SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-8287
LINDBERG CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1391480
------------------------ ------------------------
(State of Incorporation) (IRS Identification No.)
6133 North River Road, Suite 700 Rosemont, Illinois 60018
(847) 823-2021
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(Address and telephone number of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the registrant's common stock, $.01 par value,
outstanding as of August 14, 2000 was 5,661,661.
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LINDBERG CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Part I Financial Information: Page No.
--------
Item 1. Consolidated Statements of Earnings - Three Months
and Six Months Ended June 30, 2000 and 1999............. 3
Consolidated Balance Sheets - As of June 30, 2000
and December 31, 1999................................... 4
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2000 and 1999............................ 5
Notes to the Consolidated Financial Statements........... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.............................................11
Part II Other Information:
Item 1. Legal Proceedings........................................11
Item 6. Exhibits and Reports on Form 8-K.........................11
Signatures...............................................12
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PART I FINANCIAL INFORMATION
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LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 31,384,501 $ 31,583,663 $ 61,607,955 $ 63,724,803
Cost of Sale (22,952,613) (22,156,604) (44,881,316) (44,522,239)
------------ ------------ ------------ ------------
Gross Profit 8,431,888 9,427,059 16,726,639 19,202,564
Selling and Administrative
Expenses (4,878,889) (4,780,729) (9,803,288) (9,798,320)
------------ ------------ ------------ ------------
Operating Earnings 3,552,999 4,646,330 6,923,351 9,404,244
Interest Expense - Net (690,986) (572,076) (1,358,721) (1,102,223)
Investment Earnings 44,430 29,620 162,910 29,620
------------ ------------ ------------ ------------
Earnings Before
Income Taxes 2,906,443 4,103,874 5,727,540 8,331,641
Provision for Income Taxes (1,162,415) (1,685,113) (2,290,779) (3,414,422)
------------ ------------ ------------ ------------
Net Earnings $ 1,744,028 $ 2,418,761 $ 3,436,761 $ 4,917,219
============ ============ ============ ============
Basic Net Earnings
Per Share $ .31 $ .41 $ .61 $ .83
============ =========== =========== ===========
Weighted Average Shares
Outstanding 5,661,661 5,904,794 5,661,399 5,896,854
============ =========== =========== ===========
Diluted Net Earnings
Per Share $ .31 $ .40 $ .61 $ .82
============ =========== =========== ===========
Weighted Average Shares
Outstanding and
Equivalents 5,674,847 5,994,818 5,678,659 5,983,064
============ =========== =========== ===========
Cash Dividends Declared
and Paid $ .08 $ .08 $ .16 $ .16
============= =========== =========== ===========
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LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
(Unaudited)
--------------- ---------------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash $ 197,126 $ 272,649
Receivables (Net) 21,490,372 17,492,480
Other Current Assets 5,208,790 5,002,613
--------------- ---------------
Total Current Assets 26,896,288 22,767,742
Property and Equipment:
Cost 140,776,116 134,055,319
Accumulated Depreciation (62,957,692) (62,693,233)
--------------- ---------------
Net Property and Equipment 77,818,424 71,362,086
Goodwill (Less Accumulated Amortization) 40,401,544 32,717,675
Long-Term Notes Receivable 2,789,446 2,761,413
Other Non-Current Assets 2,417,441 2,402,162
--------------- ---------------
Total Assets $ 150,323,143 $ 132,011,078
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current Maturities on Long-Term Debt $ 46,695 $ 46,695
Notes Payable 2,000,000 2,000,000
Accounts Payable 3,445,775 2,760,142
Accrued Expenses 10,126,306 7,048,246
--------------- ---------------
Total Current Liabilities 15,618,776 11,855,083
Non-Current Liabilities:
Deferred Income Taxes 14,178,612 14,058,612
Long-Term Debt (Less Current Maturities) 52,812,145 41,337,949
Other Non-Current Liabilities 5,496,331 5,018,882
--------------- ---------------
Total Non-Current Liabilities 72,487,088 60,415,443
Stockholders' Equity:
Preferred Stock, $0.01 par value:
Authorized 1,000,000 shares.
