UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTER ENDED MARCH 26, 1994
OR
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 1-3258
LUKENS INC.
50 South First Avenue, Coatesville, PA 19320-0911
(610) 383-2000
Incorporated in Delaware
I.R.S. Employer Identification Number 23-2451900
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
SHARES OUTSTANDING AS OF MAY 3, 1994
Common Stock, $.01 Par Value, 14,553,869
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Lukens Inc.
Consolidated Statements of Earnings
(Dollars & shares in thousands except per share amounts)
<TABLE>
<CAPTION>
FIRST QUARTER
13 Weeks Ended
March March
26, 1994 27, 1993
--------- ---------
<S> <C> <C>
Net Sales $ 220,914 221,116
Operating Costs and Expenses
Cost of products sold 207,750 194,041
Selling and administrative expenses 13,179 12,789
--------- ---------
Total operating costs and expenses 220,929 206,830
--------- ---------
Operating Earnings (Loss) (15) 14,286
Interest income 17 9
Interest expense (4,097) (4,257)
--------- ---------
Earnings (Loss) Before Income Taxes (4,095) 10,038
Income tax expense (benefit) (1,597) 3,876
--------- ---------
Earnings (Loss) from Continuing Operations -
Before Cumulative Effect of Accounting Changes (2,498) 6,162
Discontinued Operations (Note 2)
Earnings from operations, net of tax - 16
--------- ---------
Earnings (Loss) Before Cumulative Effect of
Accounting Changes (2,498) 6,178
Cumulative Effect of Accounting Changes, Net of Tax
Postretirement benefits-SFAS No. 106 - (67,222)
Income taxes-SFAS No. 109 - 1,321
--------- ---------
Net Earnings (Loss) $ (2,498) (59,723)
========= =========
Dividend requirements for preferred stock (502) (468)
--------- ---------
Net Earnings (Loss) Applicable to Common Stock $ (3,000) (60,191)
========= =========
Earnings (Loss) Per Common Share
Primary
Earnings (loss) before cumulative
effect of accounting changes $ (.21) .39
Net earnings (loss) $ (.21) (4.07)
Fully diluted
Earnings (loss) before cumulative
effect of accounting changes $ (.21) .37
Net earnings (loss) $ (.21) (4.07)
Common Shares and Equivalents Outstanding
Primary 14,537 14,785
Fully diluted 16,368 16,416
Cash Dividends on Common Stock-Per Share $ .25 .25
The accompanying notes are an integral part of these statements.
</TABLE>
Lukens Inc.
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
March December
26, 1994 25, 1993
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 16,963 11,483
Receivables, less allowance of $9,752
in 1994 and $11,444 in 1993 115,432 114,951
Inventories
Products finished and in process 102,753 121,437
Raw materials 28,842 32,596
Supplies 5,469 6,027
---------- ----------
137,064 160,060
Deferred income taxes 14,641 15,070
Prepaid expenses and other 2,681 6,175
---------- ----------
Total current assets 286,781 307,739
---------- ----------
Plant and Equipment 763,860 789,780
Less accumulated depreciation 343,508 357,927
---------- ----------
Net plant and equipment 420,352 431,853
---------- ----------
Intangible Assets, net of accumulated amortization
of $4,336 in 1994 and $9,817 in 1993 49,925 54,594
Deferred Income Taxes 25,708 20,498
Other Assets 2,238 2,494
---------- ----------
Total Assets $ 785,004 817,178
========== ==========
Liabilities and Stockholders' Investment
Current Liabilities
Accounts payable $ 85,155 75,540
Accrued employment costs 37,021 52,339
Other accrued expenses 26,514 28,005
Current maturities of long-term debt 7,685 5,821
---------- ----------
Total current liabilities 156,375 161,705
---------- ----------
Long-term Debt (Note 4) 197,206 220,768
Retirement Benefits
Pensions 20,619 19,055
Medical and life insurance 137,314 136,056
Other Liabilities 11,463 12,840
---------- ----------
Total Liabilities 522,977 550,424
---------- ----------
Commitments and Contingencies (Note 3)
Stockholders' Investment
Series preferred stock, 1,000,000 shares authorized
Series B ESOP convertible preferred
(538,797 shares outstanding in 1994 and
541,123 in 1993) 32,328 32,467
Common stock, 40,000,000 shares authorized
and 15,813,259 issued 158 158
Capital in excess of par value 82,958 82,625
Earnings invested 187,344 193,977
Foreign currency translation adjustments (1,077) (1,641)
Deferred compensation - ESOP (25,139) (26,209)
Repurchased stock, at cost (1,266,439 shares
in 1994 and 1,284,273 in 1993) (14,545) (14,623)
---------- ----------
Total stockholders' investment 262,027 266,754
---------- ----------
Total Liabilities and Stockholders' Investment $ 785,004 817,178
========== ==========
The accompanying notes are an integral part of these statements.
