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: February 29, 1996 Commission File No. 0-4016
WORTHINGTON INDUSTRIES, INC.
--------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
DELAWARE 31-1189815
--------------------------------- -------------------------------------
(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
----------------------------------------------------------------
(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 90,819,040
-------------------------------------- -----------------------------
Class Outstanding March 31, 1996
<PAGE>
WORTHINGTON INDUSTRIES, INC.
INDEX
Page
PART I. Financial Information
Consolidated Condensed Balance Sheets -
February 29, 1996 and May 31, 1995.................................3
Consolidated Condensed Statements of Earnings -
Three and Nine Months Ended February 29, 1996 and
February 28, 1995..................................................4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended February 29, 1996 and February 28, 1995..........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.................................................11
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, Except Per Share)
February 29 May 31
1996 1995
----------- ---------
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $7,536 $2,003
Accounts receivable - net 217,304 216,443
Raw materials 136,068 142,738
Work in process and finished products 80,850 58,140
------- ------
Inventories 216,918 200,878
Prepaid expenses and other current assets 32,829 32,578
------- -------
Total Current Assets 474,587 451,902
Investment in Unconsolidated Affiliates 134,327 104,764
Intangible Assets 86,729
Other Assets 25,687 25,381
Property, plant and equipment 741,854 589,286
Less accumulated depreciation 280,711 254,369
-------- --------
Property, Plant and Equipment - net 461,143 334,917
-------- --------
Total Assets $1,182,473 $916,964
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $97,814 $87,329
Notes payable 193,800 38,200
Accrued compensation, contributions to
employee benefit plans and related taxes 28,966 31,741
Dividends payable 9,988 9,992
Other accrued items 20,897 8,597
Income taxes 8,310 2,709
Current maturities of long-term debt 1,514 660
------------ --------
Total Current Liabilities 361,289 179,228
Other Liabilities 21,329 18,055
Long-Term Debt 78,742 53,476
Deferred Income Taxes 94,150 75,873
Shareholders' Equity
Common shares, $.01 par value 908 908
Additional paid-in capital 104,937 102,733
Min. pension liability / foreign
currency translation (1,419) (1,017)
Retained earnings 522,537 487,708
------- -------
Total Shareholders' Equity 626,963 590,332
------- -------
Total Liabilities and Shareholders' Equity $1,182,473 $916,964
========== ========
See notes to consolidated condensed financial statements.
-3-
<PAGE>
<TABLE>
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share)
(Unaudited)
Three Months Ended Nine Months Ended
Feb. 29 Feb. 28 Feb. 29 Feb. 28
------- ------- ------- -------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $360,224 $370,117 $1,040,504 $1,079,650
Cost of goods sold 305,935 309,725 886,199 909,118
------- ------- ------- -------
Gross Margin 54,289 60,392 154,305 170,532
Selling, general &
administrative expense 23,939 23,117 65,307 63,144
------ ------ ------ ------
Operating Income 30,350 37,275 88,998 107,388
Other income (expense):
Miscellaneous income 468 185 854 314
Interest expense (2,025) (1,530) (4,666) (4,304)
Equity in net income of
unconsolidated affiliates 4,683 9,910 24,561 28,382
Earnings Before Income Taxes 33,476 45,840 109,747 131,780
Income taxes 12,580 17,189 41,155 49,417
------ ------ ------ -------
Net Earnings $20,896 $28,651 $68,592 $82,363
======= ======= ======= =======
Average Common Shares Outstanding 90,777 90,772 90,810 90,700
Earnings Per Common Share $.23 $.32 $.76 $.91
---- ---- ---- ----
Cash Dividends Declared
Per Common Share $.11 $.10 $.33 $.30
---- ---- ---- ----
-4-
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Unaudited)
Nine Months Ended
Feb. 29 Feb. 28
------- -------
1996 1995
------- -------
Operating Activities
<S> <C> <C>
Net earnings ........................................ $ 68,592 $ 82,363
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation ...................................... 28,614 25,998
Provision for deferred income taxes ............... 6,728 9,539
Equity in undistributed net income of
unconsolidated affiliates ....................... (21,477) (28,022)
Changes in assets and liabilities:
Accounts receivable ........................... 21,108 (17,932)
Inventories ....................................... 25,499 (32,818)
Prepaid expenses and other current assets ..... (4,372) (2,484)
Other assets .................................. (160) (1,849)
Accounts payable and accrued expenses ......... (9,983) 5,075
Other liabilities .......................... (191) (221)
--------- --------
Net Cash Provided By Operating Activities ......... 114,358 39,649
Investing Activities
Investment in property, plant and equipment, net .... (79,340) (57,121)
Purchase of Dietrich Industries, Inc.,
net of cash acquired .............................. (169,391) --
Investment in unconsolidated affiliates ............. (8,310) (1,157)
--------- --------
Net Cash Used By Investing Activities ............. (257,041) (58,278)
Financing Activities
Net proceeds from short-term borrowings ............. 155,600 38,700
Proceeds from long-term debt ........................ 43,000 --
Principal payments on long-term debt ................ (18,660) (1,771)
Proceeds from issuance of common shares ............. 2,275 2,770
Repurchase of common shares ........................ (4,024) --
Dividends paid ...................................... (29,975) (27,197)
--------- --------
Net Cash Provided By Financing Activities ......... 148,216 12,502
--------- --------
Increase (decrease) in cash and cash equivalents ...... 5,533 (6,127)
Cash and cash equivalents at beginning of period ...... 2,003 13,275
--------- --------
Cash and cash equivalents at end of period ............ $ 7,536 $ 7,148
========= ========
</TABLE>
See notes to consolidated condensed financial statements.
