<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file Number 0-8287
LINDBERG CORPORATION
DELAWARE 36-1391480
---------------------- -------------------------------
State of Incorporation IRS Employer Identification No.
6133 North River Road, Suite 700
Rosemont, Illinois 60018
(847) 823-2021
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
------ ------
The number of shares of the Registrant's Common Stock outstanding as of
November 10, 1997 was: 4,833,766.
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LINDBERG CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Part I Financial Information: Page No.
--------
Item 1. Consolidated Statements of Earnings - Three Months
and Nine Months Ended September 30, 1997 and 1996....... 3
Consolidated Balance Sheets - As of September 30, 1997 and
December 31, 1996....................................... 4
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1997 and 1996....................... 5
Notes to the Consolidated Financial Statements ........... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 7
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K ......................... 10
Signatures ............................................... 11
Exhibit Index ............................................ 12
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LINDBERG CORPORATION AND SUBSIDIARIES
PART I FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $29,125,180 $26,759,194 $88,670,994 $86,600,205
Cost of Sales (23,515,456) (21,210,418) (70,781,450) (68,723,988)
----------- ----------- ----------- -----------
Gross Profit 5,609,724 5,548,776 17,889,544 17,876,217
Selling and
Administrative Expenses (3,567,593) (3,609,972) (11,032,876) (10,965,231)
Equity in Earnings of
Partnership 605,582 262,238 1,436,328 652,597
----------- ----------- ----------- -----------
Operating Earnings 2,647,713 2,201,042 8,292,996 7,563,583
Interest Expense - Net (390,510) (406,016) (1,143,500) (1,205,648)
----------- ----------- ----------- -----------
Earnings Before
Income Taxes 2,257,203 1,795,026 7,149,496 6,357,935
Provision for
Income Taxes (908,920) (726,965) (2,890,192) (2,574,818)
----------- ----------- ----------- -----------
Net Earnings $ 1,348,283 $ 1,068,061 $ 4,259,304 $ 3,783,117
=========== =========== =========== ===========
Primary Earnings
Per Share $ .27 $ .22 $ .87 $ .78
=========== =========== =========== ===========
Fully-Diluted Earnings
Per Share $ .27 $ .22 $ .86 $ .77
=========== =========== =========== ===========
Weighted Average
Shares Outstanding
and Equivalents:
Primary $ 4,940,781 $ 4,879,593 $ 4,898,043 $ 4,852,895
=========== =========== =========== ===========
Fully-Diluted $ 4,969,814 $ 4,897,951 $ 4,962,095 $ 4,883,535
=========== =========== =========== ===========
Cash Dividends
Declared and Paid $ .08 $ .07 $ .24 $ .21
=========== =========== =========== ===========
</TABLE>
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LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 117,949 $ 51,992
Accounts Receivable - Net 16,819,983 15,419,945
Inventories
Raw Material 1,179,152 726,870
Work in Process 2,366,319 1,753,574
Finished Goods 599,026 541,064
Prepaid and Refundable Income Taxes 1,580,516 1,687,534
Note Receivable -- 1,102,600
Prepaid Expenses and Other Current Assets 3,572,409 4,745,419
----------- -----------
Total Current Assets 26,235,354 26,028,998
PROPERTY AND EQUIPMENT:
Cost 109,927,228 104,100,559
Accumulated Depreciation (61,270,772) (59,137,724)
----------- -----------
Net Property and Equipment 48,656,456 44,962,835
Goodwill 5,235,789 2,973,212
Investment in Partnership 2,095,960 1,607,632
Other Non-Current Assets 2,538,960 2,521,855
----------- -----------
TOTAL ASSETS $84,762,519 $78,094,532
=========== ===========
CURRENT LIABILITIES:
Current Maturities on Long-Term Debt $ 49,780 $ 53,565
Notes Payable 1,900,000 901,437
Accounts Payable 6,106,423 5,553,376
Accrued Expenses 6,562,512 6,104,228
----------- -----------
Total Current Liabilities 14,618,715 12,612,606
NON-CURRENT LIABILITIES:
Deferred Income Taxes 7,027,504 6,847,504
Long-term Debt (less Current Maturities) 21,514,343 20,759,150
Accrued Pension 3,031,649 3,148,114
Other Non-Current Liabilities 2,220,550 1,680,256
----------- -----------
Total Non-Current Liabilities 33,794,046 32,435,024
STOCKHOLDERS' EQUITY:
Common Shares, $2.50 par value: 14,183,493 14,183,493
