<PAGE> 1
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
Commission File Number 0-8287
LINDBERG CORPORATION
Delaware 36-1391480
State of Incorporation IRS Identification No.
6133 North River Road, Suite 700
Rosemont, Illinois 60018
(847) 823-2021
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant on March 8, 1996 was: $30,901,304.
The number of shares of the Registrant's Common Stock outstanding as of
March 8, 1996 was: 4,747,116.
<PAGE> 2
Documents Incorporated by Reference
Those sections or portions of the Registrant's 1995 Annual Report to
Stockholders (the "Annual Report") and of the Registrant's definitive Proxy
Statement for use in connection with its annual meeting of stockholders to be
held on April 26, 1996 (the "Proxy Statement"), described in the cross
reference sheet and attached hereto, are incorporated into Parts I, II and III
of this report.
<TABLE>
<CAPTION>
Table of Contents
-----------------
Item Number and Caption Page
- ----------------------- -----
<S> <C> <C> <C>
PART I
Item 1 Business.............................. Annual Report, pp. 18-19
(Note 10);
herein, pp. 4-7
Item 2 Properties............................ 7-8
Item 3 Legal Proceedings..................... Annual Report, p. 19
(Note 14);
herein, p. 8
Item 4 Submission of Matters to a Vote
of Security Holders................... 8
PART II
Item 5 Market for the Registrant's
Common Equity and Related
Stockholder Matters................... Annual Report, p. 21
"Stock Market Information";
herein, p. 8
Item 6 Selected Financial Data............... Annual Report, p. 20
"Six Year Financial Review";
herein, p. 8
Item 7 Management's Discussion and
Analysis of Financial Condition
and Results of Operations............. Annual Report, pp. 10-11;
herein, p. 9
Item 8 Financial Statements and
Supplementary Data.................... Annual Report, pp. 12-19;
herein, p. 9
Item 9 Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure.............. 9
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Item Number and Caption Page
- ----------------------- ----
<S> <C> <C>
PART III
Item 10 Directors and Executive Officers
of the Registrant
(a) Identification of directors................... Proxy Statement, pp. 1-2,
"The Election of Directors";
herein, p. 9
(b) Identification of executive
officers...................................... 9
Item 11 Executive Compensation........................ Proxy Statement, pp. 3-7,
"Executive Compensation,"
and p. 7, "Pension and
Retirement Plans" and
"Defined Contribution Plans";
herein, p. 10
Item 12 Security Ownership of Certain
Beneficial Owners and
Management.................................... Proxy Statement, pp. 9-10,
"Stock Ownership";
herein, p. 10
Item 13 Certain Relationships and Related
Transactions.................................. Proxy Statement, p. 2,
"The Election of Directors",
and p. 5, "Executive
Compensation - Compensation
Committee Interlocks and
Insider Participation";
herein, p. 10
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on
Form 8-K...................................... 10-13
Signatures.............................................. 14
Exhibit Index........................................... 15-16
</TABLE>
-3-
<PAGE> 4
Part I
Item 1. Business
General development of business
Lindberg Corporation (the "Company") was founded in 1922, and incorporated in
Illinois in 1924. In 1976, the Company changed its state of incorporation from
Illinois to Delaware.
Throughout its history, the Company has maintained a program of internal
growth and outside acquisitions resulting in the 22 domestic plants and one
development center in operation at December 31, 1995.
The business of the Company, which operates in the field of metallurgical
services and products, is comprised of heat treating plants and manufacturing
facilities.
In 1992, the Company sold its interest in Lindberg do Brasil, its
50%-owned international affiliate, for $1,250,000 in cash and a note
receivable. The final payment due on the note was received in 1994.
In March 1993, the Company announced its intent to restructure its
operations within the Heat Treating Services segment and recorded a charge of
$8,261,000 against pre-tax earnings in the first quarter of 1993 to provide
for the estimated costs of subsequent activities. As a part of this
restructuring, the Company sold its facilities in Florida and Georgia and
closed its Boston, Massachusetts plant. Also related to this plan, certain
non-productive assets were written off. The restructuring activities were
completed during 1995 within the original reserves established in 1993.
In April 1994, the Company purchased all of the outstanding shares of
Rexcorp U.S. Inc. and its wholly-owned subsidiary, Impact Industries Inc.
(Impact). Impact is an aluminum die casting facility which produces finish
machined aluminum die castings and assemblies mainly for the automotive and
lawn and garden markets. The addition of Impact has increased the Company's
business activity related to the automotive market to 35% of total revenues.
This acquisition also tripled the size of the Company's Precision Products
segment, increasing the proportion of total business from that segment from 20%
in 1993 to 45% by year-end 1995.
In June 1994, the Company entered into an agreement to form a joint
venture partnership between its Alum-A-Therm division and Aerospace Aluminum
Heat Treating Inc. The partnership commenced operation on July 1, 1994. Both
businesses engage in heat treating and metal forming of aluminum and titanium
parts, primarily in southern California.
In November 1994, the Company purchased all of the outstanding shares of
H&H Heat Treating Inc. (H&H). H&H is a heat treating facility near Los
Angeles. The acquisition nearly doubled the size of the Company's steel heat
treating activity in that area.
At December 31, 1995, the Company had 1,119 employees. Of these
employees, 227 were covered by collective bargaining agreements. No agreements
will expire during 1996.
Financial Information about Industry Segments
The Company's operations may be divided into two industry segments: Heat
Treating Services and Precision Products.
Financial information about the Company's two industry segments as of
December 31, 1995, and for the three
-4-
<PAGE> 5
years ended on that date, is incorporated by reference to pages 18-19 - Note 10
to the Consolidated Financial Statements in the Annual Report.
Narrative description of business
Heat Treating Services:
The Company's principal industry segment is Heat Treating Services. From 17
plants, this segment provides customers with heat treating of metal, a process
which improves mechanical properties, durability and wear resistance. This
service is provided to customers both with and without their own heat treating
capabilities.
While heat treating is offered through a range of processes, market needs
historically have dictated a degree of specialization for most plants. Among
the many heat treating processes offered are hardening and tempering,
carburizing, nitriding, selective hardening, solution treating and aging,
stress relieving, normalizing, brazing and other specialty processes.
The Company's heat treating plants are each located in a major industrial
area. The market for heat treating services for any plant is largely confined
to its local geographic area. Major industries served by the Company's Heat
Treating Services segment include aerospace, automotive/truck, oilfield
machinery, agricultural and construction equipment, consumer products,
fabricated metal products, production tool and die, defense and precision
machined products. Parts processed for these industries include machined
pieces, fasteners, forgings, castings and stampings made of nearly all types of
ferrous and certain nonferrous metals, including aluminum and titanium.
Because of the wide customer base served, the loss of a single customer or a
few customers would not have a material adverse effect on this segment. No
customer accounts for more than 10% of this segment's annual net sales.
Each plant has competition of varying degrees of intensity. Each competes
in its market area on the basis of quality, reliable delivery and price. Plant
management is largely responsible for its own pricing and cost control, and
thus has the flexibility to respond to local area market conditions. There are
competitors in particular localities larger than the Company's facility located
therein. Some of these firms are divisions or subsidiaries of large companies
and, therefore, have access to substantial resources. Competition also exists,
in limited instances, from captive heat treating facilities of manufacturing
concerns, although the Company also considers such concerns as potential
customers.
In addition to providing heat treating services from the 17 plants, the
Company also provides heat treating through its Strategic Partnership 2000, or
SP 2000, program. The SP 2000 program allows the Company to provide heat
treating services to its SP 2000 partners, typically manufacturers with a
significant requirement for heat treating, using dedicated equipment at either
its own or its partners' facilities.
The Company also provides heat treating consulting services through its
Technical and Management Services (T & MS) Group. The T & MS Group provides
its services to companies with their own in-house heat treating facilities.
The basic raw material for the Company's heat treating services is energy
in the forms of natural gas and electricity. The Company has not experienced
any material restrictions by its suppliers of these sources of energy.
The Company's Heat Treating Services segment employs some environmentally
hazardous materials, including oil and solvents, and has some underground
storage tanks. The Company has made expenditures to comply with laws and
regulations relating to the protection of the environment, including studies,
investigations and remediation
-5-
<PAGE> 6
of ground contamination, and expects to make such expenditures in the future in
its efforts to comply with existing and future requirements. Based on existing
regulations, the Company does not anticipate the requirement for material
capital expenditures in its operations to maintain compliance. However, there
can be no assurance that more stringent regulation or enforcement in the future
will not materially affect the Company's capital expenditures.
In some cases, the Company has notified state authorities of a possible
need for remediation at heat treating sites it previously operated or currently
operates. At all such sites, costs which may be incurred are difficult to
accurately predict until the level of contamination is determined, and would be
subject to increase if more contamination is discovered during investigation or
remediation or if state authorities require more remediation than anticipated.
Such costs may be less if the contamination proves to be less than currently
expected, if remediation costs are reduced, and to the extent costs are covered
by insurance or are allocable to others. The Company has estimated a range of
costs in establishing the accounting reserves noted below.
The Company has also been notified by various state and federal
governmental authorities that they believe it may be a "potentially responsible
party" or otherwise have responsibility with respect to clean-up obligations at
certain hazardous and other waste disposal sites which were never owned or
operated by the Company. In some such cases, the Company has effected
settlements with the relevant authorities for immaterial amounts. In other
such cases, the Company is participating in negotiations for settlement with
the relevant authorities or other parties believed by the Company to be
responsible or has notified the authorities that it denies responsibility for
clean-up obligations. Management believes that the ultimate outcome will not
have a material effect on the Company's financial condition or results of
operations.
At December 31, 1995, the Company had reserves of $1.6 million to
cover future anticipated costs for the issues outlined above. Such reserves
give no effect to possible recoveries from insurers or other potentially
responsible parties nor do they reflect any discount for the several years over
which investigation or remediation amounts may be paid out.
At December 31, 1995 this segment employed 623 employees as compared to
610 at the prior year-end.
The Company's Heat Treating Services segment operates with a limited
backlog due to the nature of its businesses. Operations in this segment
process customer produced parts on a very short turnaround basis; therefore,
backlog in facilities within the segment is generally estimated to be less than
one week.
Precision Products:
The Company's Precision Products segment consists of five plants which produce
over 900 products including precision aluminum castings, aluminum and zinc die
castings and wire mesh conveyor belting products. Additionally, one
development center provides support, and performs research and development
activities at December 31, 1995. During 1996, the Company intends on phasing
out this operation as a stand-alone entity. Markets served by this segment
include the automotive, construction equipment, consumer products, defense,
food processing and heavy-duty truck industries.
