements of
its international subsidiaries into U.S. dollars, the Company, at times, utilizes Euro foreign
currency forward contracts to hedge a portion of its Euro net investment exposure in its foreign
operations. At August 31, 2011, the Company had outstanding Euro foreign currency forward
contracts to sell 10.0 million Euro at fixed prices expected to settle during the first quarter of
fiscal 2012.
In order to reduce interest rate risk on the $30 million BSI Term Note, the Company has
entered into an interest rate swap agreement with Wells Fargo Bank, N.A. that is designed to
convert the variable interest rate on the entire amount of this borrowing to a fixed rate of 6.05%
per annum. Under the terms of the interest rate swap, the Company receives variable interest rate
payments and makes fixed interest rate payments on an amount equal to the outstanding balance of
the BSI Term Note, thereby creating the equivalent of fixed-rate debt.
24
Table of Contents
| ITEM 8 |
—
Financial Statements and Supplementary Data
|
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Lindsay Corporation:
Lindsay Corporation:
We have audited the accompanying consolidated balance sheets of Lindsay Corporation and
subsidiaries (the Company) as of August 31, 2011 and 2010, and the related consolidated statements
of operations, shareholders’ equity and comprehensive income, and cash flows for each of the years
in the three-year period ended August 31, 2011. In connection with our audits of the consolidated
financial statements, we have also audited the financial statement schedule listed in Item 15(a)(2)
of this Form 10-K. These consolidated financial statements and financial statement schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. 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 consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Lindsay Corporation and subsidiaries as of August 31,
2011 and 2010, and the results of their operations and their cash flows for each of the years in
the three-year period ended August 31, 2011, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Company’s internal control over financial reporting as of August 31,
2011, based on criteria established in
Internal Control — Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated
October 27, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
/s/ KPMG LLP
Omaha, Nebraska
October 27, 2011
October 27, 2011
25
Table of Contents
Lindsay Corporation and Subsidiaries
| Years ended August 31, | ||||||||||||
| (in thousands, except per share amounts) | 2011 | 2010 | 2009 | |||||||||
|
|
||||||||||||
|
Operating revenues
|
$ | 478,890 | $ | 358,440 | $ | 336,228 | ||||||
|
Cost of operating revenues
|
349,105 | 259,540 | 255,597 | |||||||||
|
|
||||||||||||
|
Gross profit
|
129,785 | 98,900 | 80,631 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Operating expenses:
|
||||||||||||
|
Selling expense
|
27,842 | 23,070 | 22,361 | |||||||||
|
General and administrative expense
|
34,954 | 30,196 | 29,816 | |||||||||
|
Engineering and research expense
|
10,403 | 7,792 | 6,037 | |||||||||
|
|
||||||||||||
|
Total operating expenses
|
73,199 | 61,058 | 58,214 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Operating income
|
56,586 | 37,842 | 22,417 | |||||||||
|
|
||||||||||||
|
Other income (expense):
|
||||||||||||
|
Interest expense
|
(762 | ) | (1,557 | ) | (2,030 | ) | ||||||
|
Interest income
|
315 | 352 | 934 | |||||||||
|
Other income (expense), net
|
375 | 145 | (782 | ) | ||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Earnings before income taxes
|
56,514 | 36,782 | 20,539 | |||||||||
|
|
||||||||||||
|
Income tax provision
|
19,712 | 11,920 | 6,716 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Net earnings
|
$ | 36,802 | $ | 24,862 | $ | 13,823 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Basic net earnings per share
|
$ | 2.93 | $ | 2.00 | $ | 1.12 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Diluted net earnings per share
|
$ | 2.90 | $ | 1.98 | $ | 1.11 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Weighted average shares outstanding
|
12,560 | 12,451 | 12,294 | |||||||||
|
Diluted effect of stock equivalents
|
132 | 134 | 167 | |||||||||
|
|
||||||||||||
|
Weighted average shares outstanding assuming dilution
|
12,692 | 12,585 | 12,461 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Cash dividends per share
|
$ | 0.345 | $ | 0.325 | $ | 0.305 | ||||||
|
|
||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
26
Table of Contents
Lindsay Corporation and Subsidiaries
| August 31, | August 31, | |||||||
| ($ and shares in thousands, except par values) | 2011 | 2010 | ||||||
|
ASSETS
|
||||||||
|
Current Assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 108,167 | $ | 83,418 | ||||
|
Receivables, net of allowance of $2,340 and $2,244, respectively
|
79,006 | 63,629 | ||||||
|
Inventories, net
|
49,524 | 45,296 | ||||||
|
Deferred income taxes
|
8,598 | 6,722 | ||||||
|
Other current assets
|
12,398 | 8,946 | ||||||
|
|
||||||||
|
Total current assets
|
257,693 | 208,011 | ||||||
|
|
||||||||
|
Property, plant and equipment, net
|
58,465 | 57,646 | ||||||
|
Other intangible assets, net
|
28,639 | 27,715 | ||||||
|
Goodwill, net
|
30,943 | 27,395 | ||||||
|
Other noncurrent assets
|
5,404 | 4,714 | ||||||
|
|
||||||||
|
Total assets
|
$ | 381,144 | $ | 325,481 | ||||
|
|
||||||||
|
|
||||||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
|
Current Liabilities:
|
||||||||
|
Accounts payable
|
$ | 32,153 | $ | 26,501 | ||||
|
Current portion of long-term debt
|
4,286 | 4,286 | ||||||
|
Other current liabilities
|
42,880 | 36,295 | ||||||
|
|
||||||||
|
Total current liabilities
|
79,319 | 67,082 | ||||||
|
|
||||||||
|
Pension benefits liabilities
|
6,231 | 6,400 | ||||||
|
Long-term debt
|
4,285 | 8,571 | ||||||
|
Deferred income taxes
|
12,550 | 10,816 | ||||||
|
Other noncurrent liabilities
|
3,094 | 3,005 | ||||||
|
|
||||||||
|
Total liabilities
|
105,479 | 95,874 | ||||||
|
|
||||||||
|
|
||||||||
|
Shareholders’ equity:
|
||||||||
|
Preferred stock, ($1 par value, 2,000 shares authorized, no shares
issued and outstanding)
|
— | — | ||||||
|
Common stock, ($1 par value, 25,000 shares authorized,
18,374 and 18,185 shares issued at August 31, 2011
and 2010, respectively)
|
18,374 | 18,185 | ||||||
|
Capital in excess of stated value
|
39,058 | 30,756 | ||||||
|
Retained earnings
|
302,732 | 270,272 | ||||||
|
Less treasury stock (at cost, 5,698 shares at
August 31, 2011 and 2010, respectively)
|
(90,961 | ) | (90,961 | ) | ||||
|
Accumulated other comprehensive income, net
|
6,462 | 1,355 | ||||||
|
|
||||||||
|
Total shareholders’ equity
|
275,665 | 229,607 | ||||||
|
|
||||||||
|
Total liabilities and shareholders’ equity
|
$ | 381,144 | $ | 325,481 | ||||
|
|
||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
27
Table of Contents
]\
Lindsay Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
| Capital in | Accumulated | |||||||||||||||||||||||||||||||
| Shares of | Shares of | excess of | other | Total | ||||||||||||||||||||||||||||
| Common | Treasury | Common | stated | Retained | Treasury | comprehensive | Shareholders’ | |||||||||||||||||||||||||
| (in thousands, except per share amounts) | stock | stock | stock | value | earnings | stock | income (loss) | equity | ||||||||||||||||||||||||
|
Balance at August 31, 2008
|
18,055 | 5,843 | $ | 18,055 | $ | 26,352 | $ | 239,676 | $ | (93,275 | ) | $ | 5,093 | $ | 195,901 | |||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Comprehensive income:
|
||||||||||||||||||||||||||||||||
|
Net earnings
|
— | — | — | — | 13,823 | — | — | 13,823 | ||||||||||||||||||||||||
|
Other comprehensive income
|
— | — | — | — | — | — | (2,098 | ) | (2,098 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total comprehensive income
|
11,725 | |||||||||||||||||||||||||||||||
|
Cash dividends ($0.305) per share
|
— | — | — | — | (3,754 | ) | — | — | (3,754 | ) | ||||||||||||||||||||||
|
Issuance of
common stock under stock compensation plans
|
74 | (80 | ) | 74 | 225 | (157 | ) | 1,277 | — | 1,419 | ||||||||||||||||||||||
|
Excess tax
benefits from stock-based compensation
|
— | — | — | 293 | — | — | — | 293 | ||||||||||||||||||||||||
|
Stock-based compensation expense
|
— | — | — | 2,074 | — | — | — | 2,074 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Balance at August 31, 2009
|
18,129 | 5,763 | $ | 18,129 | $ | 28,944 | $ | 249,588 | $ | (91,998 | ) | $ | 2,995 | $ | 207,658 | |||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Comprehensive income:
|
||||||||||||||||||||||||||||||||
|
Net earnings
|
— | — | — | — | 24,862 | — | — | 24,862 | ||||||||||||||||||||||||
|
Other comprehensive income
|
— | — | — | — | — | — | (1,640 | ) | (1,640 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total comprehensive income
|
23,222 | |||||||||||||||||||||||||||||||
|
Cash dividends ($0.325) per share
|
— | — | — | — | (4,051 | ) | — | — | (4,051 | ) | ||||||||||||||||||||||
|
Issuance of
common stock under stock compensation plans
|
56 | (65 | ) | 56 | (417 | ) | (127 | ) | 1,037 | — | 549 | |||||||||||||||||||||
|
Excess tax
benefits from stock-based compensation
|
— | — | — | 127 | — | — | — | 127 | ||||||||||||||||||||||||
|
Stock-based compensation expense
|
— | — | — | 2,102 | — | — | — | 2,102 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Balance at August 31, 2010
|
18,185 | 5,698 | $ | 18,185 | $ | 30,756 | $ | 270,272 | $ | (90,961 | ) | $ | 1,355 | $ | 229,607 | |||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Comprehensive income:
|
||||||||||||||||||||||||||||||||
|
Net earnings
|
— | — | — | — | 36,802 | — | — | 36,802 | ||||||||||||||||||||||||
|
Other comprehensive income
|
— | — | — | — | — | — | 5,107 | 5,107 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total comprehensive income
|
41,909 | |||||||||||||||||||||||||||||||
|
Cash dividends ($0.345) per share
|
— | — | — | — | (4,342 | ) | — | — | (4,342 | ) | ||||||||||||||||||||||
|
Issuance of
common stock under stock compensation plans
|
189 | — | 189 | 2,547 | — | — | — | 2,736 | ||||||||||||||||||||||||
|
Excess tax
benefits from stock-based compensation
|
— | — | — | 2,487 | — | — | — | 2,487 | ||||||||||||||||||||||||
|
Stock-based compensation expense
|
— | — | — | 3,268 | — | — | — | 3,268 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Balance at August 31, 2011
|
18,374 | 5,698 | $ | 18,374 | $ | 39,058 | $ | 302,732 | $ | (90,961 | ) | $ | 6,462 | $ | 275,665 | |||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
28
Table of Contents
Lindsay Corporation and Subsidiaries
| Years Ended August 31, | ||||||||||||
| ($ in thousands) | 2011 | 2010 | 2009 | |||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net earnings
|
$ | 36,802 | $ | 24,862 | $ | 13,823 | ||||||
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
|
||||||||||||
|
Depreciation and amortization
|
11,734 | 10,710 | 10,442 | |||||||||
|
Provision for uncollectible accounts receivable
|
388 | 732 | 558 | |||||||||
|
Deferred income taxes
|
(2,828 | ) | (1,500 | ) | (1,226 | ) | ||||||
|
Stock-based compensation expense
|
3,474 | 2,206 | 2,140 | |||||||||
|
Other, net
|
208 | (399 | ) | 1,357 | ||||||||
|
Changes in assets and liabilities:
|
||||||||||||
|
Receivables
|
(12,626 | ) | (22,294 | ) | 43,316 | |||||||
|
Inventories
|
(1,826 | ) | 827 | 7,726 | ||||||||
|
Other current assets
|
(1,430 | ) | (2,862 | ) | 1,009 | |||||||
|
Accounts payable
|
4,780 | 6,739 | (12,116 | ) | ||||||||
|
Other current liabilities
|
8,223 | 1,388 | (6,965 | ) | ||||||||
|
Current taxes payable
|
(2,327 | ) | 5,287 | (3,140 | ) | |||||||
|
Other noncurrent assets and liabilities
|
(1,517 | ) | (1,863 | ) | 571 | |||||||
|
|
||||||||||||
|
Net cash provided by operating activities
|
43,055 | 23,833 | 57,495 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
|
Purchases of property, plant and equipment
|
(8,405 | ) | (5,784 | ) | (10,500 | ) | ||||||
|
Proceeds from sale of property, plant and equipment
|
80 | 606 | 21 | |||||||||
|
Acquisition of business, net of cash acquired
|
(6,180 | ) | (6,436 | ) | (3,076 | ) | ||||||
|
Proceeds from note receivable
|
— | 1,409 | — | |||||||||
|
(Payment) proceeds for settlement of net investment hedge
|
(1,119 | ) | 518 | 859 | ||||||||
|
|
||||||||||||
|
Net cash used in investing activities
|
(15,624 | ) | (9,687 | ) | (12,696 | ) | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
|
Issuance of common stock under stock compensation plans
|
2,736 | 549 | 1,419 | |||||||||
|
Principal payments on long-term debt
|
(4,286 | ) | (12,769 | ) | (6,171 | ) | ||||||
|
Net borrowing on revolving line of credit
|
— | — | (1,633 | ) | ||||||||
|
Excess tax benefits from stock-based compensation
|
2,487 | 76 | 344 | |||||||||
|
Dividends paid
|
(4,342 | ) | (4,051 | ) | (3,754 | ) | ||||||
|
|
||||||||||||
|
Net cash used in financing activities
|
(3,405 | ) | (16,195 | ) | (9,795 | ) | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Effect of exchange rate changes on cash
|
723 | (462 | ) | 165 | ||||||||
|
|
||||||||||||
|
Net increase (decrease) in cash and cash equivalents
|
24,749 | (2,511 | ) | 35,169 | ||||||||
|
Cash and cash equivalents, beginning of period
|
83,418 | 85,929 | 50,760 | |||||||||
|
|
||||||||||||
|
Cash and cash equivalents, end of period
|
$ | 108,167 | $ | 83,418 | $ | 85,929 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
||||||||||||
|
Income taxes paid
|
$ | 22,057 | $ | 8,368 | $ | 11,081 | ||||||
|
Interest paid
|
$ | 860 | $ | 1,648 | $ | 2,146 | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
29
Table of Contents
Lindsay Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Lindsay Corporation, along with its subsidiaries (collectively called “Lindsay” or the “Company”),
is a global leader in providing a variety of proprietary water management and road infrastructure
products and services. The Company has been involved in the manufacture and distribution of
agricultural equipment since 1955 and has grown from a regional company to an international
agribusiness and highway infrastructure firm with worldwide sales and distribution. Lindsay, a
Delaware corporation, maintains its corporate offices in Omaha, Nebraska. The Company has
operations which are categorized into two major reporting segments.