-5-
<PAGE>
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 February 29,
1996 and May 31, 1995; the results of operations for the three and nine months
ended February 29, 1996 and February 28, 1995; and the cash flows for the nine
months then ended.
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 and nine months ended February
29, 1996 and February 28, 1995 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 and nine months ended February
29, 1996 and February 28 1995 are not necessarily indicative of the results to
be expected for the full year.
-6-
<PAGE>
Note E - Acquisition
On February 5, 1996, the Company acquired all of the outstanding capital
stock of Dietrich Industries, Inc. for approximately $146 million in cash and
$23 million in assumed liabilities, net of cash acquired. Dietrich, based in
Pittsburgh, Pa., is involved primarily in the manufacture and sale of metal
framing products for the commercial and residential construction markets. The
acquisition was accounted for using purchase accounting with results for
Dietrich included since the purchase date. The purchase price exceeded the
fair value of the net assets acquired by approximately $87 million which is
being amortized over 40 years.
The following pro forma data summarizes the results of operations of the
Company for the nine months ended February 29, 1996 and February 28, 1995,
assuming Dietrich was acquired at the beginning of each period presented. In
preparing the pro forma data, adjustments have been made to conform Dietrich's
accounting policies to those of the Company and to reflect purchase accounting
adjustments and interest expense:
Nine Months Nine Months
Ended Ended
Feb. 29, 1996 Feb. 28, 1995
------------- -------------
Net Sales .................... $1,223,481 $1,292,666
========== ==========
Net Earnings ................. $69,753 $86,427
========== ==========
Earnings Per Common Share .... $.77 $.95
===== ====
The pro forma information does not purport to be indicative of the
results of operations which would have actually been obtained if the
acquisition had occurred on the dates indicated or the results of operations
which will be reported in the future.
Note F - Debt
The funds to purchase Dietrich Industries, Inc. and to refinance $31
million of Dietrich debt, were obtained through a $180 million acquisition
bridge loan credit facility with several banks. The facility expires on
October 28, 1996. The Company intends to refinance the facility with permanent
long-term financing before the expiration date. The interest rate is variable
based on LIBOR plus a fixed percentage and was 5.7% at February 29, 1996. Also
during the quarter, the commitment for the $150,000,000 revolving credit
agreement was extended one year to April 2001.
-7-
<PAGE>
WORTHINGTON INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
For the three months ended February 29, 1996, net sales of $360.2
million were 3% lower and net earnings of $20.9 million and earnings per share
of $.23 were down 27% and 28%, respectively, from last year's third quarter.
For the first nine months of fiscal 1996, net sales were $1.041 billion,
4% below those of the same period last year. Net earnings of $68.6 million and
earnings per share of $.76 were off 17% and 16%, respectively.
On February 5, 1996, the Company acquired all of the outstanding capital
stock of Dietrich Industries, Inc. for approximately $146 million in cash and
$23 million in assumed liabilities, net of cash acquired. Dietrich, based in
Pittsburgh, Pa., is involved primarily in the manufacture and sale of metal
framing products for the commercial and residential construction markets.
Demand in most of the Company's markets remained behind last year.
Results for the quarter continue to reflect lower volume and prices from last
year's periods. The record results for the third quarter and first nine months
of fiscal 1995 in all business segments had been driven by both volume and
selling price increases.
Gross margin was down 10% for both the quarter and the nine months. This
was greater than the sales shortfall, primarily due to a softer selling price
environment, the working down of more expensive inventory and product mix
changes. Last year's gross margin increase outpaced the growth in sales due to
higher operating efficiencies and selling price increases. Gross margin as a
percentage of sales for the quarter was 15.1% compared to 16.3% last year and
for the nine months 14.8% compared to 15.8%.
Selling, general and administrative expense increased 4% for the quarter
and 3% for the nine months due to the inclusion of expenses for new operations
and for Dietrich, offset by lower profit-sharing. The increase in this expense
last year was driven mostly by higher profit sharing. As a percent of sales,
this expense for the quarter was 6.6% compared to 6.2% last year and for the
nine months was 6.3% compared to 5.8%. Operating income was 19% lower for the
quarter and 17% lower for the nine months. As a percentage of sales, operating
income decreased to 8.4% from 10.1% for the quarter and to 8.6% from 9.9% for
the nine months.
-8-
<PAGE>
Interest expense in 1996 increased 32% for the three months and 8% for
the nine months. The average interest rate rose to 6.3% from 5.9%. Average
debt outstanding increased to support capital expenditures and to fund the
purchase of Dietrich Industries. Interest of $1,420,000 was capitalized for
the nine months ended February 29, 1996.
