1
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 quarterly period ended February 29,November 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission File No. 0-40161-8399
WORTHINGTON INDUSTRIES, INC.
----------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 31-1189815
- --------------------------------------------------------------------- ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
1205 Dearborn Drive, Columbus, Ohio 43085
- ------------------------------------------------- ----------------------------------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 438-3210
-------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer'sIssuer's
classes of common stock as of the latest practicable date.
As of MarchDecember 31, 2000, 86,200,22585,375,425 of the Issuer'sRegistrant's common shares,
without par value, were outstanding.
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WORTHINGTON INDUSTRIES, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
February 29,November 30, 2000 and May 31, 1999................................32000.............................3
Condensed Consolidated Statements of Earnings -
Three and NineSix Months Ended February 29,November 30, 2000 and February 28,1999..................................................51999 .........5
Condensed Consolidated Statements of Cash Flows -
NineSix Months Ended February 29,November 30, 2000 and February 28, 1999.........61999 ...................6
Notes to Condensed Consolidated Financial Statements..............7Statements...........7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................9OPERATIONS...............9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITEXHIBITS AND REPORTS ON FORM 8-K.............................15
SIGNATURES...............................................................158-K..............................15
SIGNATURES..................................................................15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
February 29,November 30, May 31,
2000 1999
---------------------- ---------------------2000
---------- ----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 18,077936 $ 7,641538
Accounts receivable, net 293,390 281,706less allowances of $4,881 at
November 30, 2000 and $3,879 at May 31, 2000 154,502 301,175
Inventories
Raw materials 216,860 163,277132,206 144,903
Work in process 70,081 39,78661,767 81,632
Finished products 68,603 53,947
---------------------- ---------------------77,668 64,669
---------- ----------
Total Inventories 355,544 257,010
Investment in Rouge 46,122 52,497271,641 291,204
Other current assets 14,136 25,401
---------------------- ---------------------29,897 31,312
---------- ----------
TOTAL CURRENT ASSETS 727,269 624,255456,976 624,229
Property, plant and equipment 1,170,386 1,131,7611,208,377 1,180,622
Less accumulated depreciation 304,405 260,414
---------------------- ---------------------350,247 318,110
---------- ----------
Property, Plantplant and Equipment,equipment, net 865,981 871,347858,130 862,512
Other Assets 171,420 191,349
---------------------- ---------------------193,543 187,132
---------- ----------
TOTAL ASSETS $1,764,670 $1,686,951
====================== =====================$1,508,649 $1,673,873
========== ==========
See notes to condensed consolidated financial statements.
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WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
February 29,November 30, May 31,
2000 2000
--------------------- ------------------------------- ----------
(Unaudited) (Audited)
CURRENT LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 174,904148,697 $ 161,264157,998
Notes payable 208,654 122,27756,692 160,194
Current maturities of long-term debt 2,325 5,234
Debt exchangeable for common stock 46,122 52,4972,498 2,688
Other current liabilities 106,000 86,453
--------------------- ---------------------70,378 112,390
---------- ----------
TOTAL CURRENT LIABILITIES 538,005 427,725278,265 433,270
Long-Term Debt 363,015 365,802361,367 362,190
Other Liabilities 80,617 79,33175,698 79,117
Deferred Income Taxes 113,749 124,444129,226 125,942
Shareholders' Equity 669,284 689,649
--------------------- ---------------------664,093 673,354
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,764,670 $ 1,686,951
===================== =====================$1,508,649 $1,673,873
========== ==========
See notes to condensed consolidated financial statements.
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WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share)
(Unaudited)
Three Months Ended NineSix Months Ended
----------------------------- -----------------------------
Feb. 29 Feb. 28 Feb. 29 Feb. 28November 30, November 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -------------------- --------- --------- ---------
Net sales $ 486,535457,369 $ 422,074473,331 $ 1,422,777941,593 $ 1,267,782936,242
Cost of goods sold 406,894 349,737 1,174,919 1,064,597
----------- ----------- ----------- -----------400,748 388,289 821,094 768,025
--------- --------- --------- ---------
GROSS MARGIN 79,641 72,337 247,858 203,18556,621 85,042 120,499 168,217
Selling, general & administrative Expense 39,385 37,246 123,096 104,638
----------- ----------- ----------- -----------expense 41,975 41,832 83,966 83,711
--------- --------- --------- ---------
OPERATING INCOME 40,256 35,091 124,762 98,54714,646 43,210 36,533 84,506
Other income (expense):
Miscellaneous income 947 1,268 1,933 4,592(expense) (430) 24 (347) 986
Interest Expense (10,313) (11,384) (30,607) (32,070)expense (9,550) (10,079) (18,907) (20,294)
Equity in net income of unconsolidated
affiliates 6,250 5,336 19,426 16,463
----------- ----------- ----------- -----------6,168 6,406 13,204 13,176
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES 37,140 30,311 115,514 87,53210,834 39,561 30,483 78,374
Income Taxes 13,928 11,216 43,318 32,387
----------- ----------- ----------- -----------
Earnings From Continuing 23,212 19,095 72,196 55,145
Operations
Discontinued Operations, net of
Taxes - (16,870) - (14,238)
Cumulative Effect of Accounting
Change, net of taxes - - - (7,836)
----------- ----------- ----------- -----------3,954 14,835 11,126 29,390
--------- --------- --------- ---------
NET EARNINGS $ 23,2126,880 $ 2,22524,726 $ 72,19619,357 $ 33,071
=========== =========== =========== ===========48,984
========= ========= ========= =========
AVERAGE COMMON SHARES 88,847 92,588 89,412 93,687
OUTSTANDING
- DILUTED 85,755 89,483 85,755 89,796
EARNINGS PER COMMON SHARE - BASIC &
DILUTED Earnings From Continuing
Operations $ 0.260.08 $ 0.210.28 $ 0.810.23 $ 0.59
Discontinued Operations, net of
Taxes - (0.19) - (0.15)
Cumulative Effect of Accounting
Change, net of taxes - - - (0.08)
----------- ----------- ----------- -----------
NET EARNINGS $ 0.26 $ 0.02 $ 0.81 $ 0.36
=========== =========== =========== ===========0.55
========= ========= ========= =========
CASH DIVIDENDS DECLARED PER COMMON
SHARE $ 0.16 $ 0.15 $ 0.140.32 $ 0.45 $ 0.42
=========== =========== =========== ===========0.30
========= ========= ========= =========
See notes to condensed consolidated financial statements.
