<PAGE> 1
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, 1997 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 96,782,431
---------------------------- -------------------------------
Class Outstanding September 30, 1997
Page 1 of 13
<PAGE> 2
WORTHINGTON INDUSTRIES, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
August 31, 1997 and May 31, 1997.................................3
Consolidated Condensed Statements of Earnings -
Three Months Ended August 31, 1997 and 1996......................5
Consolidated Condensed Statements of Cash Flows -
Three Months Ended August 31, 1997 and 1996......................6
Notes to Consolidated Condensed Financial Statements.............7
Management's Discussion and Analysis of
Results of Operations and Financial Condition....................9
PART II. OTHER INFORMATION...............................................12
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, Except Per Share)
<TABLE>
<CAPTION>
August 31 May 31
1997 1997
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,599 $ 7,212
Accounts receivable - net 243,480 266,836
Inventories
Raw materials 192,223 187,572
Work in process and finished products 110,283 109,316
---------- ----------
Total Inventories 302,506 296,888
Prepaid expenses and other current assets 28,451 23,192
---------- ----------
TOTAL CURRENT ASSETS 576,036 594,128
Investment in Unconsolidated Affiliates 56,142 57,040
Intangible Assets 97,535 98,132
Other Assets 28,514 32,365
Investment in Rouge 92,244 88,494
Property, plant and equipment 1,110,858 1,036,621
Less accumulated depreciation 359,562 345,594
---------- ----------
Property, Plant and Equipment - net 751,296 691,027
---------- ----------
TOTAL ASSETS $1,601,767 $1,561,186
========== ==========
</TABLE>
3
<PAGE> 4
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, Except Per Share)
<TABLE>
<CAPTION>
August 31 May 31
1997 1997
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 124,639 $ 117,910
Notes payable 51,300 50,000
Accrued compensation, contributions to
employee benefit plans and related taxes 34,046 38,058
Dividends payable 12,578 12,572
Other accrued items 23,278 20,244
Income taxes 12,603 2,026
Current maturities of long-term debt 2,384 5,984
---------- ----------
TOTAL CURRENT LIABILITIES 260,828 246,794
Other Liabilities 19,325 18,839
Long-Term Debt:
Conventional long-term debt 362,958 361,899
Debt exchangeable for common stock 86,051 88,494
---------- ----------
Total Long-Term Debt 449,009 450,393
Deferred Income Taxes 122,878 120,765
Minority Interest 19,438 8,877
Shareholders' Equity
Common shares, $.01 par value 968 968
Additional paid-in capital 114,667 114,052
Unrealized loss on investment (1,532) (5,563)
Foreign currency translation (1,861) (1,861)
Retained earnings 618,047 607,922
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 730,289 715,518
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,601,767 $1,561,186
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Thousands Except Per Share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31
---------
1997 1996
---- ----
<S> <C> <C>
Net sales $500,427 $430,292
Cost of goods sold 429,096 366,937
-------- --------
GROSS MARGIN 71,331 63,355
Selling, general & administrative expense 32,432 26,868
-------- --------
OPERATING INCOME 38,899 36,487
Other income (expense):
Miscellaneous income (expense) (208) 427
Interest expense (6,778) (3,947)
Equity in net income of unconsolidated
affiliates 4,205 2,615
-------- --------
EARNINGS BEFORE INCOME TAXES 36,118 35,582
Income taxes 13,364 13,621
-------- --------
NET EARNINGS $ 22,754 $ 21,961
======== ========
AVERAGE COMMON SHARES OUTSTANDING 96,739 96,512
EARNINGS PER COMMON SHARE
$.24 $.23
---- ----
CASH DIVIDENDS DECLARED
PER COMMON SHARE
$.13 $.12
---- ----
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands, Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31
---------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 22,754 $ 21,961
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 14,922 12,953
Deferred income taxes (54) (54)
Equity in undistributed net income of unconsolidated affiliates 881 (2,615)
Minority interest in net loss of consolidated subsidiary
Changes in assets and liabilities:
Current assets 12,445 12,688
Other assets 3,698 251
Current liabilities 16,328 8,931
Other liabilities 486 (475)
-------- --------
Net Cash Provided By Operating Activities 71,460 53,640
INVESTING ACTIVITIES
Investment in property, plant and equipment, net (74,436) (48,148)
Acquisitions, net of cash acquired (8,380)
-------- --------
Net Cash Used By Investing Activities (74,436) (56,528)
FINANCING ACTIVITIES
Proceeds from (payments on) short-term borrowings 1,300 10,690
Proceeds from long-term debt 1,900 475
Principal payments on long-term debt (4,441) (5,135)
Proceeds from issuance of common shares 615 533
Proceeds from minority interest 10,561
Repurchase of common shares (623)
Dividends paid (12,572) (10,901)
-------- --------
Net Cash Used By Financing Activities (2,637) (4,961)
-------- --------
Decrease in cash and cash equivalents (5,613) (7,849)
Cash and cash equivalents at beginning of period 7,212 17,580
-------- --------
Cash and cash equivalents at end of period $ 1,599 $ 9,731
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
6
<PAGE> 7
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, 1997 and May 31, 1997; the results of
operations for the three months ended August 31, 1997 and 1996, and
cash flows for the three months ended August 31, 1997 and 1996.
