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: August 31, 1995 Commission File No. 0-4016
WORTHINGTON INDUSTRIES, INC.
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(Exact name of Registrant as specified in its Charter)
DELAWARE 31-1189815
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(State of Incorporation) (I.R.S. Employer Identification No.)
1205 Dearborn Drive, Columbus, Ohio 43085
(Address of Principal Executive Offices) ---------------------
(Zip Code)
(614) 438-3210
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(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 90,746,675
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Class Outstanding September 30, 1995
WORTHINGTON INDUSTRIES, INC.
INDEX
Page
PART I. Financial Information
Consolidated Condensed Balance Sheets -
August 31, 1995 and May 31, 1995...................................3
Consolidated Condensed Statements of Earnings -
Three Months Ended August 31, 1995 and 1994 .......................4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended August 31, 1995 and 1994........................5
Notes to Consolidated Condensed Financial Statements...............6
Management's Discussion and Analysis of
Results of Operations and Financial Condition......................7
PART II. Other Information..................................................9
PART I. FINANCIAL INFORMATION
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, Except Per Share)
August 31 May 31
1995 1995
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $12,137 $2,003
Accounts receivable - net 180,473 216,443
Raw materials 132,420 142,738
Work in process and finished products 58,944 58,140
-------- -------
Inventories 191,364 200,878
Prepaid expenses and other current assets 40,880 32,578
------- -------
Total Current Assets 424,854 451,902
Investment in Unconsolidated Affiliates 117,471 104,764
Other Assets 26,452 25,381
Property, plant and equipment 610,967 589,286
Less accumulated depreciation 263,000 254,369
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Property, Plant and Equipment - net 347,967 334,917
-------- --------
Total Assets $916,744 $916,964
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $81,220 $87,329
Notes payable 38,200
Accrued compensation, contributions to
employee benefit plans and related taxes 23,448 31,741
Dividends payable 10,000 9,992
Other accrued items 7,493 8,597
Income taxes 13,464 2,709
Current maturities of long-term debt 660 660
---------- ----------
Total Current Liabilities 136,285 179,228
Other Liabilities 17,181 18,055
Long-Term Debt 83,146 53,476
Deferred Income Taxes 78,346 75,873
Shareholders' Equity
Common shares, $.01 par value 909 908
Additional paid-in capital 103,617 102,733
Min. pension liability / foreign currency translation (933) (1,017)
Retained earnings 498,193 487,708
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Total Shareholders' Equity 601,786 590,332
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Total Liabilities and Shareholders' Equity $916,744 $916,964
======== ========
See notes to consolidated condensed financial statements.
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Thousands Except Per Share)
(Unaudited)
Three Months Ended
August 31
1995 1994
Net sales $325,736 $346,257
Cost of goods sold 278,731 294,125
------- -------
Gross Margin 47,005 52,132
Selling, general and administrative expense 19,869 19,491
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Operating Income 27,136 32,641
Other income (expense):
Miscellaneous income 247 267
Interest expense (1,407) (1,194)
Equity in net income of unconsolidated affiliates 8,436 9,003
----- -------
Earnings Before Income Taxes 34,412 40,717
Income taxes 12,904 15,269
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Net Earnings $21,508 $25,448
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Average Common Shares Outstanding 90,886 90,621
Earnings Per Common Share $.24 $.28
---- ----
Cash Dividends Declared Per Common Share $.11 $.10
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See notes to consolidated condensed financial statements.
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Unaudited)
Three Months Ended
August 31
1995 1994
Operating Activities
Net earnings ......................................... $ 21,508 $ 25,448
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation ....................................... 9,134 8,453
Provision for deferred income taxes ................ 2,473 3,338
Equity in undistributed net income of unconsolidated (8,316) (8,883)
affiliates
Changes in assets and liabilities:
Accounts receivable ............................ 35,970 12,747
Inventories ........................................ 9,514 (28,627)
Prepaid expenses and other current assets ...... (8,206) (3,669)
Other assets ................................... (1,071) 440
Accounts payable and accrued expenses .......... (4,751) (14,136)
Other liabilities ........................... (874) (254)
-------- --------
Net Cash Provided (Used) By Operating Activities ... 55,381 (5,143)
Investing Activities
Investment in property, plant and equipment, net ..... (22,184) (18,518)
Investment in unconsolidated affiliates .............. (4,403) --
-------- --------
Net Cash Used By Investing Activities .............. (26,587) (18,518)
Financing Activities
Proceeds from (payments on) short-term borrowings .... (38,200) 20,000
Proceeds from long-term debt ......................... 30,000 --
Principal payments on long-term debt ................. (330) (591)
Proceeds from issuance of common shares .............. 947 1,198
Repurchase of common shares ......................... (1,085) --
Dividends paid ....................................... (9,992) (9,056)
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Net Cash Provided (Used) By Financing Activities ... (18,660) 11,551
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Increase (decrease) in cash and cash equivalents ....... 10,134 (12,110)
Cash and cash equivalents at beginning of period ....... 2,003 13,275
-------- --------
Cash and cash equivalents at end of period ............. $ 12,137 $ 1,165
======== ========
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 adjustments
(consisting of a normal recurring nature) necessary to present fairly
the financial position of Worthington Industries, Inc. and Subsidiaries
(the Company) as of August 31, 1995 and May 31, 1995; the results of
operations and cash flows for the three months ended August 31, 1995 and
1994.
