OMAHA, Neb., March 22 - Lindsay Manufacturing Co. (NYSE: LNN), a leading manufacturer of center pivot, lateral move, and hose reel irrigation systems, today announced results for its fiscal second quarter ended February 28, 2006. Revenues increased 32 percent from the same period a year ago, and earnings per diluted share were $0.15 compared with $0.05 in the comparable prior year period.
Second Quarter Results
Second quarter fiscal 2006 total revenues were $54.9 million compared with $41.5 million for the year-ago period. Net earnings were $1.7 million or $0.15 per diluted share, versus $600,000, or $0.05 per diluted share, in the prior year's second quarter. The current period includes a $0.02 unfavorable impact to diluted earnings per share related to expensing of stock-based compensation.
Total irrigation equipment revenues increased 36 percent to $49.2 million from $36.2 million in the prior fiscal year's second quarter, as farmer sentiment improved with stabilized worldwide agricultural commodity prices and input costs. Domestic irrigation revenues increased 42 percent, while international irrigation revenues increased 22 percent. Diversified products revenues were $5.7 million compared with $5.3 million in the year-ago period, an increase of 8 percent.
Rick Parod, president and chief executive officer, commented, "We are pleased that demand for irrigation equipment continued to rebound from the prior year when growers deferred purchases. While demand in most markets strengthened, the markets in Western Europe, South Africa and Brazil remain depressed and we continued our cost reduction actions in those markets during the period."
Gross margin declined to 18.0 percent from 18.7 percent a year ago. Gross selling margins in the domestic market were slightly lower compared with the second quarter of fiscal 2005 as a result of higher zinc and structural steel costs. International gross margins were impacted by competitive intensity particularly in the Western European market. The quarter's operating income was $2.1 million versus $710,000 in the comparable fiscal 2005 quarter, driven by the higher revenues. Operating expenses rose 10 percent to $7.8 million from $7.1 million, due principally to inclusion of stock-based compensation of $421,000 and inclusion of factory consolidation costs in South Africa of $186,000. Interest and other income totaled $416,000 in the quarter compared to $363,000 in the fiscal 2005 quarter.
Parod stated, "We continue to take actions to reduce expenses and improve efficiency across the global organization. I am also pleased with the continued improvements in our global management of working capital."
Lindsay's order backlog at February 28, 2006, was $23.9 million compared with $20.9 million at November 30, 2005, and $15.3 million at February 28, 2005.
Six Month Results
Total revenues for the six months were $94.4 million, a 16 percent increase from $81.3 million for the prior year's six-month period. Total irrigation equipment revenues of $83.3 million rose 16 percent from a year ago, while diversified products revenues grew 14 percent, rising to $11.1 million. Net earnings were $2.2 million, or $0.19 per diluted share, compared with $775,000, or $0.06 per diluted share, for the first six months of fiscal 2005. The six month results include a $0.04 unfavorable impact to diluted earnings per share related to expensing of stock based compensation.
Shareholders' equity at February 28, 2006 was $111.9 million, or $9.70 per outstanding common share, compared with $110.2 million, or $9.45 per outstanding common share at February 28, 2005. Cash and marketable securities at February 28, 2006 were $50.9 million compared with $43.8 million at February 28, 2005.
Outlook
Parod stated, "In the United States, the USDA projects net farm income to be lower in 2006 due to lower production, lower commodity prices and higher input costs; yet, irrigation equipment demand remains strong due to improved farmer sentiment and dry conditions. Globally, long-term drivers remain positive as population growth, the need for productivity improvements and fresh water constraints drive demand for our irrigation technology.
"Strengthening our margins during a period of rising steel and zinc prices remains a challenge given the short-term competitive environment. We have taken actions to tightly control production costs while maximizing our throughput during our peak selling months. We are also continuing growth initiatives related to finding accretive acquisitions in infrastructure and water products. We will continue to pursue our growth initiatives and leverage our strong cash flow and financial flexibility to create shareholder value through a balance of organic growth opportunities, accretive acquisitions, share repurchases and dividend payments."
Second Quarter Conference Call
Lindsay's second quarter fiscal 2006 investor conference call is scheduled for 11:00 a.m. ET today. The conference call will be simulcast live on the Internet, and can be accessed by logging onto http://www.lindsaymanufacturing.com or http://www.vcall.com . A replay of the call will be available for 30 days. Lindsay will have a slide presentation available to augment management's formal presentation, which will also be accessible via the company's web site.
About the Company
Lindsay manufactures and markets Zimmatic, Greenfield, Stettyn and Perrot center pivot, lateral move and hose reel irrigation systems and GrowSmart controls, all of which are used by farmers to increase or stabilize crop production while conserving water, energy, and labor. The company also produces large diameter steel tubing and provides outsourced manufacturing and production services for other companies. At February 28, 2006, Lindsay had approximately 11.5 million shares outstanding, which are traded on the New York Stock Exchange under the symbol LNN.