During 1995, activity with various subsidiaries, divisions and affiliates
of General Motors Corporation (GMC), rose to 30% of this segment's total
revenues. This activity increased significantly in 1995 due to the receipt of
major new production orders at the Company's Impact division. The loss of GMC
as a customer or a significant reduction in the business generated by GMC would
have a material adverse effect on the segment's results of operations. Sales
to GMC are made through various subsidiaries, divisions and affiliates that the
Company believes act independently in their purchasing decisions. Accordingly,
the Company believes that it is unlikely that it would
-6-
<PAGE> 7
lose all of the business generated by GMC. There can be no assurance, however,
that the historic levels of business from GMC will be maintained. No other
customer represents more than 10% of the segment's annual net sales.
The basic raw materials for the Company's manufactured products are
aluminum, zinc, magnesium and steel wire. The Company has experienced no
significant difficulty in obtaining these materials.
Operations within this segment must also ensure that they comply with
environmental protection laws and regulations. Expenditures for this purpose
have not had, nor are they anticipated to have, a material adverse effect upon
the capital expenditures, net earnings or competitive position of this segment.
The Company is a minority stockholder in a consortium of five industrial
partners called Thixomat, Inc. This company was formed in 1989 to promote and
commercialize a new metal parts casting technology called Thixomolding(TM). This
process is expected to reduce energy and material consumption while yielding
higher production rates and closer tolerances of castings.
The number of associates in the Precision Products segment was 481 at
December 31, 1995 compared to 538 at December 31, 1994.
The backlog totals within the Precision Products segment as of December
31, 1995 and 1994 were estimated to be $17.1 million and $18.6 million,
respectively. The Company expects all of the backlog at December 31, 1995 to
be filled by December 31, 1996. The Company does not believe this backlog to
be of a seasonal nature nor does it consider the difference between the
December 31 totals to reflect any significant change or trend in business
activity.
Item 2. Properties
The principal facilities of the Company are set forth in the following table,
which also indicates the principal product manufactured or service performed at
each location:
<TABLE>
<CAPTION>
Leased
Location or Owned
Heat Treating Services Segment:
- -------------------------------
<S> <C>
Los Angeles, CA Owned
Santa Fe Springs, CA Leased
Berlin, CT Owned
Waterbury, CT Leased
Melrose Park, IL Owned
Wichita, KS Leased
Worcester, MA Owned
Lansing, MI Owned
Minneapolis, MN Leased
St. Louis, MO Owned
Charlotte, NC Leased
Rochester, NY Leased
Solon, OH Owned
Tulsa, OK Owned
Houston, TX Owned
New Berlin, WI Owned
</TABLE>
-7-
<PAGE> 8
<TABLE>
<S> <C>
Racine, WI Owned
Alum-A-Therm in Westminster, CA (50% partnership) Owned
Precision Products Segment:
- ---------------------------
Modesto, CA Leased
Webster City, IA Owned
Sandwich, IL Owned
Cookeville, TN Owned
Racine, WI Owned
Corporate Office:
- -----------------
Rosemont, IL Leased
</TABLE>
The Company also occupies building space at certain of its customers' locations
related to the Company's SP 2000 program.
The Company's facilities are suitable for their respective uses and are, in
general, adequate for the Company's current needs. All facilities,
particularly in the Heat Treating Services segment, serve largely localized
markets and customers. Those providing services or products in markets where
economic activity is strong at any particular time operate at relatively high
levels of plant utilization. The Company believes that it has sufficient
capacity at its current facilities to absorb additional workloads at any
reasonably anticipatable levels.
Item 3. Legal Proceedings
Incorporated by reference to page 19 of the Annual Report - Note 14
to the Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
None
Executive Officers of the Registrant
Information regarding the executive officers of the Registrant is
contained in Part III of this report, Item 10(b), and is
incorporated into Part I of this report in reliance on General
Instruction G(3) to Form 10-K, by reference.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Incorporated by reference to page 21 of the Annual Report, section
entitled "Stock Market Information." As of March 8, 1996, the
Company had 560 stockholders of record.
Item 6. Selected Financial Data
Incorporated by reference to page 20 of the Annual Report, section
entitled "Six-Year Financial Review."
-8-
<PAGE> 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Incorporated by reference to pages 10-11 of the Annual Report.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to pages 12-19 of the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors. Incorporated by reference to pages
1-2 of the Proxy Statement, section entitled "The Election of
Directors."
(b) Identification of Executive Officers
<TABLE>
<CAPTION>
N a m e A g e P o s i t i o n
- ------- ----- ---------------
<S> <C> <C>
Leo G. Thompson 55 President (since October 1987) and Chief Executive
Officer (since January 1991); formerly Chief
Operating Officer (from October 1987 to December
1990).
Stephen S. Penley 46 Senior Vice President and Chief Financial Officer
(since July 1993), Treasurer (since January
1989), Secretary (since October 1990); formerly Vice
President - Finance (from January 1989 to July 1993).
Michael W. Nelson 48 Senior Vice President and Manager of Heat Treat
Operations (since July 1993); formerly Vice President
- Central Region (from June 1992 to June 1993),
Vice President - Central Region - Heat Treat
Operations (from July 1990 to May 1992),
District Manager - Central Region (from December
1986 to June 1990).
Gary E. Miller 50 Senior Vice President, Manager of Precision Products
Operations (since January 1995) and President of Impact
Industries, Inc. (since June 1990).
</TABLE>
Executive Officers of the Company are elected annually by the Board of
Directors of the Company in April.
-9-
<PAGE> 10
Item 11. Executive Compensation
Incorporated by reference to pages 3-7 of the Proxy Statement,
section entitled "Executive Compensation" and to page 7,
sections entitled "Pension and Retirement Plans" and "Defined
Contribution Plans."
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Incorporated by reference to pages 9-10 of the Proxy Statement,
section entitled "Stock Ownership."
Item 13. Certain Relationships and Related Transactions
Incorporated by reference to page 2 of the Proxy Statement, section
entitled "The Election of Directors", and to page 5, section entitled
"Executive Compensation - Compensation Committee Interlocks and
Insider Participation."
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Page or Reference (1)
---------------------
<S> <C> <C>
(a) Certain Documents Filed as Part of the Form 10-K
------------------------------------------------
1. Financial Statements
------------------------
Consolidated Statements of Earnings and
Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993 ................. Annual Report, p. 12
Consolidated Balance Sheets as of
December 31, 1995 and 1994 ....................... Annual Report, p. 13
Consolidated Statements of Cash Flows for
the years ended December 31, 1995, 1994
and 1993 ......................................... Annual Report, p. 14
Notes to Consolidated Financial
Statements ....................................... Annual Report, pp. 15-19
Report of Independent Public
Accountants ...................................... Annual Report, p. 20
</TABLE>
(1) Matters incorporated by reference from the Lindberg Corporation 1995
Annual Report.
-10-
<PAGE> 11
<TABLE>
<CAPTION>
2. Financial Statements Schedules (2) Page
---------------------------------------- ----
<S> <C>
VIII. Valuation and Qualifying Accounts
and Reserves ................... 12
Report of Independent Public Accountants
on Schedules ....................... 13
</TABLE>
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended December 31, 1995.
(c) Exhibits Required by Item 601 of Regulation S-K. Exhibits required by
Item 601 of Regulation S-K are listed in the Exhibit Index which is
attached hereto at pages 15-16 and which is incorporated herein by
reference.
(2) Schedules other than those listed above are omitted for the reason that
they are not required or are not applicable, or because the required
information is shown in the financial statements or notes thereto.
-11-
<PAGE> 12
LINDBERG CORPORATION AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND
QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year $ 314,000 $257,000 $ 330,000
Provision charged to expense
during the year 339,000 103,000 109,000
Write-offs during the year,
net of recoveries (325,000) (76,000) (182,000)
Reserve addition related to purchase
of Impact Industries, Inc. --- 30,000 ---
-------- -------- --------
Balance at end of year $ 328,000 $314,000 $ 257,000
========= ======== =========
</TABLE>
-12-
<PAGE> 13
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To the Stockholders of
Lindberg Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Lindberg
Corporation's annual report to stockholders incorporated by reference in this
Form 10-K and have issued our report thereon dated January 19, 1996. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the index above is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 19, 1996
-13-
<PAGE> 14
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.
LINDBERG CORPORATION
BY /s/ Stephen S. Penley
------------------------------
Stephen S. Penley
Senior Vice President and Chief
Financial Officer; Principal
Financial and Accounting Officer
Dated March 22, 1996
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 in the capacities and on the date indicated.
/s/ Stephen S. Penley
--------------------------------
Stephen S. Penley
Senior Vice President and Chief Financial
Officer; Principal Financial and
Accounting Officer
/s/ Leo G. Thompson
--------------------------------
Leo G. Thompson
President and Chief Executive
Officer, and a Director
/s/ George H. Bodeen
--------------------------------
George H. Bodeen
Director
/s/ Raymond F. Decker
--------------------------------
Dr. Raymond F. Decker
Director
/s/ Raymond A. Jean
--------------------------------
Raymond A. Jean
Director
/s/ John W. Puth
--------------------------------
John W. Puth
Director
/s/ J. Thomas Schanck
--------------------------------
J. Thomas Schanck
Director March 22, 1996
-14-
<PAGE> 15
LINDBERG CORPORATION
Annual Report on Form 10-K
for the Year Ended December 31, 1995
Exhibit Index
<TABLE>
<CAPTION>
Page Number (1)
Number and Description of Exhibit or reference
- ---------------------------------- ------------
<S> <C>
1. Not applicable
2.1 Stock Purchase Agreement dated April 19, 1994 among (2)
Rexcorp Sport International Ltd., Marle Management Ltd., D.F.
Haslam Management Ltd., and Gary E. Miller and
Lindberg Corporation.