No shares issued. -- --
Common Stock, $0.01 par value:
Authorized 25,000,000 shares.
Issued 6,673,397 shares. 66,734 66,734
Additional Paid-In Capital 31,326,834 31,326,150
Retained Earnings 37,437,622 34,906,679
Treasury Shares (1,011,736 in 2000 and
1,012,336 in 1999), at Cost (6,436,348) (6,440,164)
Cumulative Foreign Translation Adjustment (84,571) (25,855)
Underfunded Pension Liability Adjustment (92,992) (92,992)
--------------- ---------------
Total Stockholders' Equity 62,217,279 59,740,552
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 150,323,143 $ 132,011,078
=============== ===============
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LINDBERG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
Increase (Decrease) in Cash June 30,
------------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Earnings $ 3,436,761 $ 4,917,219
Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating Activities:
Depreciation 4,000,248 3,791,479
Goodwill Amortization 598,711 390,513
Change in Assets and Liabilities (1,322,053) (2,459,912)
Total Adjustments to Reconcile Net Earnings to --------------- ---------------
Net Cash Provided by Operating Activities 3,276,906 1,722,080
--------------- ---------------
Net Cash Provided by Operating Activities 6,713,667 6,639,299
Cash Flows from Investing Activities:
Capital Expenditures (3,876,235) (5,581,423)
Acquisitions, Net of Cash Acquired (15,700,000) (9,937,072)
Sale of Land and Building 2,196,700 --
Sale of Discontinued Operations 21,967 2,299,411
--------------- ---------------
Net Cash Used in Investing Activities (17,357,568) (13,219,084)
Cash Flows from Financing Activities:
Net Borrowings Under Revolving Credit Agreement 11,500,000 7,600,000
Other Debt (25,804) (50,520)
Dividends Paid (905,818) (943,602)
--------------- ---------------
Net Cash Provided by Financing Activities 10,568,378 6,605,878
--------------- ---------------
Net Increase (Decrease) in Cash (75,523) 26,093
Cash at Beginning of Period 272,649 157,391
--------------- ---------------
Cash at End of Period $ 197,126 $ 183,484
=============== ===============
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 1,191,020 $ 1,378,142
Income Taxes Paid (Net of Refunds) 2,159,922 3,871,477
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LINDBERG CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 Condensed Financial Statements
The condensed consolidated financial statements included herein have
been prepared by the company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the company believes that the disclosures are
adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in
conjunction with the consolidated financial statements and the notes
thereto included in the company's latest annual report on Form 10-K.
Statements for the three month and six month periods ended June 30,
2000 and June 30, 1999 reflect, in the opinion of the company, all
adjustments (consisting only of normal recurring accruals) necessary
to present fairly the results of these periods. Results for interim
periods are not necessarily indicative of results for a full year.
NOTE 2 Acquisitions
On June 2, 2000, the Company acquired all of the assets of Thermo
TerraTech Inc.'s heat treating services group ("HTSG"). The acquired
group includes the operations of Metallurgical in Minneapolis, Metal
Treating in Milwaukee and Cal-Doran in Los Angeles and San Diego. The
company purchased the assets collectively from HTSG for $17.3 million,
with $15.7 million paid at closing and $1.6 million paid subsequent to
June 30, 2000 as a final purchase price adjustment. The acquisition
was funded with borrowings under the company's revolving credit
agreement.
The preliminary allocation of the purchase price of HTSG included in
the company's financial statements for the quarter is as follows: (in
thousands)
Property and Equipment $ 8,918
Accounts Receivable 2,433
Other Assets 44
Goodwill 8,275
Accounts Payable (30)
Environmental Reserve (1,000)
Other Liabilities (1,360)
-------------
$ 17,280
The cost of the acquisition has been allocated to the assets and
liabilities based on their estimated fair market value. Goodwill is
amortized using the straight line method over 30 years.
The following table presents pro forma information for the three month
and six month periods ended June 30, 1999 and June 30, 2000 of the
combined entities of Lindberg Corporation and HTSG.
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The pro forma information assumes the acquisition had taken place at
the beginning of the periods presented (in thousands, except per share
data).