Authorized 12,000,000 shares in 1997 and
1996. Issued 5,673,397 shares in 1997
and 1996
Additional Paid-In Capital 1,508,932 1,493,406
Retained Earnings 25,760,093 22,652,574
Treasury Shares (862,431 in 1997
and 894,256 in 1996), at Cost (4,874,840) (5,054,651)
Underfunded Pension Liability Adjustment (227,920) (227,920)
Total Stockholders' Equity 36,349,758 33,046,902
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $84,762,519 $78,094,532
=========== ===========
</TABLE>
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LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
INCREASE (DECREASE) IN CASH September 30,
--------------------------
1997 1996
------------ -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Earnings $ 4,259,304 $ 3,783,117
Adjustments to Reconcile Net Earnings
to Net Cash Provided by (Used in)
Operating Activities:
Depreciation 4,342,662 4,188,091
Increase in Deferred Taxes 180,000 180,000
Change in Assets and Liabilities 844,921 (2,607,167)
------------ -----------
Total Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating Activities 5,367,583 1,760,924
------------ -----------
Net Cash Provided by Operating Activities 9,626,887 5,544,041
Cash Flows from Investing Activities:
Capital Expenditures (7,415,088) (5,337,497)
Proceeds from Note Receivable for
Sale of Wire Belt Operation 1,102,600 --
Increase in Investment of Thixomat, Inc. (46,627) --
Payment for Purchase of Vac-Hyd -- (2,370,000)
Payment for Purchase of Ticorm (3,800,000) --
------------ -----------
Net Cash Used in Investing Activities (10,159,115) (7,707,497)
Cash Flows from Financing Activities:
Net Borrowings Under Revolving Credit Agreement 800,000 2,100,000
Note Payable for Purchase of Vac-Hyd (901,437) 970,000
Note Payable for Purchase of Ticorm 1,900,000 --
Payments of Capital Lease Obligations (48,592) (72,025)
Dividends Paid (1,151,786) (996,976)
------------ -----------
Net Cash Provided by Financing Activities 598,185 2,000,999
Net Increase (Decrease) in Cash 65,957 (162,457)
Cash at Beginning of Period 51,992 200,171
------------ -----------
Cash at End of Period $ 117,949 $ 37,714
============ ===========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 1,032,721 $ 1,062,037
Income Taxes Paid - Net of Refunds 2,599,094 2,584,357
</TABLE>
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LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
NOTE 1 The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest
annual report on Form 10-K.
Statements for the three month and nine month periods ended September
30, 1997 and September 30, 1996 reflect, in the opinion of the
Company, all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the results of these periods.
Results for interim periods are not necessarily indicative of results
for a full year.
NOTE 2 No material changes have occurred with respect to the Company's
contingent liabilities outlined in the Company's 1996 10-K through
the date of this report.
NOTE 3 On July 31, 1997, the Company acquired all of the outstanding common
stock of Ticorm, Inc. for $3.8 million, which included cash and
notes payable. Ticorm is a heat treating and forming facility
located in the Los Angeles area.
NOTE 4 On October 1, 1997, the Company acquired the remaining 50% share of
its joint venture partnership - Alumatherm Heat Treating Company -
from its partners. The purchase price for the buyout of the
partners' interest was $13 million, and was funded with additional
borrowings under the Company's revolving credit agreement and notes
payable provided to the selling parties.
NOTE 5 On October 1, 1997, the Company amended its revolving credit
agreement to expand its line of credit by $10 million, to $35
million, and to amend certain covenants contained therein. 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 revolving credit agreement contains various covenants which,
among others, restrict the ability of the Company to pay dividends
beyond certain limits and require the Company to meet certain
financial ratios.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION:
At September 30, 1997, the Company's total debt was $23.5 million, an
increase of $3.4 million from $20.1 million outstanding as of
June 30, 1997. The Company's total debt to capitalization ratio was
39% at the close of the third quarter in 1997 versus 36% at the end
of the prior quarter.