3. Articles of Incorporation and By-Laws
3.1 Certificate of Incorporation (composite) (3)
3.2 1979 Amendment to Certificate of Incorporation (4)
3.3 1987 Amendment to Certificate of Incorporation (5)
3.4 By-Laws (as amended) (6)
4. Instruments defining the rights of
security holders, including indentures (7)
4.1 Amended and Restated Credit Agreement
Dated as of April 28, 1994 (8)
4.2 First Amendment to Amended and Restated Credit
Agreement dated as of November 2, 1995 (9)
4.3 Second Amendment to Amended and Restated Credit
Agreement dated as of January 31, 1996 Attached
4.4 Note Agreement dated as of October 15, 1995 (10)
5-9. Not applicable
10. Material contracts
10.1 Description of Bonus Program (11)
10.2 Consulting Agreement Between the
Registrant and G.H. Bodeen dated
October 25, 1990 (12)
10.3 1991 Stock Option Plan for Key Employees (13)
10.4 1991 Stock Option Plan for Directors (14)
11. Statement re computation of per share earnings Attached
12. Not applicable
13. Information in Annual Report to Stockholders
incorporated herein by reference Attached
14-20. Not Applicable
21. Subsidiary of the Registrant Attached
22. Not Applicable
23. Consent of Independent Public Accountants Attached
24-26. Not Applicable
27. Financial Data Schedule Attached
28. Not Applicable
</TABLE>
-15-
<PAGE> 16
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
- ------- -----------------------
(1) Shown only in manually signed original.
(2) Incorporated by reference to Exhibit 2.1 of the Registrant's Report
on Form 8-K dated May 13, 1994, Commission file no. 0-8287.
(3) Incorporated by reference to Exhibit 3.1 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1980,
Commission file no. 0-8287.
(4) Incorporated by reference to Exhibit 3.2 of the Registrant's Report
on Form 10-Q for the quarter ended March 31, 1995, Commission file
no. 0-8287.
(5) Incorporated by reference to page 6 of the Registrant's Proxy
Statement filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1986, Commission file no. 0-8287.
(6) Incorporated by reference to Exhibit 3.4 of the Registrant's Report
on Form 10-Q for the quarter ended September 30, 1995, Commission
file no. 0-8287.
(7) Other instruments defining the rights of the holders of long-term
debt of the Registrant, which is described in Note 5 to the
financial statements incorporated herein, are omitted pursuant to
Regulation S-K Item 601(b)(4)(iii)(A). The Registrant agrees to
furnish copies of such agreements to the Securities and Exchange
Commission upon request.
(8) Incorporated by reference to Exhibit 4.2 of the Registrant's Report
on Form 8-K dated May 13, 1994, Commission file no. 0-8287.
(9) Incorporated by reference to Exhibit 4.2 of the Registrant's Report
on Form 10-Q for the quarter ended September 30, 1995, Commission
file no. 0-8287.
(10) Incorporated by reference to Exhibit 4.3 of the Registrant's Report
on Form 10-Q for the quarter ended September 30, 1995, Commission
file no. 0-8287.
(11) Incorporated by reference to page 6 of the Registrant's Proxy
Statement filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995, Commission file no. 0-8287.
(12) Incorporated by reference to Exhibit 10.5 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990, Commission
file no. 0-8287.
(13) Incorporated by reference to Appendix A of the Registrant's Proxy
Statement filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994, Commission file no. 0-8287.
(14) Incorporated by reference to Appendix B of the Registrant's Proxy
Statement filed with the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994, Commission file no. 0-8287.
<PAGE> 1
EXHIBIT 4.3
SECOND AMENDMENT
TO
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is entered into as of January 31, 1996 among LINDBERG CORPORATION,
a Delaware corporation (the "Company"), various financial institutions
(collectively, the "Banks"), and BANK OF AMERICA ILLINOIS (formerly Continental
Bank N.A.), as agent for the Banks (in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Agent and the Banks are parties to an
Amended and Restated Credit Agreement dated as of April 28, 1994 (as previously
amended, the "Credit Agreement"); and
WHEREAS, the Company has requested that the Credit Agreement be
amended in certain respects.
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS.
Terms defined in the Credit Amendment and not otherwise defined herein
are used herein as therein defined.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. On the Effective Date
(defined below):
2.1 Section 1.1 of the Credit Agreement shall be amended by adding
the following definitions thereto in appropriate alphabetical sequence:
"EBITDA means, for any period, the sum of
(a) Consolidated Net Income for such period excluding, to
the extent reflected in determining Consolidated Net
Income, extraordinary gains and losses for such
period and other non-cash or non-recurring charges,
plus
(b) to the extent deducted in determining Consolidated
<PAGE> 2
Net Income, Interest Expense, income tax expense,
depreciation, depletion and amortization for such
period."
"Funded Debt to Cash Flow Ratio means the ratio of Funded Debt
to EBITDA for the most recently ended Computation Period."
2.2 The definition of Margin set forth in the Credit Agreement
shall be amended by (i) replacing the table with the following:
<TABLE>
<CAPTION>
Funded Debt to Cash Margin for Floating Rate Margin for Eurodollar
Tier Flow Ratio Revolving Loans Revolving Loans
---- ------------------- ------------------------ ---------------------
<S> <C> <C> <C>
I Less than 1.25 to 1.0 0.0% 0.375%
II Equal to or greater than 0.0% 0.625%
1.25 to 1.0 but less than
1.75 to 1.0
III Equal to or greater than 0.0% 0.875%
1.75 to 1.0 but less than
2.0 to 1.0
IV Equal to or greater than 0.25% 1.25%,
2.0 to 1.0
</TABLE>
(ii) replacing the words "Total Liabilities Ratio and Interest Coverage Ratio"
the first two times they appear therein with "Funded Debt to Cash Flow Ratio"
and (iii) deleting the phrase "(i) if the Company's Interest Coverage Ratio and
Funded Debt Ratio are in different tiers, the applicable Margin shall be the
highest of the Margins applicable to such tiers and (ii)" in the "it being
understood" clause thereof.
2.3 The definition of Computation Period set forth in the Credit
Agreement shall be amended by (i) replacing the words "Interest Coverage Ratio
and Funded Debt Ratio" with "Interest Coverage Ratio, Funded Debt Ratio and
Funded Debt to Cash Flow Ratio" and (ii) replacing the words "lowest Funded
Debt Ratio" with "lowest Funded Debt Ratio and Funded Debt to Cash Flow Ratio".
2
<PAGE> 3
2.4 Section 2.1 of the Credit Agreement shall be amended by
replacing the amount "$20,000,000", where it appears at the end of sections (a)
and (c)(y), with "$25,000,000". The Revolving Loan Percentage for each Bank
shall not change.
2.5 Section 5.2(a)(1) of the Credit Agreement shall be amended by
replacing the phrase "an Interest Coverage Ratio or a Funded Debt Ratio" with
"a Funded Debt to Cash Flow Ratio".
2.6 Section 10.6 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
10.6 Minimum Consolidated Net Worth. Not permit Consolidated
Net Worth at any time to be less than $20,000,000 plus 40% of
Consolidated Net Income for each Fiscal Year ending after December 31,
1994 (including the portion of the then-current Fiscal Year for which
financial statements have been delivered pursuant to Section 10.1.2,
but excluding any Fiscal Year (and, if applicable, the relevant
portion of the current Fiscal Year) if Consolidated Net Income for
such Fiscal Year (or such portion thereof) was not positive) plus 100%
of any equity proceeds received by the Company or any Subsidiary
(other than, in the case of any Subsidiary, from the Company or
another Subsidiary).
2.7 Section 10.7(e) of the Credit Agreement shall be amended by
replacing the words "Merger and Sale of Assets" at the beginning of section (e)
with "Mergers, Acquisitions and Sales of Assets" and inserting the following
sentence immediately prior to the last sentence (beginning "The term
`Substantial Part' shall mean") thereof:
"Notwithstanding the foregoing, neither the Company nor any Subsidiary
will purchase all or substantially all of the stock of any Person, or
acquire any Person by merger or otherwise, if (i) such Person (or its
board of directors) has announced that it will oppose such purchase or
other acquisition, (ii) such Person has commenced any litigation which
alleges that such purchase or other acquisition violates, or will
violate, applicable law or (iii) an Event of Default or Unmatured
Event of Default shall have then occurred and be continuing or will
result therefrom."
2.8 Section 10.11 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
10.11 Funded Debt to Cash Flow Ratio. Not permit the Funded
Debt to Cash Flow Ratio for any Computation Period to exceed 2.25:1 as
of the last day of any Fiscal Quarter.
3
<PAGE> 4
2.9 Section 10.17 of the Credit Agreement shall be amended by
replacing the phrase "If the Funded Debt Ratio at the end of any Computation
Period is greater than 2.75:1" with the phrase "If any Event of Default or
Unmatured Event of Default exists or would result therefrom".
2.10 Schedule I of the Credit Agreement shall be amended by
replacing "$12,000,000" and "$8,000,000", as listed under "Amount of Revolving
Commitment", to "$15,000,000" and "$10,000,000", respectively.
2.11 Exhibit F is amended in its entirety to be in the form of
Exhibit 1 as attached hereto.
SECTION 3. CONDITIONS PRECEDENT.
The amendments to the Credit Agreement set forth in Section 2 of this
Amendment shall become effective on such date (the "Effective Date") when the
following conditions precedent have been satisfied:
3.1 Receipt of Documents. The Agent shall have received all of the
following, each duly executed and dated the date hereof, and each in a
sufficient number of signed counterparts to provide one to each Bank:
(a) Amendment. An original of this Amendment duly
executed by the Company and each Bank and an original of the
consent attached hereto executed by Impact.
(b) Certificate. A certificate, dated the Effective
Date and signed by a duly authorized representative of the
Company, as to the matters set forth in Section 3.2, in form
and substance satisfactory to the Agent.
(c) Resolutions. A copy, certified by the secretary
or an assistant secretary of the Company, of resolutions of
the Board of Directors of the Company authorizing or ratifying
(i) the execution and delivery of this Amendment and new
Revolving Notes evidencing the increased amount of the
respective Revolving Commitments (collectively the "New
Notes") and (ii) the borrowings under the Credit Agreement, as
amended hereby.
(d) Other. Such other documents as the Agent or any
Bank may reasonably request.
4
<PAGE> 5
3.2 Warranties True and Absence of Defaults. (i) No Event of Default
or Unmatured Event of Default shall have occurred and shall be continuing as of
the Effective Date (after giving effect to this Amendment) and (ii) the
warranties set forth in the Credit Agreement and each other Loan Document shall
be true and correct in all material respects with the same effect as if made on
the Effective Date.
3.3 Amendment Fee. The Agent shall have received for the account to
the Banks (pro rata according to each Bank's Total Percentage) an amendment fee
of $10,000.
