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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - K
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended May 31,1995 Commission File No. 0-4016
WORTHINGTON INDUSTRIES, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 31-1189815
(State of Incorporation) (IRS 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)
Securities Registered Pursuant To Section 12(b) of the Act: None
Securities Registered Pursuant To Section 12(g) of the Act:
Title of each class:
Common Stock, $.01 par value (90,906,630 shares outstanding at
August 8, 1995)
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
__X__
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 __
The aggregate market value of the voting stock held by non-
affiliates of the Registrant at August 8, 1995 was $1,505,425,000
(computed by reference to the closing price for such shares on
such date).
Portions of the Registrant's annual report to shareholders
for the fiscal year ended May 31, 1995 are incorporated by
reference into Part I and Part II. Portions of the definitive
proxy statement furnished to shareholders of the Registrant in
connection with the annual meeting of shareholders to be held on
September 21, 1995 are incorporated by reference into Part III.
Exhibit index begins on page 16 of consecutively numbered
original.
PART I
Item 1. - Business.
Worthington Industries, Inc. was initially incorporated in
Ohio in 1955. It reincorporated in Delaware in 1986 through a
statutory merger. Worthington Industries, Inc. and its
subsidiaries are herein referred to as the "Company." The
Company's operations are grouped into three segments: processed
steel products, custom products and cast products.
The processed steel products segment is engaged in the
business of processing flat rolled steel to close tolerances for
sale to industrial customers who require steel of precise
thickness, length, width, shape, surface finish and temper for
their own product fabrication. The Company also makes its own
line of finished processed steel products such as low pressure
cylinders for containing liquefied petroleum, refrigerant and
other gases.
The custom products segment produces injection-molded
plastic and precision metal parts for sale to manufacturers of
automobiles, appliances, lawn equipment, sporting goods and other
items in North America.
The cast products segment produces a broad line of cast
steel products for sale to the freight railcar, mass transit and
industrial markets.
For information regarding the net sales and revenues,
earnings from continuing operations before income taxes, and
identifiable assets attributable to each segment for each of the
last three fiscal years, reference is made to page 22 of the
Company's annual report to shareholders for the year ended
May 31, 1995 which is incorporated herein by reference.
See Note J of the Notes to the Company's Consolidated
Financial Statements, which are included in Item 8 hereof, for
information concerning the Company's investments in
unconsolidated affiliates.
Processed Steel Products.
The Company buys coils of wide, open tolerance sheet steel
from major steel mills, and processes it to the custom order of
more than 1,700 industrial customers in the automotive,
automotive supply, appliance, electrical, communications,
construction, office furniture, office equipment, agricultural,
machinery, leisure time and other industries. The Company does
not process steel for inventory.
Techniques such as slitting, roller leveling, cold reduc
tion, edge rolling, blanking, coating, annealing and pickling are
used to process steel to specified thickness, length, width,
shape, temper and surface quality. One or more processes are
applied to produce steel of specified character and dimension
which the customer can stamp, blank, draw, roll form, fabricate
or otherwise incorporate into component parts or end products.
Slitting is cutting steel to specified widths. Roller leveling
is flattening steel and cutting it to exact lengths. Cold
reduction is rolling steel to close tolerances of thickness and
temper. Edge rolling imparts round, smooth or knurled edges.
Blanking cuts the steel into specific shapes. Coating results in
the production of painted, galvanized or nickel-plated steel.
Annealing is a thermal process which changes the hardness of
steel. Pickling is a chemical process whereby an acidic solution
removes the surface oxide, commonly called "scale", which
develops on steel when it is hot rolled.
Steel processing is highly competitive. The Company
competes with many other intermediate processors. The Company
knows of no other intermediate processor which offers the same
type and extent of technical service support provided by the
Company relating to material testing and application of material
suited to the particular needs of customers (see "Technical
Services"). The Company is unable to gauge, however, the extent
to which its technical service capability has improved its
competitive position.
The Company manufactures steel cylinders having refrigerant
gas capacities of 15 to 1000 pounds, and steel and aluminum
cylinders with liquefied petroleum gas capacities of 4-1/4 to 420
pounds. These cylinders are designed and produced in accordance
with safety requirements prescribed by the U.S. Department of
Transportation which specify materials, design limitations, and
marking, inspection and testing procedures to be used. The
cylinders are produced by precision stamping, deep drawing and
welding of component parts to customer specifications. They are
then tested, painted and packaged as required.
