<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, 1996
[ ] 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
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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 10, 1997 was: $25,574,715.
The number of shares of the Registrant's Common Stock outstanding as of
March 10, 1997 was: 4,801,591.
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Documents Incorporated by Reference
Those sections or portions of the Registrant's 1996 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 25, 1997 (the "Proxy Statement"), described in the cross
reference sheet and attached hereto, are incorporated by reference into Parts
I, II and III of this report.
Table of Contents
-----------------
<TABLE>
<CAPTION>
Item Number and Caption Page
- ----------------------- ----
<S> <C>
PART I
Item 1 Business......................................... Annual Report, p. 18
(Note 10);
herein, pp. 4-7
Item 2 Properties....................................... 7-8
Item 3 Legal Proceedings................................ Annual Report, p. 19
(Note 14); herein, pp. 5-8
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"
and Annual Report, p. 16
(Note 5); herein, p. 8
Item 6 Selected Financial Data.......................... Annual Report, p. 20
"Five-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
"Management's Discussion and
Analysis"; herein, p. 9
Item 8 Financial Statements and
Supplementary Data............................... Annual Report, pp. 12-19
"Consolidated Financial
Statements" and "Notes to
Consolidated Financial
Statements"; herein, p. 9
</TABLE>
-2-
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<TABLE>
<CAPTION>
Item Number and Caption Page
- ----------------------- ----
<S> <C>
Item 9 Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure........................ 9
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. 3-8,
"Executive Compensation,";
herein, p. 9
Item 12 Security Ownership of Certain
Beneficial Owners and Management................ Proxy Statement, pp. 11-12,
"Stock Ownership";
herein, p. 10
Item 13 Certain Relationships and Related
Transactions.................................... Proxy Statement, p. 2,
"The Election of Directors",
and p. 6, "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................................... 15-18
</TABLE>
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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 in
operation at December 31, 1996.
The business of the Company, which operates in the field of metallurgical
products, is comprised of heat treating plants and manufacturing facilities.
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 market.
This acquisition increased the proportion of total business from the
Company's Precision Products segment from 20% in 1993 to 40% by year-end 1994.
In June 1994, the Company entered into an agreement to form a heat
treating partnership with Aerospace Aluminum Heat Treating Inc. The
partnership commenced operation on July 1, 1994. The partnership engages in
heat treating and metal forming of aluminum and titanium parts 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.
In December 1994, the Company merged its wholly owned subsidiaries Rexcorp
U.S. Inc. and H&H into Lindberg Corporation. As such, at year-end 1994 and at
present, Impact is the Company's sole subsidiary.
In May 1996, the Company acquired the assets of Vac-Hyd. Vac-Hyd is a
heat treating facility located in the Los Angeles area.
In December 1996, the Company sold the assets of its wire belting
operation, which was located in Modesto, California. This product line was
unrelated to the primary aluminum casting operations of the Company's Precision
Products segment.
At December 31, 1996, the Company had 1,071 employees. Of these
employees, 209 were covered by collective bargaining agreements. Three
agreements will expire during 1997.
Financial Information about Industry Segments
The Company's operations may be divided into two industry segments: Heat
Treating and Precision Products.
Financial information about the Company's two industry segments as of
December 31, 1996, and for the three years ended on that date, is incorporated
by reference to page 18 - Note 10 to the Consolidated Financial Statements in
the Annual Report.
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Narrative description of business
Heat Treating:
The Company's principal industry segment is Heat Treating. From 18 plants,
this segment provides customers with heat treating of metal, a process which
improves mechanical properties, durability and wear resistance. This product
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 for any plant is largely confined to its
local geographic area. Major industries served by the Company's Heat Treating
segment include agricultural and construction equipment, automotive/truck,
aerospace, consumer products, defense, fabricated metal products, oilfield
machinery, tool and die 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 from the 18 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 to
its SP 2000 customers, typically manufacturers with a significant requirement
for heat treating, using dedicated equipment at either its own or its
customers' facilities.
The basic raw material for the Company's heat treating 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 segment employs some environmentally hazardous
materials, primarily quench oil, 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.
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
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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. During 1996, the Company transferred certain
properties it previously operated to third parties in exchange for acceptance by
said third parties of the liability for future remediation and related costs
associated with those properties.
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, 1996, approximately $650,000 of the Company's total
environmental reserves of $800,000 related to its heat treating segment. The
Company has estimated a range of costs in establishing these reserves. 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, 1996 this segment employed 649 employees as compared to
623 at the prior year-end.
The Company's Heat Treating 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 four plants, three of
which produce specialized castings of aluminum and one which manufactures
magnesium parts. Markets served by this segment include the automotive,
agricultural and construction equipment, electronics, consumer products,
defense and heavy-duty truck industries.
During 1996, activity with certain subsidiaries, divisions and affiliates
of General Motors Corporation (GMC) represented 32% of this segment's total
revenues. 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 certain subsidiaries,
divisions and affiliates that the Company believes act independently at present
in their purchasing decisions. Accordingly, the Company believes that it is
unlikely that it would 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 and magnesium. The Company has experienced no significant
difficulty in obtaining these materials.
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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 effect upon the
capital expenditures, results of operations or competitive position of this
segment. At December 31, 1996, approximately $150,000 of the Company's total
environmental reserves of $800,000 related to 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 metal castings. The
Company employs the Thixomolding(TM) process at its THX Molding division, which
is a start-up operation that produces magnesium parts.
The number of employees in the Precision Products segment was 406 at
December 31, 1996 compared to 481 at December 31, 1995.
The backlog totals within the Precision Products segment as of December
31, 1996 and 1995 were estimated to be $14.7 million and $17.1 million,
respectively. The Company expects all of the backlog at December 31, 1996 to
be filled by December 31, 1997. The Company does not believe this backlog to
be of a seasonal nature and considers the difference between the December 31
totals to be reflective of the lower sales levels in this segment in 1996 as
compared to 1995.
Item 2. Properties
The principal facilities of the Company are set forth in the following table,
which also indicates the principal product manufactured at each location:
Leased
Location or Owned
Heat Treating Segment:
- ---------------------
Compton, CA Leased
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
Racine, WI Owned
Westminster, CA Owned
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Precision Products Segment:
- --------------------------
Webster City, IA Owned
Sandwich, IL Owned
Cookeville, TN Owned
Racine, WI Owned
Corporate Office:
- ----------------
Rosemont, IL Leased
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 segment, serve largely localized markets and
customers. Those providing 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
by reference into Part I of this report in reliance on General
Instruction G(3) to Form 10-K.
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" and to page 16 of the Annual
Report - Note 5 to the Consolidated Financial Statements. As of
March 10, 1997, the Company had 506 stockholders of record.
Item 6. Selected Financial Data
Incorporated by reference to page 20 of the Annual Report, section
entitled "Five-Year Financial Review."
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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, section
entitled "Management's Discussion and Analysis."
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to pages 12-19 of the Annual Report, section
entitled "Consolidated Financial Statements" and "Notes to Consolidated
Financial Statements."
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>
Name Age Position
- ---- --- --------
<S> <C> <C>
Leo G. Thompson 56 President (since October 1987) and Chief
Executive Officer (since January 1991);
Stephen S. Penley 47 Senior Vice President and Chief Financial
Officer (since July 1993), Treasurer (January 1989 to
July 1996), Secretary (since October 1990); formerly
Vice President - Finance (from January 1989 to July
1993).
Michael W. Nelson 49 Senior Vice President and President 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).
</TABLE>
Executive Officers of the Company are elected annually by the Board of
Directors of the Company in April.
Item 11. Executive Compensation
Incorporated by reference to pages 3-8 of the Proxy Statement, section
entitled "Executive Compensation."
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Item 12. Security Ownership of Certain Beneficial Owners and
Management
Incorporated by reference to pages 11-12 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 6, 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)
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<S> <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, 1996, 1995 and 1994 .......................... Annual Report, p. 12
Consolidated Balance Sheets as of
December 31, 1996 and 1995 ................................ Annual Report, p. 13
Consolidated Statements of Cash Flows for
the years ended December 31, 1996, 1995
and 1994 .................................................. Annual Report, p. 14
Notes to Consolidated Financial Statements ......... Annual Report, pp. 15-19
Report of Independent Public Accountants ........... Annual Report, p. 20
</TABLE>
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(1) Matters incorporated by reference from the Lindberg Corporation 1996
Annual Report.
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/
Page
-----
2. Financial Statements Schedules (2)
VIII. Valuation and Qualifying Accounts and
Reserves .............................................. 12
Report of Independent Public Accountants
on Schedules ................................................. 13
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended December 31, 1996.
(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 15-18 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.