SECTION 4. MISCELLANEOUS.
4.1 Governing Law. This Amendment shall be a contract made under
and governed by the internal laws of the State of Illinois.
4.2 Counterparts. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when so executed and delivered, shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
4.3 References to Credit Agreement. Except as amended hereby, the
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed in all respects. On and after the effectiveness hereof, each
reference in the Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import, and each reference to the Credit Agreement in
any Note or other Loan Document, shall be deemed a reference to the Credit
Agreement, as amended hereby.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
LINDBERG CORPORATION
By: /s/ Stephen S. Penley
--------------------------------
Title: Senior Vice President
BANK OF AMERICA ILLINOIS, as Agent
By: /s/ David A. Johanson
--------------------------------
Title: Agency Management Services
Senior Agency Officer
BANK OF AMERICA ILLINOIS, as a Bank
By: /s/ Tom Denison
--------------------------------
Title: Senior Vice President
HARRIS TRUST AND SAVINGS BANK
By: /s/ Frank Paguro
--------------------------------
Title: Vice President
6
<PAGE> 7
The undersigned, Impact Industries, Inc., hereby acknowledges, consents and
agrees to the foregoing Amendment, and reaffirms that its obligations under the
Guaranty dated as of April 29, 1994 executed in favor of the Agent and the
Banks continue in full force and effect with respect to the Credit Agreement,
as amended by the foregoing Amendment.
IMPACT INDUSTRIES, INC.
By: /s/ Stephen S. Penley
--------------------------
Title: Vice President
7
<PAGE> 1
Exhibit 11
COMPUTATION OF NET EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1995 1994 1993
EARNINGS
- --------
<S> <C> <C> <C>
Earnings (Loss) Before
Cumulative Effect of Change
in Accounting Principle $ 5,634,516 $ 4,374,374 $ (2,817,527)
Cumulative Effect of Change in
Accounting Principle --- --- 1,500,000
----------- ----------- ------------
Net Earnings (Loss) $ 5,634,516 $ 4,374,374 $ (1,317,527)
=========== =========== ============
SHARES
- ------
Weighted Average Number of
Common Shares Outstanding 4,724,489 4,710,966 4,701,966
(See Note)
Additional Shares Assuming
Conversion of Stock Options 39,002 47,122 ---
----------- ----------- ------------
Weighted Average Common Shares
Outstanding and Equivalents 4,763,491 4,757,867 4,701,966
=========== =========== ============
PRIMARY EARNINGS PER COMMON SHARE
- ---------------------------------
Earnings (Loss) Before
Cumulative Effect of Change
in Accounting Principle $ 1.18 $ .92 $ (.60)
Cumulative Effect of Change
in Accounting Principle --- --- .32
----------- ----------- ------------
Net Earnings (Loss) $ 1.18 $ .92 $ (.28)
=========== =========== ============
</TABLE>
Note: All activity during the year has been adjusted for the number
of days in the year that the shares were outstanding.
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION:
During 1995, the Company's level of total borrowings increased by $900,000 to
$19.1 million at year-end from $18.2 million at December 31, 1994. Despite
this increase, the balance sheet improved modestly in terms of leverage as
its ratio of debt to total capitalization was 39.6% at December 31, 1995 as
compared to 42.5% at the close of December 1994.
Capital expenditures, which increased from $3.1 million in 1993 to $6.2
million in 1994, continued to be a primary use of operating funds in 1995. For
the year, $6.7 million was spent for fixed assets, a 7.4% increase from the
prior year figure.
Investments were made throughout the Company to accommodate continued
sales expansion. As in 1994, a significant share of the capital spending
related to SP 2000 projects - about 13% of the total figure. In addition,
Impact Industries, Inc.(Impact) accounted for another 32% as funds were
committed at that facility to meet a shifting customer/product mix along with
overall sales growth.
An increase in working capital of $3.2 million at year-end 1995 (excluding
the change in current maturities on long-term debt) also accounted for a use of
cash. This primarily related to a lower level of accounts payable at year-end
due in part to the timing of capital spending. Accounts receivable and
inventories were increased from December 31, 1994, but were consistent with
higher sales activity in the latter part in 1995.
Funds generated through operations largely accommodated the above cash
requirements, in combination with the $900,000 increase in borrowings.
Additionally, collections of notes receivable in 1995 also provided cash during
the year. These collections included $400,000 related to the 1993 sale of the
Company's operation in Georgia and $270,000 from Alum-A-Therm Heat Treating
Company - a partnership formed in 1994 of which the Company is a 50% partner.
In December 1994, the Company experienced a fire at its Solon, Ohio heat
treating facility. During 1995, the Company funded the costs associated with
cleaning up and restoring the facility and equipment and, relatedly, the
purchase of a major new furnace to replace one destroyed in the fire. This
funding took place largely during the first three quarters of the year, and in
December, the Company received full cash reimbursement for these contributions
in an insurance claim settlement. These insurance proceeds were then used to
reduce debt levels.
On October 25, 1995, the Board of Directors declared a cash dividend of
$.07 on each share of the Company's common stock. This dividend increased by
$.01, or 16.7%, the dividend paid in the previous quarter. At that rate, this
will increase total dividend payments by approximately $190,000 per year from
$1,130,000 to $1,320,000.
On November 2, 1995, the Company refinanced a portion of its debt. Ten
million dollars of senior notes were issued, the proceeds of which were used to
retire the outstanding balance of the Company's term loan and a portion of the
outstanding balance on its revolving credit facility. The notes bear interest
at 7.16% and have a seven-year final maturity. Equal annual principal payments
on the notes commence on the third anniversary of closing and continue on each
anniversary date through the life of the notes. The Company at the time
retained $20 million of credit through its revolving credit facility and as of
December 31, 1995, had $11.1 million of unused credit. Effective February 20,
1996, the Company expanded the revolving credit facility to $25 million from
$20 million.
During 1995 the Company made cash outlays related to certain environmental
related matters. These largely included costs for consulting/engineering,
legal support and, in certain cases, site remediation. The Company believes
that these outlays had, and in subsequent years will have, a limited effect on
its financial position and liquidity.
The Company completed its restructuring activities in 1995. These
activities did not have a material effect on cash during the year.
As of year-end 1995, and at present, the Company believes that its
increased borrowing capacity and funds generated through operations will be
sufficient to meet currently foreseen capital investment and working capital
needs both in 1996 and in the longer-term.
OF RESULTS OF OPERATIONS: 1995 VERSUS 1994
Net sales for the Company increased 22% in 1995 to $122.0 million from $99.9
million in 1994. Impact, which provided sales for only eight months in 1994
subsequent to its acquisition on April 29, 1994, accounted for about $13
million of the overall Company sales gain. Nearly all Lindberg operations
experienced revenue improvement in 1995.
The Heat Treating Services segment recorded a 13% sales increase for the
year while the Precision Products segment, excluding the effect of Impact,
registered a 10% advance. Sales during the year were particularly robust in
the first quarter, then generally softened through the remaining three
quarters. This reflected primarily a slowdown in the rates of order activity
with automotive and consumer products related customers.
Inclusion of Impact for the full year raised the over-all level of
business with automotive markets for the Company to an estimated 35% from 30%
in 1994. Additionally, a significant increase in work in 1995 from one of
Impact's major customers, a producer of automotive electronic components,
raised the amount of business for that firm to about 20% of total Precision
Products segment revenues.
10
<PAGE> 2
For 1995, the Company's gross profit margin percentage declined to 20.9%
from 21.3% in 1994. Contributing factors in the lower overall margins were the
inclusion of Impact (which operates at a lower margin) for the full year in
1995, reduced productivity within certain Precision Products operations early
in the year resulting from efforts to keep up with a high level of customer
demand, and a poor third quarter at Impact related to establishing production
lines for the new work mentioned earlier.
For the year, however, operating margins improved to 8.6% in 1995 from
8.1% in the prior year as selling and administrative expenses were lowered in
relation to sales. While this category of expense grew 13% in 1995, inclusion
of Impact for the full year accounted for about 40% of the increase.
Interest expense increased to $1.7 million in 1995 from $891,000 in 1994.
This reflected primarily a full year of borrowings related to the acquisition
of Impact, use of cash during the year to fund restoration efforts concerning
the aforementioned fire in Ohio and a higher interest rate environment for much
of the year. As the Company has fixed the rates on the senior notes issued in
November 1995, which presently represent about half its borrowings, it will be
somewhat less subject to the effects of interest rate fluctuation in the
future.
Related to the fire in Ohio, complete destruction of one major piece of
equipment and subsequent capitalization of a new furnace resulted in an
involuntary conversion gain from that asset. This accounting gain of $615,000
was reported as Other Income in the fourth quarter of 1995.
Reflecting the above, the Company's net income rose to $5.6 million, or
$1.18 per share in 1995, from $4.4 million, or $.92 per share in 1994.
Although the Company cannot accurately determine the exact effect of
inflation on its operations, it does not believe inflation had a material
effect during either year on sales or results of operations.
OF RESULTS OF OPERATIONS: 1994 VERSUS 1993
Net sales for the Company increased $30.3 million, or 43%, to $99.9 million in
1994 from $69.6 million in 1993. Approximately $22 million of the increase
related to Impact since its acquisition. The remaining increase was related to
traditional Lindberg operations, representing a 12% increase in comparison to
the prior year. Sales for the Heat Treating Services business segment,
adjusting for operations sold or closed in 1993, rose 11% in 1994 while sales
in the Precision Products segment - excluding Impact - increased by 34% in
comparison to 1993.
At nearly all Lindberg facilities in 1994, sales gains were recorded
relative to 1993. The sales strengthening which had begun to develop in the
latter part of 1993 accelerated into 1994 and continued for the full year.
Fourth quarter 1994 sales were ahead of the fourth quarter sales in the prior
year by 11%, adjusting for the effect of Impact. The Company anticipated that
the rate of the new orders experienced throughout 1994 would continue into
1995, with longer term effects contingent on the duration of the positive cycle
in the U.S. economy at the close of 1994.
The acquisition of Impact resulted in a shift in the percentage of the
Company's sales to manufactured products from heat treating services - about
40% for 1994 from 20% in 1993 - and also in a higher concentration of revenue
from automotive related markets. Estimated historically at about 20%, the
percentage of sales from the automotive customer base increased to just over
30% for 1994 as a result of the Impact acquisition. The shift in sales mix to
automotive related and other industrial oriented markets in the midwest, which
were strong in 1994, was a prime contributor to the overall sales gains during
the year.