Steel refrigerant cylinders manufactured by the Company are
sold predominantly to major refrigerant gas producers who fill
the cylinders with refrigerant gases and re-sell them to dealers
for use in charging residential, commercial, automotive and other
air conditioning and refrigeration systems. Reusable steel and
aluminum LP gas cylinders are built to contain liquefied
petroleum gas for use as a fuel, and the major buyers are
manufacturers of barbecue grills. Reusable LP gas cylinders are
also sold to propane and gas grill distributors, mass
merchandisers and manufacturers and users of materials-handling,
heating, cooking and camping equipment. The Company also
manufactures other cylinder products such as recapture and
recycling tanks for refrigerant gases, helium tanks and
compressed air tanks. It also sells acetylene cylinders for
welding applications. While a large percentage of sales are made
to major accounts, the Company has over 2,000 cylinder customers.
The Company has two principal competitors in its major
pressure cylinder markets, of which management believes the
Company has the largest share. However, the Company has no
reliable information with respect to the size of any of its
various product markets or its relative position therein for any
segment.
The largest customer of the processed steel products segment
is General Motors Corporation, purchasing through decentralized
divisions and subsidiaries and in different geographical areas.
(See "Marketing and Competition"). The loss of General Motors as
a customer could have an adverse effect on the segment, but the
Company has no reason to believe that the loss of this customer
is likely.
The Company purchases steel in large quantities, at regular
intervals from major primary producers for its steel processing
and pressure cylinder operations. During the fiscal year ended
May 31, 1995 the Company's major suppliers were Rouge Steel
Company (in which the Company holds a minority equity position),
AK Steel Corporation, Bethlehem Steel Corporation, LTV Steel
Corporation, USX Corporation, WCI Steel, Inc., Weirton Steel
Corporation and Wheeling-Pittsburgh Steel Corporation. During the
fiscal year ended May 31, 1995, the Company's major suppliers of
aluminum for pressure cylinders were Alumax Aluminum Sales
Corporation, Aluminum Corporation of America, Cressona Aluminum
Company, Kaiser Aluminum and Specialty Blanks Incorporated.
Management believes that its supplier relationships are good.
Custom Products.
In the custom products segment, the Company manufactures
injection molded plastic and precision metal parts to customer
specifications. The primary customers of this segment are in the
automotive original equipment markets, but sales are also made to
manufacturers of appliances, lawn and garden equipment, audio
equipment, recreational items, hand tools, housewares and other
items. Principal products of the segment are a variety of custom
made injection molded plastic components (both functional and
decorative) which, depending on the customers' needs, can also be
painted, assembled, silk screened, vacuum metalized, hot stamped,
roll foiled, vinyl wrapped, foamed in-place and/or appliqued by
the Company. Precision metal components are made primarily for
power steering, transmission, brake and other mechanical systems.
The custom products segment relies heavily on sales to
General Motors Corporation, The Ford Motor Company and Chrysler
Corporation. The loss of any of these customers could have an
adverse effect on the segment but the Company has no reason to
believe that the loss of any of these customers is likely.
Plastic resins and bar steel, the major raw materials
required by this segment, are available from many sources.
The Company has numerous competitors in the sale of its
custom products. This business competes in its markets by
seeking to provide well-engineered, quality products within
required delivery terms to meet the specific needs of its plastic
parts and precision metal component customers.
Cast Products.
The Company's cast products segment operates a steel
castings business. The steel castings operation manufactures a
diverse line of cast steel products ranging in size from 100
pounds to 30 tons. These products are offered to the railroad,
mass transit, construction and off-highway markets, and are
produced to satisfy customer orders. The Company can also pour
ingots of special alloy steel which are converted to coils,
plates, bars and forgings by outside users.
In general, there are a number of companies involved in the
sale of steel castings. However, there are three major
competitors in the sale of certain railcar castings. The
Company's cast products are generally sold under trademark which
is a stylized "Circle B", and the Company utilizes various other
owned and licensed trademarks and patents in connection with its
cast products. The Company is the leading North American
designer and producer of undercarriages for mass transit cars and
holds numerous patents for them.
Scrap steel, the major raw material required by the cast
products segment, is purchased from several sources, including a
wholly-owned subsidiary of the Company. Supplies of scrap steel
have been adequate, although pricing in the market tends to be
volatile. Other raw materials used by this segment are obtained
from a number of major suppliers.
