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 APRIL 1, 1995
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 1, 1995
Common Stock, $.01 Par Value, 14,667,221
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Statements of Earnings
(Dollars & shares in thousands except per share amounts)
<TABLE>
<CAPTION>
FIRST QUARTER
13 Weeks Ended
April March
1, 1995 26, 1994
--------- ---------
<S> <C> <C>
Net Sales $ 259,957 220,914
Operating Costs and Expenses
Cost of products sold 228,687 207,750
Selling and administrative expenses 14,287 13,179
--------- ---------
Total operating costs and expenses 242,974 220,929
--------- ---------
Operating Earnings (Loss) 16,983 (15)
Interest income 10 17
Interest expense (2,370) (4,097)
--------- ---------
Earnings (Loss) Before Income Taxes 14,623 (4,095)
Income tax expense (benefit) 5,527 (1,597)
--------- ---------
Net Earnings (Loss) $ 9,096 (2,498)
========= =========
Dividend requirements for preferred stock (490) (502)
--------- ---------
Net Earnings (Loss) Applicable to Common Stock $ 8,606 (3,000)
========= =========
Earnings (Loss) Per Common Share
Primary $ .58 (.21)
Fully diluted $ .55 (.21)
Common Shares and Equivalents Outstanding
Primary 14,752 14,537
Fully diluted 16,325 16,368
Cash Dividends on Common Stock-Per Share $ .25 .25
The accompanying notes are an integral part of these statements.
</TABLE>
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
April December
1, 1995 31, 1994
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 7,954 9,806
Receivables, less allowance of $8,324
in 1995 and $7,569 in 1994 138,299 120,592
Inventories
Products finished and in process 113,443 99,120
Raw materials 32,982 31,064
Supplies 4,520 4,744
---------- ----------
150,945 134,928
Deferred income taxes 13,695 13,695
Prepaid expenses and other 1,640 2,015
---------- ----------
Total current assets 312,533 281,036
---------- ----------
Plant and Equipment 869,171 843,405
Less accumulated depreciation 375,190 365,276
---------- ----------
Net plant and equipment 493,981 478,129
---------- ----------
Intangible Assets, net of accumulated amortization
of $5,547 in 1995 and $5,038 in 1994 44,922 45,522
Deferred Income Taxes 18,590 19,990
Other Assets 5,779 1,757
---------- ----------
Total Assets $ 875,805 826,434
========== ==========
Liabilities and Stockholders' Investment
Current Liabilities
Accounts payable $ 100,356 87,463
Accrued employment costs 35,602 50,526
Other accrued expenses 27,132 29,433
Current maturities of long-term debt 5,124 7,134
---------- ----------
Total current liabilities 168,214 174,556
---------- ----------
Long-Term Debt 247,459 201,351
Retirement Benefits
Pensions 25,387 23,336
Medical and life insurance 141,998 140,773
Other Liabilities 9,655 9,361
---------- ----------
Total liabilities 592,713 549,377
---------- ----------
Commitments and Contingencies (Note 4)
Stockholders' Investment
Series preferred stock, 1,000,000 shares authorized
Series B ESOP convertible preferred 30,491 30,635
(508,180 shares outstanding in 1995 and
510,592 in 1994)
Common stock, 40,000,000 shares authorized
and 15,813,259 issued 158 158
Capital in excess of par value 84,180 84,088
Earnings invested 204,715 199,586
Foreign currency translation adjustments (1,449) (1,303)
Deferred compensation - ESOP (21,746) (22,767)
Repurchased stock, at cost (1,154,239 shares (13,257) (13,340)
in 1995 and 1,161,460 in 1994)
---------- ----------
Total stockholders' investment 283,092 277,057
---------- ----------
Total Liabilities and Stockholders' Investment $ 875,805 826,434
========== ==========
The accompanying notes are an integral part of these statements.