Irrigation Segment —
The Company’s irrigation segment includes the manufacture and marketing of
center pivot, lateral move, and hose reel irrigation systems which are used principally in the
agricultural industry to increase or stabilize crop production while conserving water, energy, and
labor. The irrigation segment also manufactures and markets repair and replacement parts for its
irrigation systems and controls, and designs, manufactures and services water pumping stations and
controls for the agriculture, golf, landscape and municipal markets. The Company continues to
strengthen irrigation product offerings through innovative technology such as GPS positioning and
guidance, variable rate irrigation, wireless irrigation management, and smartphone application.
The Company’s principal irrigation manufacturing facilities are located in Lindsay, Nebraska and
Hartland, Wisconsin. Internationally, the Company has production operations in France, Brazil and
China as well as distribution operations in South Africa, Australia and New Zealand. The Company
also exports some of its equipment from the U.S. to other international markets.
Infrastructure Segment —
The Company’s infrastructure segment includes the manufacture and
marketing of moveable barriers, specialty barriers, crash cushions and end terminals, road marking
and road safety equipment, large diameter steel tubing, railroad signals and structures, and
outsourced manufacturing services. The principal infrastructure manufacturing facilities are
located in Rio Vista, California, Milan, Italy, and Omaha, Nebraska.
Notes to the consolidated financial statements describe various elements of the financial
statements and the accounting policies, estimates, and assumptions applied by management. While
actual results could differ from those estimated at the time of preparation of the consolidated
financial statements, management believes that the accounting policies, assumptions, and estimates
applied promote the representational faithfulness, verifiability, neutrality, and transparency of
the accounting information included in the consolidated financial statements.
The significant 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. All
intercompany balances and transactions are eliminated in consolidation.
(2) Reclassifications
Certain reclassifications have been made to prior financial statements to conform to the
current-year presentation.
(3) Stock Based Compensation
The Company recognizes compensation expense for all share-based payment awards made to
employees and directors based on estimated fair values on the date of grant. The Company uses the
straight-line amortization method over the vesting period of the awards. The Company has
historically issued shares upon exercise of stock options or vesting of restricted stock units or
performance stock units from new stock issuances, except for certain non-plan option shares granted
in March 2000 that are issued from Treasury Stock upon exercise. All outstanding non-plan option
shares were exercised in fiscal 2010.
The value of the portion of the award that is ultimately expected to vest is
recognized as expense in the Company’s Consolidated Statement of Operations over the periods during
which the employee or director is required to perform a service in exchange for the award.
30
Table of Contents
The Company uses the Black-Scholes option-pricing model (“Black-Scholes model”) as its
valuation method for stock option awards. Under the Black-Scholes model, the fair value of stock
option awards on the date of grant is estimated using an option-pricing model that is affected by
the Company’s stock price as well as assumptions regarding a number of highly complex and
subjective variables. These variables include, but are not limited to the Company’s expected stock
price volatility over the term of the awards and actual and projected employee stock option
exercise behaviors. Restricted stock, restricted stock units, performance shares and performance
stock units issued under the 2010 Long-Term Incentive Plan will have a grant date fair value equal
to the fair market value of the underlying stock on the grant date less present value of expected
dividends.
(4) Revenue Recognition
The Company’s basic criteria necessary for revenue recognition are: 1) evidence of a sales
arrangement exists, 2) delivery of goods has occurred, 3) the seller’s price to the buyer is fixed
or determinable, and 4) collectability is reasonably assured. The Company recognizes revenue when
these criteria have been met and when title and risk of loss transfers to the customer. The
Company generally has no post delivery obligations to its independent dealers other than standard
warranties. Revenues and gross profits on intercompany sales are eliminated in consolidation. If
an arrangement involves multiple deliverables, the delivered items are considered separate units of
accounting if the items have value on a stand-alone basis and there is objective and reliable
evidence of their fair values. Revenues from the arrangement are allocated to the separate units of
accounting based on their objectively determined fair value.
The costs related to revenues are recognized in the same period in which the specific revenues
are recorded. Shipping and handling fees billed to customers are reported in revenue. Shipping and
handling costs incurred by the Company are included in cost of sales. Customer rebates, cash
discounts and other sales incentives are recorded as a reduction of revenues at the time of the
original sale. Estimates used in the recognition of operating revenues and cost of operating
revenues include, but are not limited to, estimates for product warranties, product rebates, cash
discounts and fair value of separate units of accounting on multiple deliverables.
(5) Receivables and Allowances
Trade receivables are reported on the balance sheet net of any doubtful accounts. Allowances for
doubtful accounts are maintained in amounts considered to be appropriate in relation to the
receivables outstanding based on collection experience, economic conditions and credit risk
quality.
(6) Warranty Costs
The Company’s provision for product warranty reflects management’s best estimate of probable
liability under its product warranties. At the time a sale is recognized, the company records the
estimated future warranty costs. The Company generally determines its total future warranty
liability by applying historical claims rate experience to the amount of equipment that has been
sold and is still within the warranty period. In addition, the Company records provisions for
known warranty claims. This provision is periodically adjusted to reflect actual experience.
(7) Cash and Cash Equivalents
Cash equivalents consist of investments with original maturities of three months or less.
(8) Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the last-in,
first-out (LIFO) method for the Company’s Lindsay, Nebraska inventory and two warehouses in Idaho
and Texas. Cost is determined by the first-in, first-out (FIFO) method for inventory at the
Company’s Omaha, Nebraska warehouse, and at operating locations in California, Wisconsin, China and
Australia. Cost is determined by the weighted average cost method for inventory at the Company’s
other operating locations in Washington State, France, Brazil, Italy, and South Africa. At all
locations, the Company reserves for obsolete, slow moving, and excess inventory by estimating the
net realizable value based on the potential future use of such inventory.
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Table of Contents
(9) Property, Plant and Equipment
Property, plant, equipment, and capitalized assets held for lease are stated at cost. The Company
capitalizes major expenditures and charges 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 — 15 to 30 years; temporary structures — 5
years; equipment — 3 to 10 years; leased Barrier Transfer Machines — 8 to 10 years; leased
barriers — 12 years; other — 2 to 20 years and leasehold improvements — shorter of the economic
life or term of the 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, an impairment loss is recognized based upon the difference between the fair value of the
asset and its carrying value. During fiscal 2011, 2010 and 2009 no impairment losses were
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 resulting gain or
loss is included in operating income in the consolidated statements of operations.
(10) Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in
a business combination. Acquired intangible assets are recognized separately from goodwill.
Goodwill and intangible assets with indefinite useful lives are tested for impairment at least
annually at August 31 and whenever triggering events or changes in circumstances indicate its
carrying value may not be recoverable. The Company performs the impairment analysis at the
reporting unit level using a two-step impairment test. Fair value is typically estimated using a
discounted cash flow analysis, which requires the Company to estimate the future cash flows
anticipated to be generated by the particular assets being tested for impairment as well as a
discount rate to measure the present value of the anticipated cash flows. When determining future
cash flow estimates, the Company considers historical results adjusted to reflect current and
anticipated operating conditions. Estimating future cash flows requires significant judgment and
assumptions by management in such areas as future economic conditions, industry-specific
conditions, product pricing, and necessary capital expenditures. To the extent that the reporting
unit is unable to achieve these assumptions, impairment losses may emerge.
(11) Income Taxes
Income taxes are accounted for utilizing the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement carrying value of existing
assets and liabilities and their respective tax bases. These expected future tax consequences are
measured based on currently enacted tax rates. The effect of tax rate changes on deferred tax
assets and liabilities is recognized in income during the period that includes the enactment date.
When the Company has claimed tax benefits that may be challenged by a tax authority, the
Company recognizes tax benefits only for tax positions that are more likely than not to be
sustained upon examination by tax authorities. The amount recognized is measured as the largest
amount of benefit that is greater than 50 percent likely to be realized upon settlement. A
liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s
tax returns that do not meet these recognition and measurement standards.
(12) Net Earnings per Share
Basic net earnings per share is computed using the weighted-average number of common shares
outstanding during the period. Diluted net earnings per share is computed using the
weighted-average number of common shares outstanding plus dilutive potential common shares
outstanding during the period. Dilutive potential common shares consist of stock options and
restricted stock units to the extent that they are not anti-dilutive. Performance stock units are
included in the calculation of dilutive potential common shares once the threshold performance
conditions have been satisfied. At August 31, 2011, the threshold performance conditions for the
Company’s outstanding performance stock units that were granted on November 3, 2008, November 12,
2009 and November 1, 2010 had not been satisfied, resulting in the exclusion of 98,625 performance
stock units from the calculation of diluted net earnings per share.
Employee equity share options, nonvested shares and similar equity instruments granted by the
Company are treated as potential common shares outstanding in computing diluted net earnings per
share. The Company’s diluted common shares outstanding reported in each period include the
dilutive effect of restricted stock units, in-the-money options, and performance stock units for
which threshold performance conditions have been satisfied and is calculated based on the average
share price for each fiscal period using the treasury stock method. Under the treasury stock
method, the amount the employee must pay for exercising stock options, the amount of compensation
cost for future service that the Company has not yet recognized, and the amount of excess tax
benefits that would be recorded in additional paid-in-capital when exercised are assumed to be used
to repurchase shares.
There were 2,062, 476 and 24,204 restricted stock units excluded from the calculation of
diluted net earnings per share since their inclusion would have been anti-dilutive for the years
ended August 31, 2011, 2010 and 2009, respectively.
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Table of Contents
(13) Use of Estimates
The preparation of financial statements in conformity with U.S. 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.
(14) Derivative Instruments and Hedging Activities
The Company uses certain financial derivatives to mitigate its exposure to volatility in
interest rates and foreign currency exchange rates. All derivative instruments are recorded on the
balance sheet at their respective fair values. The Company uses these derivative instruments only
to hedge exposures in the ordinary course of business and does not invest in derivative instruments
for speculative purposes. On the date a derivative contract is entered into, the Company may elect
to designate the derivative as a fair value hedge, a cash flow hedge, or the hedge of a net
investment in a foreign operation.
When an election to apply hedge accounting is made, the Company formally documents the hedging
relationship and its risk-management objective and strategy for undertaking the hedge, the hedging
instrument, the hedged item, the nature of the risk being hedged, how the hedging instrument’s
effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and
a description of the method of measuring ineffectiveness at the inception of the hedge.
The Company also formally assesses, both at the hedge’s inception and on an ongoing basis,
whether the derivative that is used in the hedging transaction is highly effective. For those
instruments that are designated as a cash flow hedge and meet certain documentary and analytical
requirements to qualify for hedge accounting treatment, changes in the fair value for the effective
portion are reported in other comprehensive income (“OCI”), net of related income tax effects, and
are reclassified to the income statement when the effects of the item being hedged are recognized
in the income statement. Changes in fair value of derivative instruments that qualify as hedges of
a net investment in foreign operations are recorded as a component of accumulated currency
translation adjustment in accumulated other comprehensive income (“AOCI”), net of related income
tax effects. Changes in the fair value of undesignated hedges are recognized currently in
earnings. All changes in derivative fair values due to ineffectiveness are recognized currently in
income.
The Company discontinues hedge accounting prospectively when it is determined that the
derivative is no longer effective in offsetting changes in the cash flows of the hedged item, the
derivative expires or is sold, terminated, or exercised, or management determines that designation
of the derivative as a hedging instrument is no longer appropriate.
In situations in which the Company does not elect hedge accounting or hedge accounting is
discontinued and the derivative is retained, the Company carries or continues to carry the
derivative at its fair value on the balance sheet and recognizes any subsequent changes in its fair
value through earnings.
(15) Fair Value Measurements
The Company applies the provisions of the Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 820,
Fair Value Measurements and Disclosures
, which defines
fair value, establishes a framework for measuring fair value, and expands disclosures about fair
value measurements. As defined in ASC 820, fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date.
ASC 820 establishes a three-level hierarchy for fair value measurements based upon the
transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs
refers broadly to the assumptions that market participants would use in pricing the asset or
liability, including assumptions about risk. The categorization within the valuation hierarchy is
based upon the lowest level of input that is significant to the fair value measurement. Financial
assets and liabilities carried at fair value will be classified and disclosed in one of the
following three categories:
| • |
Level 1 — inputs to the valuation techniques are quoted prices in active markets
for identical assets or liabilities
|
| • |
Level 2 — inputs to the valuation techniques are other than quoted prices but are
observable for the assets or liabilities, either directly or indirectly
|
| • |
Level 3 — inputs to the valuation techniques are unobservable for the assets or
liabilities
|
33
Table of Contents
The following table presents the Company’s financial assets and liabilities measured at fair
value based upon the level within the fair value hierarchy in which the fair value measurements
fall, as of August 31, 2011:
| $ in thousands | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
|
Cash and cash equivalents
|
$ | 108,167 | $ | — | $ | — | $ | 108,167 | ||||||||
|
Derivative Liabilities
|
— | (634 | ) | — | (634 | ) | ||||||||||
The following table presents the Company’s financial assets and liabilities measured at fair
value based upon the level within the fair value hierarchy in which the fair value measurements
fall, as of August 31, 2010:
| $ in thousands | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
|
Cash and cash equivalents
|
$ | 83,418 | $ | — | $ | — | $ | 83,418 | ||||||||
|
Derivative Assets
|
— | 16 | — | 16 | ||||||||||||
|
Derivative Liabilities
|
— | (987 | ) | — | (987 | ) | ||||||||||
The carrying amount of long-term debt (including current portion) was $8.6 million and
$12.9 million as of August 31, 2011 and 2010, respectively. The fair value of this debt at August
31, 2011 and 2010, was estimated at $8.5 million and $12.6 million, respectively. Fair value of
long-term debt (including current portion) is estimated by discounting the future estimated cash
flows of each instrument at current market interest rates for similar debt instruments of
comparable maturities and credit quality.