The Company's earnings from operations increased $4.1 million to $8.1
million, or 8.1% of sales, from $4.0 million, or 5.8% of sales, in 1993. The
prior year figure excludes a restructuring charge of $8.3 million recorded in
that year. The improved operating earnings and margin percentage on a
year-to-year basis resulted mainly from the favorable effect of operating
leverage experienced as revenues expanded during 1994. Additionally, the
Company realized a full year of financial benefits related to the closure or
sale of facilities in 1993 which had lower than acceptable profitability
levels.
The Company continued with its ongoing efforts to enhance the productivity
of its operations and to limit the growth in selling and administrative
expenses to only the most essential areas. For the year, productivity
improvements were limited as many of the Company's plants focused available
resources on effectively accommodating increased customer requirements.
Selling and administrative expenses increased $2.1 million, or 19%, to
$13.2 million in 1994 from $11.1 million in the prior year. More than 60% of
the increase related to Impact. Total selling and administrative expenses fell
to 13% of sales in 1994 from 16% in 1993.
Interest expense rose $482,000 to $891,000 in 1994 from $409,000 in the
prior year. This increase was due to a higher level of borrowings and, in the
latter half of the year, rising interest rates. For 1994, the average annual
interest rate on borrowings was 6.0% as compared to 4.3% for 1993.
The Company's net income increased $5.7 million to $4.4 million, or $.92
per share, in 1994 from a net loss of $1.3 million, or $.28 loss per share, in
1993. The 1993 period included the previously mentioned restructuring charge
and a onetime gain of $1.5 million related to the adoption of SFAS 109 on
accounting for income taxes - both recorded in the first quarter of that year.
11
<PAGE> 3
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $122,003,921 $99,858,339 $69,619,134
Cost of Sales 96,535,192 78,562,252 54,516,072
- --------------------------------------------------------------------------------------------------
Gross Profit 25,468,729 21,296,087 15,103,062
Selling and Administrative Expenses 14,946,085 13,183,820 11,055,531
Restructuring Charge - - 8,261,000
- --------------------------------------------------------------------------------------------------
Earnings (Loss) From Operations 10,522,644 8,112,267 (4,213,469)
Interest Expense (1,703,041) (891,455) (409,380)
Interest Income 34,930 77,998 78,740
Other Income 615,242 - -
- --------------------------------------------------------------------------------------------------
Earnings (Loss) Before Income Taxes and Cumulative Effect
of Change in Accounting Principle 9,469,775 7,298,810 (4,544,109)
(Provision) Benefit for Income Taxes (3,835,259) (2,924,436) 1,726,582
- --------------------------------------------------------------------------------------------------
Earnings (Loss) Before Cumulative Effect
of Change in Accounting Principle 5,634,516 4,374,374 (2,817,527)
Cumulative Effect of Change in Accounting Principle - - 1,500,000
- --------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 5,634,516 $ 4,374,374 $(1,317,527)
==================================================================================================
Per Share Amounts:
Earnings (Loss) Before Cumulative Effect
of Change in Accounting Principle $1.18 $.92 $(.60)
Cumulative Effect of Change in Accounting Principle - - .32
- --------------------------------------------------------------------------------------------------
Net Earnings (Loss) $1.18 $.92 $(.28)
==================================================================================================
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Underfunded
For the Years Ended December 31, Common Additional Retained Treasury Pension Liability
1995, 1994 and 1993 Shares Paid-In Capital Earnings Shares Adjustment Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $14,183,493 $1,567,290 $13,434,738 $(5,543,941) $(179,877) $23,461,703
- -------------------------------------------------------------------------------------------------------------------------------
Net Loss (1,317,527) (1,317,527)
Dividends Paid (940,508) (940,508)
Stock Award (21,500) 56,500 35,000
Pension Adjustment (84,101) (84,101)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 14,183,493 1,545,790 11,176,703 (5,487,441) (263,978) 21,154,567
- -------------------------------------------------------------------------------------------------------------------------------
Net Earnings 4,374,374 4,374,374
Dividends Paid (989,237) (989,237)
Exercise of Stock Options (14,190) 81,784 67,594
Pension Adjustment 61,218 61,218
- -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 14,183,493 1,531,600 14,561,840 (5,405,657) (202,760) 24,668,516
- -------------------------------------------------------------------------------------------------------------------------------
Net Earnings 5,634,516 5,634,516
Dividends Paid (1,181,054) (1,181,054)
Exercise of Stock Options (19,494) 58,619 39,125
Pension Adjustment 21,332 21,332
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $14,183,493 $1,512,106 $19,015,302 $(5,347,038) $(181,428) $29,182,435
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
12
<PAGE> 4
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995 and 1994 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 200,171 $ 111,060
Receivables, Less Allowance for Doubtful Accounts
of $328,000 in 1995 and $314,000 in 1994 17,099,688 16,751,894
Inventories 4,937,987 4,331,267
Prepaid and Refundable Income Taxes 1,060,546 2,027,147
Prepaid Expenses and Other Current Assets 3,083,505 2,665,358
- ------------------------------------------------------------------------------------------
Total Current Assets 26,381,897 25,886,726
PROPERTY AND EQUIPMENT:
Land 2,165,204 2,165,204
Buildings and Improvements 18,923,762 18,589,999
Machinery and Equipment 74,839,890 68,534,930
Construction in Progress 965,625 1,036,754
- ------------------------------------------------------------------------------------------
Total Property and Equipment 96,894,481 90,326,887
Less-Accumulated Depreciation (56,153,951) (51,469,024)
- ------------------------------------------------------------------------------------------
Net Property and Equipment 40,740,530 38,857,863
Other Non-Current Assets 5,999,448 5,776,979
- ------------------------------------------------------------------------------------------
Total Assets $ 73,121,875 $ 70,521,568
==========================================================================================
LIABILITIES
CURRENT LIABILITIES:
Current Maturities on Long-Term Debt $ 83,286 $ 1,501,478
Accounts Payable 6,726,972 8,281,648
Accrued Expenses:
Salaries and Wages 1,619,228 1,960,967
Taxes, Other Than Income 994,386 740,978
Employee Insurance and Benefits 1,107,089 1,670,259
Utilities 566,470 547,907
Other 2,093,037 2,576,004
- ------------------------------------------------------------------------------------------
Total Current Liabilities 13,190,468 17,279,241
NON-CURRENT LIABILITIES:
Deferred Income Taxes 6,114,508 6,491,387
Long-Term Debt (Less Current Maturities) 19,018,285 16,699,942
Accrued Pension 2,702,295 2,526,996
Other Non-Current Liabilities 2,913,884 2,855,486
- ------------------------------------------------------------------------------------------
Total Non-Current Liabilities 30,748,972 28,573,811
STOCKHOLDERS' EQUITY:
Common Shares, $2.50 par value:
Authorized 12,000,000 shares in 1995 and 1994
Issued 5,673,397 shares in 1995 and 1994 14,183,493 14,183,493
Additional Paid-In Capital 1,512,106 1,531,600
Retained Earnings 19,015,302 14,561,840
Treasury Shares (946,006 in 1995 and 956,381 in 1994), at Cost (5,347,038) (5,405,657)
Underfunded Pension Liability Adjustment (181,428) (202,760)
- ------------------------------------------------------------------------------------------
Total Stockholders' Equity 29,182,435 24,668,516
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 73,121,875 $ 70,521,568
==========================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these balance sheets.
13
<PAGE> 5
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings (Loss) $ 5,634,516 $ 4,374,374 $(1,317,527)
Adjustments to Reconcile Net Earnings (Loss) to Net Cash Provided by Operating Activities:
Depreciation 5,222,620 4,455,002 3,715,882
Goodwill Amortization 91,528 61,019 -
(Decrease) Increase in Deferred Taxes (376,879) 728,031 (192,809)
Gain from Asset Conversion (615,242) - -
Non-Cash Portion of Restructuring Charge-Net of Tax Benefits - - 2,444,804
Change in Assets and Liabilities:
Receivables (347,794) (1,306,809) 234,992
Inventories (606,720) (967,818) 72,139
Prepaid and Refundable Income Taxes 966,601 336,078 (252,028)
Prepaid Expenses and Other Current Assets (618,147) (703,637) 350,687
Accounts Payable (1,554,676) 2,131,278 258,351
Accrued Expenses (1,115,905) (918,272) (887,134)
Other (56,264) (767,073) 318,072
- -----------------------------------------------------------------------------------------------------------------------------------
Total Adjustments to Reconcile Net Earnings (Loss) to Net Cash
Provided by Operating Activities 989,122 3,047,799 6,062,956
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 6,623,638 7,422,173 4,745,429
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (6,653,625) (6,194,914) (3,088,560)
Proceeds from Note Receivable for Sale of International Affiliate - 484,000 566,000
Proceeds from Notes Receivable for Sales of Certain Heat Treating Facilities 400,000 1,504,350 500,000
Payment for Purchase of Impact Industries, Inc., Net of Cash Acquired - (5,497,106) -
Payment for Purchase of H&H Heat Treating, Inc., Net of Cash Acquired - (474,800) -
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (6,253,625) (10,178,470) (2,022,560)
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Payments) Borrowings Under Revolving Credit Agreement (2,700,000) 3,900,000 (1,700,000)
Borrowings Under Senior Note Agreement 10,000,000 - -
Borrowings Under Bank Term Loan - 7,000,000 -
Payments on Bank Term Loan (6,300,000) (700,000) -
Payments on Other Long-Term Debt - (80,000) (80,000)
Repayment of Long-Term Debt of Impact Industries, Inc. - (6,411,633) -
Payments of Capital Lease Obligations (99,848) (62,433) -
Dividends Paid (1,181,054) (989,237) (940,508)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Cash (Used in) Provided by Financing Activities (280,902) 2,656,697 (2,720,508)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 89,111 (99,600) 2,361
Cash at Beginning of Year 111,060 210,660 208,299
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ 200,171 $111,060 $ 210,660
===================================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest Paid $ 1,716,640 $ 857,978 $ 443,923
Income Taxes Paid 3,287,073 2,111,777 807,286
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Contribution of Assets to Joint Venture - 559,429 -
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
14
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1995, 1994 and 1993
NOTE 1. ACCOUNTING POLICIES
A. NATURE OF OPERATIONS
The company serves metal-using and metal-working industries, providing
commercial heat treating services and manufacturing precision metal products,
primarily aluminum and zinc die castings and wire belting products.