</TABLE>
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
FIRST QUARTER
13 Weeks Ended
April March
1, 1995 26, 1994
---------- ----------
<S> <C> <C>
Operating Activity
Net earnings (loss) $ 9,096 (2,498)
Adjustments to Reconcile Net Earnings (Loss) to
Cash Flow from (Used for) Operating Activity
Depreciation and amortization 10,534 11,735
Income taxes deferred 1,400 (1,977)
Provision for uncollectible accounts 2,398 2,037
Retirement benefit funding less than expense 3,628 2,842
Changes in working capital affecting operations
Accounts receivable (20,105) (14,407)
Inventories (16,017) 7,666
Prepaid expenses and other 375 3,112
Accounts payable 12,896 13,789
Accrued expenses (17,349) (19,446)
Other, net (333) (325)
---------- ----------
Cash flow from (used for) operating activity (13,477) 2,528
Financing Activity
Long-term debt
Borrowed 47,550 -
Repaid (2,447) (20,642)
Dividends paid (4,277) (4,283)
Proceeds from stock options exercised - 204
Other, net (9) -
---------- ----------
Net from (for) financing activity 40,817 (24,721)
Investing Activity
Capital expenditures (25,262) (20,751)
Proceeds from sale of assets/subsidiaries 17 48,063
Other, net (3,947) 361
---------- ----------
Net from (for) investing activity (29,192) 27,673
Cash and Cash Equivalents
Increase (decrease) (1,852) 5,480
Start of period 9,806 11,483
---------- ----------
End of period $ 7,954 16,963
========== ==========
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 1994
Annual Report to Stockholders. Results from any interim period are not
necessarily indicative of the results for a full year.
2. Discontinued Operations
Subsequent to the end of the first quarter, our pipe-coating subsidiary was
sold for approximately $10,000. With this divestiture, all subsidiaries
classified as discontinued operations in 1993 have been sold. Results from
discontinued operations were charged against a loss reserve established in
the fourth quarter of 1993. First quarter 1995 discontinued operations
results included net sales of $6,633 and a net loss of $486.
3. Future Accounting Changes
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" was issued in March 1995. This statement requires review and
measurement methods to calculate impairment of long-lived assets, including
certain identifiable intangibles and goodwill, whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. The statement also requires that long-lived assets to be
disposed of be reported at the lower of the carrying amount or fair value
less costs to sell. We do not expect any significant write-downs of assets
upon adopting this statement in 1996.
4. 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.
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 April 1, 1995
Capital Structure
Cash and cash equivalents totaled $7,954 at the end of the first quarter, a
decrease of $1,852 from the end of 1994. Working capital of $144,319 was
up $37,839 from the balance at the end of 1994. Higher receivable and
inventory balances contributed to the increase. The current ratio was 1.9
compared to 1.6 at year-end 1994.
Debt at the end of the first quarter was $252,583, an increase of $44,098
from the beginning of the year. The increase reflected borrowings under
our revolving credit agreements, primarily to finance capital expenditures
and working capital requirements. The ratio of long-term debt to capital
(long-term debt plus stockholders' investment) was 46.6 percent, which
compared to 42.1 percent at year-end 1994.
Liquidity
Operating activity required cash of $13,477 compared to 1994 first quarter
cash generated from operations of $2,528. In the first quarter of 1995,
higher working capital requirements contributed to a net use of cash from
operations. First quarter incentive compensation payments, related to
prior-year results, had a negative impact on cash flow from operations.
Based on strong business conditions, especially in the Washington Stainless
Group, we expect that cash flow from operating activity will improve
through the remainder of 1995. Order backlog was $218,800 at the end of
the first quarter, which was 30 percent higher than year-end 1994 order
backlog and 49 percent higher than at the same time last year. Overall, we
expect 1995 cash flow from operating activity will be in the same range as
last year. Our ability to implement the start-up of significant capital
projects as planned will continue to be a significant factor to cash flow.