Equity in net income of unconsolidated affiliates was down 53% for the
quarter and 13% year-to-date, primarily due to lower equity from Rouge Steel
resulting from slow industry demand and selling price pressure. Equity in net
income from affiliates excluding Rouge increased over the prior year. Equity
in net income from Worthington Armstrong Venture was up significantly on
increased volume in both the U.S. and Europe. This venture's French facility
is expanding to meet demand and the new Las Vegas plant is in operation. The
Acerex joint venture in Mexico started production in October and is shipping
within Mexico and into the southwest U.S.
Income taxes decreased in line with pre-tax earnings for both the three
and nine month periods as the effective tax rate for both years was 37.5%.
The processed steel products segment saw decreases in sales and earnings
for the third quarter and the first nine months. Steel processing shipments
continue below those of last year mainly due to lower automotive demand.
Operating margins also remain lower due to the reduced volume and lower
selling prices. Last year's results included volume and selling price
increases. Dietrich's operations, which were included from the date of
acquisition only, faced selling price and material cost pressures, and
suffered from the slow commercial construction season. Pressure cylinders'
sales and earnings were down for both periods as increased demand for heating
tanks did not fully offset lower shipments of refrigerant cylinders. A shift
in product mix also affected margins. Pressure cylinders had realized growth
in most product lines in the prior year.
Sales for the custom products segment were up for both the third quarter
and nine months. Earnings for the quarter were higher, but remained lower for
the nine months. The plastics operation increased sales and earnings for both
periods as it continued to perform well, despite overall lower industry
automotive demand, due to new automotive and appliance contracts. Last year's
periods were supported by high automotive demand and operating efficiencies.
Volume from new jobs increased sales for precision metals above last year for
both periods, but profits were lower due to inefficiencies caused by startups
and specification changes on certain parts.
The cast products segment had lower sales and earnings for the quarter
and nine months as railcar demand was down from earlier quarters. Last year's
results benefited from very strong railcar demand and high production levels.
-9-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At February 29, 1996, the Company's current ratio was 1.3:1, down from
2.5:1 at May 31, 1995, as $180 million of short-term bridge loan financing was
used to purchase Dietrich. This debt, which matures October 28, 1996, is
expected to be refinanced long-term before the expiration date. Long-term debt
increased to 9.8% (26% including the bridge loan) from 7.4% of total capital
(defined as long-term debt, deferred taxes and shareholders' equity). Working
capital was $113.3 million ($293.3 million without the bridge loan), 18% of
the Company's total net worth(47% without the bridge loan), compared to 46% at
May 31, 1995.
During the nine months ended February 29, 1996, the Company's cash
position increased by $5.5 million. Cash provided by operating activities was
$114.4 million, aided by a $25.5 million decrease in inventories and a $21.1
million decrease in accounts receivable, which occurred in part because of
lower raw material costs and lower sales volume and prices. Days sales in
accounts receivable was down 1 day from fiscal year-end and days of inventory
was down 10 days. Capital expenditures and investments in affiliates totaled
$87.7 million and dividends paid were $30 million. The funds to purchase
Dietrich for a net cash price of $169 million were obtained through the $180
million acquisition bridge loan credit facility. The Company intends to
refinance this facility before the expiration date into long-term permanent
financing.
The Company expects to continue to generate cash from operations to
significantly fund capital expenditures and dividends; however, borrowings may
be needed to partially support these expenditures. The Company has a $150
million committed, revolving credit agreement, of which $85 million was unused
at February 29, 1996.
-10-
<PAGE>
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.
A Current Report on Form 8-K dated February 5, 1996 was filed to report
the acquisition of the capital stock of Dietrich Industries, Inc. Financial
statements of the business acquired and pro forma financial information of the
Registrant will be filed by amendment to that report.
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: April 12, 1996 By: /s/Donald G. Barger, Jr.
______________________________________
Donald G. Barger, Jr.
Vice President-Chief Financial Officer
By: /s/Michael R. Sayre
______________________________________
Michael R. Sayre
Controller
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> FEB-29-1996
<EXCHANGE-RATE> 1
<CASH> 7,536
<SECURITIES> 0
<RECEIVABLES> 220,854
<ALLOWANCES> 3,550
<INVENTORY> 216,918
<CURRENT-ASSETS> 474,587
<PP&E> 741,854
<DEPRECIATION> 280,711
<TOTAL-ASSETS> 1,182,473
<CURRENT-LIABILITIES> 361,289
<BONDS> 78,742
0
0
<COMMON> 908
<OTHER-SE> 626,055
<TOTAL-LIABILITY-AND-EQUITY> 1,182,473
<SALES> 1,040,504
<TOTAL-REVENUES> 1,040,504
<CGS> 886,199
<TOTAL-COSTS> 886,199
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,666
<INCOME-PRETAX> 109,747
<INCOME-TAX> 41,155
<INCOME-CONTINUING> 68,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,592
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
