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, 1996 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
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(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 90,825,090
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Class Outstanding September 30, 1996
Page 1 of 10
<PAGE>
WORTHINGTON INDUSTRIES, INC.
INDEX
Page
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PART I. Financial Information
Consolidated Condensed Balance Sheets -
August 31, 1996 and May 31, 1996..................................3
Consolidated Condensed Statements of Earnings -
Three Months Ended August 31, 1996 and 1995 .......................4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended August 31, 1996 and 1995........................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.................................................10
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<PAGE>
PART I. FINANCIAL INFORMATION
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, Except Per Share)
August 31 May 31
1996 1996
----------- ---------
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $11,206 $19,029
Accounts receivable - net 207,158 224,956
Raw materials 136,057 128,884
Work in process and finished products 82,328 79,141
-------- -------
Inventories 218,385 208,025
Prepaid expenses and other current assets 26,039 24,031
------- -------
Total Current Assets 462,788 476,041
Investment in Unconsolidated Affiliates 38,963 138,212
Intangible Assets 69,209 65,256
Other Assets 162,483 28,280
Property, plant and equipment 839,489 793,274
Less accumulated depreciation 289,083 280,938
-------- --------
Property, Plant and Equipment - net 550,406 512,336
-------- --------
Total Assets $1,283,849 $1,220,125
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $84,809 $82,178
Notes payable 10,690
Accrued compensation, contributions to
employee benefit plans and related taxes 27,898 33,234
Dividends payable 10,899 10,901
Other accrued items 21,314 17,652
Income taxes 16,152 5,829
Current maturities of long-term debt 2,245 1,475
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Total Current Liabilities 174,007 151,269
Other Liabilities 17,242 17,912
Long-Term Debt 298,870 298,742
Deferred Income Taxes 124,198 112,662
Shareholders' Equity
Common shares, $.01 par value 910 908
Additional paid-in capital 106,361 105,869
Unrealized gain on investment 21,524
Foreign currency translation (1,579) (1,437)
Retained earnings 542,316 534,200
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Total Shareholders' Equity 669,532 639,540
------- -------
Total Liabilities and Shareholders' Equity $1,283,849 $1,220,125
========== ==========
See notes to consolidated condensed financial statements.
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<PAGE>
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Thousands Except Per Share)
(Unaudited)
Three Months Ended
August 31
---------
1996 1995
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Net sales $402,571 $325,736
Cost of goods sold 344,896 278,731
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Gross Margin 57,675 47,005
Selling, general and administrative expense 25,224 19,869
------- --------
Operating Income 32,451 27,136
Other income (expense):
Miscellaneous income 424 247
Interest expense (3,725) (1,407)
Equity in net income of unconsolidated
affiliates - Joint Ventures 2,615 1,214
Equity in net income of unconsolidated
affiliates - Rouge 7,222
------- -------
Earnings Before Income Taxes 31,765 34,412
Income taxes 12,166 12,904
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Net Earnings $19,599 $21,508
======= =======
Average Common Shares Outstanding 90,838 90,886
Earnings Per Common Share $.22 $.24
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Cash Dividends Declared Per Common Share $.12 $.11
---- ----
See notes to consolidated condensed financial statements.
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<PAGE>
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Unaudited)
Three Months Ended
August 31
1996 1995
---- ----
Operating Activities
Net earnings $ 19,599 $ 21,508
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation and amortization 12,139 9,134
Deferred income taxes (54) 2,473
Equity in undistributed net income of
unconsolidated affiliates (2,615) (8,316)
Changes in assets and liabilities:
Current assets 9,421 37,278
Other assets 110 (1,071)
Current liabilities 9,259 (4,751)
Other liabilities (475) (874)
-------- --------
Net Cash Provided By Operating Activities 47,384 55,381
Investing Activities
Investment in property, plant and equipment, net (46,671) (22,184)
Acquisition of SCM Technologies, net of cash acquired (8,380)
Investment in unconsolidated affiliates (4,403)
-------- --------
Net Cash Used By Investing Activities (55,051) (26,587)
Financing Activities
Proceeds from (payments on) short-term borrowings 10,690 (38,200)
Proceeds from long-term debt 475 30,000
Principal payments on long-term debt (330) (330)
Proceeds from issuance of common shares 533 947
Repurchase of common shares (623) (1,085)
Dividends paid (10,901) (9,992)
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Net Cash Used By Financing Activities (156) (18,660)
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Increase (decrease) in cash and cash equivalents (7,823) 10,134
Cash and cash equivalents at beginning of period 19,029 2,003
-------- --------
Cash and cash equivalents at end of period $ 11,206 $ 12,137
======== ========
See notes to consolidated condensed financial statements.
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<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 August 31, 1996 and May 31, 1996; the results of
operations and cash flows for the three months ended August 31, 1996 and
1995.
The accounting policies followed by the Company are set forth in
Note A to the consolidated financial statements in the 1996 Worthington
Industries, Inc. Annual Report to Shareholders which is incorporated by
reference in the Company's 1996 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,
1996 and 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 months ended August 31,
1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
Note E - Accounting Change
During the first quarter, the Company took certain steps relative
to its investment in Rouge Steel, which resulted in the Company
accounting for this investment on the cost method instead of the equity
method. As a result, for the quarter ended August 31, 1996, the
Company's equity share of Rouge earnings will no longer be included in
reported earnings or earnings per share. The investment in Rouge common
stock has been reclassified to other assets and adjusted to market value
as an "available-for-sale" security with a net of tax adjustment to
shareholder's equity.
