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ANNUAL REPORT TO SHAREHOLDERS
Lindsey Household, Inc.
Fiscal 1999  |  Year ended August 31, 1999
Plano, Texas  ·  Ticker: LNDZ (traded over the kitchen counter)
Financial Highlights  |  Letter to Shareholders  |  Organization  |  Divisional Reports  |  Risk Factors  |  Outlook for 2000  |  Financial Statements

Fiscal 1999 at a Glance

One minivan. Two soccer seasons. One orthodontist. A beagle promoted to Head of Security. And, for the twelfth consecutive year, no missed dinners.

Financial Highlights FY99 FY98 Change
Loads of laundry processed412371+11%
Gallons of milk consumed156139+12%
Minivan miles driven18,94016,210+17%
Soccer games attended3819+100%
Orthodontist visits90NM
Permission slips lost611(45%)
Beagle incidents1422(36%)
Hugs per day (average)1212flat
Net incomepositivepositivebarely

NM = not meaningful. Management has elected not to publish dollar figures on the World Wide Web. See the Financial Statements, which are presented on a common-size basis for that reason.

Minivan Miles by Business Segment, FY99

Soccer
 6,820
School and carpool
 4,790
Groceries and errands
 3,410
Grandparents (Tyler)
 2,280
Orthodontist
 
 640
Everything else
 
 1,000

Milk Consumption, Five-Year Trend (gallons)

FY95
 72
FY96
 91
FY97
 116
FY98
 139
FY99
 156

A compound annual growth rate of about 21%, driven almost entirely by the Sales division. Management does not expect this trend to reverse before the Sales division leaves for college.


Letter to Shareholders

Dear Fellow Shareholders (Grandma and Grandpa in Tyler, Nana and Pop in Lubbock, and assorted aunts, uncles and cousins who have asked "so how are the kids?"):

We are pleased to report that fiscal 1999 was a year of solid execution for Lindsey Household, Inc. In a challenging environment, marked by rising milk costs, an expanded soccer schedule and a significant unplanned capital expenditure (the minivan's transmission, in February), the household delivered on its core commitments: everyone got where they were going, mostly on time, mostly with shoes.

Highlights of the year include the successful launch of our second soccer franchise (Ariel's under-8 team, the Purple Dragons, 3 wins, 5 losses, 1 tie, and outstanding juice-box execution), the onboarding of a new strategic partner (the orthodontist), and the long-awaited promotion of Scout to Head of Security, following several years of informal service in that role.

We also completed a restructuring of the Lego operation, consolidating four separate storage locations, including the heating vent, into a single bin. We recognized a one-time charge related to this restructuring of one Saturday morning and some tears. We believe the household is now better positioned for long-term growth.

We want to thank our employees, both of them, for their hard work and flexibility, and our Board of Directors for its continued, silent support.

Respectfully,

Susan Lindsey
Chief Executive Officer

Robert Lindsey
Chief Financial Officer

A note from the CFO: I am told by the CEO that the CEO outranks the CFO. I have reviewed the bylaws and this is correct.


Organization

BOARD OF DIRECTORS
Admiral (goldfish)
Chairman since the 1998 school carnival
|
SUSAN
Chief Executive Officer
ROBERT
Chief Financial Officer
|
JOEL, 11
Vice President of Sales
(mostly of excuses)
ARIEL, 7
Director of Research and Questions
SCOUT
Head of Security
(beagle)

The Board of Directors. Admiral was acquired at the elementary school carnival in October 1998 for one ping-pong ball, tossed. He meets daily, at feeding time, and has never once objected to a management proposal. Corporate governance experts may have concerns. We do not.

Vice President of Sales. Joel had an outstanding year in sales, particularly in the explanations category, where he closed on "the dog did it" (twice), "I thought you said tomorrow" and "it was like that when I got here." His pipeline for fiscal 2000 is strong. Management has asked him to apply these skills to selling candy bars for the band fundraiser in October.

Director of Research and Questions. Ariel set a household record this year with an estimated 41,000 questions, including why the sky is blue, why the dog can't talk, where the sun goes, and why Daddy's hair is going. Research output remains high. The CFO has asked that the last item be removed from future reports.

Head of Security. Scout has guarded the front window for three years on an informal basis, barking at the mail carrier, every delivery truck in the neighborhood and one particularly suspicious leaf. His promotion was approved in March. His compensation package includes one biscuit per shift and the corner of the couch he isn't supposed to be on. See Risk Factors.


Divisional Reports

Kitchen (Food Service Division). The division served approximately 1,400 individual dinners in fiscal 1999, in line with plan. Product mix shifted toward tacos (Tuesday) and pizza (Friday), which together now account for two-sevenths of all dinners. A test of a new vegetable line (Brussels sprouts) was discontinued after the third quarter due to weak demand. Leftovers continue to be an important secondary market.

Lawn Operations. The division, led by the CFO, maintained the St. Augustine grass through another Texas summer, with the usual brown patches in August, which management attributes to unfavorable weather conditions (Texas). The VP of Sales was approached about joining the mowing team at a competitive wage and declined, citing "allergies." The investigation continues.

Laundry. Volume rose 11%, driven by the second soccer program. The division's ongoing sock reconciliation project identified 23 unmatched socks at year end, which have been written down to zero and moved to a basket in the laundry room, where they await a merger partner.

Transportation. Our 1996 minivan logged 18,940 miles, the most in its history, with a utilization rate approaching 100% on Saturdays. The February transmission replacement was capitalized, extending the useful life of the asset by an estimated three years and the CFO's gray hair by an estimated three years. Interior condition is fair, owing to the Goldfish crackers.


Risk Factors

An investment in Lindsey Household, Inc. involves risks. Shareholders should consider the following carefully.

  • Year 2000. Management has completed its Y2K assessment. The computer, the microwave and the coffeemaker have been tested. The VCR has blinked 12:00 since 1994 and is not expected to notice. A contingency plan is in place (flashlights, canned soup, board games). The household believes its exposure is limited, but has bought extra batteries anyway.
  • Braces. The Sales division began orthodontic treatment in November. The contract runs another 27 months. Additional exposure is expected when the Research division's adult teeth come in, which the orthodontist has described as "something to keep an eye on."
  • The teenage years. The VP of Sales turns 13 in less than two years. Management has no direct experience with this transition from the parent's side and is relying on industry reports, all of which are alarming.
  • Key-person risk. The household depends heavily on the continued services of the CEO, who is the only employee who knows where anything is.
  • Concentration risk. The household operates a single vehicle capable of carrying a soccer team's worth of folding chairs.
  • Contingent liabilities. The Head of Security is not permitted on the couch. The Head of Security does not acknowledge this.
  • Commodity prices. See milk, above.

Outlook for 2000

Management reaffirms its guidance for fiscal 2000. We expect the Research division to turn 8 and to begin second grade questions in earnest; the Sales division to enter middle school, with associated increases in volume (music, and also feet); and a smooth transition to the year 2000, with a New Year's Eve party for shareholders at the Tyler location. Capital spending will focus on a backyard fence, to be funded from operations and from the Head of Security's continued good behavior.

We thank you, as always, for your investment in our family, which we know is mostly made of love and birthday checks.

This report contains forward-looking statements, including statements about the teenage years, braces, the fence and the Year 2000. These statements involve risks and uncertainties, and actual results may differ materially. The household undertakes no obligation to update them, except at Thanksgiving.

Continue to the Financial Statements >>

Report requests filled to date:
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Investor Relations: [email protected]
Last updated Wednesday, September 15, 1999