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LINDBERG CORPORATION AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND
QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year $328,000 $314,000 $257,000
Provision charged to expense
during the year 189,000 339,000 103,000
Write-offs during the year,
net of recoveries (84,000) (325,000) (76,000)
Reserve addition related to purchase
of Impact Industries, Inc. --- --- 30,000
-------- -------- --------
Balance at end of year $433,000 $328,000 $314,000
======== ======== ========
</TABLE>
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REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
ON SCHEDULES
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 20, 1997. 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 20, 1997
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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
--------------------------------------
Stephen S. Penley
Senior Vice President and Chief Financial
Officer; Principal Financial and
Accounting Officer
Dated March 21, 1997
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/ DR. 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 21, 1997
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LINDBERG CORPORATION
Annual Report on Form 10-K
for the Year Ended December 31, 1996
Exhibit Index
<TABLE>
<CAPTION>
Page Number (1)
Number and Description of Exhibit or reference
- --------------------------------- ---------------
<S> <C>
1. Not applicable
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession
2.1 Stock Purchase Agreement dated April 19, 1994
among Rexcorp Sport International Ltd., Marle
Management Ltd., D.F. Haslam Management Ltd.,
and Gary E. Miller and Lindberg Corporation (2)
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) Attached
4. Instruments defining the rights of
security holders, including indentures (6)
4.1 Amended and Restated Credit Agreement
Dated as of April 28, 1994 (7)
4.2 First Amendment to Amended and Restated Credit
Agreement dated as of November 2, 1995 (8)
4.3 Second Amendment to Amended and Restated Credit
Agreement dated as of January 31, 1996 (9)
4.4 Note Agreement dated as of October 15, 1995 (10)
4.5 Rights Agreement, dated November 21, 1996, between
Registrant and Harris Trust and Savings Bank, as rights agent (11)
5-9. Not applicable
10. Material contracts
10.1 Description of Bonus Program (12)
10.2 Consulting Agreement Between the Registrant
and G.H. Bodeen dated October 25, 1990 (13)
10.3 1991 Stock Option Plan for Key Employees * (14)
10.4 1991 Stock Option Plan for Directors * (15)
10.5 Employment Agreement, dated September 17, 1996,
Between the Registrant and Leo G. Thompson * (16)
10.6 Employment Agreement, dated September 17, 1996,
Between the Registrant and Stephen S. Penley * (17)
</TABLE>
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(1) Identifies management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 14(c).
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<TABLE>
<CAPTION>
Page Number
Number and Description of Exhibit or reference
- --------------------------------- ---------------
<S> <C>
11. Statement recomputation 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>
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<PAGE> 17
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
Definitive Proxy Statement on Schedule 14A filed with the Commission in
connection with the Registrant's 1987 annual meeting of stockholders,
Commission file no. 0-8287.
(6) 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.
(7) 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.
(8) 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.
(9) Incorporated by reference to Exhibit 4.3 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 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 Exhibit 99.1 of the
Registrant's Form 8-A filed with the Commission on December 6, 1996,
Commission file no. 0-8287.
(12) Incorporated by reference to page 6 of the Registrant's
Definitive Proxy Statement on Schedule 14A filed with the Commission in
connection with the Registrant's 1996 annual meeting of stockholders,
Commission file no. 0-8287.
(13) 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.
(14) Incorporated by reference to Appendix A of the Registrant's
Definitive Proxy Statement on Schedule 14A filed with the Commission in
connection with the Registrant's 1995 annual meeting of stockholders,
Commission file no. 0-8287.
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Exhibit
No. Description of Exhibits
- ------- -----------------------
(15) Incorporated by reference to Appendix B of the Registrant's
Definitive Proxy Statement on Schedule 14A filed with the Commission in
connection with the Registrant's 1995 annual meeting of stockholders,
Commission file no. 0-8287.
(16) Incorporated by reference to Exhibit 10.1 of the
Registrant's Report on Form 10-Q for the quarter ended September 30,
1996, Commission file no. 0-8287.
(17) Incorporated be reference to Exhibit 10.2 of the
Registrant's Report on Form 10-Q for the quarter ended September 30,
1996, Commission file no. 0-8287.
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<PAGE> 1
EXHIBIT 3.4
BY-LAWS
OF
LINDBERG CORPORATION
[As amended through October 23, 1996]
ARTICLE I
Offices
Section 1. The registered office of the corporation in Delaware shall be
in the City of Wilmington, County of New Castle.
Section 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Chicago, State of Illinois, at such place as may
be fixed from time to time by the board of directors, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the board of directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held at 9:00 A.M. on
the last Wednesday in April of each year if not a legal holiday, or if a legal
holiday, then on the next secular day following, or at such other date and time
as shall be designated from time to time by the board of directors and stated
in the notice of the meeting. At each annual meeting, stockholders shall elect
by such vote as is required by Article Tenth of the corporation's certificate
of incorporation a board of directors, and transact such other business as may
properly be brought before the meeting. Elections of directors need not be by
written ballot.
Section 3. For business properly to be brought before any meeting of
stockholders by a stockholder, the stockholder must have given timely notice
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thereof in proper written form to the secretary of the corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation not less than 30 days nor
more than 60 days prior to the date of the meeting; provided, however, that in
the event that less than 40 days notice or prior public disclosure of the date
of the meeting is given or made to stockholders, for such notice by the
stockholder to be timely, it must be so received prior to the date of the
meeting and not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. To be in proper written form, a stockholder's notice to
the secretary shall set forth in writing as to each matter the stockholder
proposes to bring before the meeting: (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business; (iii) the
number of the shares of capital stock of the corporation which are owned by the
stockholder, beneficially and of record, as of the record date for the meeting;
and (iv) any material interest of the stockholder in such business. The
chairman of the meeting shall have the sole authority to determine whether
business was properly brought before the meeting in accordance with the
provisions of this Section 3 of Article II and, if the chairman of the meeting
should determine that any such business was not so properly brought, he or she
shall so declare to the meeting, and any such business not properly brought
before the meeting shall not be transacted.
Section 4. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than 60 days (or in the case a vote of
stockholders on a merger or consolidation is one of the stated purposes of the
annual meeting, not less than 20 or more than 60 days) before the date of the
meeting.
Section 5. The officer who has charge of the stock ledger of the
corporation shall prepare, or cause to be prepared, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
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Section 6. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman of the board or the president and
shall be called by the president or secretary at the request in writing of a
majority of the board of directors. Such request shall state the purpose or
purposes of the proposed meeting.
Section 7. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten or more than 60 days (or in the case
of a merger or consolidation, not less than 20 or more than 60 days) before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 8. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 9. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. Abstentions shall be counted as present in
person or represented by proxy for purposes of determining the existence of a
quorum. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.
Section 10. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting
(other than the election of directors, which shall be determined by a plurality
vote), unless the question is one upon which, by express provision of statute,
these by-laws or of the certificate of incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Abstentions shall not be included in calculating
the number of votes cast on, in favor of, or in opposition to any questions.
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Section 11. Unless otherwise provided in the certificate of incorporation
or these by-laws, each stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
or acted upon after eleven months from its date, unless the proxy expressly
provides for a longer period.
ARTICLE III
Directors
Section 1. The number of directors which shall constitute the whole board
of directors shall be a maximum of seven. The number of directors may be
changed from time to time, as provided by Article Tenth of the corporation's
certificate of incorporation. Directorships, the terms of which expire as
provided in said Article Tenth, shall be filled at each annual meeting of the
stockholders, except as provided in Section 2 of this Article III, and each
director elected shall hold office until his successor is elected and qualified
or until his earlier resignation or removal. Directors need not be
stockholders.
Section 2. Any vacancies occurring in the board of directors and
newly-created directorships resulting from an increase in the authorized number
of directors may be filled by a majority of the remaining directors though less
than a quorum of the board of directors, and any director so chosen shall hold
office until the next election of the class for which he was chosen and until
his successor is duly elected and qualified.
Section 3. Nominations for any election of a director may be made by the
board of directors, a committee appointed by the board of directors, or by any
stockholder entitled to vote generally in the election of directors who
complies with the procedures set forth in this Section 3 of Article III. All
nominations by stockholders must be made pursuant to timely notice in proper
written form to the secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than 30 days nor more
than 60 days prior to the date of the meeting; provided, however that in the
event that less than 40 days notice or prior public disclosure of the date of
the meeting is given to stockholders, for such notice by the stockholder to be
timely, it must be so received prior to the date of the meeting and not later
than the close of business on the tenth day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper written form, such stockholder's notice shall set forth
in writing (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each
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case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, including, without limitation, such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected; and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the corporation's books, of such stockholder and
(ii) the number of shares of capital stock of the corporation which are owned
by such stockholder, beneficially and of record, as of the record date for the
meeting. At the request of the board of directors, any person nominated by the
board of directors, or a committee appointed by the board of directors, for
election as a director shall furnish to the secretary of the corporation the
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Section 3 of Article III, and
the defective nomination shall thereupon be disregarded.
