UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: November 30, 1993
Commission File No. 0-4016
WORTHINGTON INDUSTRIES, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE
(State of Incorporation)
31-1189815
(I.R.S. Employer
Identification No.)
1205 Dearborn Drive, Columbus, Ohio
(Address of Principal
Executive Offices)
43085
(Zip Code)
(614) 438-3210
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
If Changed From Last Report)
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 the number of shares outstanding of each of the
Issuer's classes of common stock, as of the latest practicable
date.
Common stock, $.01 par value
Class
90,477,398
Outstanding December 31, 1993
Page 1 of 10 pages
WORTHINGTON INDUSTRIES, INC.
INDEX
Page
PART I. Financial Information
Consolidated Condensed Balance Sheets -
November 30, 1993 and May 31, 1993 . . . . . . . . . . .3
Consolidated Condensed Statements of Earnings -
Three and Six Months Ended November 30, 1993 and 1992. .4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended November 30, 1993 and 1992. . . . . . .5
Notes to Consolidated Condensed Financial Statements . .6
Management's Discussion and Analysis of
Results of Operations and Financial Condition. . . . . .8
PART II. Other Information . . . . . . . . . . . . . . . . . 10
PART I. FINANCIAL INFORMATION
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands Except Per Share)
November 30 May 31
1993 1993
(Unaudited)(Audited)
ASSETS
Current Assets
Cash and cash equivalents $9,635 $16,691
Short-term investments 857 898
Accounts receivable - net 151,579 168,855
Inventories
Raw materials 116,456 100,739
Work in process and finished products 56,626 58,748
173,082 159,487
Prepaid expenses and other current assets 26,511 18,082
Total Current Assets 361,664 364,013
Other Assets 31,436 28,653
Property, plant and equipment 512,376 488,921
Less accumulated depreciation 210,463 195,529
Property, Plant and Equipment - net 301,913 293,392
Total Assets $695,013 $686,058
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $67,649 $90,461
Notes payable 15,000
Accrued compensation, contributions to
employee benefit plans and related taxes 29,882 34,546
Dividends payable 8,140 7,810
Other accrued items 6,990 8,974
Income taxes 13,162 3,996
Current maturities of long-term debt 1,165 1,165
Total Current Liabilities 141,988 146,952
Accrued Pension Cost 536 507
Long-Term Debt 55,398 55,626
Deferred Income Taxes 45,046 49,868
Shareholders' Equity
Common shares, $.01 par value 904 601
Additional paid-in capital 83,577 81,176
Retained earnings 367,564 351,328
Total Shareholders' Equity 452,045 433,105
Total Liabilities and Shareholders' Equity $695,013 $686,058
See notes to consolidated condensed financial statements.
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Thousands Except Per Share)
(Unaudited)
Three Months Ended Six Months Ended
November 30 November 30
1993 1992 1993 1992
Net sales $295,907 $261,983 $586,017 $512,333
Cost of goods sold 252,838 221,597 498,664 435,154
Gross Margin 43,069 40,386 87,353 77,179
Selling, general and
administrative expense 16,543 15,863 33,582 31,332
Interest expense 730 926 1,379 1,825
Earnings Before
Income Taxes 25,796 23,597 52,392 44,022
Income taxes 9,932 8,731 20,171 16,288
Net Earnings $15,864 $14,866 $32,221 $27,734
Average Common
Shares Outstanding 90,317 89,408 90,251 89,426
Earnings Per Common
Share $0.18 $0.17 $0.36 $0.31
Cash Dividends
Declared Per Common
Share $0.09 $0.08 $0.18 $0.16
See notes to consolidated condensed financial statements.