The level of debt increased in the quarter primarily as a result of
the acquisition of Ticorm, Inc. ("Ticorm") on July 31, 1997 for a
purchase price of $3.8 million, which was funded through additional
borrowings under the Company's revolving credit agreement and notes
payable provided to the selling parties. The effect of the purchase
of Ticorm was offset to a degree by cash generated through operations
during the period, which was used to repay debt.
Capital expenditures for the first nine months of 1997 were
$7.4 million, 39% above the $5.3 million recorded in the same period
of 1996. The increase in spending in 1997 related primarily to the
completion of equipment installation projects under the Company's
Strategic Partnership 2000 facilities program and additional
furnaces/equipment for expansion at certain heat treating divisions.
On July 28, 1997, the Board of Directors declared a cash dividend of
$.08 on each share of the Company's common stock, payable on
September 10, 1997. The total cash dividends paid on the latter date
were $385,000, bringing to $1.2 million the total cash outlay for
dividends to stockholders in the first nine months of 1997. The nine
month figure for this year was 16% above the $1.0 million paid out
for the same period in 1996.
The Company believes that its borrowing capacity and funds generated
through operations will be sufficient to meet currently foreseen
capital investment and working capital needs in support of existing
businesses for the balance of 1997 and in the longer term.
OF RESULTS OF OPERATIONS:
Quarter ended September 30, 1997 and 1996
Sales for the quarter ended September 30, 1997 were $29.1 million, up
$2.4 million, or 9%, from $26.8 million for the same three month
period in 1996. Sales within the Company's Heat Treating business
segment rose by 14% in comparison to the third quarter of 1996, while
Precision Products segment sales fell 3% in comparison to the third
quarter of the prior year.
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Revenues rose within the Heat Treating segment due mainly to the
acquisition of Ticorm on July 31, 1997, and the continued strength of
many of the segment's served markets - particularly the commercial
aerospace industry. Sales within the Precision Products segment
overall were down slightly in comparison to the year-ago period due
to the sale of a wire-belting product line in the fourth quarter of
1996, thereby eliminating those sales for 1997. Revenues of current
Precision Products operations rose 13% this year versus the third
quarter of 1996. For the third quarter of 1997, Heat Treating
segment sales represented 72% of total Company sales.
The Company's gross profit percentage in the third quarter of 1997
was 19.3% in comparison to 20.7% in the same period of 1996 as gross
margins were lower within each segment for the period. However, an
increase in the overall percentage of sales contributed by the higher
margin Heat Treating segment in 1997 partially offset the overall
effect of the reductions in each segment.
Operating earnings for the Company improved to $2.6 million in the
third quarter of 1997 from $2.2 million in the prior year. Operating
earnings gains within the Heat Treating segment were offset somewhat
by lower results from Precision Products businesses overall. During
the 1997 quarter, the Precision Products segment recorded an
operating loss of $374,000.
Earnings from the Heat Treating segment improved in comparison to the
third quarter of 1996 in part due to the gain in revenues experienced
in the period. In addition, equity earnings from a heat treating
partnership - Alumatherm Heat Treating Company ("Alumatherm") -
increased to $606,000 from $262,000 in the year ago period, thereby
enhancing the segment's results.
Reflecting the above issues, net earnings in the third quarter of
1997 of $1.3 million, or $.27 per share, increased from $1.1 million,
or $.22 per share, for the same three month period of 1996.
Nine months ended September 30, 1997 and 1996
Sales for the first nine months of 1997 were $88.7 million, up
$2.1 million, or 2%, from $86.6 million for the same period of 1996.
This overall increase in revenues reflects a 14% improvement within
the Heat Treating business segment, partially offset by a 17% decline
from Precision Products operations. For the nine month period, sales
from the Heat Treating segment represented 70% of total Company
sales.
The decrease in Precision Products sales year-over-year related to
reduced revenue at the Company's Impact Industries division, and to a
lesser degree, from the sale of a wire-belting product line in
December 1996, which thereby eliminated those revenues from 1997
results. Heat Treating segment revenues increased in comparison to
the prior year due to continued strength in many of the segment's
markets, higher sales from Strategic Partnership 2000 projects and
the acquisition of Ticorm.
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The Company's overall gross profit percentage decreased slightly to
20.2% from 20.6% in the nine month 1996 period. A lower gross margin
from the Precision Products segment was largely offset by the effect
of a higher proportion of overall Company sales from the higher
margin Heat Treating segment. Heat Treating segment gross margins
were level year-to-year.