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
Unaudited 2000 1999 2000 1999
--------- -------- -------- -------- --------
Net Sales $ 34,236 $ 35,942 $ 69,154 $ 73,198
Net Earnings 1,691 2,572 3,604 5,392
Net Earnings
Per Diluted Share .30 .43 .63 .90
Adjustments to the statement of earnings include additional
depreciation and interest charges, goodwill amortization, adjustments
of certain other expenses and income tax effects. The pro forma
information is provided for illustrative purposes only and is not
necessarily reflective of the future results of the Company or results
of operations that would have actually occurred had the transaction
been in effect for the periods presented.
NOTE 3 Material Changes
No material changes have occurred with respect to the Company's
contingent liabilities outlined in the Company's 1999 10-K through the
date of this report. However, the Company did establish a reserve for
environmental contingencies of $1.0 million in its acquisition of
HTSG.
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"Safe Harbor" Statement: This report contains "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are those that are not
statements of historical fact, including statements regarding future
revenues, expenses and profits. These forward-looking statements are
subject to known and unknown risks, uncertainties or other factors which
may cause the actual results of the company to be materially different
from the historical results or from any results expressed or implied by
the forward-looking statements. Such risks and factors include, but are
not limited to, those discussed in Exhibit 99.1 of the company's most
recently filed Form 10-K with the Securities Exchange Commission.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION:
At June 30, 2000, the Company's total debt was $54.9 million, an
increase of $11.5 million from $43.4 million outstanding at December 31,
1999. The Company's total debt to capitalization ratio was 47% at the
end of the second quarter of 2000 as compared to 42% at the end of 1999.
The principal reason for the increase in the level of debt during the
first six months of 2000 was the acquisition of the heat treating
services group of Thermo TerraTech ("HTSG") for $15.7 million of cash in
June 2000. The purchase price was funded with additional borrowings
under the Company's revolving credit agreement. Partially offsetting
the increase in debt from the acquisition was the receipt of $2.2
million of cash in April 2000 from the sale of land and a building
which the Company owned and had been leasing to the purchaser of one
of the Company's previously discontinued Precision Products
businesses. Positive cash flow from operations for the six-month
period also offset the effect of the acquisition to a degree.
The Company maintains, with two banks, a revolving credit facility with
a total borrowing capacity of $70 million. The maturity date of the
agreement relating to the facility is December 2002. At June 30, 2000,
the Company had $22 million of available capacity under that revolving
credit facility.
Capital expenditures for the first six months of 2000 were $3.9
million, a decrease from $5.6 million in the corresponding period of
1999. The spending in the first half of 2000 related primarily to
the acquisition of additional furnaces and equipment at certain of
the Company's facilities.
On April 28, 2000, the Board of Directors declared a cash dividend of
$.08 on each share of the Company's common stock, payable on June 1,
2000. The total cash dividends paid on the latter date were $453,000.
This compared to a dividend payout of $.08 per share of common stock, or
$472,000, in the corresponding quarter of 1999.
The Company believes that its borrowing capacity and funds generated
through operations will be sufficient to meet currently foreseen capital
investment and working capital needs in support of existing businesses
for the balance of 2000 and in the longer term.
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OF RESULTS OF OPERATIONS:
Quarter ended June 30, 2000 and 1999
Net sales for the quarter ended June 30, 2000 were $31.4 million,
essentially level with the $31.6 million reported in the corresponding
period in 1999. Excluding the effect of the acquisition of HTSG, which
was acquired on June 2, 2000 and contributed $1.4 million in sales to
the 2000 quarter results, the Company's sales decreased by 5% versus
the second quarter of 1999.
The decline in net sales resulted largely from lower levels of business,
in comparison to the year-ago quarter, at Company facilities serving
customers in the commercial aerospace market. During the first two
quarters of 1999, order levels with commercial aerospace related
customers were relatively strong, but then trended down for the balance
of last year and into 2000.
Gross profit for the second quarter of 2000 was $8.4 million, down $1.0
million, or 11%, from $9.4 million for the second quarter of 1999. The
gross profit decline in the second quarter of 2000 versus a year ago was
reflective of the slightly lower net sales this year, increased natural
gas costs due to higher gas rates in 2000 and, to a lesser degree,
somewhat higher equipment maintenance expense. The Company's gross
margin in the second quarter of 2000 was 26.9%, compared to 29.8% in the
corresponding period of 1999.