Concerning Forward-looking Statements
This release contains forward-looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company and those statements preceded by, followed by or including the words "expectation," "outlook," "could," "may," "should," or similar expressions. For these statements, we claim the protection of the safe harbor for forward- looking statements contained in the Private Securities Litigation Reform Act of 1995. For more information regarding Lindsay Manufacturing Co., see Lindsay's Web
site at http://www.lindsaymanufacturing.com
Lindsay Manufacturing Co. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
February 28, 2006 and 2005 and August 31, 2005
(Unaudited) (Unaudited)
February February August
2006 2005 2005
($ in thousands, except par values)
ASSETS
Current Assets:
Cash and cash equivalents $26,907 $7,571 $25,564
Marketable securities 13,104 11,720 14,101
Receivables, net 35,999 35,680 28,919
Inventories, net 26,292 29,858 19,311
Deferred income taxes 3,948 1,288 3,276
Other current assets 4,539 3,343 3,042
Total current assets 110,789 89,460 94,213
Long-term marketable securities 10,925 24,517 15,157
Property, plant and equipment, net 17,551 16,724 17,268
Other noncurrent assets 6,933 9,158 8,201
Total assets $146,198 $139,859 $134,839
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $14,215 $11,010 $6,704
Other current liabilities 14,743 13,849 13,434
Total current liabilities 28,958 24,859 20,138
Pension benefits liabilities 5,217 4,664 5,142
Other noncurrent liabilities 169 161 229
Total liabilities 34,344 29,684 25,509
Shareholders' equity:
Preferred stock, ($1 par value,
2,000,000 shares
authorized, no shares issued
and outstanding) --- --- ---
Common stock, ($1 par value,
25,000,000 shares
authorized, 17,573,531,
17,521,272 and 17,568,084
shares issued in February 2006
and 2005 and August 2005,
respectively) 17,573 17,521 17,568
Capital in excess of stated value 4,500 3,092 3,690
Retained earnings 184,290 180,700 183,444
Less treasury stock, (at cost,
6,048,448, 5,862,569 and
6,048,448 shares, respectively) (96,547) (93,073) (96,547)
Accumulated other comprehensive
income, net 2,038 1,935 1,175
Total shareholders' equity 111,854 110,175 109,330
Total liabilities and
shareholders' equity $146,198 $139,859 $134,839
Lindsay Manufacturing Co. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three-months and six-months ended February 28, 2006 and 2005
(unaudited) (unaudited)
Three Months Ended Six Months Ended
February February February February
2006 2005 2006 2005
(in thousands, except per
share amounts)
Operating revenues $54,912 $41,487 $94,416 $81,254
Cost of operating revenues 45,048 33,721 77,125 66,915
Gross profit 9,864 7,766 17,291 14,339
Operating expenses:
Selling expense 2,884 2,999 5,732 5,746
General and administrative expense 4,285 3,397 7,854 6,994
Engineering and research expense 607 660 1,254 1,356
Total operating expenses 7,776 7,056 14,840 14,096
Operating income 2,088 710 2,451 243
Interest income, net 436 295 863 556
Other (loss) income, net (20) 68 (18) 452
Earnings before income taxes 2,504 1,073 3,296 1,251
Income tax provision 787 473 1,068 476
Net earnings $1,717 $600 $2,228 $775
Basic net earnings per share $0.15 $0.05 $0.19 $0.07
Diluted net earnings per share $0.15 $0.05 $0.19 $0.06
Average shares outstanding 11,522 11,710 11,521 11,741
Diluted effect of stock options 174 168 163 188
Average shares outstanding assuming
dilution 11,696 11,878 11,684 11,929
Cash dividends per share $0.060 $0.055 $0.120 $0.110
Net income for the three-months and six-months ended February 28, 2006, included stock-based compensation expense under SFAS 123(R) of $275,000 and $519,000, respectively, net of tax. There was no stock-based compensation expense under SFAS 123 in the first or second quarters of fiscal 2005 because the Company did not adopt the recognition provisions of SFAS 123.
Lindsay Manufacturing Co. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six-months ended February 28, 2006 and 2005
(unaudited)
February February
($ in thousands) 2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $2,228 $775
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 1,661 1,783
Amortization of marketable
securities, net 126 110
Loss on sale of property, plant
and equipment 30 ---
Provision for uncollectible
accounts receivable 36 53
Equity in net earnings of
equity method investments (4) (230)
Deferred income taxes (239) (332)
Stock option tax expense (24) ---
Stock-based compensation expense 741 ---
Other, net (37) (50)
Changes in assets and liabilities:
Receivables, net (6,448) (427)
Inventories, net (6,824) (8,914)
Other current assets (1,392) (521)
Accounts payable, trade 7,503 1,425
Other current liabilities 1,223 (2,616)
Current taxes payable (251) 351
Other noncurrent assets and liabilities 292 2,528
Net cash used in operating activities (1,379) (6,065)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (1,772) (1,769)
Sale of an equity investment 354 ---
Proceeds from sale of property,
plant and equipment 81 7
Purchases of marketable securities
available-for-sale --- (1,841)
Proceeds from maturities or sales
of marketable securities
available-for-sale 5,113 12,360
Net cash provided by investing activities 3,776 8,757
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock under option plan 93 208
Repurchases of common stock --- (3,175)
Dividends paid (1,382) (1,284)
Net cash used in financing activities (1,289) (4,251)
Effect of exchange rate changes on cash 235 157
Net increase (decrease) in cash
and cash equivalents 1,343 (1,402)
Cash and cash equivalents,
beginning of period 25,564 8,973
Cash and cash equivalents, end of period $26,907 $7,571