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<PAGE>
WORTHINGTON INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales for the three months ended August 31,1996 were a record $402.6
million, 24% higher than last year's first quarter. Net earnings were $19.6
million and earnings per share were $.22. Comparisons with last year's first
quarter are discussed below.
During the first quarter, the Company took certain steps relative to its
investment in Rouge Steel, which resulted in the Company accounting for this
investment on the cost method instead of the equity method. As a result,
effective for the quarter ended August 31, 1996, the Company's equity share of
Rouge earnings will no longer be included in reported earnings or earnings per
share. The Company believes that to appropriately compare periods, fiscal 1996
results should be adjusted to eliminate the impact of Rouge equity earnings.
In the first quarter of fiscal 1996, Rouge contributed $.05 to the Company's
reported earnings per share of $.24, and the steel, plastics, castings and
joint venture businesses contributed $.19 per share. This year's first quarter
earnings per share of $.22 (which does not include Rouge equity earnings
because of the accounting change), were 16% higher than last year's results
excluding Rouge, of $.19 per share.
The sales increase principally reflects the inclusion of the metal
framing business in this year's results. Gross margin was up 23% for the
quarter in line with the sales increase. Gross margin as a percentage of sales
for the quarter was 14.3% compared to 14.4% last year. Selling, general and
administrative expense increased 27% for the quarter because of higher
profit-sharing and the inclusion of the metal framing business expenses this
year. As a percent of sales, this expense was 6.3% compared to 6.1% last year.
Operating income was 20% higher for the quarter due to better performances in
the processed steel products and custom products segments. As a percentage of
sales, operating income was 8.1% compared to 8.3%.
Interest expense increased 165% for the three months. Average debt rose
because of increased borrowings to acquire the metal framing business and to
support higher levels of capital expenditures. The average interest rate
decreased to 5.9% from 6.8% last year. Interest of $929,000 was capitalized
during the quarter. Overall, interest expense will increase as the Company
continues to fund its growth through debt financing rather than equity
financing.
Equity in net income of unconsolidated affiliates was down 69% for the
quarter because of the elimination of equity earnings from the investment in
Rouge due to the accounting change discussed above. Excluding Rouge, equity
from unconsolidated affiliates was up 115%. Worthington Armstrong Venture was
up significantly on increased demand.
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<PAGE>
Income taxes decreased less than pre-tax earnings for the three month
period as the effective tax rate increased to 38.3% from 37.5% last year due
to an increase in state taxes.
The processed steel products segment posted record sales with the
inclusion of the metal framing business this year and record earnings due to
improvements in its businesses. Steel processing shipments were down mainly
due to lower automotive volume but earnings increased due to more favorable
pricing and product mix. Pressure cylinders had record sales for the first
three months because of increased non-refillable refrigerant volume. Also, in
June 1996, the Company purchased SCM Technologies which designs, engineers and
manufactures high pressure industrial, medical, halon and electronic gas
cylinders. SCM, which is located just outside Windsor, Ontario, will enable
the Company to increase its penetration in the high pressure cylinder market.
The custom products segment sales and earnings were records for the
first quarter. The plastics operation benefited from higher volume in its
automotive contracts and improvement at its newer, non-automotive plants.
Precision metals increased sales and operating income above last year.
The cast products segment results were lower than in last year's first
quarter. Improved industrial volume was more than offset by lower demand for
freight railcars. Operating income was also lower due to the decrease in
volume and the resulting decreases in production efficiencies and coverage of
fixed costs.
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1996, the Company's current ratio was 2.7:1, down from
3.2:1 at May 31, 1996. Long-term debt was 31% of total capital. Working
capital was $288.8 million, 43% of the Company's total net worth, down from
51% at fiscal 1996 year-end.
During the three months ended August 31, 1996, the Company's cash
position decreased by $7.8 million. Cash provided by operations was $47.4
million, consisting mostly of cash from earnings and a $18.7 million decrease
in some working capital items. The working capital decrease occurred because
of the lower sales volume of the first quarter versus the fourth quarter.
Capital expenditures and investments in acquisitions were $55.1 million and
dividends paid were $10.9 million.
The Company expects its operating results and cash from normal operating
activities to improve during the year. However, as in the first three months
of the year, borrowings may be needed to support anticipated capital
expenditures. The Company has a $150 million committed, revolving credit
agreement, of which $65 million was unused at August 31, 1996. 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. The Company intends
to offer $75 to $100 million of three year notes exchangeable into Class A
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<PAGE>
Common Stock of Rouge Steel Company in the form of DECS (SM) (Debt
Exchangeable for Common Stock (SM)). At maturity, holders of the DECS will
receive in exchange for the principle amount of the notes, shares of Rouge
Steel held by the Company (or at the Company's option, cash in lieu of the
shares). The number of Rouge shares (or the amount of cash) will be based upon
the price of Rouge Steel Class A Common Stock shortly before the maturity of
the DECS. The Company plans to use the proceeds from the DECS offering to pay
down borrowings under its current revolving credit agreement or for general
corporate purposes. The DECS will be offered only by means of a Prospectus.
-9-
<PAGE>
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 August 31, 1996.
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 14, 1996 By: /s/ Donald G. Barger, Jr.
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Donald G. Barger, Jr.
Vice President-Chief Financial Officer
By: /s/ Michael R. Sayre
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Michael R. Sayre
Controller
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ON FORM 10Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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