</TABLE>
Lukens Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
FIRST QUARTER
13 Weeks Ended
March March
26, 1994 27, 1993
---------- ----------
<S> <C> <C>
Operating Activity
Net earnings (loss) $ (2,498) (59,723)
Adjustments to Reconcile Net Earnings (Loss) to
Cash Flow from Operating Activity
Depreciation and amortization 11,735 11,319
Cumulative effect of accounting changes - 65,901
Income taxes deferred (1,977) 1,977
Provision for uncollectible accounts 2,037 3,495
Retirement benefit funding less (greater)
than expense 2,842 (6,997)
Changes in working capital affecting operations
Accounts receivable (14,407) (12,571)
Inventories 7,666 2,907
Prepaid expenses and other 3,112 1,250
Accounts payable 13,789 10,430
Accrued expenses (19,446) (10,328)
Other, net (325) (149)
---------- ----------
Cash flow from operating activity 2,528 7,511
Financing Activity
Long-term debt
Borrowed - 9,000
Repaid (20,642) (444)
Dividends paid (4,283) (4,276)
Proceeds from stock options exercised 204 843
---------- ----------
Net from (for) financing activity (24,721) 5,123
Investing Activity
Capital expenditures (20,751) (6,773)
Proceeds from sale of assets/subsidiaries 48,063 -
Other, net 361 174
---------- ----------
Net from (for) investing activity 27,673 (6,599)
Cash and Cash Equivalents
Increase (decrease) 5,480 6,035
Start of period 11,483 14,970
---------- ----------
End of period $ 16,963 21,005
========== ==========
The accompanying notes are an integral part of these statements.
</TABLE>
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
1. Basis of Presentation
The financial statements are unaudited but reflect all
adjustments (consisting of normal recurring accruals) which
are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented.
These financial statements should be read in conjunction with
the financial statements and related notes in the 1993 Annual
Report to Stockholders. Results from any interim period are
not necessarily indicative of the results for a full year.
2. Discontinued Operations
As part of a program, adopted in 1993, to focus Lukens'
resources on its steel businesses, the subsidiaries previously
reported in the Corrosion Protection Group, Safety Products
Group and most subsidiaries in the Diversified Group were
reported as discontinued operations.
In the first quarter of 1994, the safety products and
materials-handling subsidiaries were sold. Net proceeds from
the sales totaled $46,649, including purchase price
adjustments paid in the 1994 second quarter of $1,108. Net
assets of these subsidiaries as of year-end 1993 were $46,837.
Because the 1993 fourth quarter discontinued operations
provision included projected results, current year results
were charged against the 1993 provision. For the 1994 first
quarter, net sales of discontinued operations were $31,043
with a net loss of $350.
Net sales and income tax expense of the discontinued
operations and an earnings per common share reconciliation
(before the cumulative effect of accounting changes) for the
first quarter of 1993 are listed below.
Net Sales $ 35,940
Income Tax Expense $ 8
Earnings Per Common Share - Primary
Continuing operations $ .39
Discontinued operations -
-------
$ .39
=======
Earnings Per Common Share - Fully Diluted
Continuing operations $ .37
Discontinued operations -
-------
$ .37
=======
Net assets of the discontinued operations at the end of the
1994 first quarter were $40,316.
3. Commitments and Contingencies
The company is party to various claims, disputes, legal
actions and other proceedings involving product liability,
contracts, equal employment opportunity, occupational safety,
environmental issues and various other matters. In the
opinion of management, the outcome of these matters should not
have a material adverse effect on the consolidated financial
condition or results of operations of the company.
4. Subsequent Event
On April 27, 1994, the Board of Directors approved a proposed
shelf registration for $100,000 of Lukens Inc. notes.
Although there are no immediate plans to issue the notes, they
would be available as a financing option for our five-year,
$400,000, capital expenditure program that began in 1993 and
other long-term liquidity needs. The notes will be
structured to provide flexibility in maturities, from nine
months to 30 years, and in interest rate structures.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(Dollars in thousands)
Changes in Financial Condition during
the Thirteen Weeks Ended March 26, 1994
Capital Structure
Cash and cash equivalents totaled $16,963 at the end of the
first quarter, an increase of $5,480 from the end of 1993. The
increase reflected proceeds from the discontinued operations
divestitures, discussed in Note 2, that were invested in cash
equivalents and not used to reduce debt. Working capital of
$130,406 at the end of the first quarter was down $15,628 from the
balance at the end of 1993. Divestitures of the discontinued
operations caused a decrease in working capital of $24,238. The
current ratio was 1.8 compared to 1.9 at year-end 1993.