Technical Services.
The Company employs a staff of engineers and other technical
personnel and maintains fully-equipped, modern laboratories to
support its operations. The facilities enable the Company to
verify, analyze and document the physical, chemical,
metallurgical and mechanical properties of its raw materials and
products. Technical service personnel also work in conjunction
with the sales force to determine the types of flat rolled steel
and steel castings required for the particular needs of the
Company's customers. In order to provide such service, the
Company maintains a continuing program of developmental
engineering with respect to the characteristics and performance
of its products under varying conditions. Laboratory facilities
are also used to perform the quality control and extensive
testing of all low pressure cylinders required by the regulations
of the U. S. Department of Transportation and associated
agencies, as well as varying customer requirements. The Company
also maintains a separate testing facility for its steel castings
operation.
Marketing and Competition.
The Company's products and services are sold primarily by
Company sales personnel.
As a percentage of the Company's consolidated sales and
revenues, sales of steel processing services represented 57% for
fiscal 1995, 59% for fiscal 1994, and 56% for fiscal 1993; sales
of pressure cylinders represented 12% for 1995, 13% for 1994 and
13% for 1993; and sales of custom plastics represented 17% in
1995, 17% in 1994 and 19% in 1993.
During the fiscal year ended May 31, 1995, General Motors
Corporation, purchasing through decentralized divisions and
subsidiaries in different geographical areas, accounted for
approximately 13.8% of the Company's consolidated sales and
revenues.
The principal methods of competition encountered by the
Company are quality of product, ability to meet delivery
requirements of customers, and price. Geographic proximity to
customers has a significant effect upon relative ability to meet
customer delivery schedules and impacts the freight charge
portion of overall product price. See also the information set
forth above as to competition in the various segments.
Environmental Regulation.
The Company's manufacturing facilities, generally in common
with those similar industries making similar products, are
subject to many federal, state and local requirements relating to
the protection of the environment. The Company continually
examines ways to reduce emissions and waste and to effect cost
savings related to environmental compliance. Management does not
anticipate that capital expenditures for environmental control
facilities required in order to meet environmental requirements
will be material when compared with the Company's overall capital
expenditures.
Employees.
The Company employs approximately 8,200 people.
Investments in Unconsolidated Affiliates.
The Company participates in five joint ventures as follows:
(a) Worthington Armstrong Venture manufactures suspended ceiling
systems for concealed and lay-in panel ceilings from three plants
located in Pennsylvania, Maryland and France; (b) Worthington
Specialty Processing processes wide sheet steel from its plant in
Jackson, Michigan; (c) TWB Company, located in Monroe, Michigan,
produces laser welded steel blanks for the automobile industry;
(d) London Industries, Inc. produces injection molded plastic
products in London, Ohio; and (e) Acerex S.A. de C.V. is a steel
processor in Monterrey, Mexico. The Company also owns a minority
equity interest (28%) in Rouge Steel Company, an integrated steel
mill located near Detroit, Michigan. See Note J of the Notes to
the Company's Consolidated Financial Statements for additional
information on these unconsolidated affiliates of the Company.
Item 2. - Properties.
The Company's principal properties presently consist of 28
owned manufacturing and office facilities. These properties are
located in Ohio (13), Alabama (1), Georgia (2), Indiana (1),
Kentucky (2), Maryland (1), Michigan (4), Oklahoma (1), Ontario
(1), Pennsylvania (1), South Carolina (2) and Tennessee (1).
These plants and offices are used in the processed steel products
(17), custom products (7) and cast products (3) segments and for
general corporate purposes (1). The above facilities, all of
which are well maintained and in good operating condition,
contain in excess of 5,000,000 square feet, and are adequate to
meet the Company's present needs.
See Item 1 under the heading "Investments in Unconsolidated
Affiliates" for the location of the Company's unconsolidated
affiliates.
Item 3. - Legal Proceedings.
The Ohio EPA has threatened to sue the Company's subsidiary,
Buckeye Steel Castings Company, for various alleged air pollution
matters at its foundry in Columbus, Ohio. The primary
allegations concern (a) alleged emissions of fugitive dust from
the facility, mainly related to malfunctions of its dust
collection systems (i.e. baghouses) in 1989; (b) alleged failures
to obtain permits in a timely manner; and (c) alleged failures in
prior years to use reasonably available control measures to
collect dust inside its facility. The Company disputes the
alleged violations, and is currently involved in negotiations in
an attempt to resolve the matter. Any remedy will be discussed
as part of the negotiations.