(16) Treasury Stock
When the Company repurchases its outstanding stock, it records the repurchased shares at cost as a
reduction to shareholders’ equity. The weighted average cost method is utilized for share
re-issuances. The difference between the cost and the re-issuance price is charged or credited to
a “capital in excess of stated value — treasury stock” account to the extent that there is a
sufficient balance to absorb the charge. If the treasury stock is sold for an amount less than its
cost and there is not a sufficient balance in the capital in excess of stated value — treasury
stock account, the excess is charged to retained earnings.
(17) Contingencies
The Company’s accounting for contingencies covers a variety of business activities including
contingencies for legal exposures and environmental exposures. The Company accrues these
contingencies when its assessments indicate that it is probable that a liability has been incurred
and an amount can be reasonably estimated. The Company’s estimates are based on currently available
facts and its estimates of the ultimate outcome or resolution. Actual results may differ from the
Company’s estimates resulting in an impact, positive or negative, on earnings.
(18) Translation of Foreign Currency
The Company’s portion of the assets and liabilities related to foreign investments are translated
into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenue and expenses
are translated at the average rates of exchange prevailing during the year. Unrealized gains or
losses are reflected within common shareholders’ equity as accumulated other comprehensive income
or loss.
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Table of Contents
B. ACQUISITIONS
The Company acquires businesses synergistic to the Company’s core irrigation and infrastructure
businesses and to align with its strategic intent with respect to growth markets and adjacent
product lines or technologies. The Company accounts for business combinations in accordance with
ASC 805 —
Business Combinations,
which requires the recognition of the identifiable assets
acquired, liabilities assumed, goodwill, and any noncontrolling interest in the acquiree. In
addition, the Company expenses all acquisition-related costs in the period in which the costs are
incurred and the services received. For fiscal 2011, 2010 and 2009, the acquisition-related
expenses are not included because the impact on the Company’s consolidated financial statements was
not considered to be material.
IRZ Consulting, LLC
On August 26, 2011, the Company completed the acquisition of IRZ Consulting, LLC (“IRZ”) based in
Pasco, Washington and Portland, Oregon. The IRZ business is involved in irrigation engineering,
field monitoring, and broadband internet services for rural areas. Total consideration paid was
$4.9 million which was financed with cash on hand. The allocation of purchase price for IRZ is
considered preliminary, largely with respect to certain acquired intangible assets and other
long-term liabilities. Goodwill recorded in connection with this acquisition is deductible for
income tax purposes.
WMC Technology Limited
On November 3, 2010, the Company completed the acquisition of certain assets of WMC Technology
Limited (“WMC”) based in Feilding, New Zealand. The assets acquired primarily relate to technology
that has enhanced the Company’s irrigation product offerings. Total consideration paid was $1.3
million which was financed with cash on hand. The fair value assigned to the assets was finalized
in the second quarter of the Company’s 2011 fiscal year. Goodwill recorded in connection with this
acquisition is not deductible for income tax purposes.
The total purchase price for IRZ and WMC has been allocated to the tangible and intangible assets
acquired and liabilities assumed based on fair value assessments. The Company’s allocation of
purchase price for these acquisitions consisted of current assets of $0.9 million, fixed assets of
$0.6 million, finite-lived intangible assets of $1.6 million, indefinite-lived intangible assets of
$1.0 million, goodwill of $2.2 million, other long-term assets of $1.1 million, current liabilities
of $0.4 million, and long-term liabilities of $0.8 million. Goodwill resulting from business
combinations is largely attributable to the existing workforce and historical and projected
profitability of the acquired businesses. The goodwill associated with WMC and IRZ are included in
the goodwill of the Company’s irrigation segment. Pro forma information related to acquisitions was
not included because the impact on the Company’s consolidated financial statements was not
considered to be material.
Digitec, Inc.
On August 31, 2010, the Company completed the acquisition of all outstanding shares of stock of
Digitec, Inc., (“Digitec”) based in Milford, Nebraska. Digitec is an electronics research,
development and manufacturing company. The addition of Digitec enhances the Company’s capabilities
in providing electronic design and integration. Total consideration paid to the selling
shareholders was $6.4 million which was financed with cash on hand. The purchase price has been
allocated to the tangible and intangible assets and liabilities assumed based on fair value
assessments. The Company’s allocation of purchase price consisted of current assets of $1.1
million (including $0.1 million of cash), fixed assets of $0.8 million, intangible assets of $1.5
million, goodwill of $4.4 million, current liabilities of $0.5 million and long-term liabilities of
$0.9 million. Goodwill related to the acquisition of Digitec primarily relates to intangible
assets that do not qualify for separate recognition, including the experience and knowledge of
Digitec management, its assembled workforce, and its intellectual capital and specialization within
the Irrigation industry. Goodwill recorded in connection with this acquisition is non-deductible
for income tax purposes. Proforma data is not presented for this acquisition, as it was not
considered material.
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Table of Contents
C. COMPREHENSIVE INCOME
Comprehensive income (loss) was as follows:
| For the years ended August 31, | ||||||||||||
| $ in thousands | 2011 | 2010 | 2009 | |||||||||
|
Net Income
|
$ | 36,802 | $ | 24,862 | $ | 13,823 | ||||||
|
|
||||||||||||
|
Other comprehensive income (loss):
|
||||||||||||
|
Defined benefit pension plan
|
69 | (50 | ) | (501 | ) | |||||||
|
Cash flow hedges
|
319 | 1,201 | (145 | ) | ||||||||
|
Foreign currency translation, net of hedging activities
|
4,719 | (2,791 | ) | (1,452 | ) | |||||||
|
|
||||||||||||
|
Total other comprehensive income (loss), net of tax
expense (benefit) of $440, $1,104 and ($81)
|
5,107 | (1,640 | ) | (2,098 | ) | |||||||
|
|
||||||||||||
|
Total other comprehensive income
|
$ | 41,909 | $ | 23,222 | $ | 11,725 | ||||||
|
|
||||||||||||
Accumulated other comprehensive income is included in the accompanying Consolidated Balance Sheets
in the shareholders’ equity section, and consists of the following components:
| For the years ended | ||||||||
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Accumulated other comprehensive income (loss):
|
||||||||
|
Defined benefit pension plan, net of tax of $1,306 and $1,348
|
(2,139 | ) | (2,208 | ) | ||||
|
Cash flow hedges, net of tax of $155 and $348
|
(253 | ) | (572 | ) | ||||
|
Foreign currency translation, net of hedging activities, net of tax of $1,573 and $1,368
|
8,854 | 4,135 | ||||||
|
|
||||||||
|
Total accumulated other comprehensive income
|
$ | 6,462 | $ | 1,355 | ||||
|
|
||||||||
D. INCOME TAXES
For financial reporting purposes earnings before income taxes include the following components:
| For the years ended August 31, | ||||||||||||
| $ in thousands | 2011 | 2010 | 2009 | |||||||||
|
United States
|
$ | 53,879 | $ | 34,165 | $ | 18,385 | ||||||
|
Foreign
|
2,635 | 2,617 | 2,154 | |||||||||
|
|
||||||||||||
|
|
$ | 56,514 | $ | 36,782 | $ | 20,539 | ||||||
|
|
||||||||||||
Significant components of the income tax provision are as follows:
| For the years ended August 31, | ||||||||||||
| $ in thousands | 2011 | 2010 | 2009 | |||||||||
|
Current:
|
||||||||||||
|
Federal
|
$ | 18,705 | $ | 11,077 | $ | 6,479 | ||||||
|
State
|
1,309 | 770 | 489 | |||||||||
|
Foreign
|
2,526 | 1,573 | 974 | |||||||||
|
|
||||||||||||
|
Total current
|
22,540 | 13,420 | 7,942 | |||||||||
|
|
||||||||||||
|
Deferred:
|
||||||||||||
|
Federal
|
(1,484 | ) | 501 | (938 | ) | |||||||
|
State
|
(29 | ) | (1,364 | ) | (52 | ) | ||||||
|
Foreign
|
(1,315 | ) | (637 | ) | (236 | ) | ||||||
|
|
||||||||||||
|
Total deferred
|
(2,828 | ) | (1,500 | ) | (1,226 | ) | ||||||
|
|
||||||||||||
|
Total income tax provision
|
$ | 19,712 | $ | 11,920 | $ | 6,716 | ||||||
|
|
||||||||||||
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Table of Contents
Total income tax provision resulted in effective tax rates differing from that of the
statutory United States Federal income tax rates. The reasons for these differences are:
| For the years ended August 31, | ||||||||||||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||||||||||||
| $ in thousands | Amount | % | Amount | % | Amount | % | ||||||||||||||||||
|
U.S. statutory rate
|
$ | 19,780 | 35.0 | $ | 12,874 | 35.0 | $ | 7,189 | 35.0 | |||||||||||||||
|
State and local taxes, net of federal tax benefit
|
889 | 1.6 | 540 | 1.5 | 275 | 1.3 | ||||||||||||||||||
|
State tax credits
|
— | — | (1,393 | ) | (3.8 | ) | — | — | ||||||||||||||||
|
Foreign tax rate differences
|
(257 | ) | (0.5 | ) | (122 | ) | (0.3 | ) | (302 | ) | (1.5 | ) | ||||||||||||
|
Domestic production activities deduction
|
(1,301 | ) | (2.3 | ) | (608 | ) | (1.7 | ) | (385 | ) | (1.9 | ) | ||||||||||||
|
R&D, Phone, and Fuel tax credits
|
(239 | ) | (0.4 | ) | (28 | ) | (0.1 | ) | (96 | ) | (0.5 | ) | ||||||||||||
|
Other
|
840 | 1.5 | 657 | 1.8 | 35 | 0.3 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Effective rate
|
$ | 19,712 | 34.9 | $ | 11,920 | 32.4 | $ | 6,716 | 32.7 | |||||||||||||||
|
|
||||||||||||||||||||||||
In fiscal 2010, the Company recognized investment tax credits from the state of Nebraska’s
economic development program, the Nebraska Advantage Act. These credits, which expire in fiscal
2018, reduced income tax expense by $1.4 million. The Company uses the deferral method of
accounting for its investment tax credits.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as
follows:
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Deferred tax assets:
|
||||||||
|
Deferred rental revenue
|
$ | 1,233 | $ | 2,148 | ||||
|
Employee benefits liability
|
1,305 | 1,273 | ||||||
|
Net operating loss carryforwards
|
74 | 137 | ||||||
|
Defined benefit pension plan
|
1,306 | 1,348 | ||||||
|
Share-based compensation
|
1,614 | 1,515 | ||||||
|
State tax credits
|
802 | 934 | ||||||
|
Inventory
|
789 | 744 | ||||||
|
Warranty
|
1,268 | 592 | ||||||
|
Vacation
|
200 | 765 | ||||||
|
Accrued expenses and allowances
|
5,039 | 3,731 | ||||||
|
|
||||||||
|
Total deferred tax assets
|
$ | 13,630 | $ | 13,187 | ||||
|
|
||||||||
|
|
||||||||
|
Deferred tax liabilities:
|
||||||||
|
Intangible assets
|
(7,088 | ) | (6,972 | ) | ||||
|
Property, plant and equipment
|
(9,054 | ) | (8,760 | ) | ||||
|
Inventory
|
(113 | ) | (130 | ) | ||||
|
Other
|
(1,058 | ) | (1,273 | ) | ||||
|
|
||||||||
|
Total deferred tax liabilities
|
(17,313 | ) | (17,135 | ) | ||||
|
|
||||||||
|
|
||||||||
|
Net deferred tax liabilities
|
$ | (3,683 | ) | $ | (3,948 | ) | ||
|
|
||||||||
In assessing the ability to realize deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods in which the deferred tax assets
are deductible, management believes it is more likely than not that the Company will realize the
benefits of these deductible differences. Accordingly, a valuation allowance for deferred tax
assets at August 31, 2011 and 2010 has not been established.
37
Table of Contents
The Company does not intend to repatriate earnings of its non-U.S. subsidiaries and
accordingly, has not provided a U.S. deferred income tax liability for cumulative earnings on
non-U.S. affiliates and associated companies that have been reinvested indefinitely. The Company
continues to analyze the potential tax impact should it elect to repatriate non-U.S. earnings and
would recognize a deferred income tax liability if the Company were to determine that such earnings
are no longer indefinitely reinvested.
The Company recognizes tax benefits only for tax positions that are more likely than not to be
sustained upon examination by tax authorities. The amount recognized is measured as the largest
amount of benefit that is greater than 50 percent likely to be realized upon settlement.
Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet
these recognition and measurement standards.
A reconciliation of changes in pre-tax unrecognized tax benefits is as follows:
| $ in thousands | 2011 | 2010 | ||||||
|
Unrecognized Tax Benefits at September 1
|
$ | 1,112 | $ | 1,464 | ||||
|
Increases for positions taken in current year
|
78 | 42 | ||||||
|
Increases for positions taken in prior years
|
448 | 63 | ||||||
|
Decreases for positions taken in current year
|
— | — | ||||||
|
Decreases for positions taken in prior years
|
— | — | ||||||
|
Settlements with taxing authorities
|
— | — | ||||||
|
Reduction resulting from lapse of applicable statute of limitations
|
(87 | ) | (460 | ) | ||||
|
Other increases (decreases)
|
14 | 3 | ||||||
|
|
||||||||
|
Unrecognized Tax Benefits at August 31
|
$ | 1,565 | $ | 1,112 | ||||
|
|
||||||||
The net amount of unrecognized tax benefits at August 31, 2011 and 2010 that, if recognized,
would impact the Company’s effective tax rate was $1.6 million and $1.1 million, respectively.