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
November 30
1993 1992
OPERATING ACTIVITIES
Net Earnings $32,221 $27,734
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 15,974 14,570
Provision for deferred income taxes 2,692 96
Changes in assets and liabilities:
Decrease (increase) in:
Short-term investments 41 (8)
Accounts receivable 17,276 24,452
Inventories (13,595) (3,634)
Other currents assets (8,429) (3,914)
Other assets (2,783) (12,354)
Increase (decrease) in:
Accounts payable and accrued expenses (27,478) (13,788)
Accrued pension cost 29 (63)
Net Cash Provided By Operating Activities 15,948 33,091
INVESTING ACTIVITIES
Net Cash Invested in Property,
Plant and Equipment (24,495) (10,059)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 15,000
Principal payments on long-term debt (228) (1,134)
Proceeds from issuance of common shares 2,706 2,029
Repurchase of common shares (27) (2,279)
Dividends paid (15,960) (14,310)
Net Cash Provided(Used) By Financing Activities 1,491 (15,694)
Increase (decrease) in cash
and cash equivalents (7,056) 7,338
Cash and cash equivalents
at beginning of period 16,691 4,996
Cash and cash equivalents
at end of period $9,635 $12,334
See notes to consolidated condensed financial statements.
WORTHINGTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - Management's Opinion
In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all ad-
justments (consisting of a normal recurring nature) necessary
to present fairly the financial position of Worthington
Industries, Inc. and Subsidiaries (the Company) as of
November 30, 1993 and May 31, 1993; the results of operations
for the three and six months ended November 30, 1993 and 1992;
and the cash flows for the six months then ended.
The accounting policies followed by the Company are set
forth in Note A to the consolidated financial statements in
the 1993 Worthington Industries, Inc. Annual Report to Share-
holders which is incorporated by reference in the Company's
1993 Form 10-K.
Note B - Income Taxes
The income tax rate is based on statutory federal and
state rates, and an estimate of annual earnings adjusted for
the permanent differences between reported earnings and
taxable income. The tax rate increased to 38.5% for the three
and six month periods ended November 30, 1993 from 37% for the
same periods of the prior year reflecting the higher tax rates
and decreased deductions provided by the "Omnibus Budget
Reconciliation Act of 1993," which became law during August
1993.
Note C - Earnings Per Share
Earnings per common share for the quarter and six
months ended November 30, 1993 and 1992 are based on the
weighted average common shares outstanding during each of
the respective periods, after giving effect to the three-for-
two share split which was distributed on October 22, 1993.
Earnings per common share for the quarters ended August 31,
1993 and 1992, adjusted for the share split, are $.18 and
$.14, respectively.
Note D - Contingent Liabilities
In March 1993, a trial court in Chicago, Illinois issued
a decision against the Company's subsidiary, Buckeye Steel
Castings Company ("Buckeye") in the amount of approximately
$5.8 million in damages, interest, and attorney's fees and
costs. The dispute involves the infringement of a patent,
which Buckeye believed to be invalid. The patent expired in
1989. Buckeye has appealed the judgment on various issues
which if successful would substantially reduce or eliminate
the amount of the judgment. Management and legal counsel are
presently unable to predict the outcome or to estimate the
amount of any liability Buckeye may ultimately have with
respect to this lawsuit.
The Company is a defendant in certain other legal
actions. In the opinion of management, the outcome of the
above and other actions, which is not clearly determinable at
the present time, would not significantly affect the Company's
consolidated financial position or future operations.
Note E - Results of Operations
The results of operations for the three and six months
ended November 30, 1993 and 1992 are not necessarily
indicative of the results to be expected for the full year.
WORTHINGTON INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the three months ended November 30, 1993, net sales
reached a second quarter record of $295.9 million, 13% higher than
the previous record set last year. Net earnings of $15.9 million
and earnings per share of $.18, were records as well, increasing 7%
and 6%, respectively, from the same period in 1992.
Records were also set for the first six months of fiscal 1994.
Net sales reached $586 million, 14% higher than in the previous
year. Net earnings of $32.2 million and earnings per share of $.36
were 16% higher.
The record results were achieved in spite of difficult
operating circumstances for several of the Company's business
segments. The strength came from the core businesses, as steel
processing and pressure cylinders produced strong sales and
earnings growth. Gross margin improved 7% for the quarter, less
than the growth in sales because of start-up inefficiencies on
several new jobs for custom plastics and a temporary decrease in
demand for railcar castings. The 4% increase in selling, general
and administrative expenses for the quarter was in line with the
sales increase.