Section 4. The business of the corporation shall be managed by its board
of directors, which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
only by the stockholders.
Meetings of the Board of Directors
Section 5. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 6. The first meeting of each newly elected board of directors
shall be held without other notice than this by-laws, immediately after, and at
the same place as, the annual meeting of stockholders, provided a quorum shall
be present. In the event of the failure to hold the first meeting of a newly
elected board at such time and place, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 7. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 8. Special meetings of the board may be called by the chairman of
the board or the president on two days' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
president or secretary in like manner and on like notice at the written request
of two directors.
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Section 9. At all meetings of the board a majority of the total number of
directors then constituting the whole board shall constitute a quorum for the
transaction of business and the vote of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by
the certificate of incorporation. If a quorum shall not be present at any
meeting of the board of directors, a majority of the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee; and any member of the board
of directors or of any committee thereof may participate in a meeting of such
board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in such meeting shall constitute present in
person at such meeting.
Committees of Directors
Section 11. The board of directors may have any executive committee, an
audit committee, an executive compensation committee, a finance committee, a
nominating committee, an incentive stock option committee, a directors stock
option committee, and such other committees as they may designate by resolution
passed by a majority of the whole board, each committee to consist of one or
more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to
the extent provided in the resolution of the board of directors, when the board
of directors is not in session, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it; provided, however, that in the absence or
disqualification of any member of such committee or committees or alternate
members designated by the board, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the board of directors to
act at the meeting in the place of any such absent or disqualified member.
Notwithstanding the foregoing provisions of this Section 10 of this Article
III, no such committee shall have the power or authority in reference to
amending the certificate of incorporation, adopting an agreement of merger or
consolidation,
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recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of the
dissolution, or amending the by-laws of the corporation; and, unless the
resolution or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 12. Each committee shall have a chairman, appointed by the board
of directors, who shall preside at all meetings of such committee. Each
committee shall keep regular minutes of its meetings and report the same to the
board of directors when required.
Compensation of Directors
Section 13. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have authority to
fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a
stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings, and the chairmen of such
committees may be paid an additional fixed sum for their services as chairmen.
ARTICLE IV
Notices
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram or by electronic facsimile transmission
and shall be deemed to be given at the time of delivery to the telegraph
company or at the time of electronic facsimile transmission.
Section 2. Whenever any notice is required to be given by statute or by
the certificate of incorporation or these by-laws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
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ARTICLE V
Officers
Section 1. The officers of the corporation shall include a chairman of
the board, a president, one or more vice presidents (the number and designation
thereof to be determined by the board of directors), a secretary, a treasurer,
a controller and such assistant secretaries, assistant treasurers or other
officers as may be elected or appointed by the board of directors. Any two or
more offices may be held by the same person.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall elect a chairman of the board and president from
among the directors and shall elect one or more vice presidents, a secretary, a
treasurer and such assistant officers or other officers as it shall deem
advisable.
Section 3. The board of directors may from time to time appoint such
other officers and agents as it shall deem advisable, who shall hold their
offices for such terms and shall perform such duties as from time to time may
be prescribed by the board of directors or the president.
Section 4. The salaries of all officers of the corporation shall be fixed
by the board of directors.
Section 5. Each officer of the corporation shall hold office until his
successor is chosen and qualified or until his earlier death, resignation or
removal. Any officers elected or appointed by the board of directors may be
removed at any time by the affirmative vote of a majority of the board of
directors. Election or appointment as an officer or agent shall not of itself
create contract rights. Any vacancy occurring in any office of the corporation
may be filled by the board of directors.
Chairman of the Board
Section 6. The chairman of the board shall preside at all meetings of the
stockholders and the board of directors. He may sign certificates for shares
of the corporation and any deeds, mortgages, bonds, contracts, or other
instruments which the board of directors has authorized to be executed, whether
or not under the seal of the corporation, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors or by
these by-laws to some other officer or agent of the corporation, and he shall
perform such other duties and have such other powers as from time to time may
be prescribed by the board of directors.
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President
Section 7. The president shall be the chief executive officer of the
corporation. Subject to the direction of the board of directors, he shall have
general and active management responsibility for the business of the
corporation and general supervision of the other officers, agents and employees
of the corporation and shall see that all orders and resolutions of the board
of directors are carried into effect. In the absence of the chairman of the
board, or in the event of his inability to act, he shall preside at all
meetings of the stockholders and of the board of directors. He may sign
certificates for shares of the corporation, and any deeds, mortgages, bonds,
contracts, or other instruments, whether or not under the seal of the
corporation, except in cases where the signing and execution thereof shall be
expressly delegated by the board of directors or by these by-laws to some other
officer or agent of the corporation, and shall perform such other duties and
have such other powers as from time to time may be prescribed by the board of
directors.
Vice Presidents
Section 8. In the absence of the president, or in the event of his
inability to act, the vice president (or if there be more than one, the
executive vice presidents, senior vice presidents or the vice presidents in the
order designated, or in the absence of any designation then in the order named
in the most recent resolution providing for the annual election of officers)
shall perform the duties of the president and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the president. The
vice presidents shall perform such other duties and have such other powers as
from time to time may be prescribed by the board of directors or the president.
Secretary
Section 9. The secretary shall: (a) keep the minutes of the
stockholders' and the board of directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the corporation and see
that the seal of the corporation or a facsimile thereof is affixed to, and
attested to, all certificates for shares prior to the issue thereof and that
the seal of the corporation is affixed to, and attested to, all documents, the
execution of which on behalf of the corporation under its seal is duly
authorized in accordance with the provisions of these by-laws; (d) keep or
cause to be kept a register of the mailing address of each stockholder which
shall be furnished to the secretary or any transfer agent of the corporation by
such stockholder; (e) sign, with the chairman of the board, the president or a
vice president, certificates for shares of the corporation, the issue of which
shall have been authorized by resolution of the board of directors;
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(f) have general charge of the stock transfer books of the corporation; and (g)
in general perform all duties incident to the office of the secretary and such
other duties as from time to time may be prescribed by the board of directors
or the president.
Treasurer
Section 10. The treasurer shall have charge and custody of and be
responsible for all funds and securities of the corporation, the receipt and
disbursement, subject to the direction of the board of directors, of all moneys
due and payable to or by the corporation and to deposit funds and securities of
the corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with these by-laws; and (b) in general perform all
the duties incident to the office of treasurer and such other duties as from
time to time may be prescribed by the board of directors, the president or the
chief financial officer. If required by the board of directors, the treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the board of directors shall determine.
Assistant Treasurers and Assistant Secretaries
Section 11. The assistant secretaries as thereunto authorized by the
board of directors may sign with the chairman of the board, the president or a
vice president certificates for shares of the corporation, the issue of which
shall have been authorized by a resolution of the board of directors. The
assistant treasurers shall, if required by the board of directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the board of directors shall determine. The assistant secretaries and
assistant treasurers in general shall perform such duties as from time to time
may be prescribed by the secretary or the treasurer, respectively, or by the
board of directors or the president.
Controller
Section 12. The controller shall: (a) have responsibility to record the
transactions of the corporation in the books of account of the corporation; (b)
report the results of operations and financial condition of the corporation to
stockholders, directors, and officers of the corporation; (c) maintain proper
internal controls over the assets of the corporation, and (d) in general
perform such other duties as from time to time may be prescribed by the chief
financial officer, by the board of directors, or by the president.
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ARTICLE VI
Contracts, Loans, Checks, Deposits and Investments
Section 1. The board of directors may authorize any officer or officers,
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 2. No loans shall be contracted on behalf of the corporation and
no evidence of indebtedness shall be issued in its name unless authorized by a
resolution of the board of directors. Such authority may be general or
confined to specific instances.
Section 3. All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the corporation
shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner, as shall from time to time be determined by
resolution of the board of directors.
Section 4. All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as the board of directors may authorize.
ARTICLE VII
Certificates for Shares and Their Transfer
Section 1. Each holder of stock in the corporation shall be entitled to
have a certificate in such form as may be determined by the board of directors,
signed by or in the name of the corporation by the chairman of the board, the
president or a vice president and by the secretary or an assistant secretary,
or the treasurer or an assistant treasurer of the corporation, and sealed with
the seal or a facsimile of the seal of the corporation. All certificates for
shares shall be consecutively numbered or otherwise identified. The name of
the person to who the shares represented thereby are issued, and with the
number of shares and date of issue, shall be entered on the book of the
corporation.