Recognition of these tax benefits would have a favorable impact on the Company’s effective tax
rate.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in
income tax expense. Total accrued pre-tax liabilities for interest and penalties included in the
unrecognized tax benefits liability were $0.5 million and $0.4 million for the years ended August
31, 2011 and 2010, respectively.
The Company files income tax returns in the U.S. federal jurisdiction, and various state and
foreign jurisdictions. The U.S. Internal Revenue Service has closed examination of the Company’s
income tax returns through 2006. In addition, with regard to a number of state and foreign tax
jurisdictions, the Company is no longer subject to examination by tax authorities for years prior
to 2006.
While it is expected that the amount of unrecognized tax benefits will change in the next
twelve months as a result of the expiration of statutes of limitations, the Company does not expect
this change to have a significant impact on its results of operations or financial position.
The American Jobs Creation Act of 2004 (the “Jobs Act”)
On October 22, 2004, the Jobs Act was enacted, which created a “manufacturing deduction” that
allows for a deduction from taxable income of up to 9% of “qualified production activities income”
not to exceed taxable income. The deduction is phased in over a nine-year period, with the
eligible percentage increasing from 3% in 2005 to 9% in 2010 and thereafter. The Company reported
a $3.7 million, $1.7 million and $1.1 million manufacturing deduction for fiscal years 2011, 2010
and 2009, respectively.
38
Table of Contents
E. INVENTORIES
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Inventory:
|
||||||||
|
FIFO inventory
|
$ | 22,614 | $ | 19,218 | ||||
|
LIFO reserves
|
(7,178 | ) | (6,263 | ) | ||||
|
|
||||||||
|
LIFO inventory
|
15,436 | 12,955 | ||||||
|
|
||||||||
|
Weighted average inventory
|
20,848 | 15,854 | ||||||
|
Other FIFO inventory
|
15,407 | 18,532 | ||||||
|
Obsolescence reserve
|
(2,167 | ) | (2,045 | ) | ||||
|
|
||||||||
|
Total inventories
|
$ | 49,524 | $ | 45,296 | ||||
|
|
||||||||
The estimated percentage distribution between major classes of inventory before reserves is as
follows:
| August 31, | ||||||||
| 2011 | 2010 | |||||||
|
Raw materials
|
14 | % | 12 | % | ||||
|
Work in process
|
8 | % | 8 | % | ||||
|
Finished goods and purchased parts
|
78 | % | 80 | % | ||||
F. PROPERTY, PLANT AND EQUIPMENT
| August, 31 | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Operating property, plant and equipment:
|
||||||||
|
Land
|
$ | 2,859 | $ | 2,757 | ||||
|
Buildings
|
29,372 | 28,294 | ||||||
|
Equipment
|
71,942 | 66,754 | ||||||
|
Other
|
5,521 | 3,830 | ||||||
|
|
||||||||
|
Total operating property, plant and equipment
|
109,694 | 101,635 | ||||||
|
Accumulated depreciation
|
(65,083 | ) | (58,429 | ) | ||||
|
|
||||||||
|
Total operating property, plant and equipment, net
|
$ | 44,611 | $ | 43,206 | ||||
|
|
||||||||
|
Property held for lease:
|
||||||||
|
Machines
|
3,907 | 4,360 | ||||||
|
Barriers
|
18,198 | 16,215 | ||||||
|
|
||||||||
|
Total property held for lease
|
$ | 22,105 | $ | 20,575 | ||||
|
Accumulated depreciation
|
(8,251 | ) | (6,135 | ) | ||||
|
|
||||||||
|
Total property held for lease, net
|
$ | 13,854 | $ | 14,440 | ||||
|
|
||||||||
|
|
||||||||
|
Property, plant and equipment, net
|
$ | 58,465 | $ | 57,646 | ||||
|
|
||||||||
Depreciation expense was $9.0 million, $8.1 million and $7.6 million for the years ended August 31,
2011, 2010, and 2009, respectively.
39
Table of Contents
G. OTHER NONCURRENT ASSETS
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Other noncurrent assets:
|
||||||||
|
Cash surrender value of life insurance policies
|
$ | 2,414 | $ | 2,335 | ||||
|
Split dollar life insurance
|
929 | 929 | ||||||
|
Deferred income taxes
|
269 | 145 | ||||||
|
Other
|
1,792 | 1,305 | ||||||
|
|
||||||||
|
Total noncurrent assets
|
$ | 5,404 | $ | 4,714 | ||||
|
|
||||||||
H. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The carrying amount of goodwill by reportable segment for the year ended August 31, 2011 and 2010
is as follows:
| $ in thousands | Irrigation | Infrastructure | Total | |||||||||
|
Balance as of September 1, 2009
|
$ | 6,978 | $ | 17,196 | $ | 24,174 | ||||||
|
Acquisition of Digitec
|
3,913 | — | 3,913 | |||||||||
|
Foreign currency translation
|
(10 | ) | (682 | ) | (692 | ) | ||||||
|
|
||||||||||||
|
Balance as of August 31, 2010
|
10,881 | 16,514 | 27,395 | |||||||||
|
Acquisition of IRZ and WMC
|
2,182 | — | 2,182 | |||||||||
|
Finalization of Digitec
Acquisition
|
490 | — | 490 | |||||||||
|
Foreign currency translation
|
129 | 747 | 876 | |||||||||
|
|
||||||||||||
|
Balance as of August 31, 2011
|
$ | 13,682 | $ | 17,261 | $ | 30,943 | ||||||
|
|
||||||||||||
Other Intangible Assets
The components of the Company’s identifiable intangible assets at August 31, 2011 and 2010 are
included in the table below.
| August 31, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
| Gross | Gross | |||||||||||||||
| Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
| $ in thousands | Amount | Amortization | Amount | Amortization | ||||||||||||
|
Amortizable Intangible Assets:
|
||||||||||||||||
|
Patents
|
$ | 26,316 | $ | (8,661 | ) | $ | 24,520 | $ | (6,479 | ) | ||||||
|
Customer relationships
|
6,371 | (2,768 | ) | 5,813 | (2,112 | ) | ||||||||||
|
Non-compete agreements
|
852 | (320 | ) | 543 | (196 | ) | ||||||||||
|
Other
|
171 | (41 | ) | 101 | (56 | ) | ||||||||||
|
Unamortizable Intangible Assets:
|
||||||||||||||||
|
Tradenames
|
6,719 | — | 5,581 | — | ||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 40,429 | $ | (11,790 | ) | $ | 36,558 | $ | (8,843 | ) | ||||||
|
|
||||||||||||||||
Amortization expense for amortizable intangible assets was $2.8 million, $2.6 million and $2.8
million for 2011, 2010, and 2009, respectively. Amortizable intangible assets are being amortized
using the straight-line method over an average term of approximately 12.5 years.
40
Table of Contents
Future estimated amortization of intangible assets for the next five years is as follows:
| Fiscal Years | $ in thousands | |||
|
2012
|
$ | 2,909 | ||
|
2013
|
2,827 | |||
|
2014
|
2,760 | |||
|
2015
|
2,493 | |||
|
2016
|
2,180 | |||
The Company updated its impairment evaluation of goodwill and intangible assets with indefinite
useful lives at August 31, 2011. While the fair value of most of the Company’s reporting units
exceeded the respective carrying values by a substantial margin, one international reporting unit,
which has goodwill of $6.1 million, had an estimated fair value less than 10% in excess of carrying
value. Accordingly, no impairment losses were indicated as a result of the annual impairment
testing for fiscal years 2011, 2010 and 2009. The Company does not include a roll forward of
impairment losses because the Company has never had an impairment loss.
I. OTHER CURRENT LIABILITIES
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Other current liabilities:
|
||||||||
|
Payroll, vacation and retirement plans
|
$ | 13,364 | $ | 12,192 | ||||
|
Deferred revenue
|
6,718 | 5,813 | ||||||
|
Warranty
|
3,651 | 1,862 | ||||||
|
Customer deposits
|
3,560 | 1,454 | ||||||
|
Dealer related liabilities
|
3,198 | 1,650 | ||||||
|
International freight accrual
|
1,780 | 173 | ||||||
|
Environmental remediation liability
|
1,540 | 900 | ||||||
|
Workers compensation and product liability
|
1,127 | 1,148 | ||||||
|
Taxes, other than income
|
1,009 | 2,156 | ||||||
|
Derivative liability
|
485 | 503 | ||||||
|
Income tax liability
|
460 | 2,829 | ||||||
|
Other
|
5,988 | 5,615 | ||||||
|
|
||||||||
|
Total other current liabilities
|
$ | 42,880 | $ | 36,295 | ||||
|
|
||||||||
J. CREDIT ARRANGEMENTS
Euro Line of Credit
The Company’s wholly-owned European subsidiary, Lindsay Europe, has an unsecured revolving line of
credit with Societe Generale, a European commercial bank, under which it could borrow for working
capital purposes up to 2.3 million Euros, which equates to approximately USD $3.3 million as of
August 31, 2011 (the “Euro Line of Credit”). There were no borrowings outstanding on this credit
agreement at August 31, 2011 or 2010. Under the terms of the Euro line of Credit, borrowings, if
any, bear interest at a floating rate in effect from time to time designated by the commercial bank
as Euro Interbank Offered Rate plus 110 basis points, (2.13% at August 31, 2011). Unpaid principal
and interest is due by January 31, 2012, which is the termination date of the Euro Line of Credit.
The Company’s management expects to obtain a similar line of credit prior to termination.
41
Table of Contents
BSI Term Note
The Company entered into an unsecured $30.0 million Term Note and Credit Agreement, effective June
1, 2006, with Wells Fargo Bank, N.A. (the “BSI Term Note”) to partially finance the acquisition of
BSI. Borrowings under the BSI Term Note originally bore interest at a rate equal to LIBOR plus 50
basis points. The Company has fixed the interest rate at 6.05 percent through an interest rate swap
as described in Note K,
Financial Derivatives.
Principal is repaid quarterly in equal payments of
$1.1 million over a seven year period that began in September, 2006. The BSI term note is due in
June of 2013.
Snoline Term Note
The Company’s wholly-owned Italian subsidiary, Snoline S.P.A. (“Snoline”) had an unsecured $13.2
million seven-year Term Note and Credit Agreement with Wells Fargo Bank, N.A. that was effective on
December 27, 2006 (the “Snoline Term Note”). On May 17, 2010, the Company repaid the $7.1 million
outstanding balance on the Snoline Term Note in its entirety.
Revolving Credit Agreement
The Company has an unsecured $30.0 million Revolving Credit Note and Credit Agreement with Wells
Fargo Bank, N.A. (the “Revolving Credit Agreement”). The Company entered into the Second Amendment
to the Revolving Credit Agreement, effective January 23, 2011 in order to extend the Revolving
Credit Agreement’s termination date from January 23, 2012 to January 23, 2014. The Revolving
Credit Agreement, as amended, is hereinafter referred to as the “Amended Revolving Credit
Agreement.” The borrowings from the Amended Revolving Credit Agreement will primarily be used for
working capital purposes and funding acquisitions. At August 31, 2011 and 2010, there was no
outstanding balance on the Amended Revolving Credit Agreement.
Borrowings under the Amended Revolving Credit Agreement bear interest at a rate equal to LIBOR plus
105 basis points, subject to adjustment as set forth in the Amended Revolving Credit Agreement.
Interest is paid on a monthly to quarterly basis depending on loan type. The Company also pays an
annual commitment fee of 0.25% on the unused portion of the Amended Revolving Credit Agreement.
Unpaid principal and interest is due by January 23, 2014, which is the termination date of the
Amended Revolving Credit Agreement.
The BSI Term Note and the Amended Revolving Credit Agreement (collectively, the “Notes”) each
contain the same covenants, including certain covenants relating to the Company’s financial
condition. These include maintaining a funded debt to EBITDA ratio, a fixed charge coverage ratio,
a current ratio and a tangible net worth requirement (all as defined in the Notes) at specified
levels. Upon the occurrence of any event of default of these covenants specified in the Notes,
including a change in control of the Company (as defined in the Notes), all amounts due thereunder
may be declared to be immediately due and payable. At August 31, 2011 and 2010, the Company was
in compliance with all loan covenants.
Long-term debt consists of the following:
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
BSI Term Note
|
$ | 8,571 | $ | 12,857 | ||||
|
Less current portion
|
(4,286 | ) | (4,286 | ) | ||||
|
|
||||||||
|
Total long-term debt
|
$ | 4,285 | $ | 8,571 | ||||
|
|
||||||||
Interest expense was $0.8 million, $1.6 million and $2.0 million for the years ended August 31,
2011, 2010 and 2009, respectively.
42
Table of Contents
Principal payments due on the term note are as follows:
| Due within: | ||||
|
1 year
|
$ | 4,286 | ||
|
2 years
|
4,285 | |||
|
3 years
|
— | |||
|
|
||||
|
|
$ | 8,571 | ||
|
|
||||
K. FINANCIAL DERIVATIVES
Financial derivatives consist of the following:
| Fair Values of Derivative Instruments | ||||||||||
| Asset (Liability) Derivatives | ||||||||||
| August 31, | August 31, | |||||||||
| $ in thousands | Balance Sheet Location | 2011 | 2010 | |||||||
|
Derivatives designated as hedging instruments:
|
||||||||||
|
Foreign currency forward contracts
|
Other current liabilities | $ | (218 | ) | $ | (66 | ) | |||
|
Interest rate swap
|
Other current liabilities | (267 | ) | (437 | ) | |||||
|
Interest rate swap
|
Other noncurrent liabilities | (149 | ) | (484 | ) | |||||
|
|
||||||||||
|
Total derivatives designated as hedging instruments
|
$ | (634 | ) | $ | (987 | ) | ||||
|
|
||||||||||
|
|
||||||||||
|
Derivatives not designated as hedging
instruments under SFAS No. 133:
|
||||||||||
|
Foreign currency forward contracts
|
Other current liabilities | $ | — | $ | 16 | |||||
|
|
||||||||||
In addition, accumulated other comprehensive income included gains, net of related income tax
effects of $0.5 million and $1.0 million at August 31, 2011 and 2010, respectively, related to
derivative contracts designated as hedging instruments.