Item 4. - Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.
The following table lists the names, positions held, and
ages of all the executive officers of the Company:
Present
Office
Name Age Positions with the Company Held
Since
John H. McConnell 72 Chairman of the Board
and Director 1955
John P. McConnell 41 Vice Chairman, Chief Executive
Officer and Director 1993
Donald G. Barger, Jr. 52 Vice President-Finance and
Chief Financial Officer 1993
Robert J. Borel 52 Vice President-Engineering 1985
Edward A. Ferkany 58 Vice President-Processed Steel 1985
Thomas L. Hockman 51 Vice President-Personnel 1993
Robert J. Klein 58 Executive Vice President-Marketing
and Planning and Director 1985
Pete A. Klisares 59 Executive Vice President
and Director 1993
Donal H. Malenick 56 President, Chief Operating
Officer and Director 1976
Charles D. Minor 68 Secretary and Director 1955
The principal employment of Donal H. Malenick, Robert J. Klein,
Robert J. Borel and Edward A. Ferkany for more than the last
five years has been in their present capacity with the Company.
John H. McConnell was also Chief Executive Officer of the
Company from its founding in 1955 until June 1, 1993 at which time
he retired as CEO and remained Chairman of the Board.
John P. McConnell's principal occupation for more than five
years prior to July 1990 had been in various capacities with the
Company. In July 1990, he resigned his employment with the Company
to become President of JMAC, Inc., a private holding company. John
P. McConnell was elected Vice Chairman of the Company in June 1992
and became Chief Executive Officer as of June 1, 1993.
Donald G. Barger, Jr. was Vice President-Corporate Controller
for B. F. Goodrich Company for more than five years prior to
September 1993, when he became Vice President-Finance and Chief
Financial Officer of the Company.
Thomas L. Hockman was Assistant Treasurer and Manager of
Compensation and Benefits for the Company for more than five years
prior to becoming Vice President-Personnel in January 1993.
Pete A. Klisares was Manufacturing Vice President and General
Manager for AT&T for more than five years prior to May 1991 and
Executive Director of JMAC, Inc. from May 1991 through December
1991. He became Assistant to the Chairman of the Company in
December 1991 and was named Executive Vice President effective
August 1993.
Charles D. Minor was a partner in the law firm of Vorys,
Sater, Seymour and Pease, counsel to the Company, for more than
five years prior to January 1993. In January 1993 he became
counsel to that firm.
Executive officers serve at the pleasure of the directors.
John H. McConnell is the father of John P. McConnell. There are no
other family relationships among the executive officers of the
Company. No arrangements or understandings exist pursuant to which
any person has been, or is to be, selected as an officer.
PART II
Item 5. - Market for Registrant's Common Equity and Related
Stockholder Matters.
The information called for by this Item 5 is incorporated by
reference herein from the information set forth on pages 30 and 31
of the Company's annual report to shareholders for the year ended
May 31, 1995.
Item 6. - Selected Financial Data.
The information called for by this Item 6 is incorporated by
reference herein from the information presented for each of the
Company's five most recent fiscal years under "Eleven Year Selected
Financial Data" set forth on pages 28 and 29 of the Company's
annual report to shareholders for the year ended May 31, 1995.
Item 7. - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information called for by this Item 7 is incorporated by
reference herein from "Management's Discussion and Analysis" set
forth on pages 16, 17 and 18 of the Company's annual report to
shareholders for the year ended May 31, 1995.
Item 8. - Financial Statements and Supplementary Data.
The following consolidated financial statements of Worthington
Industries, Inc. and Subsidiaries and Report of Independent
Auditors, included in the Company's annual report to shareholders
for the year ended May 31, 1995, on pages 18 through 27 thereof are
incorporated herein by reference.
Consolidated Balance Sheets--May 31, 1995 and 1994
Consolidated Statements of Earnings--Years ended May 31, 1995,
1994 and 1993
Consolidated Statements of Shareholders' Equity--Years ended
May 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows--Years ended May 31,
1995, 1994 and 1993
Industry Segment Data
Notes to Consolidated Financial Statements
Report of Independent Auditors
Item 9. - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. - Directors and Executive Officers of the Registrant.
