Lindsay Manufacturing Co.

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Lindsay Manufacturing Co.

East Highway 91
P.O. Box 156
Lindsay, Nebraska 68644
U.S.A.
(402) 428-2131
Fax: (402) 428-2795

Public Company
Incorporated: 1969
Employees: 542
Sales: $136.23 million (1996)
Stock Exchanges: NASDAQ
SICs: 3523 Farm Machinery and Equipment; 3317 Steel Pipe and Tubes; 3479 Coating, Engraving and Allied Services, Not Elsewhere Classified; 3443 Fabricated Plate Work (Boiler Shops); 4213 Trucking, Except Local; 4212 Local Trucking Without Storage; 3599 Industrial and Commercial Machinery and Equipment, Not Elsewhere Classified

Lindsay Manufacturing Co. is one of the two largest makers of center pivot irrigation equipment in the United States, and America’s largest exporter of such equipment. The company has weathered the storms of a changing marketplace and retained its position in a field where many of its competitors have gotten out of the business. Its ability to adapt and to deploy new strategies in the unpredictable world of agriculture has been a major factor in its success.

Beginnings

Lindsay Manufacturing Co. was founded as a farm equipment repair business in the small Nebraska town of Lindsay in 1955 by Paul Zimmerer. Over the next few years he was joined by his sons, Bernard and Arthur. In 1969, the company was incorporated and began to manufacture its first irrigation system, under the “Zimmatic” name. The so-called “center pivot” system, which involves a central tower 11 feet above the ground, attached to a quarter-mile-long pipe standing on motorized towers which slowly rotates to irrigate a large area, had first been patented (by a Nebraskan) in 1952. Compared,to traditional flood plain irrigation, where water moves by gravity across a field from its higher end, a center pivot system can use as little as half as much water. By 1971, Lindsay was having enough success to bring in professional business and manufacturing managers. The following year, the Zimmerer sons bought the company from their father, selling it to DeKalb Corp. in 1974. In 1978, the Zimmerers left active involvement with the company, Bernard moving to California and becoming a Lindsay dealer. Arthur Zimmerer was killed in an automobile accident the day after he left his post as a Lindsay executive.

Gary Parker, who had started at Lindsay in 1971, was named CEO in 1984, when the steadily growing company reached a peak in employment of 1100 workers and annual sales hit a high of almost $40 million. At this time the company’s sales were largely to the domestic market, which was to lead to near-disastrous consequences when the farm economy hit the skids over the next several years, at the same time that the company’s growing exports also slipped. In 1985, Lindsay’s annual sales plummeted to $1 million, sliding back up to $6 million the next year. The company’s workforce bottomed out at 307 in 1986. The strength of farm equipment sales were dependent on many factors, a primary one being the size of the farmer’s pocket-book. This could vary greatly, depending on the weather, the length of the growing season in a particular year, the prices in the national or international marketplace, etc. A company that produced expensive equipment exclusively for farmers was thus highly reliant upon the farmer’s good fortune to have a successful year. With a Zimmatic system costing as much as $80,000 to purchase and install, it was easy for a company such as Lindsay to have widely varying annual sales figures.

But Lindsay was already laying the groundwork for the future. A new line of Zimmatic equipment, “Generation 2,” was ready to go, and the company had begun to establish itself in Saudi Arabia, soon to be a highly lucrative market. The company also was making efforts to find other ways to make money besides selling irrigation equipment. One approach was to do contract manufacturing for other businesses, making use of excess capacity at the company’s 500,000 square foot plant. This has included work for Deere & Company and Caterpillar, for whom Lindsay has produced components. Other contract jobs included projects as small as manufacturing the invention of a Nebraska weightlifter—a machine which “spots” for people lifting weights, keeping the weight from falling if it slips. The company also made and sold large-diameter tubing which was used mainly in grain-handling equipment. In other efforts to improve the company’s bottom line, manufacturing efficiency was continually being improved, with a reduction in the man-hours required to build a center pivot from 500 in the 1970s to less than 200 a decade later.

Sales to Saudi Arabia Boom in the Late 1980s

Lindsay’s biggest success in the 1980s came through the company’s relationship with Saudi Arabia. The company had pursued international sales since the early 1970s, with some success in South America, South Africa, Spain, France, and Iran. In 1976 Lindsay first sent sales representatives to the Middle East, but it was not until 1983 that the first significant sales were made. In that year, the Saudi government, flush with the huge amounts of cash flowing in from its oil fields, decided to become agriculturally self-sufficient, and began to subsidize the production of wheat in the desert. According to Lindsay CEO Gary Parker, the country also wanted to influence its Bedouin tribes, traditionally nomadic herders of livestock, to begin to settle down and convert to wheat farming, which would help stabilize the country’s borders. This was initiated by setting the price of a bushel of wheat at approximately six times the going international rate. Soon, companies like Lindsay and its leading rival Valmont (also of Nebraska) were selling large numbers of irrigation systems to the Saudis, as well as to some of their oil-rich neighbors. The company’s export sales, which had risen from five percent of its total business in 1978 to 32 percent in 1982, stood at over 80 percent by 1988, with sales to over 50 countries in all. Lindsay maintained sales offices in Riyadh, Saudi Arabia, employing Saudi natives as agents in order to most effectively do business in a way that respected the country’s customs. Lindsay also sent a number of its employees from different areas of the operation over, to get a feel for what the Saudis wanted from the company, and encouraged its foreign customers to visit the factory in Nebraska to see how the equipment was made.