Section 2. Upon surrender to any transfer agent of the corporation of a
certificate for shares of the corporation, duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
corporation shall issue a new certificate to the person entitled thereto and
cancel
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the old certificate and record the transaction on the books of the corporation.
The person in whose name shares stand on the books of the corporation shall be
deemed the owner thereof for all purposes as regards the corporation.
Section 3. The board of directors may appoint one or more transfer agents
and registrars of transfers, and may require all stock certificates to be
countersigned by such transfer agent and registered by such registrar. The
board of directors shall have authority to make or approve rules and
regulations concerning the issue, transfer and registration of certificates for
shares.
Section 4. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such officer, transfer agent or registrar were still authorized at the
date of issue.
Section 5. The board of directors may authorize the issuance of a new
certificate in lieu of a certificate alleged by the holder thereof to have been
stolen, lost mutilated or destroyed, upon compliance by such holder, or his
legal representatives, with such requirements as the board of directors may
impose or authorize. Such authorization by the board of directors may be
general or confined to specific instances.
ARTICLE VIII
Fixing Record Date
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect to any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall be given
not less than ten nor more than sixty days (or in the case of a merger or
consolidation, not less than twenty or more than sixty days) before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
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ARTICLE IX
Dividends
The board of directors may from time to time, declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its certificate of incorporation.
ARTICLE X
General Provisions
Seal
Section 1. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Fiscal Year
Section 2. The fiscal year of the corporation shall begin on the first
day of January in each year and end on the thirty-first day of December in each
year.
ARTICLE XI
Amendments
Section 1. Subject to the provisions of Article Tenth of the
corporation's certificate of incorporation, these by-laws may be altered,
amended or repealed and new by-laws may be adopted at any meeting of the board
of directors or at any meeting of stockholders, held pursuant to notice duly
given.
ARTICLE XII
Emergency Directors
Section 1. The board of directors, by resolution, may provide for
emergency directors and appoint or designate the manner in which emergency
directors shall be determined. To the extent provided in said resolution and
as provided by Section 110 of the Delaware General Corporation Law, such
emergency directors, together with any remaining directors able to perform
their duties, shall have and may exercise the powers of the board of directors
in the management of the business and affairs of the corporation, and shall
thereby be deemed to constitute the board of directors of the corporation,
during any interval commencing when the board of directors shall be unable to
function by reason of
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vacancies due to death, incapacity, or catastrophe or other similar emergency
conditions, as a result of which a quorum of the board of directors or a
standing committee thereof cannot readily be convened for action. Such
emergency directors, including any remaining directors able to perform their
duties, shall, during the term they are authorized to function as provided
herein, have the power to appoint such temporary officers to fill existing
vacancies as the circumstances may require, to remove officers as the
circumstances may require, to authorize the seal of the corporation to be
affixed to all papers which may require it, and to take any and all other
actions as may be required and permitted in conformity with the provisions of
Section 110 of the Delaware General Corporation Law. The emergency directors
shall consist of any available members of the board of directors and any other
persons in such order as named by the board of directors on any list as it may
compile from time to time for purposes of appointing such emergency directors.
If the board of directors shall have failed to compile any list for purposes of
appointing emergency directors, the emergency directors shall consist of (in
the order specified below) any available members of the board of directors, the
chairman of the board, the president, the vice presidents (in order of
seniority), the secretary, the treasurer, the controller, the assistant
secretaries (in order of seniority), and the assistant treasurers (in order of
seniority) of the corporation. The chairman of the emergency directors shall
be the highest ranking available person on any list compiled by the board of
directors for purposes of appointing the emergency directors, or, if the board
of directors shall have failed to compile any such list, the highest ranking
available person of the following: the chairman, the most senior member of the
board of directors, the president, the most senior vice president, the
secretary, the treasurer, the controller, the most senior assistant secretary,
and the most senior assistant treasurer.
Section 2. The emergency directors shall meet as promptly as possible
after the occurrence of the event herein described which would activate their
appointment and at such subsequent time or times as it may designate until a
board of directors has been duly elected by the stockholders and qualified. A
meeting of the emergency directors may be called by any emergency director,
notice of which meeting need be given only to such emergency directors as it is
feasible to reach at the time. Such emergency directors shall make their own
rules of procedure except to the extent otherwise provided by resolution of the
board of directors. The emergency directors in attendance at the meeting shall
constitute a quorum.
Section 3. During such times as the emergency directors shall be required
to function pursuant to the provisions hereof, in the absence of the chief
executive officer, the chairman of said emergency directors shall function as,
and have the powers of, the chief executive officer of the corporation and
shall preside at all meetings of the stockholders and the emergency directors.
The
14
<PAGE> 15
chief executive officer shall have and exercise, subject to the direction
of the emergency directors, general charge and supervision over the business
and affairs of the corporation.
Section 4. To the extent not inconsistent with the provisions of this
Article XII or Section 110 of the Delaware General Corporation Law, all other
provisions of these bylaws shall remain in effect during the interval in which
the emergency directors shall be required to function pursuant to the
provisions hereof.
ARTICLE XIII
Indemnification
Section 1. The right to indemnification conferred by Article Eighth of
the corporation's certificate of incorporation shall include the right to be
paid by the corporation the expenses (including attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if the Delaware General Corporation Law requires, an advancement
of expenses incurred by an indemnitee in his capacity as a director or officer
(and not in any other capacity in which service was or is rendered by such
indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the corporation of an undertaking, by or on
behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined that such indemnitee is not entitled to be indemnified
for such expenses under Article Eighth of the corporation's certificate of
incorporation or otherwise. This Article XIII shall not be amended in a manner
which diminishes the rights conferred hereby upon any then current or former
director or officer of the corporation.
15
<PAGE> 1
Exhibit 11
COMPUTATION OF NET EARNINGS PER COMMON SHARE
<TABLE>
Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
EARNINGS
Net Earnings $ 5,016,392 $ 5,634,516 $ 4,374,374
=========== =========== ===========
SHARES
Weighted Average Number of
Common Shares Outstanding 4,756,789 4,724,489 4,710,966
(See Note)
Additional Shares Assuming
Conversion of Stock Options 112,913 39,002 47,122
----------- ----------- -----------
Weighted Average Common Shares
Outstanding and Equivalents 4,869,702 4,763,491 4,757,867
=========== =========== ===========
PRIMARY EARNINGS PER COMMON SHARE
Net Earnings $ 1.03 $ 1.18 $ .92
=========== =========== ===========
</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
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS (in thousands of dollars)
Net Sales $114,020 $122,004
Net Earnings 5,016 5,635
- ------------------------------------------------------------------------
FINANCIAL POSITION (in thousands of dollars)
Total Assets $ 78,095 $ 73,122
Total Debt 21,714 19,101
Stockholders' Equity 33,047 29,182
Debt/Capitalization Ratio 40% 40%
Return on Average Stockholders' Equity 16% 21%
- ------------------------------------------------------------------------
PER SHARE DATA
Net Earnings $ 1.03 $ 1.18
Cash Dividends .29 .25
Book Value 6.91 6.17
</TABLE>
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS:
During 1996, the Company's level of borrowings increased by $2.6 million to
$21.7 million at year-end from $19.1 million at December 31, 1995. Despite the
year-over-year increase in borrowings, the ratio of debt to total
capitalization was unchanged from 1995, closing 1996 at 40%.
A significant factor in the increased borrowing levels in
1996 was the use of debt to fund the $2.3 million purchase price for the
acquisition of assets of Vac-Hyd, based near Los Angeles, in May 1996. At the
close of 1996, a note payable of $901,000 remained to be paid from this
transaction, while $1.4 million paid at the closing in May had been funded
through bank borrowings.
Another main use of funds was capital expenditures. A total of $8.3
million was spent on capital projects in 1996, as compared to $6.7 million in
1995. This was a 24% increase over the prior year. The 1996 figure excludes
funds used in the purchase of Vac-Hyd.
Capital investments throughout the company in 1996 were made to largely
accommodate new sales opportunities or to replace/upgrade facilities and
equipment. Approximately 10% of the total capital spending related to SP 2000
projects - slightly less than the percentage for 1995. The addition of a new
thixomolding production cell represented 11% of the total capital figure. Other
major projects included new furnace installations at several of the Company's
heat treating facilities and equipment to be used for the manufacture of a new
part at Impact Industries ("Impact"). For 1997, the Company expects its outlays
for capital projects in its current businesses to approximate the 1996 level.