Debt at the end of the first quarter was $204,891, a decrease
of $21,698 from year end. The decrease was caused primarily by
repayment of short-term notes under our revolving credit agreements
from the proceeds of discontinued operations divestitures. Also,
a $3,000 industrial revenue bond, collateralized by property owned
by one of the discontinued operations, was repaid. The ratio of
long-term debt to capital (long-term debt plus stockholders'
investment) was 42.9 percent, which compared to 45.3 percent at
year-end 1993.
On April 27, 1994, the Board of Directors approved a proposed
shelf registration for $100,000 of Lukens Inc. notes. Although
there are no immediate plans to issue the notes, they would be
available as a financing option for our five-year, $400,000,
capital expenditure program that began in 1993 and other long-term
liquidity needs. The notes will be structured to provide
flexibility in maturities, from nine months to 30 years, and in
interest rate structures.
Liquidity
Cash flow from operating activity was $2,528 for the first
quarter compared to 1993 cash flow of $7,511. Lower results for
the 1994 first quarter contributed to the drop in cash flow from
operating activity. Also, first quarter cash flow from operating
activity is impacted by incentive compensation payments related to
prior-year earnings. Incentive compensation payments in the 1994
first quarter exceeded payments in the 1993 first quarter. We
anticipate that cash flow from operating activity will improve over
the remainder of the year from lower raw material costs, improving
selling prices, and strong shipment levels. Overall, we expect
1994 cash flow from operating activity to be in the range of 1993
cash flow. Order backlog at the end of the quarter totaled
$146,824, up 45 percent from the beginning of the year.
Financing activity required $24,721, including dividend
payments of $4,283 and debt repayments of $20,642. Investing
activity generated $27,673 with proceeds from the discontinued
operations divestitures partially offset by capital expenditures of
$20,751.
Capital expenditure projections for 1994 continue to be high,
with expenditures of approximately $141,000 projected. We
anticipate funding these expenditures through the combination of
cash flow from operations, debt under an existing committed line of
credit and proceeds from the sale of discontinued operations.
In the long term, Lukens relies on the ability to generate
sufficient cash flows from operating activity to fund investing and
financing requirements and maintain a target long-term debt to
capital ratio of 35 percent. Because of our aggressive capital
expenditure program, however, we anticipate exceeding our target
long-term debt to capital ratio until the projected benefits of the
program improve cash flow from operations.
Results of Operations for the Quarters Ended
March 26, 1994 and March 27, 1993
Operating Results
A first quarter operating loss of $15 compared to 1993 first
quarter operating earnings of $14,286 reflected lower operating
results from both the Lukens Steel Group and the Washington
Stainless Group. The Lukens Steel Group recorded a loss for the
quarter from production disruptions and maintenance costs caused by
severe weather conditions, combined with increased raw material
costs. The Washington Stainless Group experienced lower selling
prices and an unfavorable shipment mix.
Sales for the first quarter were $220,914, down slightly from
1993 sales of $221,116. A decrease in sales volume in the Lukens
Steel Group was almost entirely offset by higher sales recorded by
the Washington Stainless Group.
Interest Expense
Interest expense of $4,097 was down 4 percent compared to 1993
expense of $4,257. The decrease was attributable to lower interest
rate swap expense and higher amounts of capitalized interest.
Income Taxes
The effective tax rate was 39.0 percent in 1994 and 38.6
percent in 1993.
Results From Continuing Operations
A loss from continuing operations of $2,498 was reported in
the first quarter 1994 compared to first quarter 1993 earnings of
$6,162.
Net Earnings (Loss)
A net loss of $2,498 was reported in the first quarter
compared to 1993 earnings before the cumulative effect of
accounting changes of $6,178.