Cash Flow Hedging Relationships
In order to reduce interest rate risk on the BSI Term Note, the Company entered into an
interest rate swap agreement with Wells Fargo Bank, N.A. that is designed to convert the variable
interest rate on the entire amount of this borrowing to a fixed rate of 6.05% per annum. Under the
terms of the interest rate swap, the Company receives variable interest rate payments and makes
fixed interest rate payments on an amount equal to the outstanding balance of the BSI Term Note,
thereby creating the equivalent of fixed-rate debt (see Note J,
Credit Arrangements
). Changes in
the fair value of the interest rate swap designated as the hedging instrument that effectively
offset the variability of cash flows associated with the variable-rate, long-term debt obligation
are reported in AOCI, net of related income tax effects.
Similarly, the Company entered into a cross currency swap transaction with Wells Fargo Bank,
N.A fixing the conversion rate of Euros to U.S. dollars for the Snoline Term Note. In addition,
the variable interest rate was converted to a fixed rate. Changes in the fair value of the cross
currency swap designated as a hedging instrument that effectively offset the hedged risks were
reported in AOCI, net of related income tax effects. On May 17, 2010, in conjunction with repaying
the Snoline Term Note, the Company exited the cross currency swap transaction with a zero fair
value.
In order to reduce exposures related to changes in foreign currency exchange rates, the
Company, at times, may enter into forward exchange or option contracts for transactions denominated
in a currency other than the functional currency for certain of its operations. This activity
primarily relates to economically hedging against foreign currency risk in purchasing inventory,
sales of finished goods, and future settlement of foreign denominated assets and liabilities.
Changes in fair value of the forward exchange contracts or option contracts designated as hedging
instruments that effectively offset the hedged risks are reported in AOCI, net of related income
tax effects. At August 31, 2011 and 2010, the Company had forward exchange contracts with cash
flow hedging relationships totaling less than $0.1 million included in other current liabilities.
43
Table of Contents
| Amount of Gain/(Loss) Recognized in OCI | ||||||||||||
| $ in thousands | For the years ended August 31, | |||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Interest rate swap
|
$ | 312 | $ | 289 | $ | (2 | ) | |||||
|
Cross currency swap
|
— | 922 | (143 | ) | ||||||||
|
Foreign currency forward contracts
|
7 | (10 | ) | — | ||||||||
|
|
||||||||||||
|
Total
1
|
$ | 319 | $ | 1,201 | $ | (145 | ) | |||||
|
|
||||||||||||
| 1 |
Net of tax expense (benefit) of $193, $519 and ($54) for the years ended
August 31, 2011, 2010 and 2009, respectively.
|
| Location of Gain/(Loss) | ||||||||||||||
| Reclassified from AOCI | Amount of Gain (Loss) Reclassified from | |||||||||||||
| $ in thousands | into Income | AOCI into Income | ||||||||||||
| For the years ended August 31, | ||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||
|
Interest rate swap
|
Interest Expense | $ | (557 | ) | $ | (850 | ) | $ | (974 | ) | ||||
|
Cross currency swap
|
Interest Expense | — | (884 | ) | (346 | ) | ||||||||
|
Foreign currency
forward contracts
|
Revenue | (76 | ) | (8 | ) | — | ||||||||
|
|
||||||||||||||
|
|
$ | (633 | ) | $ | (1,742 | ) | $ | (1,320 | ) | |||||
|
|
||||||||||||||
| Location of Gain/(Loss) | ||||||||||||||
| Recognized in Income | Gain/(Loss) Recognized in Income on | |||||||||||||
| $ in thousands | (Ineffectiveness) | Derivatives (Ineffectiveness) | ||||||||||||
| For the years ended August 31, | ||||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||
|
Interest rate swap
|
Other income (expense) | $ | 4 | $ | (52 | ) | $ | 99 | ||||||
|
Cross currency swap
|
Other income (expense) | — | — | — | ||||||||||
|
Foreign currency
forward contracts
|
Other income (expense) | — | — | — | ||||||||||
|
|
||||||||||||||
|
|
$ | 4 | $ | (52 | ) | $ | 99 | |||||||
|
|
||||||||||||||
Net Investment Hedging Relationships
In order to reduce translation exposure resulting from translating the financial statements of its
international subsidiaries into U.S. dollars, the Company, at times, utilizes Euro foreign currency
forward contracts to hedge a portion of its Euro net investment exposure in its foreign operations.
These foreign currency forward contracts qualify as a hedge of net investments in foreign
operations. Changes in fair value of the net investment hedge contracts are reported in OCI as
part of the currency translation adjustment, net of tax.
| Amount of Gain/(Loss) Recognized in OCI | ||||||||||||
| on Derivatives | ||||||||||||
| For the years ended August 31, | ||||||||||||
| $ in thousands | 2011 | 2010 | 2009 | |||||||||
|
Foreign currency
forward
contracts
1
|
$ | (800 | ) | $ | 296 | $ | 455 | |||||
| (1) |
Net of tax (benefit) expense of ($489), $181 and $279 for the years ended August 31,
2011, 2010 and 2009, respectively.
|
44
Table of Contents
During fiscal 2011, 2010 and 2009, the Company settled Euro foreign currency forward
contracts resulting in after-tax net (losses) gains of ($0.7 million), $0.3 million and $0.5
million, respectively, which were included in OCI as part of a currency translation adjustment.
There were no amounts recorded in the consolidated statement of operations related to
ineffectiveness of Euro foreign currency forward contracts for the years ended August 31, 2011,
2010 and 2009. Accumulated currency translation adjustment in AOCI at August 31, 2011, 2010 and
2009 reflected after-tax gains of $0.9 million, $1.6 million and $1.2 million, net of related
income tax effects of $0.5 million, $0.9 million and $0.8 million, respectively, related to settled
foreign currency forward contracts.
At August 31, 2011 and 2010, the Company had outstanding Euro foreign currency forward
contracts to sell 10.0 million Euro and 5.0 million Euro, respectively, at fixed prices to settle
during the next fiscal quarter following each period. The Company’s foreign currency forward
contracts qualify as hedges of a net investment in foreign operations.
Derivatives Not Designated as Hedging Instruments
In order to reduce exposures related to changes in foreign currency exchange rates, the Company, at
times, may enter into forward exchange or option contracts for transactions denominated in a
currency other than the functional currency for certain of the Company’s operations. This activity
primarily relates to economically hedging against foreign currency risk in purchasing inventory,
sales of finished goods, and future settlement of foreign denominated assets and liabilities. The
Company may choose whether or not to designate these contracts as hedges. For those contracts not
designated, changes in fair value are recognized currently in the income statement. At August 31,
2011, 2010 and 2009, the Company had no material undesignated hedges outstanding.
L. COMMITMENTS AND CONTINGENCIES
In 1992, the Company entered into a consent decree with the Environmental Protection Agency of
the United States Government (the “EPA”) in which the Company committed to remediate environmental
contamination of the groundwater that was discovered in 1982 through 1990 at and adjacent to its
Lindsay, Nebraska facility (the “site”). The site was added to the EPA’s list of priority
superfund sites in 1989. Between 1993 and 1995, remediation plans for the site were approved by
the EPA and fully implemented by the Company. Since 1998, the primary remaining contamination at
the site has been the presence of volatile organic chemicals in the groundwater. The current
remediation process consists of drilling wells into the aquifer and pumping water to the surface to
allow these contaminants to be removed by aeration. In 2008, the Company and the EPA conducted a
periodic five-year review of the status of the remediation of the contamination of the site. In
response to the review, the Company and its environmental consultants have developed a remedial
action work plan, under which the Company continues to work with the EPA to define and implement
steps to better contain and remediate the remaining contamination.
The Company accrues the anticipated cost of remediation when the obligation is probable and
can be reasonably estimated. Due to the current stage of discussions with the EPA and the
uncertainty of the remediation actions that may be required, the Company believes that meaningful
estimates of costs or range of costs cannot currently be made for all future remediation
requirements. The Company is scheduled to meet with the EPA in fiscal 2012 to discuss options that
could result in more permanent or more clearly defined remediation of the source areas of
contamination at the site.
During fiscal 2011, the Company accrued incremental costs of $1.3 million for additional
environmental monitoring and remediation in connection with the current ongoing remedial action
work plan. The undiscounted amounts accrued in balance sheet liabilities related to the
remediation actions were $1.5 million and $0.9 million at August 31, 2011 and 2010, respectively.
Although the Company has accrued all reasonably estimable costs of completing the actions defined
in the current ongoing work plan agreed to between the Company and the EPA, it is expected that
additional testing and environmental monitoring and remediation will be required in the near future
as part of the Company’s ongoing discussions with the EPA regarding the development and
implementation of the remedial action work plan, which could result in the recognition of
additional related expenses. While these additional expenses could significantly exceed the amount
accrued as of August 31, 2011 and could be material to the operating results of any fiscal quarter
or fiscal year, the Company does not expect that such additional expenses would have a material
adverse effect on the liquidity or financial condition of the Company.
In the ordinary course of its business operations, the Company is involved, from time to time,
in commercial litigation, employment disputes, administrative proceedings, and other legal
proceedings. No such current proceedings, individually or in the aggregate, are expected to have a
material effect on the business or financial condition of the Company.
45
Table of Contents
The Company leases land, buildings, machinery, equipment, and computer equipment under various
noncancelable operating lease agreements. At August 31, 2011, future minimum lease payments under
noncancelable operating leases were as follows:
| Fiscal Years | $ in thousands | |||
|
2012
|
$ | 2,295 | ||
|
2013
|
1,977 | |||
|
2014
|
1,148 | |||
|
2015
|
957 | |||
|
2016
|
888 | |||
|
Thereafter
|
2,453 | |||
|
|
||||
|
|
$ | 9,718 | ||
|
|
||||
Lease expense was $3.4 million, $2.8 million and $2.8 million for the years ended August 31,
2011, 2010, and 2009, respectively.
M. RETIREMENT PLANS
The Company has a defined contribution profit-sharing plan covering substantially all of its
full-time U.S. 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 the Company. The Company’s total contributions charged to expense under
this plan were $0.5 million, $0.6 million and $0.6 million for the years ended August 31, 2011,
2010 and 2009, respectively.
A supplementary non-qualified, non-funded retirement plan for six former 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. The Company has purchased life insurance
policies on certain executives named in this supplemental retirement plan to provide funding for
this liability.
As of August 31, 2011 and 2010, the funded status of the supplemental retirement plan was
recorded in the consolidated balance sheets. The Company utilizes an August 31 measurement date
for plan obligations related to the supplemental retirement plan. As this is an unfunded
retirement plan, the funded status is equal to the benefit obligation. The funded status of the
plan and the net amount recognized in the accompanying balance sheets as of August 31 is as
follows:
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Change in benefit obligation:
|
||||||||
|
Benefit obligation at beginning of year
|
$ | 6,957 | $ | 6,964 | ||||
|
Interest cost
|
334 | 351 | ||||||
|
Actuarial loss
|
53 | 259 | ||||||
|
Benefits paid
|
(557 | ) | (617 | ) | ||||
|
|
||||||||
|
Benefit obligation at end of year
|
$ | 6,787 | $ | 6,957 | ||||
|
|
||||||||
Amounts recognized in the statement of financial position consist of:
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Other current liabilities
|
$ | 557 | $ | 557 | ||||
|
Pension
benefit liabilities
|
6,230 | 6,400 | ||||||
|
|
||||||||
|
Net amount recognized
|
$ | 6,787 | $ | 6,957 | ||||
|
|
||||||||
46
Table of Contents
The before-tax amounts recognized in accumulated other comprehensive loss as of August 31 consists
of:
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Net actuarial loss
|
$ | (3,445 | ) | $ | (3,556 | ) | ||
|
Transition obligation
|
— | — | ||||||
|
|
||||||||
|
Total
|
$ | (3,445 | ) | $ | (3,556 | ) | ||
|
|
||||||||
The assumptions used for the determination of the liability as of years ended:
| August 31, | ||||||||
| 2011 | 2010 | |||||||
|
Discount rate
|
5.00 | % | 5.00 | % | ||||
|
Assumed rates of compensation increases
|
N/A | N/A | ||||||
|
Rate of return on underlying 401(k) investments
|
N/A | N/A | ||||||
The assumptions used to determine benefit obligations and costs are selected based on current and
expected market conditions. The discount rate is based on a hypothetical portfolio of long-term
corporate bonds with cash flows approximating the timing of expected benefit payments.
The components of the net periodic benefit cost for the supplemental retirement plan for the years
ended August 31 are as follows:
| For the years ended August 31, | ||||||||||||
| $ in thousands | 2011 | 2010 | 2009 | |||||||||
|
Service cost
|
$ | — | $ | — | $ | — | ||||||
|
Interest cost
|
334 | 351 | 347 | |||||||||
|
Net amortization and deferral
|
164 | 178 | 176 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 498 | $ | 529 | $ | 523 | ||||||
|
|
||||||||||||
The estimated actuarial loss for the supplemental retirement plan that will be amortized, on a
pre-tax basis, from accumulated other comprehensive loss into net periodic benefit cost during
fiscal 2012 will be $166.
The assumptions used for the determination of the net periodic benefit cost were:
| For the years ended August 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Discount rate
|
6.00 | % | 6.00 | % | 6.00 | % | ||||||
|
Assumed rates of compensation
|
N/A | N/A | 3.50 | % | ||||||||
The Company’s future annual contributions to the supplemental retirement plan will be equal to
expected net benefit payments since the plan is unfunded. The following net benefit payments are
expected to be paid:
| Fiscal Years | $ in thousands | |||
|
2012
|
557 | |||
|
2013
|
542 | |||
|
2014
|
537 | |||
|
2015
|
532 | |||
|
2016
|
526 | |||
|
Thereafter
|
4,093 | |||
47
Table of Contents
N. WARRANTIES
Product Warranties
The Company generally warrants its products against certain manufacturing and other defects. These
product warranties are provided for specific periods and/or usage of the product. The accrued
product warranty costs are for a combination of specifically identified items and other incurred,
but not identified, items based primarily on historical experience of actual warranty claims. This
reserve is classified within other current liabilities.