Levels of working capital associated with accounts receivable, inventory
and accounts payable were, in the aggregate, lower at year-end 1996 in large
part due to the sales volume reduction that was experienced during the year.
During 1996, the Company made cash outlays related to certain
environmental related matters. These outlays largely included costs for
consulting/engineering, legal support and, in certain cases, site remediation.
The Company believes it will continue to need to make such expenditures in the
future, but that such cash outlays will continue to have a limited effect on
its financial position and liquidity.
On October 23, 1996, the Board of Directors declared a cash dividend of
$.08 on each share of the Company's common stock. This dividend increased by
$.01, or 14%, from the dividend paid in the previous quarter. For the calendar
year 1996, $1.4 million was paid to stockholders in total cash dividends as
compared to $1.2 million in 1995. At a rate of $.08 per quarter, approximately
$1.5 million in cash dividends will be paid annually.
Funds generated through operations largely accommodated the above cash
requirements, in combination with the increase in borrowings. In addition, the
Company received $1.0 million in cash in December 1996 from the sale of the
assets of its wire belting operation. The Company held a receivable of $1.1
million at the close of the year also related to that sale.
Effective February 20, 1996, the Company expanded the revolving credit
facility it maintains with two banks to $25.0 million from $20.0 million. At
year-end 1996, as total borrowings against the facility were $10.7 million, the
Company had $14.3 million of unused credit available.
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 business both in
1997 and in the longer term.
OF RESULTS OF OPERATIONS: 1996 VERSUS 1995
Net sales for the Company decreased 7% to $114.0 million in 1996 from $122.0
million in 1995. The decrease in sales resulted from a falloff in revenues
within the Precision Products business segment, which more than offset an
increase registered by the Heat Treating segment.
The Heat Treating segment recorded 7% higher sales in 1996, increasing
from $67.7 million in 1995 to $72.6 million in 1996. Within this segment's
overall increase, results were mixed with some operations showing gains while
others reported lower sales. In general, growth related to SP 2000 projects,
the acquisition of Vac-Hyd and a strong commercial aerospace market were
important contributors to the sales improvement.
The Precision Products segment sales fell 24% to $41.4 million in 1996
from $54.3 million in 1995. While the decrease was shared by each operation
within the segment to a degree, the primary cause of the overall decline was a
significant falloff in sales at the Company's Impact operation.
Sales were lower at Impact in 1996 for the following primary reasons.
Business levels in the first six months of 1995 reflected strong customer
demand generally, which trended lower into 1996 thereby contributing to the
overall unfavorable sales comparision. Also in 1995, sales to certain customers
were discontinued as the year progressed. This occurred partially due to a
planned shedding of sales which were providing lower than acceptable returns.
In addition, during the second half of 1996, certain production parts were
eliminated by existing customers for model changeover purposes which adversely
affected Impact's sales as well. Finally, a portion of the sales shortfall
related to a decline in the price of aluminum in 1996 from 1995, which is
reflected to a degree in the prices billed to customers.
As a result of the above issues, revenue trended lower in
10
<PAGE> 3
1996 as new production parts were not obtained to replace the lost sales as
outlined above, despite ongoing marketing and quoting related efforts. The
Company expects that sales at this operation will not show material improvement
in the near term given normal lead times for new part production in the event
new customer orders are received.
Overall, the Company's gross profit percentage was essentially unchanged
in 1996 as compared to 1995. This resulted primarily from a shifting in the mix
of the Company's overall business towards heat treating in 1996, which operates
at higher gross profits. In 1996, 64% of sales were heat treating related while
56% of sales were from heat treating in 1995.
From a business segment standpoint, the Heat Treating segment recorded 14%
higher operating earnings in 1996. However, primarily due to the reduction in
sales within Precision Products/Impact discussed above and weak operating
performance therein, the Precision Product segment did not contribute to the
Company's overall earnings in 1996.
Selling and administrative expenses were lowered 5% to $14.2 million in
1996 from $14.9 million in 1995, consistent with the reduced sales. As a
percentage of sales, selling and administrative expenses were unchanged at 12%
in 1996 as compared to the prior year.
Interest expense decreased to $1.5 million in 1996 from $1.7 million in
1995 mainly as a result of lower interest rates during the year.
Results in 1995 also included a $615,000 gain related to a fire at the
Company's facility in Ohio in late 1994. The complete destruction of one major
piece of equipment and subsequent capitalization of a new furnace resulted in
an involuntary conversion gain reported as other income.
Reflecting the above items, and with no change in the Company's effective
income tax rate in 1996 from 1995, the Company's net earnings fell to $5.0
million, or $1.03 per share, in 1996 from $5.6 million, or $1.18 per share, in
1995.
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: 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 segment recorded a 13% sales increase for the year while
the Precision Products segment, excluding the effect of Impact, registered a 7%
advance. Sales during the year were strong 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 overall 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.
For 1995, the Company's gross profit margin percentage declined slightly
from the 1994 level. Contributing factors in the lower margin 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 poor results later in 1995 at Impact related to establishing
production lines for the new work mentioned earlier.
From a business segment standpoint, operating earnings improved by 40%
within the Heat Treating business. However, despite the increase in sales
within the Precision Products segment, largely related to Impact, operating
earnings fell 27% for the segment due to the poor operating and productivity
results discussed above.
For the year, however, total Company operating margins improved to 9% in
1995 from 8% 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 fixed the rates on senior notes issued in November
1995, which represented about half its borrowings at year-end 1995, it became
somewhat less subject to the effects of subsequent fluctuations in interest
rates.
Related to the fire in Ohio, as previously discussed, an accounting gain of
$615,000 was reported as other income in 1995.
Reflecting the above, the Company's net earnings rose to $5.6 million, or
$1.18 per share in 1995, from $4.4 million, or $.92 per share in 1994.
11
<PAGE> 4
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $114,020,042 $122,003,921 $ 99,858,339
Cost of Sales (90,787,860) (96,836,387) (78,616,439)
- -------------------------------------------------------------------------------------------
Gross Profit 23,232,182 25,167,534 21,241,900
Selling and Administrative Expenses (14,158,902) (14,946,085) (13,183,820)
Equity in Earnings of Partnership 892,822 301,195 54,187
- -------------------------------------------------------------------------------------------
Operating Earnings 9,966,102 10,522,644 8,112,267
Other Income (Expense):
Interest Expense (1,535,438) (1,703,041) (891,455)
Interest Income - 34,930 77,998
Gain on Asset Conversion - 615,242 -
- -------------------------------------------------------------------------------------------
Earnings Before Income Taxes 8,430,664 9,469,775 7,298,810
Provision for Income Taxes (3,414,272) (3,835,259) (2,924,436)
- -------------------------------------------------------------------------------------------
NET EARNINGS $ 5,016,392 $ 5,634,516 $ 4,374,374
===========================================================================================
- -------------------------------------------------------------------------------------------
NET EARNINGS PER SHARE $ 1.03 $ 1.18 $ .92
===========================================================================================
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Underfunded
For the Years Ended December 31, Common Additional Retained Treasury Pension Liability
1996, 1995 and 1994 Shares Paid-In Capital Earnings Shares Adjustment Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------------------------------------------------------
Net Earnings 5,016,392 5,016,392
Dividends Paid (1,379,120) (1,379,120)
Exercise of Stock Options (18,700) 292,387 273,687
Pension Adjustment (46,492) (46,492)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $14,183,493 $1,493,406 $22,652,574 $(5,054,651) $(227,920) $33,046,902
==========================================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
12
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
For the Years Ended December 31, 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 51,992 $ 200,171
Receivables, Less Allowance for Doubtful Accounts
of $433,000 in 1996 and $328,000 in 1995 15,419,945 17,099,688
Inventories 3,021,508 4,937,987
Prepaid and Refundable Income Taxes 1,687,534 1,060,546
Note Receivable 1,102,600 -
Prepaid Expenses 3,543,863 1,980,913
Other Current Assets 1,201,556 1,102,592
- ----------------------------------------------------------------------------------------------
Total Current Assets 26,028,998 26,381,897
PROPERTY AND EQUIPMENT:
Land 2,165,204 2,165,204
Buildings and Improvements 20,115,658 18,923,762
Machinery and Equipment 78,757,461 74,839,890
Construction in Progress 3,062,236 965,625
- ----------------------------------------------------------------------------------------------
Total Property and Equipment 104,100,559 96,894,481
Less-Accumulated Depreciation (59,137,724) (56,153,951)
- ----------------------------------------------------------------------------------------------
Net Property and Equipment 44,962,835 40,740,530
Goodwill 2,973,212 2,755,736
Investment in Partnership 1,607,632 914,810
Other Non-Current Assets 2,521,855 2,328,902
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS $78,094,532 $73,121,875
==============================================================================================
- ----------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES:
Current Maturities on Long-Term Debt $ 53,565 $ 83,286
Note Payable 901,437 -
Accounts Payable 5,553,376 6,726,972
Accrued Expenses:
Salaries and Wages 1,559,913 1,619,228
Taxes, Other Than Income 663,532 994,386
Employee Insurance and Benefits 1,530,348 1,107,089
Utilities 662,013 566,470
Other 1,688,422 2,093,037
- ----------------------------------------------------------------------------------------------
Total Current Liabilities 12,612,606 13,190,468
NON-CURRENT LIABILITIES:
Deferred Income Taxes 6,847,504 6,114,508
Long-Term Debt (Less Current Maturities) 20,759,150 19,018,285
Accrued Pension 3,148,114 2,702,295
Other Non-Current Liabilities 1,680,256 2,913,884
- ----------------------------------------------------------------------------------------------
Total Non-Current Liabilities 32,435,024 30,748,972
STOCKHOLDERS' EQUITY:
Common Shares, $2.50 par value:
Authorized 12,000,000 shares in 1996 and 1995
Issued 5,673,397 shares in 1996 and 1995 14,183,493 14,183,493
Additional Paid-In Capital 1,493,406 1,512,106
Retained Earnings 22,652,574 19,015,302
Treasury Shares (894,256 in 1996 and 946,006 in 1995), at Cost (5,054,651) (5,347,038)
Underfunded Pension Liability Adjustment (227,920) (181,428)
- ----------------------------------------------------------------------------------------------
Total Stockholders' Equity 33,046,902 29,182,435
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $78,094,532 $73,121,875
==============================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these balance sheets.