The accounting policies followed by the Company are set forth
in Note A to the consolidated financial statements in the 1997
Worthington Industries, Inc. Annual Report to Shareholders which is
included in the Company's 1997 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, 1997 and 1996 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, 1997 are not necessarily indicative of the results to be expected
for the full year.
NOTE E - INVOLUNTARY CONVERSION OF ASSETS
On August 14, 1997, the Company experienced a fire at its
steel processing facility in Monroe, Ohio. The fire significantly
damaged the pickling area of the facility and caused less extensive
damage to the remainder of the plant. The Company has shifted as much
business as possible to its other locations, with the remainder being
sent to third party processors. The blanking operations are currently
running, slitting is expected to return within a few months, and
pickling in around one year.
7
<PAGE> 8
WORTHINGTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The Company carries both property damage and business interruption
insurance and as a result, management does not expect the fire to have a
material adverse impact on the Company's financial results. The total loss from
business interruption, extra expenses and property damage is expected to be in
excess of $60 million. The deductible portion of the loss (one-half million
dollars) was included as other expense during the quarter ended August 31, 1997.
The Company will record the expected insurance recovery for business
interruption and extra expenses as a receivable, netted with amounts advanced by
the insurance company. The estimated net benefit from the business interruption
insurance which approximates the operating income which would have resulted had
the fire not occurred, is included in net sales and other revenues.
8
<PAGE> 9
WORTHINGTON INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The first quarter results were a record for sales and core earnings
(excluding Rouge Steel equity earnings). For the three months ended August 31,
1997, net sales of $500.4 million were 16% higher than in last year's first
quarter. Net earnings were $22.7 million and earnings per share were $.24, both
up 4% from the previous year.
Sales increases for the quarter were achieved for all segments. Volume
increased in the metal framing, automotive body panel, cylinder, plastic and
steel castings businesses. Pricing increased in metal framing and automotive
body panels. Earnings for the quarter were supported by significant increases in
metal framing, automotive body panels, cylinders and equity in net income of
unconsolidated affiliates.
Gross margin was up 13% for the quarter and as a percentage of sales
was 14.3% (14.7% last year). Material, labor and overhead costs were higher for
the quarter due to the inclusion of acquired operations in the current year
amounts and the startup of the Delta steel processing plant. The material cost
component of cost of goods sold, primarily in steel processing, contributed to
most of the increase.
Selling, general and administrative expense increased 21% for the
quarter due mostly to the startup of Delta and the inclusion of expenses for
acquired operations in the current year. As a percent of sales, this expense for
the quarter was 6.5% (6.2% last year). Operating income was 7% higher for the
quarter. As a percentage of sales, operating income was 7.8% for the quarter
(8.5% last year).
Interest expense increased 72% for the three months. Average debt
outstanding increased due to the high level of capital expenditures and the
average interest rate increased from last year. The Company capitalized interest
of $1,469,000 ($929,000 last year) during the quarter.
Equity in net income of unconsolidated affiliates was up 61% for the
quarter. Equity from Worthington Armstrong Venture and Acerex were up
significantly for the period.
Income taxes decreased 2% for the three month period as the effective
tax rate was lower (37.0% compared to 38.3%) due to lower state taxes.
9
<PAGE> 10
The processed steel products segment posted record sales for the period
due to increased volume for the metal framing business, auto body panels and
cylinders and the startup of the Delta, Ohio facility. Steel processing sales
improved from last year despite summer strikes, shutdowns in the automotive and
appliance markets and a fire at the Monroe, Ohio plant. The new nickel plating
line at the Malvern, Pa. plant started production in June.
On August 14, 1997, the Company experienced a fire at its steel
processing facility in Monroe. The fire significantly damaged the pickling area
of the facility and caused less extensive damage to the remainder of the plant.
The Company has shifted as much business as possible to its other locations,
with the remainder being sent to third party processors. Blanking is now back in
operation, while slitting is expected to return within a few months and pickling
in around one year. The estimated net benefit from the business interruption
insurance, which approximates the operating income which would have resulted had
the fire not occurred, is included in net sales and other revenues.
Pressure cylinders' sales and operating income were up because of
increased volume for steel portables and high pressure cylinders. The metal
framing business contributed to the increased sales and operating income for the
segment, benefiting from improved market conditions and operating efficiency
gains. The auto body panel business experienced increased volume and higher
operating income for the three months due to strong demand for its automotive
replacement parts.
Sales for the custom products segment were up for the first quarter;
however, operating income was lower. The plastics operation increased sales due
to the acquisition of PMI in December 1996. Operating income was lower because
of the summer strikes and shutdowns in the automotive and appliance sectors.