In accordance with General Instruction G(3), the information
required by this Item 10 is incorporated by reference herein from
the material under the heading "Election of Directors" contained on
pages 2 through 6 of the Company's definitive proxy statement filed
with the Commission relating to the Company's annual meeting of
shareholders to be held on September 21, 1995. The information
regarding Executive Officers required by Item 401 of Regulation S-K
is included in Part I hereof under an appropriate caption. No
disclosure is required to be made under Item 405 of Regulation S-K.
Item 11. - Executive Compensation.
In accordance with General Instruction G(3), the information
required by this Item 11 is incorporated by reference herein from
the information contained in the Company's definitive proxy
statement filed with the Commission relating to the Company's
annual meeting of shareholders to be held on September 21, 1995
under the heading "Election of Directors - Compensation of
Directors" on page 5 and under the heading "Executive Compensation"
- "Summary of Cash and Certain Other Compensation" on pages 7 and
8, "Option Grants" on page 8, and "Option Exercises and Holdings"
on page 9.
Item 12. - Security Ownership of Certain Beneficial Owners and
Management.
In accordance with General Instruction G(3), the information
required by this Item 12 is incorporated by reference herein from
the material under the headings "Voting Securities and Principal
Holders Thereof - Security Ownership of Certain Beneficial Owners"
contained on page 2 and "Election of Directors" contained on pages
2 through 6 of the Company's definitive proxy statement filed with
the Commission relating to the Company's annual meeting of
shareholders to be held on September 21, 1995.
Item 13. - Certain Relationships and Related Transactions.
In accordance with General Instruction G(3), the information
required by this Item 13 is incorporated by reference herein from
the material under the heading "Election of Directors" contained on
pages 2 through 5 of the Company's definitive proxy statement filed
with the Commission relating to the Company's annual meeting of
shareholders to be held on September 21, 1995.
PART IV
Item 14. - Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a)(1) and (2) The response to this portion of Item 14 is submitted
as a separate section of this report--See List of
Financial Statements and Financial Statement
Schedules on page F-1 of this report - Page 14 of
consecutively numbered original.
(3) Listing of Exhibits--See Index to Exhibits
beginning on page E-1 of this report - Page 16 of
consecutively numbered original. The index to
exhibits specifically identifies each management
contract or compensatory plan required to be filed
as an Exhibit to this Form 10-K.
(b) No report on Form 8-K was filed during the quarter ended
May 31, 1995.
(c) Exhibits filed with this report are attached hereto.
(d) Financial Statement Schedules--The response to this portion of
Item 14 is submitted as a separate section of this report--See
List of Financial Statements and Financial Statement Schedules
on Page F-1 - Page 14 of consecutively numbered original.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: August 28, 1995 By: /s/____________________________
Donal H. Malenick, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated.
SIGNATURE DATE TITLE
* * Director, Chairman of the Board
John H. McConnell
* * Director, Vice Chairman,
John P. McConnell Chief Executive Officer
8/28/95 Director, President,
Donal H. Malenick Chief Operating Officer
* * Director, Executive Vice
Pete A. Klisares President
* * Director, Executive Vice
Robert J. Klein President-Marketing and Planning
* * Vice President-Finance,
Donald G. Barger, Jr. Chief Financial Officer
* * Director, Secretary
Charles D. Minor
* * Director
Charles R. Carson
* * Director
John E. Fisher
* * Director
John F. Havens
* * Director
Katherine S. LeVeque
* * Director
Robert B. McCurry
* * Director
Gerald B. Mitchell
* * Director
James Petropoulos
*By: __________________________ Date: 8/28/95
Donal H. Malenick
Attorney-In-Fact
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Fiscal 1995 was the third consecutive record year for the
Company. Net sales of $1.484 billion, net earnings of $116.7
million and earnings per share of $1.29 were all records,
increasing 15%, 38% and 37%, respectively. This followed a
strong fiscal 1994 when net sales of $1.285 billion, net
earnings of $84.9 million and earnings per share of $.94 had
increased 15%, 25% and 24%, respectively.
Profitability after taxes continued to improve in 1995.
Return on sales rose to 7.9% in fiscal 1995 from 6.6% in 1994
and 6.1% in 1993. Return on average assets increased to 13.6%
in 1995 from 11.4% in 1994 and 10.3% in 1993. Return on average
shareholder's equity rose to 21.3% from 18.0% in 1994 and 16.4%
in 1993.
Every quarter during the fiscal year was a record as the
Company continued to benefit from high demand in its markets.
The economy continued to expand and most product lines stayed
strong throughout the year.