13
<PAGE> 6
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $5,016,392 $5,634,516 $4,374,374
Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities:
Depreciation 5,543,009 5,222,620 4,455,002
Equity Earnings, Net of Cash Distributions (692,822) (301,195) (54,187)
Goodwill Amortization 102,262 91,528 61,019
Increase (Decrease) in Deferred Taxes 732,996 (376,879) 728,031
Gain from Asset Conversion - (615,242) -
Change in Assets and Liabilities:
Receivables 2,199,292 (347,794) (1,306,809)
Inventories 993,879 (606,720) (1,449,766)
Prepaid and Refundable Income Taxes (626,989) 966,601 336,078
Prepaid Expenses and Other Current Assets (1,644,369) (618,147) (221,689)
Accounts Payable (1,173,596) (1,554,676) 2,131,278
Accrued Expenses (760,630) (1,115,905) (918,272)
Other (1,455,531) 244,931 (712,886)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Adjustments to Reconcile Net Earnings to Net Cash
Provided by Operating Activities 3,217,501 989,122 3,047,799
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 8,233,893 6,623,638 7,422,173
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (8,252,348) (6,653,625) (6,194,914)
Investment in Thixomat, Inc. (37,625) - -
Cash Received for Sale of Wire Belt Operation 1,000,000 - -
Payment for Purchase of Vac-Hyd (2,325,560) - -
Proceeds from Note Receivable for Sales of International Affiliate - - 484,000
Proceeds from Notes Receivable for Sales of Heat Treat Facilities - 400,000 1,504,350
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 (9,615,533) (6,253,625) (10,178,470)
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Payments) Under Revolving Credit Agreement 1,800,000 (2,700,000) 3,900,000
Note Payable 901,437 - -
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)
Repayment of Long-Term Debt of Impact Industries, Inc. - - (6,411,633)
Payments of Capital Lease Obligations (88,856) (99,848) (62,433)
Dividends Paid (1,379,120) (1,181,054) (989,237)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities 1,233,461 (280,902) 2,656,697
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (148,179) 89,111 (99,600)
Cash at Beginning of Year 200,171 111,060 210,660
- ----------------------------------------------------------------------------------------------------------------------------------
Cash at End of Year $ 51,992 $ 200,171 $ 111,060
==================================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest Paid $1,673,404 $1,716,640 $ 857,978
Income Taxes Paid 3,235,993 3,287,073 2,111,777
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Contribution of Assets to Partnership - - 559,429
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
14
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 1. ACCOUNTING POLICIES
A. NATURE OF OPERATIONS The company serves metal-using and metal-working
industries, providing commercial heat treating and manufacturing precision
metal products, primarily specialized castings of aluminum and magnesium.
B. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include
the accounts of Lindberg Corporation and its subsidiary. Significant
intercompany balances and transactions have been eliminated.
The company's 50% share of a heat treating partnership is carried at cost
plus equity in undistributed earnings since the partnership formation on July
1, 1994.
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, 1996,
1995 and 1994 were 4,869,702, 4,763,491 and 4,757,867, 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, revenues and expenses. Actual results could differ from those
estimates.
H. IMPAIRMENT OF LONG-LIVED ASSETS Effective January 1, 1996, the company
adopted SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS 121). The provisions of SFAS 121
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. The company does not believe that any impairment of long-lived
assets has occurred, and, therefore, the adoption of SFAS 121 did not have any
effect on the company's statements of earnings in 1996.
I. RECLASSIFICATIONS Certain prior period amounts have been reclassified to be
consistent with the 1996 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.,
paying $5.5 million in cash and retiring its $6.4 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. for $500,000. The results of operations since
November 30, 1994 are included in the totals of the company.
On May 31, 1996, the company acquired the assets of Vac-Hyd for $2.3
million, which included cash and a note payable. Vac-Hyd is a heat treating
facility located in the Los Angeles area. The results of operations since May
31, 1996 are included in the totals of the company.
NOTE 3. INVENTORIES
The components of inventory are as follows: (in thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1996 1995
--------------------------------------------------------------------------
<S> <C> <C>
Raw material $ 727 $1,998
Work in process 1,754 2,352
Finished goods 541 588
--------------------------------------------------------------------------
$3,022 $4,938
--------------------------------------------------------------------------
</TABLE>
NOTE 4. INCOME TAXES
The major components of the provision for income taxes for 1996, 1995
and 1994 are as follows: (in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Current Deferred Total
- -------------------------------------------------------------------------
<S> <C> <C> <C>
1996 Federal $2,271 $378 $2,649
State 622 72 694
Canadian 54 17 71
- -------------------------------------------------------------------------
$2,947 $467 $3,414
- -------------------------------------------------------------------------
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
- -------------------------------------------------------------------------
</TABLE>
15
<PAGE> 8
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 sources of these differences and the
tax effect of each are as follows: (in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation $66 $89 $49
Restructuring activities - 385 402
Environmental control activities 241 (370) 57
Other 160 180 (27)
- -----------------------------------------------------------------------------
$467 $284 $481
- -----------------------------------------------------------------------------
</TABLE>
The differences between the provision for income taxes at the statutory rate
and that shown in the consolidated statements of earnings are summarized as
follows: (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated pretax earnings
at statutory rate $2,866 $3,220 $2,482
State income taxes, net of
federal tax benefit 458 513 389
Other 90 102 53
- ------------------------------------------------------------------------------
$3,414 $3,835 $2,924
- ------------------------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
company's deferred tax liabilities and assets at December 31, 1996, 1995 and
1994 are as follows: (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Liabilities:
Tax depreciation over book $(7,452) $(7,520)
Other liabilities (398) (377)
- ------------------------------------------------------------------------------
Total Deferred Tax Liabilities (7,850) (7,897)
- ------------------------------------------------------------------------------
Deferred Tax Assets:
Restructuring activities -- --
Reserves not deducted for tax 829 1,605
Employee benefit provisions in
excess of cash payments 1,266 1,471
Other assets 324 276
- ------------------------------------------------------------------------------
Total Deferred Tax Assets 2,419 3,352
- ------------------------------------------------------------------------------
Net Deferred Tax Liability $(5,431) $(4,545)
- ------------------------------------------------------------------------------
Included in Balance Sheet in:
Prepaid and Refundable Income Taxes $1,417 $1,570
Deferred Income Taxes (6,848) (6,115)
- ------------------------------------------------------------------------------
$(5,431) $(4,545)
- ------------------------------------------------------------------------------
</TABLE>
NOTE 5. DEBT
Long-term debt consists of the following: (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Senior notes $10,000 $10,000
Revolving credit 10,700 8,900
Note payable 901 --
Capital lease agreements 113 201
- ------------------------------------------------------------------------------
21,714 19,101
Less-current maturities (955) (83)
- ------------------------------------------------------------------------------
$20,759 $19,018
- ------------------------------------------------------------------------------
</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.
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 was 6.7%
and 7.6% during 1996 and 1995, respectively, and 6.5% and 7.1% at year-end 1996
and 1995, respectively.