The accounting policies followed by the Company are set forth in
Note A to the consolidated financial statements in the 1995 Worthington
Industries, Inc. Annual Report to Shareholders which is incorporated by
reference in the Company's 1995 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.
Note C - Earnings Per Share
Earnings per common share for the three months ended August 31,
1995 and 1994 are based on the weighted average common shares
outstanding during each of the respective periods.
Note D - Results of Operations
The results of operations for the three months ended August 31,
1995 and 1994 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
Results for the three months ended August 31,1995 were below the same
period of the prior year. Net sales of $325.7 million were 6% lower and net
earnings of $21.5 million and earnings per share of $.24 were 15% and 14%
lower, respectively.
Results reflect principally a slowing of economic activity from the
strong levels experienced last year. Last year's first quarter results were
driven by volume and selling price increases. Demand in most of the Company's
markets softened this year resulting in lower volumes and lower pricing.
Inventory adjustments by customers anticipating a more favorable pricing
environment also impacted demand. Gross margin was down 10% for the quarter.
This was greater than the sales shortfall, due to selling price pressure and
the working down of more expensive inventory . Last year's gross margin was
squeezed somewhat due to a lag in passing on raw material price increases to
customers. Gross margin as a percentage of sales for the quarter was 14.4%
compared to 15.1% last year. Selling, general and administrative expense
increased 2% for the quarter as this year included expenses for new operations
offset by lower profit-sharing. As a percent of sales, this expense was 6.1%
compared to 5.6% last year. Operating income was 17% lower for the quarter. As
a percentage of sales, operating income decreased to 8.3% from 9.4%.
Interest expense increased 18% for the three months as the average
interest rate rose to 6.8% from 5.3% and average debt outstanding increased.
Average debt rose because of increased borrowings to support capital
expenditures. Interest of $450,000 was capitalized during the quarter.
Equity in net income of unconsolidated affiliates was down 6% for the
quarter. Equity from Rouge Steel was down as industry demand and selling
prices decreased. Equity from Worthington Armstrong Venture was up
significantly on increased volume in both the U.S. and Europe.
Income taxes decreased in line with pre-tax earnings for the three month
period as the effective tax rate for both periods was 37.5%.
The processed steel products segment posted decreases in sales and
earnings for the quarter. Steel processing shipments were off mainly due to
lower automotive output as car companies reduced inventories due to
anticipated lower demand and lower steel prices. Operating margins were lower
due to the reduced volume and selling price pressures. Pressure cylinder's
results were also down as demand, specifically for refrigerant cylinders, was
negatively impacted by the cool, rainy spring weather. Last year's first
quarter benefited from favorable demand and selling prices.
Sales for the custom products segment were flat and earnings were lower
than last year's first three months. The plastics operation generated good
results despite lower automotive demand. In addition, results for this year
include non-automotive sales from new plants in St. Matthews, South Carolina
and Lebanon, Kentucky which were in the start-up mode last year. Volume from
new jobs increased sales for precision metals above last year, but profits
suffered from start-up inefficiencies and adjustments due to specification
changes and increased volume on certain parts.
The cast products segment continued its strong performance. Strong
demand for freight railcars continued to drive sales. Margins increased
greater than sales due to the efficiencies from the high volume level. Last
year's first three months also benefited from railcar demand and high
production levels.
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1995, the Company's current ratio was 3.1:1, up from 2.5:1
at May 31, 1995, as $30 million of short-term debt was replaced with long-term
debt. Long-term debt increased to 12% of total capital. Working capital was
$288.6 million, 48% of the Company's total net worth, up from 46% at May 31,
1995.
During the three months, the Company's cash position increased by $10.1
million. Cash provided by operating activities was $55.4 million, aided by a
$9.5 million decrease in inventories and a $36 million decrease in accounts
receivable. The inventory and accounts receivable decreases occurred in part
because of the lower sales volume. Days sales in accounts receivable was
constant since fiscal year-end and days of inventory was down modestly.
Capital expenditures and investments in affiliates were $26.6 million and
dividends paid were $10 million.
The Company expects its operating results to improve during the year;
however, borrowings may be needed to support anticipated capital expenditures.
The Company has a $150 million committed, revolving credit agreement, of which
$80 million was unused at August 31, 1995. Immediate borrowing capacity plus
cash generated from operations should be more than sufficient to fund expected
normal operating cash needs, dividends, debt payments and capital expenditures
for existing businesses.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits - Exhibit 27, Financial Data Schedule
B. Reports on Form 8-K. There were no reports on Form 8-K during the
three months ended August 31, 1995.
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: October 11, 1995 By: /s/Donald G. Barger, Jr.
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Donald G. Barger, Jr.
Vice President-Chief Financial Officer