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Lindberg
Corporation and its subsidiaries. Significant intercompany balances and
transactions have been eliminated.
C. INVENTORIES
Inventories consist of material, labor and indirect manufacturing costs and are
valued at the lower of cost (determined on a first-in, first-out basis) or net
realizable value.
D. PROPERTY AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is provided on the
straight line method for financial statement purposes and on accelerated
methods for income tax purposes. Maintenance costs are charged to expense as
incurred. Expenditures which improve efficiency or capacity or extend the
useful life of assets are capitalized. Interest cost incurred during the
period of construction of plant and equipment is capitalized as part of the
cost of such plant and equipment.
E. INCOME TAXES
The company determines its tax provision and deferred tax balance in compliance
with SFAS 109, "Accounting for Income Taxes" (SFAS 109). Under this approach,
the provision for income taxes represents income taxes paid or payable for the
current year adjusted for the change in deferred taxes during the year.
Deferred income taxes reflect the net tax effects of temporary differences
between the financial statement bases and the tax bases of assets and
liabilities and are adjusted for changes in tax rates and tax laws when changes
are enacted.
F. EARNINGS PER SHARE
Earnings per share are based on the weighted average number of shares
outstanding and common share equivalents of dilutive stock options. Shares
used in the calculations for the years ended December 31, 1995, 1994 and 1993
were 4,763,491, 4,757,867 and 4,701,966, respectively.
G. USE OF ESTIMATES
The preparation of these financial statements, in conformity with generally
accepted accounting principles, required the use of certain estimates by
management in determining the company's assets, liabilities, revenue and
expenses. Actual results could differ from those estimates.
H. NEW PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" (SFAS 121). The company will implement SFAS 121 for the year
ended December 31, 1996. The provisions require a review of long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If it is determined that an
impairment loss has occurred based on expected future cash flow, the loss will
be recognized in the statement of earnings and certain disclosures will be made
regarding the impairment.
In October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based
Compensation" (SFAS 123). This standard is effective for fiscal years beginning
after December 15, 1995 and therefore will be adopted by the company in 1996.
The company's employee stock option plan is covered by this statement. Under
SFAS 123, entities may continue to use the accounting method prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and provide
pro-forma disclosures in the notes to the consolidated financial statements as
if the fair value based method defined in SFAS 123 had been applied. The
company intends to adopt the disclosure method of this statement.
I. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to be consistent with the
1995 presentation.
NOTE 2. ACQUISITIONS
On April 29, 1994, the company acquired all of the outstanding shares of
Rexcorp U.S. Inc. and its wholly-owned subsidiary Impact Industries, Inc.
(Impact), paying $5.50 million in cash and retiring its $6.41 million of
outstanding debt. The results of operations since April 29, 1994 are included
in the totals of the company.
On November 30, 1994, the company acquired all of the outstanding shares
of H&H Heat Treating, Inc. (H&H) for $500,000. The results of operations since
November 30, 1994 are included in the totals of the company.
Both acquisitions were accounted for using the purchase method;
accordingly, the assets and liabilities of the acquired entities have been
recorded at their estimated fair value at the date of acquisition. The
allocations of the purchase prices are based upon results of asset valuations
and liability and contingency assessments.
The final allocation of the purchase prices are as follows:
<TABLE>
<CAPTION>
(in thousands)
------------------------------------------------------------------
Impact H&H
------------------------------------------------------------------
<S> <C> <C>
Property and Equipment $ 9,156 $ 466
Accounts Receivable 4,534 302
Inventory 2,417 -
Goodwill 2,908 -
Other Assets 788 49
Accounts Payable (3,282) (111)
Other Liabilities (4,609) (206)
------------------------------------------------------------------
$11,912 $ 500
------------------------------------------------------------------
</TABLE>
Goodwill is being amortized over a period of 30 years.
15
<PAGE> 7
The following table presents proforma information for the combined
entities of Lindberg Corporation, Rexcorp U.S. Inc. and H&H Heat Treating, Inc.
for the twelve months ended December 31, 1994 and 1993 as if the acquisitions
had taken place on January 1st of each year. Adjustments to the income
statement include additional depreciation and interest charges, the reduction
of certain other expenses and income tax effects: (in thousands except for per
share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Unaudited 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $112,567 $95,609
- ------------------------------------------------------------------------------
Net Earnings (Loss) Before Cumulative
Effect of Change in Accounting Principle 4,576 (2,748)
Cumulative Effect of Change in
Accounting Principle - 1,500
- ------------------------------------------------------------------------------
Net Earnings (Loss) 4,576 (1,248)
- ------------------------------------------------------------------------------
Per Share Amounts:
Net Earnings (Loss) Before Cumulative
Effect of Change in Accounting Principle .96 (.58)
Cumulative Effect of Change
in Accounting Principle - .32
- ------------------------------------------------------------------------------
Net Earnings (Loss) $ .96 $ (.26)
- ------------------------------------------------------------------------------
</TABLE>
NOTE 3. INVENTORIES
The components of inventory are: (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Raw material $ 1,998 $1,678
Work in Process 2,352 2,138
Finished goods 588 515
- ------------------------------------------------------------------------------
$ 4,938 $4,331
- ------------------------------------------------------------------------------
</TABLE>
NOTE 4. INCOME TAXES
The major components of the provision (benefit) for income taxes for 1995, 1994
and 1993 are as follows: (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Current Deferred Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 Federal $2,816 $ 242 $ 3,058
State 735 42 777
- ------------------------------------------------------------------------------
$3,551 $ 284 $ 3,835
- ------------------------------------------------------------------------------
1994 Federal $1,933 $ 402 $ 2,335
State 510 79 589
- ------------------------------------------------------------------------------
$2,443 $ 481 $ 2,924
- ------------------------------------------------------------------------------
1993 Federal $ 705 $(2,032) $(1,327)
State 148 (548) (400)
- ------------------------------------------------------------------------------
$ 853 $(2,580) $(1,727)
- ------------------------------------------------------------------------------
</TABLE>
The provision for income taxes includes deferred tax expense/ (benefit)
resulting from timing differences in the recognition of revenue and expense for
tax and financial statement purposes. The tax effects of these differences
are as follows: (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation $ 89 $ 49 $ 349
Restructuring activities 385 402 (3,091)
Other (190) 30 162
- ------------------------------------------------------------------------------
$ 284 $481 $(2,580)
- ------------------------------------------------------------------------------
</TABLE>
The differences between the provision (benefit) for income taxes at the
statutory rate and that shown in the consolidated statements of earnings are
summarized as follows: (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated pretax earnings (loss)
at statutory rate $3,220 $2,482 $(1,545)
State income taxes, net of
Federal tax benefit 513 389 (264)
Other 102 53 82
- ------------------------------------------------------------------------------
$3,835 $2,924 $(1,727)
- ------------------------------------------------------------------------------
</TABLE>
Effective January 1, 1993, the company adopted SFAS 109. The cumulative effect
of adopting SFAS 109 was to reduce the company's net loss in 1993 by
$1,500,000.
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and for income tax purposes. Significant components of the company's
deferred tax liabilities and assets at December 31, 1995, 1994 and 1993 are as
follows: (in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred Tax Liabilities:
Tax depreciation over book $(7,520) $(7,357) $(5,494)
Other liabilities (377) (562) (176)
- -------------------------------------------------------------------------
Total Deferred Tax Liabilities (7,897) (7,919) (5,670)
- -------------------------------------------------------------------------
Deferred Tax Assets:
Restructuring activities -- 502 1,578
Reserves not deducted for tax 1,605 1,062 261
Employee benefit provisions in
excess of cash payments 1,471 1,386 870
Other assets 276 697 351
- -------------------------------------------------------------------------
Total Deferred Tax Assets 3,352 3,647 3,060
- -------------------------------------------------------------------------
Net Deferred Tax Liability $(4,545) $(4,272) $(2,610)
- -------------------------------------------------------------------------
Included in Balance Sheet in:
Prepaid and Refundable Income Taxes $ 1,570 $ 2,219 $ 1,692
Deferred Income Taxes (6,115) (6,491) (4,302)
- -------------------------------------------------------------------------
$(4,545) $(4,272) $(2,610)
- -------------------------------------------------------------------------
</TABLE>
NOTE 5. DEBT
Long-term debt consists of the following: (in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Senior notes $10,000 $ --
Revolving credit 8,900 11,600
Term loan -- 6,300
Capital lease agreements 201 301
- ----------------------------------------------------------------------------
19,101 18,201
Less-current maturities (83) (1,501)
- ----------------------------------------------------------------------------
$19,018 $ 16,700
- ----------------------------------------------------------------------------
</TABLE>
In April 1994, the company entered into an unsecured revolving credit agreement
with two banks which provided for a line of credit of $20,000,000 and a term
loan of $7,000,000.
In November 1995, the company refinanced its debt. Ten million dollars of
senior notes were issued, the proceeds of which were used to retire the
outstanding balance of the company's term loan and a portion of the outstanding
balance on its revolving credit facility. The notes bear interest at 7.16%
annually and have a seven-year final maturity. Equal annual principal payments
on the notes commence on the third anniversary of closing and continue on each
anniversary date through the life of the notes.
16
<PAGE> 8
In February 1996, the company amended its revolving credit agreement to
expand its line of credit by $5,000,000, to $25,000,000. The agreement will
expire in April 1999 unless renewed. The company may choose from two interest
rate alternatives - the bank's reference rate (prime rate) and a rate based on
the Eurodollar. The effective interest rate for the credit agreement and term
loan was 7.6% during 1995 and 7.1% at year-end.
The revolving credit and senior note agreements contain various covenants
which, among others, restrict the ability of the company to pay dividends
beyond certain limits and require the company to meet certian financial
ratios.
The company also has a second agreement which provides for the issuance of
letters of credit, up to a maximum of $5,000,000. As of December 31, 1995, a
$4,500,000 letter of credit was issued in accordance with an insurance
agreement.
Annual maturities of long-term debt, excluding the revolving credit
agreement, for the five years following December 31, 1995 are $83,000, $67,000,
$2,051,000, $2,001,000 and $2,000,000, respectively.
NOTE 6. LEASES
The company has a number of lease agreements related to the rental of
production and administrative facilities and equipment. These leases are of
varying terms and extend as far as the year 2007. The company capitalizes all
significant leases which qualify as capital leases.