Selling and administrative expenses for the second quarter of 2000 were
$4.9 million, up from $4.8 million in the same period of 1999. Excluding
the effect of added expenses in the 2000 quarter related to the
acquisition of HTSG, selling and administrative expenses were about
level with the prior year. Selling and administrative expenses as a
percentage of sales were 15.5% for the second quarter of 2000, up
from 15.1% in the same period of 1999. This corresponded to the
reduced sales level in the 2000 quarter.
Interest expense net of interest income in the second quarter of 2000
was $691,000, compared to $572,000 in the second quarter of 1999. The
increase resulted from a higher borrowing level at the end of the 2000
quarter due to the HTSG acquisition and also from higher average
interest rates in 2000.
During the second quarter of 2000, the Company received a cash dividend
of $44,000 from Thixomat, Inc., a business in which it owns a minority
interest. A dividend of $30,000 was received in the second quarter of
1999. The Company anticipates continuing to receive such dividends from
Thixomat, Inc. from time to time.
Reflecting the above, net earnings in the second quarter of 2000 were
$1.7 million, down from $2.4 million for the corresponding period of
1999. Diluted earnings per share in the second quarter of 2000 were
$.31 as compared to $.40 per share in the second quarter of the 1999.
The weighted average shares and equivalents outstanding for the second
quarter of 2000, compared to the same quarter of 1999, were lower as a
result of the purchase by the Company of 264,000 shares of common stock
for the treasury in December 1999.
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Six months ended June 30, 2000 and 1999
Net sales for the six months ended June 30, 2000 were $61.6 million,
down $2.1 million, or 3%, from $63.7 million for the corresponding
period in 1999. Excluding the effect of the acquisition of HTSG in the
comparison, sales for the 2000 period declined 6% from the first six
months of 1999. The decline in net sales was largely reflective of
reduced business levels, in comparison to the year-ago period, at
Company facilities serving customers in the commercial aerospace market,
and during the first three months of 2000, the oil-field machinery
market.
Gross profit for the first six months of 2000 was $16.7 million, down
$2.5 million, or 13%, from $19.2 million for the first six months of
1999. The gross profit decline in the 2000 period was largely the
result of the decrease in net sales for the period. The Company's
gross margin in the first six months of 2000 was 27.2%, compared to
30.1% in the corresponding period of 1999, reflecting the effect of
the relatively fixed cost structure of the Company's operations and
the limited opportunity to reduce costs to offset sales declines in
the short term.
Selling and administrative expenses for the first six months of both
2000 and 1999 were $9.8 million. Selling and administrative expenses as
a percentage of sales were 15.9% for the first six months of 2000, up
from 15.4% in the corresponding period of 1999 as a result of the lower
level of sales.
Interest expense net of interest income in the first six months of 2000
was $1.4 million, compared to $1.1 million in the first six months of
1999. The increase resulted primarily from higher interest rates in the
2000 period and, to a lesser degree, from additional borrowings due to
the acquisition of HTSG in June 2000.
During the first six months of 2000, the Company received cash
dividends totaling $163,000 from Thixomat, Inc. A dividend of
$30,000 was received in the same period of 1999.
Reflecting the above, net earnings in the first six months of 2000 were
$3.4 million, down from $4.9 million for the corresponding period of
1999. Diluted earnings per share in the first six months of 2000 were
$.61 as compared to $.82 per share in the same period of 1999.
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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There has been no material change during the three months ended June 30,
2000 from the disclosures about market risk provided in the company's
latest annual report on Form 10-K.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
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.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-K
The following exhibits are attached only to the copies of this report
filed with the Securities and Exchange Commission:
Number and Description of Exhibit
---------------------------------
11. Computation of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended June 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LINDBERG CORPORATION
Principal Financial and Accounting Officer: By/s/ Stephen S. Penley
------------------------
Stephen S. Penley
Executive Vice President
and Chief Financial Officer
Dated: August 14, 2000
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