Business Group Results
Operating
Net Sales Earnings (Loss)
1Q 1994 1Q 1993 1Q 1994 1Q 1993
------- ------- ------- -------
Lukens Steel $ 107,529 110,419 (1,339) 8,508
Washington Stainless 113,385 110,697 5,290 9,391
Corporate - - (3,966) (3,613)
------- ------- ------- -------
$ 220,914 221,116 (15) 14,286
======= ======= ======= =======
Lukens Steel Group
Sales for the first quarter were down 3 percent. Shipments of
172,100 tons in 1994 were down 4 percent from the 180,100 tons
shipped in 1993. The 1994 loss compared to 1993 earnings
reflected production disruptions and maintenance costs resulting
from severe weather conditions and higher scrap costs. Also, a
lower-value shipment mix contributed to the earnings decline. We
anticipate seeing higher selling prices and lower scrap prices
for the remainder of 1994. However, earnings in 1994 are not
expected to exceed 1993 earnings.
Washington Stainless Group
First quarter earnings were 44 percent lower than 1993
earnings on a 2 percent sales increase. Sales improvements at
our service center operations were offset by sales declines in
other product lines. Lower selling prices and a lower-value
shipment mix contributed to the earnings decline. Selling prices
continue to be impacted by increased competition. Shipped tons
were 57,800 in 1994 compared to 56,000 in the 1993 first quarter.
PART II - OTHER INFORMATION
Item 2. Changes in Securities.
Information regarding a proposed shelf registration of
Lukens Inc. notes is incorporated herein by reference to Note 4.
Item 4. Submission of Matters to a Vote of Security Holders.
The following directors were elected for a term of
three years at the Annual Meeting of Stockholders on April 27,
1994:
T. Kevin Dunnigan (a)
Votes For: 13,080,793
Votes Withheld: 223,842
Ronald M. Gross
Votes For: 13,118,848
Votes Withheld: 214,074
W. Paul Tippett
Votes For: 13,118,030
Votes Withheld: 214,892
R. W. Van Sant
Votes For: 12,773,588
Votes Withheld: 305,737
(a) T. Kevin Dunnigan was nominated to replace
Frederick R. Dusto who announced his retirement at the Annual
Meeting of Stockholders.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(11) Statement regarding computation of per share
earnings
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter
ended March 26, 1994.
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.
LUKENS INC.
May 9, 1994 R. W. Van Sant
--------------
R. W. Van Sant
Chairman and Chief Executive Officer
May 9, 1994 John N. Maier
-------------
John N. Maier
Vice President and Controller
<TABLE>
Lukens Inc. Exhibit 11
Computation of Per Share Earnings
Before Cumulative Effect of Accounting Changes
(Dollars and shares in thousands except per share amounts)
<CAPTION>
FIRST QUARTER
Thirteen Weeks Ended
March March
26, 1994 27, 1993
--------- ---------
<S> <C> <C>
Primary Earnings (Loss) Per Common Share
Net earnings (loss) applicable to common stock $ (3,000) 5,710
========= =========
Shares and equivalents outstanding:
Weighted average of common shares 14,537 14,482
Common stock equivalents -
Options assuming exercised at average
market price - * 303
--------- ---------
Weighted average of common shares outstanding
and equivalents 14,537 14,785
========= =========
Primary Earnings (Loss) Per Common Share $ (0.21) 0.39
========= =========
Fully Diluted Earnings (Loss) Per Common Share
Net earnings (loss) applicable to common stock $ - 6,028
========= =========
Shares and equivalents outstanding:
Weighted average of common shares - 14,482
Common stock equivalents -
Options assuming exercised at greater
of ending or average market price - 303
Assumed conversion of Series B ESOP
preferred stock - 1,631
--------- ---------
Weighted average of common shares outstanding
and equivalents - 16,416
========= =========
Fully Diluted Earnings (Loss) Per Common Share $ (0.21)** 0.37
========= =========
* Not applicable because it would result in an anti-dilutive calculation.
** Fully diluted calculation is not presented because it is anti-dilutive.
Lukens Inc. Exhibit 11
Computation of Per Share Earnings
After Cumulative Effect of Accounting Changes
(Dollars and shares in thousands except per share amounts)
<CAPTION>
FIRST
QUARTER
Thirteen
Weeks Ended
March
27, 1993
---------
<S> <C>
Primary Earnings Per Common Share
Net earnings (loss) applicable to common stock $ (60,191)
=========
Shares and equivalents outstanding:
Weighted average of common shares 14,482
Common stock equivalents -
Options assuming exercised at average market price 303
---------
Weighted average of common shares outstanding and equivalents 14,785
=========
Primary Earnings (Loss) Per Common Share $ (4.07)
=========
Fully Diluted Earnings Per Common Share
Fully Diluted Earnings (Loss) Per Common Share* $ (4.07)
=========
* Fully diluted calculation is not presented because it is anti-dilutive.
</TABLE>