The following is a schedule of estimated future minimum rental payments
required under leases that have initial or remaining noncancelable terms in
excess of one year as of December 31, 1995:
(in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Operating Capital
Leases Leases
- ---------------------------------------------------------------------
<S> <C> <C>
1996 $1,279 $100
1997 1,290 70
1998 1,231 53
1999 1,164 1
2000 701 -
Thereafter 1,480 -
- ---------------------------------------------------------------------
Total minimum payment required $7,145 224
------
Less imputed interest (23)
----
Present value of minimum lease payments $201
- ---------------------------------------------------------------------
</TABLE>
No sublease income is due in 1996 or thereafter.
The total rent expense for 1995, 1994 and 1993 was $1,298,000, $960,000
and $985,000, respectively.
NOTE 7. EMPLOYEE BENEFITS
The company and its subsidiaries maintain several defined benefit pension
plans covering many of their employees. The related pension expense for 1995,
1994 and 1993 was $31,000, $237,000 and $306,000, respectively, which included
amortization of past service cost over 30 years. The standards utilized by
the company to fund the pension plans satisfy the minimum funding requirements
under the provisions of ERISA.
Net periodic pension cost for 1995, 1994 and 1993 included the following
components:(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 533 $ 670 $ 641
Interest cost on projected
benefit obligations 1,076 1,071 1,105
Return on plan assets (3,194) 161 (1,318)
Net amortization and deferral 1,616 (1,665) (122)
- ------------------------------------------------------------------------------
$ 31 $ 237 $ 306
- ------------------------------------------------------------------------------
</TABLE>
Table 1 summarizes the funded status of the plans and provides a
reconciliation to the long-term pension liability recorded on the company's
consolidated balance sheets at December 31, 1995 and 1994.
Table 1: Reconciliation of Funded Status (in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Assets Accumu- Assets Accumu-
Exceed lated Exceed lated
Accumu- Benefits Accumu- Benefits
lated Exceed lated Exceed
Benefits Assets Benefits Assets
- ---------------------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value
of benefit obligations:
Vested benefit obligations $ (10,559) $ (1,775) $ (9,167) $ (1,719)
- ---------------------------------------------------------------------------------------
Accumulated benefit
obligations (11,023) (1,844) (9,571) (1,746)
- ---------------------------------------------------------------------------------------
Projected benefit obligations (14,179) (1,960) (12,127) (1,746)
Plan assets at fair value 16,163 606 13,966 518
- ---------------------------------------------------------------------------------------
Plan assets in excess of
(or less than) projected
benefit obligations 1,984 (1,354) 1,839 (1,228)
Unrecognized net (gain) loss (1,082) 432 (883) 353
Unrecognized net (assets) obli-
gations amortized over average
remaining service period of
the employee workforce (1,274) 137 (1,447) 165
Unrecognized prior
service cost 286 240 237 116
Long-term balance
sheet liability - (693) - (634)
- ---------------------------------------------------------------------------------------
Long-term pension liability $ (86) $ (1,238) $ (254) $ (1,228)
- ---------------------------------------------------------------------------------------
</TABLE>
The discount rate used in determining the projected benefit obligation
was 7.25% in 1995 and 8.25% in 1994. The rate of increase in future
compensation levels and the expected long-term rate of return on assets were
5.0% and 9.0%, respectively, in both 1995 and 1994.
Effective January 1, 1995, the company established a 401(k) defined
contribution plan available to certain of its associates. The company also
administers and contributes to a 401(k) savings plan previously available at
Impact Industries. The company matches 50% of the participants' contributions
up to 4% of compensation. Additionally, the company also contributes a
percentage of compensation for those associates who remain participants in one
of the 401(k) savings plans at the end of each year, and who are not covered by
a defined benefit pension plan. The company made distributions for
contributions and related expenses of $499,000 to these defined contribution
plans in 1995.
The company provides no other postretirement or postemployment benefit
plans other than those described above.
17
<PAGE> 9
NOTE 8. STOCK OPTIONS
In 1982, the Board of Directors and stockholders approved a qualified incentive
stock option plan. This plan had reserved for the issuance of options to
purchase 250,000 shares of common stock. In 1989, the plan was amended by the
Board of Directors and stockholders to increase the reserve to 450,000 shares.
In 1991, the stockholders approved a new stock option plan for key employees
covering a maximum of 300,000 shares. This plan replaced the 1982 plan. In
1995, the 1991 plan was amended by the Board of Directors and stockholders to
increase the reserve to 675,000 shares. The plan provides for the issuance,
from time to time, of options to purchase shares of the company's common stock
at prices not less than 100% of the fair market value of the stock at the time
an option is granted. Information as to options granted, exercised, cancelled
and outstanding under these plans during the past three years is summarized as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Average Option
Shares Price per Share
- --------------------------------------------------------------------
<S> <C> <C>
Outstanding, December 31, 1992 212,500 $6.39
Options granted during year 71,000 3.54
Options cancelled during year (20,000) 6.63
- --------------------------------------------------------------------
Outstanding, December 31, 1993 263,500 5.61
Options granted during year 89,500 7.52
Options exercised during year (14,475) 4.67
Options cancelled during year (20,125) 5.37
- --------------------------------------------------------------------
Outstanding, December 31, 1994 318,400 6.20
Options exercised during year (10,375) 3.77
Options cancelled during year (1,250) 4.63
- --------------------------------------------------------------------
Outstanding, December 31, 1995 306,775 $6.29
- --------------------------------------------------------------------
</TABLE>
In 1991, the stockholders approved a stock option plan for members of the
Board of Directors who are not employees of the company, covering a maximum of
72,000 shares. Under the terms of this plan, options to purchase an aggregate
of 45,000 shares have been granted. The average exercise price for these
options is $6.90 per share. At December 31, 1995, 27,000 shares were available
for future grant.
NOTE 9. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1995 and 1994 are shown in Table 2.
Table 2: Quarterly Financial Data (Unaudited)
(in thousands of dollars except for per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Quarter Net Gross Net Earnings
Ended Sales Profit Earnings Per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
March 31 $ 33,580 $ 6,978 $ 1,471 $ .31
June 30 31,376 6,635 1,482 .31
September 30 27,372 5,421 855 .18
December 31 29,676 6,435 1,827 .38
- --------------------------------------------------------------------------------
$ 122,004 $ 25,469 $ 5,635 $ 1.18
- --------------------------------------------------------------------------------
1994
March 31 $ 18,827 $ 4,734 $ 992 $ .21
June 30 26,501 5,901 1,322 .28
September 30 26,919 5,684 1,157 .24
December 31 27,611 4,977 903 .19
- --------------------------------------------------------------------------------
$ 99,858 $ 21,296 $ 4,374 $ .92
- --------------------------------------------------------------------------------
</TABLE>
NOTE 10. BUSINESS SEGMENT INFORMATION
The company is engaged in Heat Treating Services and Precision Products
industry segments. Through its Heat Treating Services segment, it provides
commercial heat treating and consulting services. This segment services the
agricultural and construction equipment, automotive and truck, aerospace,
consumer products, defense and metal products industries.
The Precision Products segment produces alloy conveyor belts and
specialized castings of aluminum. The products are used mainly in the
automotive, construction equipment, electronics, consumer products, defense and
food processing industries. During 1995, revenues from one customer and its
affiliates accounted for 30% of this segment's net sales.
Intersegment and export sales are insignificant. Operating
18
<PAGE> 10
earnings are defined as sales less operating expenses. Identifiable assets by
segment are those assets used in the company's operations in that segment.
Corporate assets are principally cash, prepaid expenses and long-term
investments.
Table 3 sets forth certain financial information for the years ended 1995,
1994 and 1993.
1993 Operating Earnings for the Heat Treating segment include an
$8,261,000 charge for restructuring (see Note 13).
Table 3: Business Segment Information (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Net Operating Identifiable Depreciation Capital
Sales Earnings Assets Expense Expenditures
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Heat Treating Services $ 67,010 $ 10,873 $ 36,102 $ 3,316 $ 3,923
Precision Products 54,994 2,398 30,744 1,854 2,670
Corporate - (2,748) 6,276 53 61
- ------------------------------------------------------------------------------------------------------------
$ 122,004 $ 10,523 $ 73,122 $ 5,223 $ 6,654
- ------------------------------------------------------------------------------------------------------------
1994
Heat Treating Services $ 59,512 $ 7,967 $ 34,959 $ 3,099 $ 4,260
Precision Products 40,346 2,844 29,243 1,287 1,848
Corporate - (2,699) 6,320 69 87
- ------------------------------------------------------------------------------------------------------------
$ 99,858 $ 8,112 $ 70,522 $ 4,455 $ 6,195
- ------------------------------------------------------------------------------------------------------------
1993
Heat Treating Services $ 56,009 $ (2,847) $ 33,592 $ 3,235 $ 2,537
Precision Products 13,610 1,089 6,918 355 529
Corporate - (2,455) 7,094 126 23
- ------------------------------------------------------------------------------------------------------------
$ 69,619 $ (4,213) $ 47,604 $ 3,716 $ 3,089
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 11. GAIN ON ASSET CONVERSION
In December 1994, the company experienced a fire at its facility in Solon,
Ohio. Subsequently, expenditures were made to repair or replace equipment
damaged in the fire. By December 31, 1995, the company had been reimbursed
under its insurance program for its losses.
In conjunction with the replacement of a furnace, the company recorded a
gain of $807,949 related to the capitalization of that furnace. Additionally,
the net book value of lost equipment of $192,707 was written off resulting in a
pre-tax gain of $615,242.
NOTE 12. RELATED PARTY
The company holds an 11% equity interest in Thixomat, Inc., a company formed to
promote and commercialize Thixomolding(R) technology. The Chairman of Thixomat
serves on the Board of Directors of Lindberg, and is also the President and
Chief Executive Officer of University Science Partners, Inc., which holds a 26%
equity interest in Thixomat. In addition, Lindberg holds a seat on Thixomat's
Board of Directors. At December 31, 1995, the company held a $350,000 equity
investment in Thixomat, held a note receivable of $47,000 and had a $44,000
investment in related capital equipment.
NOTE 13. RESTRUCTURING
In March 1993, the company recorded a pre-tax charge to earnings of $8,261,000
for the restructuring of its Heat Treating Services operations. As a part of
this restructuring, the company sold its facilities in Florida and Georgia and
closed its Boston, Massachusetts plant. Also related to this plan, certain
non-productive assets were written off.