Financing activity generated $40,817 with net borrowings of $45,103 offset
by dividend payments of $4,277. Investing activity required $29,192,
primarily for capital expenditures of $25,262.
Stainless melting facilities in Coatesville, Pennsylvania, were completed
in the first quarter, and the Lukens Steel Group began production of
stainless steel slabs for the Washington Stainless Group. Also in the
first quarter, start-up of the plate and sheet processing system at our
facility in Conshohocken, Pennsylvania, began.
In the long term, Lukens relies on the ability to generate sufficient cash
flows from operating activity to fund investing and financing requirements
and to 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 and
enable us to reach our target in the long term.
Results of Operations for the Quarters Ended
April 1, 1995 and March 26, 1994
Operating Results
First quarter operating earnings of $16,983 compared to an operating loss
of $15 in the first quarter of 1994. The increase primarily reflected
improved selling prices and strong shipment volume in the Washington
Stainless Group. The Lukens Steel Group also reported higher results. The
loss recorded in 1994 was largely attributable to production disruptions
and maintenance costs associated with severe weather conditions. The
increase in 1995 selling and administrative costs included higher incentive
compensation accruals.
Sales for the first quarter were $259,957, up 18 percent from 1994 sales of
$220,914. Most of the increase in sales resulted from strong business
conditions in the Washington Stainless Group.
Interest Expense
Interest expense of $2,370 was down 42 percent compared to 1994 expense of
$4,097. Higher amounts of capitalized interest associated with significant
capital projects were recognized in 1995. Interest rates in 1995 were
significantly higher than rates in 1994.
Income Taxes
The effective tax rate was 37.8 percent in 1995 and 39.0 percent in 1994.
The 1994 rate included higher estimates of non-deductible expenses.
Net Earnings (Loss)
Net earnings of $9,096 in 1995 compared to a net loss of $2,498 in 1994.
Business Group Results
Operating
Net Sales Earnings (Loss)
1Q 1995 1Q 1994 1Q 1995 1Q 1994
------- ------- ------- -------
Lukens Steel $ 119,558 110,161 4,148 (1,339)
Washington Stainless 153,789 113,417 17,920 5,290
Corporate - - (5,085) (3,966)
Inter-group eliminations/a/ (13,390) (2,664) - -
------- ------- ------- -------
$ 259,957 220,914 16,983 (15)
======= ======= ======= =======
/a/ Primarily sales from the Lukens Steel Group to the Washington Stainless
Group.
Lukens Steel Group
Net sales increased 9 percent. With the completion of stainless melting
facilities in Coatesville, Pennsylvania, during the first quarter,
stainless slabs were manufactured and sold to the Washington Stainless
Group. Sales also benefited from higher selling prices in most product
lines. Shipped tons decreased 10 percent, from 172,100 tons in 1994 to
154,600 tons in 1995. Lower shipment volumes were caused primarily by
disruptions from our capital expenditure program.
Earnings in 1995 benefited from higher selling prices and a more favorable
shipment mix. These favorable factors were partially offset by costs
associated with start-up and production disruptions of significant capital
projects. The group recorded a loss in the first quarter of 1994 primarily
from production disruptions and maintenance costs associated with severe
weather conditions.
Washington Stainless Group
Strong market conditions in the Washington Stainless Group led to a 36
percent increase in sales. Increased shipment volumes and selling prices
in most stainless product lines, and in our service center operations,
resulted in the improvement. Shipments increased 20 percent, from 57,800
tons in 1994 to 69,500 tons in 1995. The sales increase led to earnings
which were more than three times 1994 first quarter earnings. Higher raw
material costs partially offset the earnings improvement.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In connection with the workers' compensation hearing loss claims alleged
against Lukens Steel Company, which have been previously reported, an
additional 22 claims were filed during the first quarter of 1995. Of the
approximately 372 hearing loss claimants, 249 have released their claims
and received negotiated payments, as of April 1, 1995.