The following tables provide the changes in the Company’s product warranties:
| For the years ended | ||||||||
| August 31, | ||||||||
| $ in thousands | 2011 | 2010 | ||||||
|
Warranties:
|
||||||||
|
Product warranty accrual balance, beginning of period
|
$ | 1,862 | $ | 1,736 | ||||
|
Liabilities accrued for warranties during the period
|
4,865 | 3,820 | ||||||
|
Warranty claims paid during the period
|
(3,076 | ) | (3,694 | ) | ||||
|
|
||||||||
|
Product warranty accrual balance, end of period
|
$ | 3,651 | $ | 1,862 | ||||
|
|
||||||||
Warranty costs were $4.9 million, $3.8 million, and $3.6 million for the fiscal years ended August
31, 2011, 2010 and 2009, respectively.
O. INDUSTRY SEGMENT INFORMATION
The Company manages its business activities in two reportable segments:
Irrigation: This reporting segment includes the manufacture and marketing of center pivot,
lateral move, and hose reel irrigation systems as well as various water pumping stations and
controls. The irrigation reporting segment consists of twelve operating segments that have similar
economic characteristics and meet the aggregation criteria, including similar products, production
processes, type or class of customer and methods for distribution.
Infrastructure: This reporting segment includes the manufacture and marketing of moveable
barriers, specialty barriers and crash cushions; providing outsource manufacturing services and the
manufacturing and selling of large diameter steel tubing and railroad signals and structures. The
infrastructure reporting segment consists of three operating segments that have similar economic
characteristics and meet the aggregation criteria.
The accounting policies of the two reportable segments are described in the “Accounting
Policies” section of Note A. The Company evaluates the performance of its reportable segments
based on segment sales, gross profit, and operating income, with operating income for segment
purposes excluding unallocated corporate general and administrative expenses, interest income,
interest expense, other income and expenses, and income taxes. Operating income for segment
purposes does include general and administrative expenses, selling expenses, engineering and
research expenses and other overhead charges directly attributable to the segment. There are no
inter-reporting segment sales.
The Company has no single major customer representing 10% or more of its total revenues during
fiscal 2011, 2010, or 2009.
48
Table of Contents
Summarized financial information concerning the Company’s reportable segments is shown in the
following tables:
| $ in thousands | 2011 | 2010 | 2009 | |||||||||
|
Operating revenues:
|
||||||||||||
|
Irrigation
|
$ | 369,930 | $ | 258,666 | $ | 255,507 | ||||||
|
Infrastructure
|
108,960 | 99,774 | 80,721 | |||||||||
|
|
||||||||||||
|
Total operating revenues
|
$ | 478,890 | $ | 358,440 | $ | 336,228 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Operating income:
|
||||||||||||
|
Irrigation
|
$ | 59,703 | $ | 40,869 | $ | 35,504 | ||||||
|
Infrastructure
|
11,901 | 11,083 | (36 | ) | ||||||||
|
|
||||||||||||
|
Segment operating income
|
$ | 71,604 | $ | 51,952 | $ | 35,468 | ||||||
|
Unallocated general and administrative
expenses
|
(15,018 | ) | (14,110 | ) | (13,051 | ) | ||||||
|
Interest and other income (expense), net
|
(72 | ) | (1,060 | ) | (1,878 | ) | ||||||
|
|
||||||||||||
|
Earnings before income taxes
|
$ | 56,514 | $ | 36,782 | $ | 20,539 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total Capital Expenditures:
|
||||||||||||
|
Irrigation
|
$ | 5,490 | $ | 3,125 | $ | 5,681 | ||||||
|
Infrastructure
|
2,915 | 2,659 | 4,819 | |||||||||
|
|
||||||||||||
|
|
$ | 8,405 | $ | 5,784 | $ | 10,500 | ||||||
|
|
||||||||||||
|
Total Depreciation and Amortization:
|
||||||||||||
|
Irrigation
|
$ | 6,009 | $ | 4,597 | $ | 4,191 | ||||||
|
Infrastructure
|
5,725 | 6,113 | 6,251 | |||||||||
|
|
||||||||||||
|
|
$ | 11,734 | $ | 10,710 | $ | 10,442 | ||||||
|
|
||||||||||||
|
Total Assets:
|
||||||||||||
|
Irrigation
|
$ | 267,275 | $ | 206,885 | $ | 186,558 | ||||||
|
Infrastructure
|
113,869 | 118,596 | 121,339 | |||||||||
|
|
||||||||||||
|
|
$ | 381,144 | $ | 325,481 | $ | 307,897 | ||||||
|
|
||||||||||||
Summarized financial information concerning the Company’s geographical areas is shown in the
following tables. No individual foreign country’s operating revenues were material for separate
disclosure purposes.
| For the years ended August 31, | ||||||||||||||||||||||||
| $ in thousands | 2011 | 2010 | 2009 | |||||||||||||||||||||
| % of Total | % of Total | % of Total | ||||||||||||||||||||||
| Revenues | Revenues | Revenues | Revenues | Revenues | Revenues | |||||||||||||||||||
|
United States
|
$ | 307,694 | 64 | $ | 204,465 | 57 | $ | 200,625 | 60 | |||||||||||||||
|
International
|
171,196 | 36 | 153,975 | 43 | 135,603 | 40 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total Revenues
|
$ | 478,890 | 100 | $ | 358,440 | 100 | $ | 336,228 | 100 | |||||||||||||||
|
|
||||||||||||||||||||||||
| For the years ended August 31, | ||||||||||||||||||||||||
| $ in thousands | 2011 | 2010 | 2009 | |||||||||||||||||||||
| % of Total | % of Total | % of Total | ||||||||||||||||||||||
| Long-Lived | Long-Lived | Long-Lived | Long-Lived | Long-Lived | Long-Lived | |||||||||||||||||||
| Assets | Assets | Assets | Assets | Assets | Assets | |||||||||||||||||||
|
United States
|
$ | 91,564 | 78 | $ | 89,935 | 80 | $ | 88,335 | 78 | |||||||||||||||
|
Italy
|
19,578 | 16 | 17,810 | 16 | 21,429 | 19 | ||||||||||||||||||
|
International
|
6,905 | 6 | 5,011 | 4 | 3,151 | 3 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Total
Long-Lived Assets
|
$ | 118,047 | 100 | $ | 112,756 | 100 | $ | 112,915 | 100 | |||||||||||||||
|
|
||||||||||||||||||||||||
49
Table of Contents
P. SHARE BASED COMPENSATION
Share Based Compensation Program
Share based compensation is designed to reward employees for their long-term contributions to
the Company and provide incentives for them to remain with the Company. The number and frequency
of share grants are based on competitive practices, operating results of the Company, and
individual performance. As of August 31, 2011, the Company’s share-based compensation plan was the
2010 Long-Term Incentive Plan (the “2010 Plan”). The 2010 Plan was approved by the stockholders of
the Company, and became effective on January 25, 2010, and replaced the Company’s 2006 Long Term
Incentive Plan. At August 31, 2011 the Company had share based awards outstanding under its 2001,
2006 and 2010 Long-Term Incentive Plans.
The 2010 Plan provides for awards of stock options, restricted shares, restricted stock units,
stock appreciation rights, performance shares and performance stock units to employees and
non-employee directors of the Company. The maximum number of shares as to which stock awards may
be granted under the 2010 Plan is 435,000 shares, exclusive of any forfeitures from the 2001 and
2006 Long Term Incentive Plans. At August 31, 2011, 357,425 shares of common stock (including
forfeitures from prior plans) remained available for issuance under the 2010 Plan. All stock
awards will be counted against the 2010 Plan in a 1 to 1 ratio. If options, restricted stock units
or performance stock units awarded under the 2006 Plan or the 2001 Plan terminate without being
fully vested or exercised, those shares will be available again for grant under the 2010 Plan. The
2010 Plan also limits the total awards that may be made to any individual. Any options granted
under the 2010 Plan would have an exercise price equal to the fair market value of the underlying
stock on the grant date and expire no later than ten years from the grant date. The restricted
stock units granted to employees and directors under the 2010 Plan have a grant date fair value
equal to the fair market value of the underlying stock on the grant date less present value of
expected dividends. The restricted stock units granted to employees vest over a three-year period
at approximately 33% per year. The restricted stock units granted to non-employee directors
generally vest over a nine-month period. The performance stock units granted to employees under
the 2010 Plan have a grant date fair value equal to the fair market value of the underlying stock
on the grant date less present value of expected dividends. The performance stock units granted to
employees cliff vest after a three-year period and a specified number of shares of common stock
will be awarded under the terms of the performance stock units, if performance measures relating to
three-year average revenue growth and a three-year average return on net assets are achieved.
Share Based Compensation Information
The following table summarizes information about stock options outstanding as of and for the years
ended August 31, 2011, 2010 and 2009:
| Average | ||||||||||||||||
| Remaining | ||||||||||||||||
| Average | Contractual | Aggregate | ||||||||||||||
| Number of | Exercise | Term | Intrinsic | |||||||||||||
| Shares | Price | (years) | Value (’000s) | |||||||||||||
|
Outstanding
at August 31, 2009
|
370,099 | $ | 21.60 | 3.9 | $ | 7,370 | ||||||||||
|
Granted
|
— | — | ||||||||||||||
|
Exercised
|
(78,324 | ) | $ | 15.50 | $ | 2,042 | ||||||||||
|
Forfeitures
|
(150 | ) | $ | 24.29 | ||||||||||||
|
|
||||||||||||||||
|
Outstanding at
August 31, 2010
|
291,625 | $ | 23.23 | 3.7 | $ | 3,977 | ||||||||||
|
|
||||||||||||||||
|
Granted
|
— | — | ||||||||||||||
|
Exercised
|
(153,700 | ) | $ | 23.28 | $ | 7,001 | ||||||||||
|
Forfeitures
|
(1,350 | ) | $ | 24.33 | ||||||||||||
|
|
||||||||||||||||
|
Outstanding at
August 31, 2011
|
136,575 | $ | 23.17 | 3.1 | $ | 5,331 | ||||||||||
|
|
||||||||||||||||
There were 6,750, 27,115 and 109,450 outstanding stock options that vested during the
fiscal years ended August 31, 2011, 2010 and 2009, respectively. The intrinsic value of options
exercised for the fiscal years ended August 31, 2011, 2010 and 2009 was $7.0 million, $2.0 million
and $3.3 million, respectively.
50
Table of Contents
Cash received from option exercises for the fiscal years ended August 31, 2011, 2010 and 2009 was
$2.7 million, $0.5 million and $1.4 million, respectively. The actual tax benefit realized for the
tax deductions from option exercises totaled $2.7 million, $0.2 million and $0.2 million for fiscal
2011, 2010 and 2009, respectively.
The following table summarizes information about restricted stock units as of and for the years
ended August 31, 2011, 2010 and 2009:
| Weighted- | ||||||||
| Average | ||||||||
| Number of | Grant-Date | |||||||
| Shares | Fair Value | |||||||
|
Restricted stock units at August 31, 2009
|
76,727 | $ | 41.52 | |||||
|
Granted
|
45,583 | 34.17 | ||||||
|
Vested
|
(41,376 | ) | 39.25 | |||||
|
Forfeited
|
(5,841 | ) | 35.38 | |||||
|
|
||||||||
|
Restricted stock units at August 31, 2010
|
75,093 | $ | 38.61 | |||||
|
|
||||||||
|
Granted
|
40,699 | 55.27 | ||||||
|
Vested
|
(40,337 | ) | 43.91 | |||||
|
Forfeited
|
(3,629 | ) | 51.17 | |||||
|
|
||||||||
|
Restricted stock units at August 31, 2011
|
71,826 | $ | 47.99 | |||||
|
|
||||||||
Restricted stock units are generally settled with the issuance of shares with the exception of
certain restricted stock units awarded to internationally-based employees that are settled in cash.
At August 31, 2011, 2010 and 2009, outstanding restricted stock units included 5,658, 7,546 and
6,097 units, respectively, that will be settled in cash. The vesting date fair value of restricted
stock units that vested was $1.7 million and $1.6 million for the years ended August 31, 2011 and
2010, respectively.
The table below summarizes the status of the Company’s performance stock units as of and for the
year ended August 31, 2011, 2010 and 2009:
| Weighted- | ||||||||
| Average | ||||||||
| Number of | Grant-Date | |||||||
| Units | Fair Value | |||||||
|
Performance stock units at August 31, 2009
|
63,828 | $ | 41.48 | |||||
|
Granted
|
45,608 | 32.81 | ||||||
|
Vested
|
(18,183 | ) | 33.49 | |||||
|
Forfeited
|
(3,552 | ) | 32.81 | |||||
|
|
||||||||
|
Performance stock units at August 31, 2010
|
87,701 | $ | 38.98 | |||||
|
|
||||||||
|
Granted
|
27,932 | 55.45 | ||||||
|
Vested
|
(17,008 | ) | 47.27 | |||||
|
Forfeited
|
— | — | ||||||
|
|
||||||||
|
Performance stock units at August 31, 2011
|
98,625 | $ | 42.21 | |||||
|
|
||||||||
In connection with the performance stock units, the performance goals are based upon a three-year
average revenue growth and a three-year average return on net assets over the performance period.
The awards actually earned will range from zero to two hundred percent of the targeted number of
performance stock units and will be paid in shares of common stock. Shares earned will be
distributed upon vesting on the first day of November following the end of the three-year
performance period. The Company is accruing compensation expense based on the estimated number of
shares expected to be issued utilizing the most current information available to the Company at the
date of the financial statements. If defined performance goals are not met, no compensation cost
will be recognized and any previously recognized compensation expense will be reversed.
Performance stock units that vested in fiscal 2011 and 2010 represented 13,395 and 24,964 actual
shares of common stock issued. The vesting date fair value of performance stock units that vested
was $0.6 million and $0.8 million for the years ended August 31, 2011 and 2010, respectively.
51
Table of Contents
As of August 31, 2011, there was $4.2 million pre-tax of total unrecognized compensation cost
related to nonvested share-based compensation arrangements which is expected to be recognized over
a weighted-average period of 1.8 years.