The higher sales for 1995 and 1994 were largely as a result
of higher volume and order levels. Both years included some
selling price increases, as higher raw material prices were
generally passed through to customers.
Cost of goods sold increased 14% in 1995, slightly less
than the sales increase, and 17% in 1994. In both years, higher
raw material costs offset the benefits gained from leveraging
fixed costs, cost reductions and the increased productivity that
resulted from higher volumes.
Gross margin increased 25% in 1995, following a 10%
increase in 1994. As a percentage of sales, gross margin was
16.1% in 1995, 14.9% in 1994 and 15.7% in 1993. Margins
improved in 1995 as the expanding economy provided a more
favorable environment for passing raw material price increases
to customers. In 1994, margins were squeezed as some selling
price increases did not match raw material cost increases and
new job start-up inefficiencies existed in Custom Products.
Selling, general and administrative expense increased 18%
in fiscal 1995 and 5% in 1994 because of the higher sales
volumes and increased profit sharing from the higher profits.
Profit sharing is not a fixed cost and represented 24% of total
selling, general, and administrative expense in 1995 and 1994.
Selling, general and administrative expense as a percentage of
sales was 6.2% in 1993, 5.6% in 1994 and 5.7% in 1995.
Operating income for core businesses increased 29% after a
13% increase in 1994. As a percentage of sales, operating
income was up to 10.4% from 9.3% in 1994 and 9.5% in 1993.
Interest expense increased 100% in 1995 following a 12%
decrease in fiscal 1994. In 1995, both the average debt
outstanding and the average interest rate increased. In 1994,
higher average debt outstanding was offset somewhat by a lower
average interest rate. The increases in average debt
outstanding were due to the Company's aggressive capital
spending program and increasing working capital to support the
sales growth. The average interest rate was 6.2% in 1995, up
from 4.0% in 1994 and 4.7% and 1993.
Equity in net income of unconsolidated affiliates increased
103% in 1995, after a 311% increase in 1994. This followed a
16% decline in 1993. The majority of the increases came from
the equity in Rouge Steel which continued to benefit from the
favorable market environment for integrated steel producers and
higher steel prices. TWB Company is still in a start-up mode,
but its loss was down significantly from 1994. Worthington
Armstrong Venture (WAVE) contributed to the increased equity in
1995 as demand for its products was favorable and the plant in
France became profitable in its first full year of operation.
Income taxes increased in line with earnings for fiscal
1995. The effective tax rate increased slightly to 37.5% from
37.4% in 1994 and 37.0% in 1993. Increases in state tax rates
and a shift in sales to higher state rates was offset by
permanent differences which became a larger percentage of pre-
tax earnings. The increase from 1993 to 1994 resulted from the
higher rates and decreased deductions from the "Omnibus Budget
Reconciliation Act of 1993.
Processed Steel Products
In 1995, sales of processed steel products rose 12% to
$1,028 million and operating income and increased 15% to $112.4
million, both setting records. Return on sales increased to
10.9% from 10.7%. The steel processing operations continued to
gain market share as demand remained strong due to the expanding
economy, increased auto production and strength in the non-
automotive sector. The sales increase was attributable mostly
to higher volume and, to a lesser extent, higher prices as
increases from the steel mills were generally passed through to
customers. In pressure cylinders, high worldwide demand led to
higher volumes in most product lines, particularly the largest
lines, steel portables and non-refillables. The cylinder sales
increase also contained a price factor, as selling prices rose
to reflect the increase in steel prices and the higher cost of
the newly required "quick connect" valve.
In fiscal 1994, sales increased 20% and operating income
rose 24%. Steel processing experienced favorable automotive and
non-automotive markets and pressure cylinders had excellent
growth in its major product lines.
In May the Company announced plans to build a steel
processing facility in Delta, Ohio. This plant will have
pickling, slitting and galvanizing capabilities and will be
supported by a supply agreement with the North Star/BHP mini-
mill located adjacent. This arrangement is expected to
complement the supply/equity relationship with Rouge Steel and
purchases from other mills.
Custom Products
Custom Products posted record results, as sales increased
21% to $302.1 million and operating income increased 29% to
$19.8 million. Return on sales rose to 6.5% from 6.1% in 1994.
The plastics operation benefited from high demand for
automobiles and non-automotive products. The new plastics
facility in St. Matthews, South Carolina became profitable
during the year and the new plant in Lebanon, Kentucky became
profitable in its fourth month of operation. Metals sales and
profits were up due to higher production levels and increased
experience on new contracts started last year.