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 certain 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. At December 31, 1996, 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, 1996 are $955,000,
$2,059,000, $2,001,000, $2,000,000 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, 1996: (in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Operating Capital
Leases Leases
- ---------------------------------------------------------------------------
<S> <C> <C>
1997 $1,414 $ 70
1998 1,346 53
1999 1,276 1
2000 839 -
2001 349 -
Thereafter 1,163 -
- ---------------------------------------------------------------------------
Total minimum payment required $6,387 124
------
Less imputed interest (11)
----
Present value of minimum lease payments $113
- ---------------------------------------------------------------------------
</TABLE>
Sublease income of $109,000 is due in each of the next five years.
16
<PAGE> 9
The total rent expense for 1996, 1995 and 1994 was $1,610,000, $1,298,000
and $960,000, respectively.
NOTE 7. EMPLOYEE BENEFITS
The company and its subsidiary have various defined benefit pension
plans covering many of their employees. The pension expense related to these
plans for 1996, 1995 and 1994 was $455,000, $31,000 and $237,000, 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 1996, 1995 and 1994 included the following
components: (in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 776 $ 533 $ 670
Interest cost on projected
benefit obligations 1,158 1,076 1,071
Return on plan assets (2,436) (3,194) 161
Net amortization and deferral 957 1,616 (1,665)
- --------------------------------------------------------------------------------------------------
$ 455 $ 31 $ 237
- --------------------------------------------------------------------------------------------------
</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, 1996 and 1995.
<TABLE>
Table 1: Reconciliation of Funded Status (in thousands)
- -----------------------------------------------------------------------------------------------
Assets Accumu- Assets Accumu-
Exceed lated Exceed lated
Accumu- Benefits Accumu- Benefits
lated Exceed lated Exceed
Benefits Assets Benefits Assets
1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value
of benefit obligations:
Vested benefit obligations $(10,807) $(1,805) $(10,559) $(1,775)
- -----------------------------------------------------------------------------------------------
Accumulated benefit
obligations (11,295) (2,028) (11,023) (1,844)
- -----------------------------------------------------------------------------------------------
Projected benefit obligations (14,593) (2,255) (14,179) (1,960)
Plan assets at fair value 17,592 714 16,163 606
- -----------------------------------------------------------------------------------------------
Plan assets in excess of
(or less than) projected
benefit obligations 2,999 (1,541) 1,984 (1,354)
Unrecognized net (gain) loss (2,452) 619 (1,082) 432
Unrecognized net (assets) obli-
gations amortized over average
remaining service period of
the employee workforce (1,100) 109 (1,274) 137
Unrecognized prior
service cost 269 238 286 240
Long-term balance
sheet liability - (738) - (693)
- -----------------------------------------------------------------------------------------------
Long-term pension liability $(284) $(1,313) $(86) $(1,238)
- -----------------------------------------------------------------------------------------------
</TABLE>
The discount rate used in determining the projected benefit obligation was
7.50% in 1996 and 7.25% in 1995. 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 1996 and 1995.
Effective January 1, 1995, the defined benefit pension plan was closed to
new enrollment. In its place, the company established a 401(k) defined
contribution plan available to all its employees. The company also administers
and contributes to a 401(k) savings plan previously available at Impact. The
company matches 50% of the participants' contributions up to 4% of
compensation. Additionally, the company also contributes one percent of each
employee's compensation for all employees who joined the company on or after
January 1, 1995, have six months of service, and who are still participants in
the 401(k) savings plan at the end of the year. The company made distributions
for contributions and related expenses of $544,000, $499,000 and $72,000 to
these defined contribution plans in 1996, 1995 and 1994, respectively.
The company provides no other postretirement benefits other than the
benefit plans listed above.
NOTE 8. STOCK OPTIONS
In 1991, the Board of Directors and stockholders approved a stock option plan
for key employees. 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. In 1995, the plan was amended to increase the reserve of common stock
available for issuance upon the exercise of options to 675,000 shares. The
following table summarizes information as to options granted, exercised,
cancelled and outstanding under this plan and options still available under a
similar plan which expired in 1991.
<TABLE>
- -------------------------------------------------------------------------------
Average Option
Shares Price per Share
- -------------------------------------------------------------------------------
<S> <C> <C>
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
Options granted during year 72,900 7.50
Options exercised during year (51,750) 5.29
Options cancelled during year (9,700) 7.30
- -------------------------------------------------------------------------------
Outstanding, December 31, 1996 318,225 $6.70
- -------------------------------------------------------------------------------
</TABLE>
The company adopted the disclosure-only option under SFAS 123, "Accounting for
Stock Based Compensation" (SFAS 123), as of December 31, 1996. As such, the
company continues to account for employee stock options under APB Opinion 25,
as permitted under generally accepted accounting principles. Accordingly, no
compensation cost has been recognized in the accompanying financial statements
related to these options. Had compensation cost for these plans been determined
consistent with SFAS 123, the company's net earnings and net earnings per share
would
17
<PAGE> 10
reflect the following: (in thousands, except per share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1996
- --------------------------------------------------------------
<S> <C> <C>
Net Earnings: As Reported $5,016
Pro Forma $4,922
- --------------------------------------------------------------
Net Earnings Per Share: As Reported $ 1.03
Pro Forma $ 1.01
- --------------------------------------------------------------
</TABLE>
Since SFAS 123 does not apply to options granted prior to January 1, 1995, the
pro forma disclosure is not likely to be indicative of pro forma results which
may be expected in future years.
The fair value of each option is estimated on the date of grant based on
the Black-Scholes option pricing model with the following weighted-average
assumptions: a risk-free interest rate of 6.5 percent; a 3.2 percent
distribution yield; and an average expected life of 5 years. The options
granted to employees in 1996 vest ratably over 4 years. The fair value of
options granted during 1996 was calculated to be $2.83.
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, 1996, 27,000 shares were available
for future grant.
NOTE 9. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for 1996 and 1995 are shown in Table 2.
NOTE 10. BUSINESS SEGMENT INFORMATION
The company is engaged in Heat Treating and Precision Products industry
segments. Through its Heat Treating segment, it provides commercial heat
treating to the agricultural and construction equipment, automotive and truck,
aerospace, consumer products, defense and metal products industries.
The Precision Products segment produces specialized castings of aluminum
and magnesium. The products are used mainly in the automotive, construction and
agricultural equipment, electronics, consumer products and defense industries.
<TABLE>
<CAPTION>
Table 2: Quarterly Financial Data (Unaudited)
(in thousands of dollars except for per share amounts)
- ------------------------------------------------------------------
Quarter Net Gross Net Earnings
Ended Sales Profit Earnings Per Share
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
March 31 $29,502 $5,931 $1,242 $ .26
June 30 30,339 6,396 1,473 .30
September 30 26,759 5,549 1,068 .22
December 31 27,420 5,356 1,233 .25
- ------------------------------------------------------------------
$114,020 $23,232 $5,016 $1.03
- ------------------------------------------------------------------
1995
March 31 $33,580 $6,975 $1,471 $ .31
June 30 31,376 6,558 1,482 .31
September 30 27,372 5,311 855 .18
December 31 29,676 6,324 1,827 .38
- ------------------------------------------------------------------
$122,004 $25,168 $5,635 $1.18
- ------------------------------------------------------------------
</TABLE>
Intersegment and export sales are insignificant. Operating earnings are
defined as sales and other income directly related to a segment's operations,
less operating expenses. Identifiable assets by segment are those assets used
in the company's operations in that segment. Corporate assets are principally
notes receivable, prepaid expenses and property and equipment.
Table 3 sets forth certain financial information for the years ended 1996,
1995 and 1994.
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.
<TABLE>
Table 3: Business Segment Information (in thousands)
- -------------------------------------------------------------------------------------------------
Net Operating Identifiable Depreciation Capital
Sales Earnings Assets Expense Expenditures
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Heat Treating $ 72,629 $ 12,877 $ 41,999 $ 3,596 $ 4,389
Precision Products 41,391 77 29,622 1,900 3,854
Corporate - (2,988) 6,474 47 9
- -------------------------------------------------------------------------------------------------
$114,020 $ 9,966 $ 78,095 $ 5,543 $ 8,252
- -------------------------------------------------------------------------------------------------
1995
Heat Treating $ 67,729 $ 11,313 $ 37,786 $ 3,316 $ 3,923
Precision Products 54,275 2,119 30,744 1,854 2,670
Corporate - (2,909) 4,592 53 61
- -------------------------------------------------------------------------------------------------
$122,004 $ 10,523 $ 73,122 $ 5,223 $ 6,654
- -------------------------------------------------------------------------------------------------
1994
Heat Treating $ 59,755 $ 8,054 $ 35,572 $ 3,099 $ 4,260
Precision Products 40,103 2,906 29,243 1,287 1,848
Corporate - (2,848) 5,707 69 87
- -------------------------------------------------------------------------------------------------
$ 99,858 $ 8,112 $ 70,522 $ 4,455 $ 6,195
- -------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 11
NOTE 12. RELATED PARTY
The company holds a 14% equity interest in Thixomat, Inc., a company formed to
promote and commercialize Thixomolding(TM) 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 31%
equity interest in Thixomat. In addition, Lindberg holds a seat on Thixomat's
Board of Directors. At December 31, 1996, the company held a $387,625 equity
investment in Thixomat and held a note receivable of $47,000.