During the quarter, a strategic alliance with a German plastics company,
Troester Systeme und Komponenten, was formed allowing global growth without
additional capital investment. Precision Metals profits increased above last
year's first quarter on sales that were flat.
The cast products segment continues to suffer from lower volume and
operating income was down for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1997, the Company's current ratio was 2.2:1, down from
2.4:1 at May 31, 1997, mostly due to a decrease in accounts receivable. Total
debt as a percentage of total committed capital (total debt and shareholder's
equity), both excluding DECS, decreased to 36% from 37% at May 31, 1997. Working
capital was $315.2 million, 43% of the Company's total net worth, down
10
<PAGE> 11
from 49% at May 31, 1997. As a percentage of annualized sales, working capital
was 15.7%, down from 17.3% for last year's first quarter.
During the three months, the Company's cash position decreased by $5.6
million. Cash provided by operating activities was $71.5 million, up from $53.6
last year. Capital expenditures of $74.4 million and dividends paid of $12.6
million were funded mostly from cash provided from operations and proceeds from
minority interest investment. Capital expenditures were up 55% over last year
and will continue at high levels with the construction of the Decatur, Alabama
steel processing plant and funding of the Spartan Steel joint venture.
At August 31, 1997, $50 million of the $190 million revolving credit
facility was unused. The Company expects its operating results and cash from
normal operating activities to improve during the remainder of the fiscal year.
Additional borrowings may be needed to support anticipated capital expenditures.
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 regularly
considers long-term debt issuance an alternative depending on financial market
conditions.
FORWARD-LOOKING INFORMATION
The Company wishes to take advantage of the Safe Harbor provisions
included in the Private Securities Litigation Reform Act of 1995 (the "Act").
Statements by the Company relating to future revenues and cash, growth, or plant
start-ups or capabilities and other statements which are not historical
information constitute "forward looking statements" within the meaning of the
Act. All forward looking statements are subject to risks and uncertainties which
could cause actual results to differ from those projected. Factors that could
cause actual results to differ materially include, but are not limited to, the
following: general economic conditions; conditions in the Company's major
markets; competitive factors and pricing pressures; product demand and changes
in product mix; changes in pricing or availability of raw material, particularly
steel; delays in construction or equipment supply; and other risks described
from time to time in the Company's filings with the Securities and Exchange
Commission.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Registrant's annual Meeting of Shareholders was held on September 18, 1997.
In connection with the meeting, proxies were solicited. Following are the voting
results on proposals considered and voted upon.
1. All nominees for Class of Directors whose term expires in 2000 were
elected by the stockholders who were present or represented by proxy.
VOTES FOR VOTES
THE ELECTION WITHHOLDING
OF DIRECTOR AUTHORITY TO VOTE
----------- -----------------
Charles R. Carson 83,919,790 749,982
William S. Dietrich 83,552,443 1,147,329
John E. Fisher 83,889,465 780,307
John F. Havens 83,893,855 775,918
Charles D. Minor 83,901,772 767,991
2. The Amendment to the Worthington Industries, Inc. 1990 Stock Option
Plan to insert limitations called for under Section 162(m) of the
Internal Revenue Code was approved by the following vote:
FOR: 81,524,539 AGAINST: 2,700,926 ABSTAIN: 444,307
3. The Worthington Industries, Inc. 1997 Long-Term Incentive Plan was
approved by the following vote:
FOR: 69,562,133 AGAINST: 14,661,477 ABSTAIN: 446,162
4. The selection of Ernst & Young as auditors of the Company was ratified
by the following vote:
FOR: 84,331,578 AGAINST: 121,462 ABSTAIN: 216,732
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, 1997.
12
<PAGE> 13
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, 1997 By: /s/Donald G. Barger, Jr.
-------------------------
Donald G. Barger, Jr.
Vice President-Chief
Financial Officer
By: /s/Michael R. Sayre
-------------------------
` Michael R. Sayre
Controller
13
<TABLE> <S> <C>
<ARTICLE> 5
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 1,599
<SECURITIES> 0
<RECEIVABLES> 246,425
<ALLOWANCES> 2,945
<INVENTORY> 302,506
<CURRENT-ASSETS> 576,036
<PP&E> 1,110,858
<DEPRECIATION> 359,562
<TOTAL-ASSETS> 1,601,767
<CURRENT-LIABILITIES> 260,828
<BONDS> 449,009
0
0
<COMMON> 968
<OTHER-SE> 729,321
<TOTAL-LIABILITY-AND-EQUITY> 1,601,767
<SALES> 500,427
<TOTAL-REVENUES> 500,427
<CGS> 429,096
<TOTAL-COSTS> 429,096
<OTHER-EXPENSES> 32,432
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,778
<INCOME-PRETAX> 36,118
<INCOME-TAX> 13,364
<INCOME-CONTINUING> 22,754
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,754
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