In fiscal 1994, this segment suffered through the loss of
major jobs due to the phase-out of certain car models and the
normal start-up inefficiencies associated with new jobs.
Efficiencies and profits improved later in the year as the jobs
became more mature.
Cast Products
In the cast products segment, sales increased 33% to a
record $153.8 million, while operating income rose 261% to a
record $21.7 million. Return on sales increased to 14.2% from
5.2% in 1994. This segment was led by strong demand for freight
railcars, which drove volume and productivity gains. Industry
environment is favorable for this segment to take advantage of
its market position for the foreseeable future.
In fiscal 1994 sales of cast products rose 11% and
operating income decreased 8%. Demand for freight railcar
castings suffered temporarily, due primarily to the flooding in
the midwest and shipping problems caused by severe winter
weather.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 1995, the Company's balance sheet remained
strong and flexible. Working capital increased to $272.7
million, representing 30% of total assets and 18% of sales, in
line with historic trends. The current ratio increased to 2.5
to 1 from 2.3 to 1 at May 31, 1994. Total balance debt stood at
$92 million. Long-term debt was $53.5 million, only 8% of total
capital.
During 1995, the Company used $11.3 million of its
beginning cash position, $66.4 million in cash provided by
operating activities, $4.2 million of proceeds from common
shares and $28.2 million of net short-term borrowings to fund
$61.5 million of capital expenditures, $10.9 million of
investments in unconsolidated affiliates and $36.3 million of
cash dividends.
Dividends paid during 1995 were a record and represented
31% of net earnings. Capital investment in businesses (capital
expenditures and investments in affiliates) increased 55% in
1995. The most significant projects were the Lebanon, Kentucky
plastics plant and a business information system for steel
processing.
Accounts receivable, inventory, and accounts payable and
accrued expenses continued to increase to support the higher
sales level. Inventory turnover decreased to 6.0 times while
days sales in accounts receivable increased to 46 days.
The Company entered into a $150 million long-term revolving
credit agreement with several banks during the fourth quarter,
replacing the $40 million unsecured line of credit. At May 31,
1995, $110 million of the revolver was unused. The Company's
immediate borrowing capacity, plus its cash generated from
operations, should be more than sufficient to fund expected
normal operating costs, dividends, debt payments and capital
expenditures for existing businesses. While there are no
specific needs, the Company regularly considers long-term debt
issuance as an alternative depending on financial market
conditions.
The Company believes that environmental issues will not
have a material effect on capital expenditures, consolidated
financial position or future results of operations.
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MAY 31, 1995
Exhibit
Number Description Page Number
3(a) Certificate of Incorporated herein by
Incorporation of reference to Exhibit 3 of the
Worthington Industries, Company's Annual Report on Form
Inc. 10-Q for the Quarter ended
August 31, 1994
3(b) Bylaws of Worthington Incorporated herein by
Industries,Inc. reference to Exhibit 3(b) of
the Company's Annual Report on
Form 10-K for the fiscal year
ended May 31, 1992
4 Agreement to furnish Page 19*
instruments defining
rights of holders of
long-term debt
10(a) Amended 1980 Stock Incorporated herein by
Option Plan, as reference to Annex B to the
amended** Prospectus filed as part of
Post-Effective Amendment No. 1
to the Company's Registration
Statement on Form S-8
(Registration No. 2-80094)
10(b) 1990 Stock Option Incorporated herein by
Plan** reference to Exhibit 10(d) of
the Company's Annual Report on
Form 10-K for the fiscal year
ended May 31, 1991.
10(c) Executive Deferred Incorporated herein by
Compensation Plan** reference to Exhibit 10(e) of
the Company's Annual Report on
Form 10-K for the fiscal year
ended May 31, 1984
10(d) Deferred Compensation Incorporated herein by
Plan for Directors** reference to Exhibit 10(f) of
the Company's Annual Report on
Form 10-K for the fiscal year
ended May 31, 1984
13 Portions of 1995 Annual Page 21*
Report to security
holders incorporated
by reference into
Form 10-K
21 Subsidiaries of the Page 54*
Company
23 Consent of Independent Page 57*
Auditors
24 Powers of Attorney Page 59*
27 Financial Data Schedule Page 74*
-------------
*Page number in consecutively numbered original.
**Management compensation plan.