NOTE 13. UNCONSOLIDATED PARTNERSHIP (UNAUDITED)
The company's financial statements include the equity in earnings of an
unconsolidated 50%-owned heat treating partnership based on financial data as
of November 30 and for the twelve months then ended. The partnership was formed
on July 1, 1994. This represents the most current information available to the
company. Financial information is summarized as follows:
Balance Sheet information as of November 30: (in thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $1,846 $1,333
Current liabilities 465 434
Long-term assets 2,102 755
Long-term liabilities 220 124
- ---------------------------------------------------------------------------
</TABLE>
Income Statement information for the 12 months
ending November 30: (in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $8,828 $6,032 $2,153
Costs and expenses 6,595 5,279 2,018
Earnings before taxes 2,233 753 135
- -------------------------------------------------------------------------
</TABLE>
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 business segments employ some environmentally hazardous
materials, including oil and solvents, and have 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 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. During 1996, the company transferred certain properties it previously
operated to third parties in exchange for acceptance by said third parties of
the liability for future remediation and related costs associated with those
properties.
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, 1996, the company had reserves of approximately $800,000
to cover future anticipated costs. The company has estimated a range of costs
in establishing these reserves. 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.
NOTE 15. STOCKHOLDER RIGHTS PLAN
In 1996, the company declared a dividend distribution of one common share
purchase right on each outstanding share of common stock. The rights become
exercisable after a person or group acquires beneficial ownership of 20% or
more of the common stock of the company or publicly announces a tender offer or
exchange offer for 20% or more of the common stock. Initially, each right will
entitle its holder to buy one share of common stock of the
company at an exercise price of $40 per share. If a person or group acquires
beneficial ownership of 20% or more of the outstanding common stock of the
company; 1.) each right will entitle its holder to purchase shares of common
stock of the company at one-half their market price, or, in certain
circumstances, at their par value (currently $2.50 per share) and 2.) if the
company or its assets are acquired in certain merger or other transactions,
holders of rights may acquire common stock of the acquiring company having a
market value of twice the exercise price of the right. Rights held by the 20%
holder will become void and will not be exercisable to purchase shares at the
reduced purchase price. The rights, which do not have voting rights, will
expire on November 21, 2006 and may be redeemed by the company's board of
directors at a price of $.01 per right prior to their expiration or the
accumulation of 20% or more of the company's common stock.
19
<PAGE> 12
FIVE-YEAR FINANCIAL REVIEW
<TABLE>
<CAPTION>
For the Years Ended December 31, 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS (In thousands of dollars)
Net Sales $114,020 $122,004 $99,858 $ 69,619 $ 71,039
Gross Profit 23,232 25,168 21,242 15,103 14,661
Selling and Administrative Expenses (14,159) (14,946) (13,184) (11,056) (12,916)
Equity in Earnings of Partnership 893 301 54 -- --
Interest Expense, Net of Interest Income (1,536) (1,668) (813) (330) (408)
Other Income (Expense) -- 615 -- (8,261) --
Earnings (Loss) Before Income Taxes 8,430 9,470 7,299 (4,544) 1,337
Provision (Benefit) for Income Taxes 3,414 3,835 2,925 (1,726) 395
- -----------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ 5,016 $ 5,635 $ 4,374 $(1,318)(1) $ 942
- -----------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share $ 1.03 $ 1.18 $ .92 (.28) $ .20
=======================================================================================================================
FINANCIAL POSITION (In thousands of dollars)
Working Capital $ 13,416 $ 13,191 $ 8,607 $ 6,550 $ 8,012
Property and Equipment (net) 44,963 40,741 38,858 28,265 33,706
Total Assets 78,095 73,122 70,522 47,604 52,056
Long-Term Debt 20,759 19,018 16,700 7,700 9,480
Total Debt 21,714 19,101 18,201 7,780 9,560
Stockholders' Equity 33,047 29,182 24,669 21,155 23,462
=======================================================================================================================
OTHER FINANCIAL INFORMATION
Cash Dividends Declared and Paid
(In thousands of dollars) $ 1,379 $ 1,181 $ 989 $ 941 $ 1,126
Cash Dividends Per Share .29 .25 .21 .20 .24
Return on Average Stockholders' Equity 16% 21% 19% (6%) 4%
Book Value Per Share of
Stockholders' Equity $ 6.91 $ 6.17 $ 5.23 $ 4.50 $ 5.00
Debt/Capitalization Ratio 40% 40% 42% 27% 29%
Shares Outstanding at Year-End 4,779,141 4,727,391 4,717,016 4,702,541 4,692,541
Capital Expenditures
(In thousands of dollars) $ 8,252 $ 6,654 $ 6,195 $ 3,089 $ 4,788
Depreciation (In thousands of dollars) 5,543 5,223 4,455 3,716 4,420
Number of Employees at Year-End 1,071 1,119 1,168 737 760
=======================================================================================================================
</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 subsidiary as of December 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders' equity
and cash flows for the years ended December 31, 1996, 1995 and 1994. 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
subsidiary as of December 31, 1996 and 1995 and the results of its operations
and its cash flows for the years ended December 31, 1996, 1995 and 1994, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 20, 1997
20
<PAGE> 13
STOCK MARKET INFORMATION
The company's common stock trades on the Nasdaq National Market tier of 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>
- ----------------------------------------------------------------
1996 Market Price Dividend
Quarter High Low Per Share
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
1st $10.250 $6.375 $ .07
2nd 11.000 8.250 .07
3rd 11.125 8.750 .07
4th 11.000 9.250 .08
- ----------------------------------------------------------------
$ .29
<CAPTION>
- ----------------------------------------------------------------
1995 Market Price Dividend
Quarter High Low Per Share
- ----------------------------------------------------------------
<S> <C> <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>
STOCKHOLDER INFORMATION
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
ANNUAL MEETING
The annual stockholders' meeting will be held on Friday, April 25, 1997, 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, 1997.
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, 1996, is available to any
stockholder upon written request to the Secretary of the Company, 6133 N. River
Road, Suite 700, Rosemont, Illinois, 60018.
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 1,3
Executive Vice President
and Chief Operating Officer
Varlen Corporation
JOHN W. PUTH 1,2,3
President
J.W. Puth Associates
J. THOMAS SCHANCK 1,2
Retired Vice Chairman
Illinois Tool Works Inc.
LEO G. THOMPSON 3
President and
Chief Executive Officer
COMMITTEES OF THE BOARD:
1. Audit
2. Executive Compensation
3. Finance
OFFICERS
GEORGE H. BODEEN
Chairman of the Board
LEO G. THOMPSON
President and
Chief Executive Officer
MICHAEL W. NELSON
Senior Vice President and
President of Heat Treat Operations
STEPHEN S. PENLEY
Senior Vice President and
Chief Financial Officer
Secretary
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
Treasurer
Assistant Secretary
[Recycle 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 Statement File Nos. 33-47323 and 33-60361.
Arthur Andersen LLP
Chicago, Illinois
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000059593
<NAME> LINDBERG CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 51,992
<SECURITIES> 0
<RECEIVABLES> 15,419,945
<ALLOWANCES> 433,000
<INVENTORY> 3,021,508
<CURRENT-ASSETS> 26,028,998
<PP&E> 104,100,559
<DEPRECIATION> 59,137,724
<TOTAL-ASSETS> 78,094,532
<CURRENT-LIABILITIES> 12,612,606
<BONDS> 0
0
0
<COMMON> 14,183,493
<OTHER-SE> 1,493,406
<TOTAL-LIABILITY-AND-EQUITY> 78,094,532
<SALES> 114,020,042
<TOTAL-REVENUES> 114,020,042
<CGS> 90,787,860
<TOTAL-COSTS> 90,787,860
<OTHER-EXPENSES> 14,158,902
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,535,438
<INCOME-PRETAX> 8,430,664
<INCOME-TAX> 3,414,272
<INCOME-CONTINUING> 5,016,392
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,016,392
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