The following table summarizes share-based compensation expense for the fiscal years ended August
31, 2011, 2010 and 2009:
| For the years ended August 31, | ||||||||||||
| $ in thousands | 2011 | 2010 | 2009 | |||||||||
|
Share-based compensation expense included in cost of operating revenues
|
$ | 157 | $ | 123 | $ | 145 | ||||||
|
|
||||||||||||
|
Research and development
|
120 | 60 | 131 | |||||||||
|
Sales and marketing
|
574 | 360 | 437 | |||||||||
|
General and administrative
|
2,623 | 1,663 | 1,427 | |||||||||
|
|
||||||||||||
|
Share-based compensation expense included in operating expenses
|
3,317 | 2,083 | 1,995 | |||||||||
|
|
||||||||||||
|
Total share-based compensation expense
|
3,474 | 2,206 | 2,140 | |||||||||
|
Tax benefit
|
(1,317 | ) | (836 | ) | (811 | ) | ||||||
|
|
||||||||||||
|
Share-based compensation expense, net of tax
|
$ | 2,157 | $ | 1,370 | $ | 1,329 | ||||||
|
|
||||||||||||
Q. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
| First | Second | Third | Fourth | |||||||||||||
| $ in thousands, except per share amounts | Quarter | Quarter | Quarter | Quarter | ||||||||||||
|
Year ended August 31, 2011
|
||||||||||||||||
|
Operating revenues
|
$ | 89,166 | $ | 120,168 | $ | 153,446 | $ | 116,110 | ||||||||
|
Cost of operating revenues
|
64,943 | 86,159 | 111,947 | 86,056 | ||||||||||||
|
Earnings before income taxes
|
6,577 | 17,001 | 23,159 | 9,777 | ||||||||||||
|
Net earnings
|
4,286 | 11,325 | 15,289 | 5,902 | ||||||||||||
|
Diluted net earnings per share
1
|
$ | 0.34 | $ | 0.89 | $ | 1.20 | $ | 0.46 | ||||||||
|
Market price (NYSE)
|
||||||||||||||||
|
High
|
$ | 66.48 | $ | 79.56 | $ | 85.87 | $ | 73.03 | ||||||||
|
Low
|
$ | 37.22 | $ | 58.00 | $ | 61.85 | $ | 47.68 | ||||||||
|
|
||||||||||||||||
|
Year ended August 31, 2010
|
||||||||||||||||
|
Operating revenues
|
$ | 85,970 | $ | 85,196 | $ | 100,073 | $ | 87,201 | ||||||||
|
Cost of operating revenues
|
60,166 | 63,067 | 74,818 | 61,489 | ||||||||||||
|
Earnings (loss) before income taxes
|
10,928 | 6,556 | 9,636 | 9,662 | ||||||||||||
|
Net earnings
|
6,677 | 5,978 | 6,248 | 5,959 | ||||||||||||
|
Diluted net earnings per share
1
|
$ | 0.53 | $ | 0.48 | $ | 0.49 | $ | 0.48 | ||||||||
|
Market price (NYSE)
|
||||||||||||||||
|
High
|
$ | 45.08 | $ | 47.45 | $ | 43.92 | $ | 38.19 | ||||||||
|
Low
|
$ | 31.20 | $ | 35.02 | $ | 33.00 | $ | 30.80 | ||||||||
| 1 |
The quarterly diluted net earnings per share is calculated based on the weighted average shares outstanding assuming
dilution for the quarter. There may be rounding differences between the sum of the quarterly diluted net earnings per share
amounts and the year-to-date diluted net earnings per share.
|
52
Table of Contents
| ITEM 9 |
—
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
NONE
| ITEM 9A |
—
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s management, including the
Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design
and operation of the Company’s disclosure controls and procedures, as defined in Exchange Act Rules
13a-15 (e) and 15d-15(e) and internal control over financial reporting, as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f). Based upon that evaluation, the Company’s Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are
effective in enabling the Company to record, process, summarize and report information required to
be included in the Company’s periodic SEC filings within the required time period.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over
financial reporting for the Company. The Company’s internal control system was designed to provide
reasonable assurance to the Company’s management and board of directors regarding the preparation
and fair presentation of published financial statements.
Management has assessed the effectiveness of the Company’s internal control over financial
reporting as of August 31, 2011, based on the criteria for effective internal control described in
Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on its assessment, management concluded that the Company’s internal
control over financial reporting was effective as of August 31, 2011.
The Audit Committee has engaged KPMG LLP, the independent registered public accounting firm
that audited the consolidated financial statements included in this Annual Report on Form 10-K, to
attest to and report on management’s evaluation of the Company’s internal control over financial
reporting. The report of KPMG LLP is included herein.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Lindsay Corporation:
Lindsay Corporation:
We have audited Lindsay Corporation’s internal control over financial reporting as of August 31,
2011, based on criteria established in
Internal Control — Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management
is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the
accompanying management’s report on internal control over financial reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
53
Table of Contents
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Lindsay Corporation maintained, in all material respects, effective internal
control over financial reporting as of August 31, 2011, based on criteria established in
Internal
Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Lindsay Corporation and subsidiaries as
of August 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’
equity and comprehensive income, and cash flows for each of the years in the three-year period
ended August 31, 2011, and our report dated October 27, 2011 expressed an unqualified opinion on
those consolidated financial statements.
/s/ KPMG LLP
Omaha, Nebraska
October 27, 2011
October 27, 2011
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting that occurred
during the quarter ended August 31, 2011, that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial reporting.
| ITEM 9B |
—
Other Information
|
None.
54
Table of Contents
| ITEM 10 |
—
Directors, Executive Officers and Corporate Governance
|
The Company will file with the Securities and Exchange Commission a definitive Proxy Statement for
its 2012 Annual Meeting of Stockholders (the “Proxy Statement”) not later than 120 days after the
close of its fiscal year ended August 31, 2011. Information about the Board of Directors required
by Items 401 and 407 of Regulation S-K is incorporated by reference to the discussion responsive
thereto under the captions “Board of Directors and Committees” and “Corporate Governance” in the
Proxy Statement.
The executive officers and significant employees of the Company, their ages, positions and past
five years experience are set forth below. All executive officers of the Company are appointed by
the Board of Directors annually and have employment agreements. There are no family relationships
between any director or executive officer. There are no arrangements or understandings between any
executive officer and any other person pursuant to which they were selected as an officer.
| Age | Position | |||
|
Richard W. Parod
|
58 | President and Chief Executive Officer | ||
|
James C. Raabe
|
51 | Vice President and Chief Financial Officer | ||
|
Steven S. Cotariu
|
53 | President — Infrastructure Business | ||
|
David B. Downing
|
56 | President — International Operations | ||
|
Barry A. Ruffalo
|
41 | President — Irrigation Business | ||
|
Douglas A. Taylor*
|
48 | President — Technology Business | ||
|
Eric R. Arneson*
|
37 | Vice President, General Counsel and Secretary | ||
|
Dan G. Keller*
|
52 | Vice President — Human Resources | ||
|
Mark A. Roth*
|
36 | Vice President — Corporate Development and Treasurer | ||
|
Lori L. Zarkowski*
|
36 | Chief Accounting Officer |
| * |
The employee is not an executive officer of the Registrant.
|
Mr. Richard W. Parod is President and Chief Executive Officer (“CEO”) of the Company, and
has held such positions since April 2000. Prior to that time and since 1997, Mr. Parod was Vice
President and General Manager of the Irrigation Division of The Toro Company. Mr. Parod was
employed by James Hardie Irrigation from 1993 through 1997, becoming President in 1994. Mr. Parod
has been a Director since April 2000, when he began his employment with the Company.
Mr. James C. Raabe is Vice President and Chief Financial Officer of the Company, and has held
such positions since June 2011. Prior to joining Lindsay and since April 1999, he served as Senior
Vice President and Chief Financial Officer of Select Comfort Corporation. From September 1997 to
April 1999, Mr. Raabe served as the Controller for Select Comfort Corporation. From May 1992 to
September 1997, he served as Vice President — Finance of ValueRx, Inc., a pharmacy benefit
management provider. Mr. Raabe held various positions with KPMG LLP from August 1982 to May 1992.
Mr. Steven S. Cotariu is President — Infrastructure Business of the Company and has held that
position since September 2010 when he joined the Company. Prior to joining Lindsay and since
October 2002, Mr. Cotariu held a variety of positions of increasing responsibility with Pentair,
Inc., most recently as Vice President, Marketing for Pentair Technical Products. Previously, Mr.
Cotariu held marketing and business development positions with Textron, Inc. and was a consultant
with McKinsey & Company.
Mr. David B. Downing is President — International Operations of the Company and has held such
position since March 2008. Between March 2009 and June 2011, Mr. Downing served as both Chief
Financial Officer and President — International Operations of the Company. Previously he was
Senior Vice President-Finance, Chief Financial Officer, Treasurer and Secretary of the Company and
held such positions from August 2004, when he joined the Company, to March 2008. Prior to August
2004, Mr. Downing served as the President of FPM L.L.C., a heat-treating company based in Elk Grove
Village, Illinois, after joining that company in January 2001 as Vice President and Chief Financial
Officer. Previously, Mr. Downing served as Vice President and Controller for Thermo-King, which
manufactured transport refrigeration equipment.
55
Table of Contents
Mr. Barry A. Ruffalo is President — Irrigation Business of the Company and has held such
position since March 2007, when he joined the Company. Prior to joining Lindsay and since February
2007, Mr. Ruffalo was most recently a Director of North American Operations for Joy Global Inc.
Prior to that time and since 1996, Mr. Ruffalo held various positions of increasing responsibility
with Case New Holland; the last five years were spent in Operations Management within the Tractor
and the Hay and Forage divisions for both the Case IH and New Holland brands.
Mr. Douglas A. Taylor is President — Technology Business of the Company and has held such
position since July 2011. Mr. Taylor joined the Company in May 2005 as the Chief Information
Officer and was promoted to Vice President and Chief Information Officer in October 2006, a
position he held until appointment to his current position. From 2004 through early 2005, Mr.
Taylor was a Technology Consultant. Prior to that time and since 1999, Mr. Taylor held several
positions with ConAgra Foods, most recently as the Vice President of Process and Systems
Integration, Vice President of Financial Systems, and Director of Information Systems.
Mr. Eric R. Arneson is Vice President, General Counsel and Secretary of the Company and has
held such positions since April 2008, when he joined the Company. Prior to that time and since
January 1999, Mr. Arneson practiced law with the law firm of Kutak Rock LLP, and was most recently
a partner of the firm.
Mr. Dan G. Keller is Vice President — Human Resources of the Company and has held such
position since April 2008, when he joined the Company. Prior to that time and since December 2006,
Mr. Keller was a Director of Human Resources for Johnson & Johnson. Previously, Mr. Keller was
with Pfizer Inc., the last seven years as a Director of Human Resources.
Mr. Mark A. Roth is Vice President — Corporate Development and Treasurer of the Company. Mr.
Roth joined Lindsay in 2004, as Director of Corporate Development and was promoted to Vice
President — Corporate Development in March 2007, adding Treasurer to his role in April 2008. From
March 2001 through 2004 when he joined the Company, Mr. Roth was an Associate with McCarthy Group,
Inc., a Midwest-based investment bank and private equity fund. From January 1998 through February
2001, Mr. Roth was a Senior Credit Analyst at US Bancorp.
Ms. Lori L. Zarkowski is Chief Accounting Officer of the Company, and has held such position
since August 2011. Ms. Zarkowski joined Lindsay in June 2007 as Corporate Reporting Manager and
was promoted to Corporate Controller in April 2008. Prior to joining the Company and since 1997,
Ms. Zarkowski was most recently an Audit Senior Manager with Deloitte & Touche LLP.
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 information required by Item 405 is incorporated by
reference to the discussion responsive thereto under the caption “Section 16(a) Beneficial
Ownership Reporting Compliance” in the Proxy Statement.
Code of Ethics —
Item 406 of Regulation S-K calls for disclosure of whether the Company has
adopted a code of ethics applicable to the principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing similar functions. The
Company has adopted a code of ethics applicable to the Company’s principal executive officer and
senior financial officers known as the Code of Ethical Conduct (Principal Executive Officer and
Senior Financial Officers). The Code of Ethical Conduct (Principal Executive Officer and Senior
Financial Officers) is available on the Company’s website. In the event that the Company amends or
waives any of the provisions of the Code of Ethical Conduct applicable to the principal executive
officer and senior financial officers, the Company intends to disclose the same on the Company’s
website at
www.lindsay.com
. No waivers were provided for the fiscal year ended August 31, 2011.
56
Table of Contents
| ITEM 11 |
—
Executive Compensation
|
The information required by this Item is incorporated by reference to the discussion responsive
thereto under the captions “Executive Compensation”, “Compensation Discussion and Analysis”,
“Pension Benefits”, “Nonqualified Deferred Compensation”, “Report of the Compensation Committee on
Executive Compensation”, “Compensation of Directors” and “Compensation Committee Interlocks and
Insider Participation” in the Proxy Statement.
| ITEM 12 |
—
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
|
The information required by this Item relating to security ownership of certain beneficial owners
and management is incorporated by reference to the discussion responsive thereto under the caption
“Voting Securities and Beneficial Ownership Thereof by Principal Stockholders, Directors and
Officers” in the Proxy Statement.
Equity Compensation Plan Information —
The following equity compensation plan information
summarizes plans and securities approved by security holders as of August 31, 2011 (there were no
equity compensation plans not approved by security holders as of August 31, 2011):
| (c) | ||||||||||||
| (a) | (b) | Number of securities | ||||||||||
| Number of securities | Weighted-average | remaining | ||||||||||
| to be issued upon | exercise price of | available for future issuance | ||||||||||
| exercise of | outstanding | under equity compensation | ||||||||||
| outstanding options, | options, warrants, | plans (excluding securities | ||||||||||
| PLAN CATEGORY | warrants, and rights | and rights | reflected in column (a)) | |||||||||
|
Equity compensation plans
approved by security
holders
(1)
(2)
|
301,368 | $ | 23.17 | 357,425 | ||||||||
|
|
||||||||||||
|
Total
|
301,368 | $ | 23.17 | 357,425 | ||||||||
|
|
||||||||||||
| (1) |
Plans approved by shareholders include the Company’s 2001, 2006 and 2010
Long-Term Incentive Plans. While certain share based awards remain outstanding under the Company’s
2001 and 2006 Long-Term Incentive Plans, no future equity compensation awards may be granted under
such plans.
|
|
| (2) |
Column (a) includes (i) 98,625 shares that could be issued under
performance stock units (“PSU”) outstanding at August 31, 2011, and (ii) 66,168 shares that could
be issued under restricted stock units (“RSU”) outstanding at August 31, 2011. The PSUs are earned
and Common Stock issued if certain predetermined performance criteria are met. Actual shares
issued may be equal to, less than or greater than (but not more than 200% of) the number of
outstanding PSUs included in column (a), depending on actual performance. The RSUs vest and are
payable in Common Stock after the expiration of the time periods set forth in the related
agreements. Column (b) does not take these PSU and RSU awards into account because they do not
have an exercise price.
|
| ITEM 13 |
—
Certain Relationships and Related Transactions, and Director Independence
|
The information required by this Item is incorporated by reference to the discussion responsive
thereto under the captions “Corporate Governance” and “Corporate Governance —
Related Party
Transactions
” in the Proxy Statement.
| ITEM 14 |
—
Principal Accounting Fees and Services
|
The information required by this Item is incorporated by reference to the discussion responsive
thereto under the caption “Ratification of Appointment of Independent Registered Public Accounting
Firm” in the Proxy Statement.