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 26, 1995:
Sandra L. Helton
Votes For: 14,286,106
Votes Withheld: 128,648
William H. Nelson, III
Votes For: 14,283,360
Votes Withheld: 131,394
Stuart J. Northrop (a)
Votes For: 14,660,120
Votes Withheld: 126,673
(a) Stuart J. Northrop is expected to retire in October 1996 pursuant to
company policy.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(11) Statement regarding computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended April 1, 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.
LUKENS INC.
May 10, 1995 /s/ R. W. Van Sant
------------------
R. W. Van Sant
Chairman and Chief Executive Officer
May 10, 1995 /s/ C. B. Houghton, Jr.
-----------------------
C. B. Houghton, Jr.
Vice President and Controller
Exhibit 11
Computation of Earnings Per Common Share
(Dollars and shares in thousands except per share amounts)
<TABLE>
<CAPTION> FIRST QUARTER
13 Weeks Ended
April March
1, 1995 26, 1994
-------- --------
<S> <C> <C>
Primary Earnings (Loss) per Common Share
Net earnings (loss) applicable to common stock
Net earnings (loss) $ 9,096 (2,498)
ESOP dividend requirements
Preferred stock dividends declared (610) (647)
Tax benefit on dividends-unallocated shares 120 145
-------- --------
Net earnings (loss) applicable to common stock $ 8,606 (3,000)
-------- --------
Weighted average number of common shares and equivalents outstanding
Weighted average number of common shares outstanding 14,656 14,537
Common stock equivalents:
Stock options, assuming exercised at average market price 96 - *
-------- --------
Weighted average number of common shares and equivalents
outstanding 14,752 14,537
-------- --------
Primary Earnings (Loss) per Common Share $ 0.58 (0.21)
======== ========
Fully Diluted Earnings (Loss) per Common Share
Net earnings (loss) applicable to common stock
Net earnings (loss) $ 9,096 -
Incremental cash contribution to the ESOP assuming
conversion of preferred stock to common (229) -
Tax benefit on the incremental cash contribution 80 -
-------- --------
Net earnings (loss) applicable to common stock $ 8,947 -
-------- --------
Weighted average number of common shares and equivalents outstanding
Weighted average number of common shares outstanding 14,656 -
Common stock equivalents:
Stock options, assuming exercised at greater of ending or
average market price 141 -
Series B ESOP preferred stock 1,528 -
-------- --------
Weighted average number of common shares and equivalents
outstanding 16,325 -
-------- --------
Fully Diluted Earnings (Loss) per Common Share $ 0.55 (0.21)**
======== ========
* Excluded from the calculation because of its anti-dilutive effect.
**Fully diluted calculation results in an improvement over primary earnings
per share. As a result, fully diluted earnings per share equals primary
earnings per share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LUKENS INC.
FINANCIAL STATEMENTS FOR THE FIRST QUARTER ENDED APRIL 1, 1995 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> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-01-1995
<CASH> 7,954
<SECURITIES> 0
<RECEIVABLES> 146,623
<ALLOWANCES> 8,324
<INVENTORY> 150,945
<CURRENT-ASSETS> 312,533
<PP&E> 869,171
<DEPRECIATION> 375,190
<TOTAL-ASSETS> 875,805
<CURRENT-LIABILITIES> 168,214
<BONDS> 247,459
<COMMON> 158
0
30,491
<OTHER-SE> 252,443
<TOTAL-LIABILITY-AND-EQUITY> 875,805
<SALES> 259,957
<TOTAL-REVENUES> 259,957
<CGS> 228,687
<TOTAL-COSTS> 228,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,398
<INTEREST-EXPENSE> 2,370
<INCOME-PRETAX> 14,623
<INCOME-TAX> 5,527
<INCOME-CONTINUING> 9,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,096
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.55
</TABLE>