Interest expense declined for the quarter and six months as a
lower average interest rate more than offset higher average debt
outstanding.
Income taxes increased more than earnings for the three and
six month periods, reflecting the higher tax rates and decreased
deductions provided by the "Omnibus Budget Reconciliation Act of
1993," which passed in August. The income tax rate rose to 38.5%
for the three and six month periods from 37% for the same periods
of the prior year.
Sales and earnings for the processed steel products segment
showed significant increases for the three and six month periods.
The steel processing operations continued to gain market share and
demand remained strong. This was offset somewhat during the second
quarter by an unfavorable sales mix at some locations. A portion
of the sales increases for both the three and six month periods was
attributable to higher prices as increases from the steel mills
were generally passed through to customers. The Porter, Indiana
plant continued to improve its results and contribution to this
segment. The six month comparison was also helped as the Malvern,
Pennsylvania plant experienced a strike during last year's first
quarter. Sales for the pressure cylinder business increased over
the second quarter and first six months of last year. Earnings
rose at a higher rate because of improved product mix and a related
reduction in labor costs.
The custom products segment showed a slight increase in sales
for the quarter and six months, but earnings have lagged. The
plastics operation has virtually replaced the sales lost when
certain car models were phased out during the summer, but earnings
have not kept pace due to start-up inefficiencies on the new jobs.
For the quarter, precision metal's sales and earnings increased as
productivity on the new jobs has improved. Six month earnings for
the segment remain below the prior year because of the job start-up
inefficiencies experienced in the first quarter.
In the cast products segment, sales and earnings were lower
compared to the same periods of the prior year. Steel castings
earnings for the quarter dropped significantly as a temporary
decrease in demand for freight railcar castings, which was impacted
by the Midwest flooding, depressed sales early in the quarter. See
Note F to the Consolidated Condensed Financial Statements
concerning the contingent liability of the steel castings operation
with respect to certain patent litigation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position has strengthened since fiscal
year-end. At November 30, 1993, working capital was $219.7 million
and the current ratio was 2.6:1. Long-term debt was 11% of total
capital.
During the six months, the Company used $7.1 million of its
cash position and $15 million of short-term borrowings to help fund
its cash needs. Cash was also provided by net earnings of $32.2
million, depreciation of $16.0 million, and a $17.3 million
decrease in accounts receivable. Cash was used to fund a $13.6
million increase in inventories, a $8.4 million increase in other
current assets, a $27.5 million decrease in accounts payable and
accrued expenses, a $24.5 million net cash investment in capital
expenditures, and $16.0 million of cash dividends. The decrease in
accounts receivable occurred with the reduced activity of the first
six months compared to the fourth quarter of fiscal 1993. Accounts
payable and accrued expenses have decreased since fiscal year-end
as the Company has aggressively pursued vendor prepayment
discounts. The increase in inventory occurred largely in the
processed steel products segment, where the amount of inventory
rose in anticipation of higher sales volumes and raw material costs
were up reflecting the price increases from the steel mills.
Days sales in accounts receivable has improved since fiscal
year-end and the inventory turn has remained constant despite the
increased investment in inventory.
The Company expects its operating results and cash from normal
operating activities to improve during fiscal 1994. The Company
has $40 million in unsecured, short-term lines of credit available
at below the prime rate. Immediate borrowing capacity plus cash
generated from operations should be more than sufficient to fund
expected normal operating costs, dividends, debt payments and
capital expenditures for existing businesses.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits - None
B. Reports on Form 8-K. There were no reports on Form 8-K
during the three months ended November 30, 1993.
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.
WORTHINGTON INDUSTRIES, INC.
Date: January 12, 1994 By:/s/Donald G. Barger, Jr.
Donald G. Barger, Jr.
Vice President -
Chief Financial Officer