57
Table of Contents
| ITEM 15 |
—
Exhibits, Financial Statement Schedules
|
a(1) Financial Statements
The following financial statements of Lindsay Corporation and Subsidiaries are included in Part II
Item 8.
| Page | ||||
|
|
||||
| 25 | ||||
|
|
||||
| 26 | ||||
|
|
||||
| 27 | ||||
|
|
||||
| 28 | ||||
|
|
||||
| 29 | ||||
|
|
||||
| 30-52 | ||||
|
|
||||
| 59 | ||||
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.
58
Table of Contents
a(2) Exhibit
Lindsay Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
Years ended August 31, 2011, 2010 and 2009
| Additions | ||||||||||||||||||||
| Balance at | Charges to | Charged to | Balance at | |||||||||||||||||
| beginning | costs and | other | end of | |||||||||||||||||
| (in thousands) | of period | expenses | accounts | Deductions | period | |||||||||||||||
|
Year ended August 31, 2011:
|
||||||||||||||||||||
|
Deducted in the balance sheet from the
assets to which they apply:
|
||||||||||||||||||||
|
Allowance for doubtful accounts (a)
|
2,244 | 388 | — | 292 | 2,340 | |||||||||||||||
|
Allowance for inventory
obsolescence (b)
|
2,045 | 426 | (2 | ) | 302 | 2,167 | ||||||||||||||
|
Year ended August 31, 2010:
|
||||||||||||||||||||
|
Deducted in the balance sheet from the
assets to which they apply:
|
||||||||||||||||||||
|
Allowance for doubtful accounts (a)
|
1,864 | 732 | 4 | 356 | 2,244 | |||||||||||||||
|
Allowance for inventory
obsolescence (b)
|
1,643 | 984 | 60 | 642 | 2,045 | |||||||||||||||
|
Year ended August 31, 2009:
|
||||||||||||||||||||
|
Deducted in the balance sheet from the
assets to which they apply:
|
||||||||||||||||||||
|
Allowance for doubtful accounts (a)
|
1,457 | 554 | — | 147 | 1,864 | |||||||||||||||
|
Allowance for inventory
obsolescence (b)
|
1,409 | 492 | — | 258 | 1,643 | |||||||||||||||
| (a) |
Deductions consist of uncollectible items written off, less recoveries of items previously
written off.
|
|
| (b) |
Deductions consist of obsolete items sold or scrapped.
|
59
Table of Contents
a(3) EXHIBIT INDEX
| Exhibit | ||||
| Number | Description | |||
|
|
||||
| 3.1 |
Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit
3.1 to the Company’s Current Report on Form 8-K filed on December 14, 2006.
|
|||
|
|
||||
| 3.2 |
Restated By-Laws of the Company, incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed on November 6, 2007.
|
|||
|
|
||||
| 4.1 |
Specimen Form of Common Stock Certificate incorporated by reference to Exhibit 4(a) to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2006.
|
|||
|
|
||||
| 10.1 |
Lindsay Corporation 2010 Long-Term Incentive Plan and forms of award agreements, incorporated
by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended May 31, 2010.
|
|||
|
|
||||
| 10.2 |
Lindsay Manufacturing Co. 2006 Long-Term Incentive Plan and forms of award agreements,
incorporated by reference to Exhibit 10(a) to the Company’s Annual Report on Form 10-K for the
fiscal year ended August 31, 2007.
|
|||
|
|
||||
| 10.3 |
Lindsay Manufacturing Co. 2001 Amended and Restated Long-Term Incentive Plan, incorporated by
reference to Exhibit 10(i) of the Company’s Annual Report on Form 10-K for the fiscal year
ended August 31, 2001.
|
|||
|
|
||||
| 10.4 |
Amendment to Lindsay Manufacturing Co. 2001 Amended and Restated Long-Term Incentive Plan,
incorporated by reference to Exhibit 10(k) to the Company’s Annual Report on Form 10-K for the
fiscal year ended August 31, 2005.
|
|||
|
|
||||
| 10.5 |
Lindsay Corporation Management Incentive Umbrella Plan, incorporated by reference to Exhibit
10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 28,
2009.
|
|||
|
|
||||
| 10.6 | ** |
Lindsay Corporation Management Incentive Plan (MIP), 2011 Plan Year, incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended November 30, 2010.
|
||
|
|
||||
| 10.7 |
Form of Indemnification Agreement between the Company and its Officers and Directors, ,
incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2008.
|
|||
|
|
||||
| 10.8 |
Employment Agreement between the Company and Richard W. Parod effective March 8, 2000,
incorporated by reference to Exhibit 10(a) to the Company’s Report on Form 10-Q for the fiscal
quarter ended May 31, 2000.
|
|||
|
|
||||
| 10.9 |
First Amendment to Employment Agreement, dated May 2, 2003, between the Company and Richard
W. Parod, incorporated by reference to Exhibit 10 (a) of Amendment No. 1 to the Company’s
Report on Form 10-Q for the fiscal quarter ended May 31, 2003.
|
|||
|
|
||||
| 10.10 |
Second Amendment to Employment Agreement, dated December 22, 2004, between the Company and
Richard W. Parod, incorporated by reference to Exhibit 10(a) to the Company’s Current Report
on Form 8-K filed on December 27, 2004.
|
|||
|
|
||||
| 10.11 |
Third Amendment to Employment Agreement, dated March 20, 2007, between the Company and
Richard W. Parod, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on March 22, 2007.
|
|||
60
Table of Contents
| Exhibit | ||||
| Number | Description | |||
|
|
||||
| 10.12 |
Fourth Amendment to Employment Agreement, dated December 22, 2008, between the Company and
Richard W. Parod, incorporated by reference to Exhibit 10.2 of the Company’s Current Report on
Form 8-K filed on January 30, 2009.
|
|||
|
|
||||
| 10.13 |
Fifth Amendment to Employment Agreement, dated January 26, 2009, between the Company and
Richard W. Parod, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on
Form 8-K filed on January 30, 2009.
|
|||
|
|
||||
| 10.14 |
Restated Sixth Amendment, effective February 25, 2010, by and between the Company and
Richard W. Parod, incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report
on Form 10-Q for the fiscal quarter ended February 28, 2010.
|
|||
|
|
||||
| 10.15 |
Seventh Amendment to Employment Agreement, dated January 31, 2011, between the Company and
Richard W. Parod, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on
Form 8-K filed on February 3, 2011.
|
|||
|
|
||||
| 10.16 |
Employment Agreement, dated May 5, 2011, between the Company and James Raabe, incorporated
by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on May 10, 2011.
|
|||
|
|
||||
| 10.17 |
Employment Agreement dated February 19, 2009, by and between the Company and David B.
Downing, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K
filed on February 25, 2009.
|
|||
|
|
||||
| 10.18 |
Employment Agreement, dated February 19, 2009, by and between the Company and Barry A.
Ruffalo, incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K
filed on February 25, 2009.
|
|||
|
|
||||
| 10.19 |
Employment Agreement, dated February 19, 2009, by and between the Company and Timothy J.
Paymal, incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K
filed on February 25, 2009.
|
|||
|
|
||||
| 10.20 |
Employment Agreement, dated August 13, 2010, by and between the Company and Steve Cotariu,
incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K for the
fiscal year ended August 31, 2010.
|
|||
|
|
||||
| 10.21 |
Term Note, dated June 1, 2006, by and between the Company and Wells Fargo Bank, N.A.,
incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
June 2, 2006.
|
|||
|
|
||||
| 10.22 |
Amended and Restated Credit Agreement, dated June 1, 2006, by and between the Company and
Wells Fargo Bank, N.A., incorporated by reference to Exhibit 10.5 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended on February 28, 2010.
|
|||
|
|
||||
| 10.23 |
Amended and Restated ISDA Confirmation dated May 8, 2006, by and between the Company and
Wells Fargo Bank, N.A., incorporated by reference to Exhibit 10.4 to the Company’s Current
Report on Form 8-K filed on June 2, 2006.
|
|||
|
|
||||
| 10.24 |
ISDA Master Agreement, dated May 5, 2006, by and between the Company and Wells Fargo Bank,
N.A., incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K
filed on June 2, 2006.
|
|||
|
|
||||
| 10.25 |
Schedule to the ISDA Master Agreement, dated May 5, 2006, by and between the Company and
Wells Fargo Bank, N.A., incorporated by reference to Exhibit 10.6 to the Company’s Current
Report on Form 8-K filed on June 2, 2006.
|
|||
|
|
||||
| 10.26 |
Term Note, dated December 27, 2006, by Snoline S.pA. (successor in interest to Lindsay
Italia, S.r.l.) in favor of Wells Fargo Bank, N.A., incorporated by reference to Exhibit 10.2
of the Company’s Current Report on Form 8-K filed on December 29, 2006.
|
|||
61
Table of Contents
| Exhibit | ||||
| Number | Description | |||
|
|
||||
| 10.27 |
Credit Agreement, dated December 27, 2006, by and between Snoline S.pA. (successor in
interest to Lindsay Italia, S.r.l.) and Wells Fargo Bank, N.A., incorporated by reference to
Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on December 29, 2006.
|
|||
|
|
||||
| 10.28 |
Restated First Amendment to Credit Agreement, dated January 23, 2010, by and between Snoline
S.p.A. and Wells Fargo Bank, N.A., incorporated by reference to Exhibit 10.4 to the Company’s
Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2010.
|
|||
|
|
||||
| 10.29 |
First Bank Guarantee, dated December 27, 2006, by the Company in favor of Wells Fargo Bank,
N.A., incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K
filed on December 29, 2006.
|
|||
|
|
||||
| 10.30 |
Revolving Credit Note, dated January 24, 2008, by and between the Company and Wells Fargo
Bank, N.A., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K filed on January 30, 2008.
|
|||
|
|
||||
| 10.31 |
Revolving Credit Agreement, dated January 24, 2008, by and between the Company and Wells
Fargo Bank, N.A., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed on January 30, 2008.
|
|||
|
|
||||
| 10.32 |
First Amendment to Revolving Credit Agreement, dated January 23, 2010, by and between the
Company and Wells Fargo Bank, N.A., incorporated by reference to Exhibit 10.1 of the Company’s
Current Report on Form 8-K filed on January 26, 2010.
|
|||
|
|
||||
| 10.33 |
Second Amendment to Credit Agreement, dated January 23, 2011, by and between the Company and
Wells Fargo Bank, N.A., incorporated by reference to Exhibit 10.1 of the Company’s Current
Report on Form 8-K filed on January 26, 2011.
|
|||
|
|
||||
| 10.34 |
Lindsay Corporation Policy on Payment of Directors Fees and Expenses, incorporated by
reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the fiscal year
ended August 31, 2008.
|
|||
|
|
||||
| 21 | * |
Subsidiaries of the Company
|
||
|
|
||||
| 23 | * |
Consent of KPMG LLP
|
||
|
|
||||
| 24 | * |
The Power of Attorney authorizing Richard W. Parod to sign the Annual Report on Form 10-K for
fiscal 2011 on behalf of non-management directors.
|
||
|
|
||||
| 31.1 | * |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 18 U.S.C. Section 1350.
|
||
|
|
||||
| 31.2 | * |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 18 U.S.C. Section 1350.
|
||
|
|
||||
| 32 | * |
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350.
|
||
| * |
- filed herein
|
|
| ** |
- certain confidential portions of this Exhibit were omitted by means of redacting a portion of
the text. This Exhibit has been filed separately with the Secretary of the Commission with the
redacted text pursuant to the Company’s application requesting confidential treatment under Rule
24b-2 of the Securities and Exchange Act of 1934.
|
62
Table of Contents
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 on this 27
th
day of October, 2011.
| LINDSAY CORPORATION | ||||||||
|
|
||||||||
| By: | /s/ JAMES C. RAABE | |||||||
|
|
Name: | James C. Raabe | ||||||
|
|
Title: | Vice President and Chief Financial 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 27
th
day of October, 2011.
|
/s/
Richard W. Parod
|
Director, President and Chief Executive Officer
(Principal Executive Officer) |
|
|
|
||
|
/s
/ James C. Raabe
|
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) |
|
|
|
||
|
/s/
Michael N. Christodolou
(1)
|
Chairman of the Board of Directors | |
|
|
||
|
/s/
Howard G. Buffett
(1)
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W. Thomas Jagodinski
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J. David McIntosh
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Michael C. Nahl
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Michael D.Walter
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William f. welsh ii
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(1) By:
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Richard W. Parod
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TABLE OF CONTENTS
Part IItem 1 BusinessItem 1A Risk FactorsItem 1B Unresolved Staff CommentsItem 2 PropertiesItem 3 Legal ProceedingsItem 4 ( Removed and Reserved)Part IIItem 5 Market For The Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6 Selected Financial DataItem 7 Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A Quantitative and Qualitative Disclosures About Market RiskItem 8 Financial Statements and Supplementary DataItem 9 Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A Controls and ProceduresItem 9B Other InformationPart IIIItem 10 Directors, Executive Officers and Corporate GovernanceItem 11 Executive CompensationItem 12 Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13 Certain Relationships and Related Transactions, and Director IndependenceItem 14 Principal Accounting Fees and ServicesPart IVItem 15 Exhibits, Financial Statement Schedules