During 1995, the company completed its restructuring activities. The
completion of these activities did not have a significant impact on the
financial position of the company and had no effect on its net earnings.
NOTE 14. COMMITMENTS AND CONTINGENCIES
The company is a party to various lawsuits and claims arising in the ordinary
course of business. Management, after review and consultation with legal
counsel, considers that any liability resulting from these matters would not
materially affect the financial condition or results of operations of the
company.
The company's Heat Treating Services segment employs some environmentally
harzardous materials, including oil and solvents, and has some underground
storage tanks. The company has made expenditures to comply with laws and
regulations relating to the protection of the environment, including studies,
investigations and remediation of ground contamination, and expects to make
such expenditures in the future in its efforts to comply with existing and
future requirements. While such expenditures to date have not materially
affected the company's capital expenditures, competitive position, financial
condition, or results of operations, there can be no assurance that more
stringent regulation or enforcement in the future will not have such effects.
In some cases, the company has notified state authorities of a possible
need for remediation at sites it previously operated, or, in one case,
currently operates. At all such sites, costs which may be incurred are
difficult to accurately predict until the level of contamination is determined,
and would be subject to increase if more contamination is discovered during
investigation or remediation or if state authorities require more remediation
than anticipated. Such costs may be less if the contamination proves to be
less than currently expected and to the extent costs are covered by insurance
or are allocable to others. The company has estimated a range of costs in
establishing the reserves noted below.
The company has also been notified by various state and federal
governmental authorities that they believe it may be a "potentially responsible
party" or otherwise have responsibility with respect to clean-up obligations at
certain hazardous and other waste disposal sites which were never owned or
operated by the company. In some such cases, the company has effected
settlements with the relevant authorities for immaterial amounts. In other
such cases, the company is participating in negotiations for settlement with
the relevant authorities or other parties believed by the company to be
responsible or has notified the authorities that it denies responsibility for
clean-up obligations. Management believes that the ultimate outcome will not
have a material effect on the company's financial condition or results of
operations.
At December 31, 1995, the company had reserves of approximately $1.6
million to cover future anticipated costs. Such reserves give no effect to
possible recoveries from insurers or other potentially responsible parties nor
do they reflect any discount for the several years over which investigation or
remediation amounts may be paid out.
19
<PAGE> 11
SIX-YEAR FINANCIAL REVIEW
<TABLE>
<CAPTION>
For the Years Ended December 31, 1995 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS (In thousands of dollars)
Net Sales $ 122,004 $ 99,858 $ 69,619 $ 71,039 $ 73,819 $ 76,141
Gross Profit 25,469 21,296 15,103 14,662 15,977 20,407
Earnings (Loss) From Operations 10,523 8,112 (4,213) 1,745 1,628 5,542
Interest Expense 1,703 891 409 511 424 635
Earnings (Loss) Before Income Taxes 9,470 7,299 (4,544) 1,337 449 5,301
Provision (Benefit) for Income Taxes 3,835 2,925 (1,726) 395 322 2,096
- ----------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ 5,635 $ 4,374 $ (1,318)(1) $ 942 $ 127 $ 3,205
- ----------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share $ 1.18 $ .92 $ (.28) $ .20 $ .03 $ .68
==================================================================================================================================
FINANCIAL POSITION (In thousands of dollars)
Working Capital $ 13,191 $ 8,607 $ 6,550 $ 8,012 $ 7,384 $ 6,380
Property and Equipment (net) 40,741 38,858 28,265 33,706 33,672 31,151
Total Assets 73,122 70,522 47,604 52,056 51,329 47,876
Long-Term Debt 19,018 16,700 7,700 9,480 8,660 5,440
Total Debt 19,101 18,201 7,780 9,560 8,940 5,730
Stockholders' Equity 29,182 24,669 21,155 23,462 23,614 24,727
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL INFORMATION
Cash Dividends Declared and Paid
(In thousands of dollars) $ 1,181 $ 989 $ 941 $ 1,126 $ 1,311 $ 1,321
Cash Dividends Per Share .25 .21 .20 .24 .28 .28
Return on Average Stockholders' Equity 20.9% 19.1% (5.9%) 4.0% .5% 13.4%
Book Value Per Share of
Stockholders' Equity $ 6.17 $ 5.23 $ 4.50 $ 5.00 $ 5.04 $ 5.30
Debt/Capitalization Ratio 39.6% 42.5% 26.9% 29.0% 27.5% 18.8%
Shares Outstanding at Year-End 4,727,391 4,717,016 4,702,541 4,692,541 4,682,541 4,669,207
Capital Expenditures
(In thousands of dollars) $ 6,654 $ 6,195 $ 3,089 $ 4,788 $ 6,627 $ 5,183
Depreciation (In thousands of dollars) 5,223 4,455 3,716 4,420 4,102 3,763
Number of Employees at Year-End 1,119 1,168 737 760 803 880
==================================================================================================================================
</TABLE>
(1) 1993 includes a provision of $8,261,000 ($5,122,000 after-tax) for the
restructuring of the company's heat treat operations and a gain of $1,500,000
representing the cumulative effect of adopting SFAS 109, Accounting for Income
Taxes.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Lindberg Corporation:
We have audited the accompanying consolidated balance sheets of Lindberg
Corporation (a Delaware Corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of earnings, stockholders'
equity and cash flows for the years ended December 31, 1995, 1994 and 1993.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material 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 financial statements referred to above present fairly,
in all material respects, the financial position of Lindberg Corporation and
subsidiaries as of December 31, 1995 and 1994 and the results of its operations
and its cash flows for the years ended December 31, 1995, 1994 and 1993, in
conformity with generally accepted accounting principles.
As explained in Note 4 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
Arthur Andersen LLP
Chicago, Illinois
January 19, 1996
20
<PAGE> 12
DIRECTORS AND OFFICERS
DIRECTORS
George H. Bodeen (2),(3)
Chairman of the Board
Dr. Raymond F. Decker (1)
President and
Chief Executive Officer
University Science Partners, Inc.
Chairman, Thixomat, Inc.
Raymond A. Jean
Executive Vice President
and Chief Operating Officer
Varlen Corporation
John W. Puth (1),(2),(3)
President, J.W. Puth Associates
Chairman, American Lantern
Company
J. Thomas Schanck (1),(2)
Retired Vice Chairman
Illinois Tool Works, Inc.
Leo G. Thompson (3),(4)
President and
Chief Executive Officer
COMMITTEES OF THE BOARD:
1. Audit
2. Executive Compensation
3. Finance
4. Directors Stock Option
OFFICERS
George H. Bodeen
Chairman of the Board
Leo G. Thompson
President and
Chief Executive Officer
Stephen S. Penley
Senior Vice President and
Chief Financial Officer
Secretary
Michael W. Nelson
Senior Vice President and
Manager of Heat Treat
Operations
Gary E. Miller
Senior Vice President,
Manager of Precision Products
Operations and President,
Impact Industries, Inc.
Terrence D. Brown
Vice President
Geoffrey S. Calhoun
Vice President
Roger J. Fabian
Vice President
Paul J. McCarren
Vice President
Jerome R. Sullivan
Vice President
Brian J. McInerney
Assistant Treasurer
STOCK MARKET AND STOCKHOLDER INFORMATION
STOCK MARKET INFORMATION
The company's common stock trades on The NASDAQ National Market tier of the The
NASDAQ Stock Market under the symbol LIND. Stock price quotations can be found
in national listings in many daily newspapers. High and low market prices and
dividend payments during the past two years are as follows:
<TABLE>
<CAPTION>
1995 Market Price Dividend
Quarter High Low Per Share
- ---------------------------------------------------------
<S> <C> <C> <C>
1st $7.500 $6.000 $.06
2nd 7.500 6.000 .06
3rd 7.500 6.250 .06
4th 7.000 5.250 .07
- ---------------------------------------------------------
$.25
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
1994 Market Price Dividend
Quarter High Low Per Share
- ---------------------------------------------------------
<S> <C> <C> <C>
1st $6.500 $4.125 $.05
2nd 8.250 5.750 .05
3rd 8.750 6.500 .05
4th 8.500 6.250 .06
- ---------------------------------------------------------
$.21
</TABLE>
STOCK TRANSFER AGENT AND
REGISTRAR
Harris Trust & Savings Bank
Chicago, Illinois
INDEPENDENT PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
GENERAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
CORPORATE OFFICES
Lindberg Corporation
6133 N. River Road, Suite 700
Rosemont, Illinois 60018
(847) 823-2021
STOCKHOLDER INFORMATION
ANNUAL MEETING
The annual stockholders' meeting will be held on Friday, April 26, 1996 at 9
a.m., in the auditorium at Riverway, 6133 N. River Road, Rosemont, Illinois. A
formal notice of the meeting will be mailed to stockholders on or about
April 1, 1996.
FORM 10-K
A copy of the company's Annual Report to the Securities and Exchange
Commission (Form 10-K), for the year ended December 31, 1995, is available to
any stockholder upon written request to the Secretary of the Company, 6133 N.
River Road, Suite 700, Rosemont, Illinois, 60018.
[RECYCLED LOGO]
Printed on recycled paper
<PAGE> 1
Exhibit 21
SUBSIDIARY OF REGISTRANT
<TABLE>
<CAPTION>
Name Where Incorporated
- ---- ------------------
<S> <C>
Impact Industries, Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K into the Company's previously filed
Registration Statements File No. 33-47323 and 33-60361.
Arthur Andersen LLP
Chicago, Illinois
March 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 200,171
<SECURITIES> 0
<RECEIVABLES> 17,427,688
<ALLOWANCES> 328,000
<INVENTORY> 4,937,987
<CURRENT-ASSETS> 26,381,897
<PP&E> 96,894,481
<DEPRECIATION> 56,153,951
<TOTAL-ASSETS> 73,121,875
<CURRENT-LIABILITIES> 13,190,468
<BONDS> 0
0
0
<COMMON> 14,183,493
<OTHER-SE> 1,512,106
<TOTAL-LIABILITY-AND-EQUITY> 73,121,875
<SALES> 122,003,921
<TOTAL-REVENUES> 122,003,921
<CGS> 96,535,192
<TOTAL-COSTS> 96,535,192
<OTHER-EXPENSES> 14,946,085
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,703,041
<INCOME-PRETAX> 9,469,775
<INCOME-TAX> 3,835,259
<INCOME-CONTINUING> 5,634,516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,634,516
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