Company operating earnings rose to $8.3 million for the first nine
months of 1997 as compared to $7.6 million in the same nine month
period of 1996. The 1997 results include $1.4 million in equity
earnings from Alumatherm while $0.7 million was included for the same
period of last year. On a year-to-date basis in 1997, the Precision
Products business segment recorded an operating loss of $1.0 million,
due largely to weak results at the segment's Impact Industries
division.
Net earnings of $4.3 million, or $.87 per share, improved from $3.8
million, or $.78 per share, in the first nine months of 1996.
SUBSEQUENT EVENTS:
On October 1, 1997, the Company acquired the remaining 50% share of
its joint venture partnership - Alumatherm - from its partners. The
purchase price for the buyout of the partners' interest was $13
million, and was funded with additional borrowings under the
Company's revolving credit agreement and notes payable provided to
the selling parties.
Effective October 1, 1997, the Company's revolving credit agreement
with its banks was amended to increase the total borrowing facility
from $25 million to $35 million and to adjust certain loan covenants.
At the close of October 1997, the Company had $17 million of
available borrowing capacity under its amended revolving credit
agreement.
On October 20, 1997, the Company announced that it was evaluating
strategic alternatives for all of its Precision Products segment
businesses. The possibilities being considered include strategic
partnerships, spinoff or sale.
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PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) 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 page 12 and
which is incorporated herein by reference.
(b) Reports on Form 8-K - There were no reports on Form 8-K
filed in the three months ended September 30, 1997.
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SIGNATURES
Pursuant to the requirements 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
Principal Financial and Accounting By Stephen S. Penley
Officer: ----------------------------
Stephen S. Penley
Senior Vice President
and Chief Financial Officer
Dated: November 14, 1997
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LINDBERG CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 1997
Exhibit Index
Number and Description of Exhibit
---------------------------------
11. Statement recomputation of per share earnings Attached
27. Financial Data Schedule Attached
<PAGE> 1
Exhibit 11
COMPUTATION OF NET EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EARNINGS
Net Earnings $ 1,348,283 $ 1,068,061 $ 4,259,304 $ 3,783,117
=========== =========== =========== ===========
PRIMARY EARNINGS PER SHARE
Weighted Average Number
of Common Shares Outstanding 4,809,490 4,764,478 4,801,771 4,750,062
Common Share Equivalents 131,291 115,115 96,272 102,833
----------- ----------- ----------- -----------
Weighted Average Common
Shares Outstanding and
Equivalents 4,940,781 4,879,593 4,898,043 4,852,895
=========== =========== =========== ===========
PRIMARY EARNINGS PER
SHARE $ .27 $ .22 $ .87 $ .78
=========== =========== =========== ===========
FULLY-DILUTED EARNINGS PER
SHARE
Weighted Average Number of
Common Shares Outstanding 4,809,490 4,764,478 4,801,771 4,750,062
Common Share Equivalents 160,324 133,473 160,324 133,473
----------- ----------- ----------- -----------
Weighted Average Common
Shares Outstanding and
Equivalents 4,969,814 4,897,951 4,962,095 4,883,535
=========== =========== =========== ===========
FULLY-DILUTED EARNINGS
PER SHARE $ .27 $ .22 $ .86 $ .77
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 117,949
<SECURITIES> 0
<RECEIVABLES> 16,819,983
<ALLOWANCES> 469,000
<INVENTORY> 4,144,497
<CURRENT-ASSETS> 26,235,354
<PP&E> 109,927,228
<DEPRECIATION> 61,270,772
<TOTAL-ASSETS> 84,762,519
<CURRENT-LIABILITIES> 14,618,715
<BONDS> 0
0
0
<COMMON> 14,183,493
<OTHER-SE> 1,508,932
<TOTAL-LIABILITY-AND-EQUITY> 84,762,519
<SALES> 88,670,994
<TOTAL-REVENUES> 88,670,994
<CGS> 70,781,450
<TOTAL-COSTS> 70,781,450
<OTHER-EXPENSES> 9,596,548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,143,500
<INCOME-PRETAX> 7,149,496
<INCOME-TAX> 2,890,192
<INCOME-CONTINUING> 4,259,304
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,259,304
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.86
</TABLE>