At about the same time in the mid-1980s that Lindsay had experienced a precipitous drop in American sales, the Saudis, beginning to show grain surpluses due to the success of their wheat subsidy program, dropped their guaranteed price in half. However, while several competitors got out of the center pivot market at this point, Lindsay persevered, impressing the Saudis with their commitment to the business and successfully making the shift in sales from large project farms to individual farmers. The company also was working to find ways to spring back in the United States, seeking to increase sales of other products such as its “lateral move” irrigation devices. These were designed to better fit the needs of farmers who, as in California, could not afford to lose the revenues from the corners of expensive plots of land which were not irrigated by the circular reach of a center pivot.

In 1988 DeKalb Corp. divided itself into four companies, with Lindsay being spun off as a single entity. It was offered publicly on the NASDAQ market in October 1988. Lindsay’s export sales had become the largest part of its business, and were driving the company’s strong annual figures at the end of the 1980s. In 1990, Lindsay’s sales had risen to $99 million, and its employment figures had also gone back up to over 500 from the low point of the mid-1980s. The company estimated it had manufactured over two-thirds of the irrigation systems in use in Saudi Arabia by that time. Lindsay was now appearing in annual rankings such as Business Week magazine’s “Top 100 Small Businesses,” where it was recognized for several years in a row.

Transitions in the 1990s

In 1991 Lindsay announced the introduction of a new computer controlling system for its irrigation equipment. The Automated Irrigation Management System, or AIMS, was available on Lindsay’s center pivot and lateral move irrigation systems. The computer device allowed the user to program a week’s worth of movement into the irrigation equipment, with options such as varying amounts of water, fertilizer, or chemicals that could be dispensed to different parts of a field. This enabled the farmer to make fewer trips to the field to adjust the equipment. Lindsay had previously introduced its Remote Monitoring and Control system, which was a radio-control device that performed some of the same functions. Also in 1991 the company lost a $7 million lawsuit against a well drilling contractor. Lindsay had claimed that in 1983, poorly drilled monitoring wells caused pollution from a waste pit to leach into the ground-water in the area, but the court ruled that Lindsay would have to pay for the cleanup itself. The company had prevailed the year before in a judgment against Warner Electric Brake and Clutch, being awarded $1.5 million in damages for faulty center pivot braking systems sold to Lindsay.

Company Perspectives:

At Lindsay, we will continue to cultivate opportunities as we strive to further improve performance and shareholder value.

While the farm economy is cyclical, long-term demand drivers, including farmers’ need to conserve water, energy and labor while stabilizing yields, will be a constant. Pressures to protect the environment and conserve water will continue to mount as governments and consumer groups at the local, state and national levels increasingly press for policies designed to preserve resources. With the ability to reduce water usage by 40 to 60 percent over flood irrigation as well as decrease leaching and runoff of fertilizer and chemical inputs, center pivot and lateral move irrigation is the clear choice for efficient, environmentally responsible crop irrigation.

The invasion of Kuwait by Iraq in 1991 initially caused some concern at the company, which brought its staff in Saudi Arabia back to the United States out of fear for their safety. The Gulf War only slowed sales briefly, however, and actually generated some good publicity. American news gatherers, restricted by the Pentagon from reporting on much of the action, turned to writing stories about Saudi Arabia, and several articles appeared in the American media on the marvelous circles of grain growing in the desert. When the war ended, strong sales continued to the Saudis, until 1993 when the government suddenly cut back on its support for domestic agriculture. At this time the declining price of oil on the international market and the fact that Saudi Arabia was producing more wheat than the country needed led the government to put an end to its grain subsidies. Lindsay’s annual sales to the Saudi kingdom fell from $44 million in 1991 to only $8 million three years later. However, while this was happening the United States farm economy was doing well enough for Lindsay’s annual domestic sales to increase by 53 percent in 1994, for a record tally of $77 million. This, plus increasing sales to Latin America and Western Europe, effectively offset the losses in Saudi Arabia so that Lindsay maintained profitability with barely a dip in its year-end sales total of $112.7 million.

From the late 1980s onward, the company had been able to put away strong cash reserves. It was often announced that Lindsay was looking to acquire another company, but no acquisition materialized. Lindsay continued in the late 1990s to seek a compatible company to purchase, while its annual sales curve became relatively stable compared to the precipitous increases and decreases of the 1980s. Lindsay also continued to improve its manufacturing process, investing $3 million in robotics at its plant and offering employee incentives to improve productivity. Where there had once been as many as 75 American makers of center pivot irrigation equipment, by the 1990s only seven remained in business. Of those, Lindsay and Nebraska rival Valmont were the top two, Valmont the leader in domestic sales and Lindsay the top exporter.

Lindsay Manufacturing, while concentrating on the production of a highly specialized product, farm irrigation equipment, managed to ride out the vagaries of the marketplace in the 1980s and 1990s to emerge with strong cash reserves and steadily increasing annual sales. Through the introduction of product improvements, by continuing to develop new strategies to increase sales and operating efficiency, and by utilizing its large manufacturing plant for subcontracting work, the company has successfully found a path that should lead it to continued success through the end of the 1990s and beyond.