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WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
NineSix Months Ended
-----------------------------------------
Feb. 29 Feb. 28November 30,
---------------------------
2000 1999
------------------ --------------------------- ---------
OPERATING ACTIVITIES
Net Earnings $ 72,19619,357 $ 33,07148,984
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 53,983 58,75735,848 35,285
Other adjustments 23,648 (2,507)(6,563) 26,482
Changes in current assets and liabilities (81,580) 2,265
------------------ ------------------120,001 (19,521)
--------- ---------
Net Cash Provided By Operating Activities 68,247 91,586168,643 91,230
INVESTING ACTIVITIES
Investment in property, plant and equipment, net (56,882) (96,098)
Acquisitions, net of cash acquired - (26,718)(32,697) (31,946)
Proceeds from sale of assets 2,403 117,056
------------------ ------------------719 519
--------- ---------
Net Cash Used By Investing Activities (54,479) (5,760)(31,978) (31,427)
FINANCING ACTIVITIES
Proceeds fromPayments on short-term borrowings 86,463 24,499(103,502) (16,508)
Proceeds from long-term debt - 2,600482 86
Principal payments on long-term debt (5,429) (5,649)(1,228) (4,633)
Repurchase of common shares (51,239) (59,422)(737) (12,902)
Dividends paid (40,231) (39,426)(27,441) (26,858)
Other 7,104 4,534
------------------ ------------------(3,841) 582
--------- ---------
Net Cash Used By Financing Activities (3,332) (72,864)
------------------ ------------------(136,267) (60,233)
--------- ---------
Increase (decrease) in cash and cash equivalents 10,436 12,962398 (430)
Cash and cash equivalents at beginning of period 538 7,641
3,788
------------------ --------------------------- ---------
Cash and cash equivalents at end of period $ 18,077936 $ 16,750
================== ==================7,211
========= =========
See notes to condensed consolidated financial statements.
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WORTHINGTON INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and ninesix months
ended February 29,November 30, 2000 are not necessarily indicative of the results that may
be expected for the year ended May 31, 2000.2001. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Worthington Industries, Inc.'s 1999 2000 Annual Report to Shareholders and incorporated
by reference in itsthe Form 10-K for the fiscal year ended May 31, 1999.2000 of
Worthington Industries, Inc.
NOTE B - INDUSTRY SEGMENT DATA
Three Months Ended NineSix Months Ended
---------------------------------- ----------------------------------
Feb. 29 Feb. 28 Feb. 29 Feb. 28November 30, November 30,
-------------------------------- -----------------------------------
($000) 2000 1999 2000 1999
---------------- ---------------- ------------------------------- -------------- ------------------ ----------------
NET SALES:
Processed Steel Products $313,090 $266,947 $929,506 $809,128$306,578 $316,012 $624,691 $616,416
Metal Framing 85,201 76,955 258,003 252,97589,215 84,315 184,225 172,802
Pressure Cylinders 86,640 76,417 231,123 201,03459,815 71,443 129,791 144,483
Other 1,604 1,755 4,145 4,6451,761 1,561 2,886 2,541
-------------- -------------- ------------------ ----------------
---------------- ----------------- ----------------
$486,535 $422,074 $1,422,777 $1,267,782
================ ================ =================$457,369 $473,331 $941,593 $936,242
============== ============== ================== ================
OPERATING INCOME:
Processed Steel Products $21,163 $21,081 $72,415 $57,814$ 5,029 $27,491 $14,393 $51,252
Metal Framing 10,772 3,799 31,680 15,6877,414 10,306 16,441 20,908
Pressure Cylinders 9,426 10,158 24,557 25,1513,172 6,929 8,485 15,131
Other (1,105) 53 (3,890) (105)(969) (1,516) (2,786) (2,785)
-------------- -------------- ------------------ ----------------
---------------- ----------------- ----------------
$40,256 $35,091 $124,762 $98,547
================ ================ =================$14,646 $43,210 $36,533 $84,506
============== ============== ================== ================
Nov. 30, May 31,
2000 2000
------------------ ----------------
TOTAL ASSETS:
Processed Steel Products $ 877,779 $ 1,049,579
Metal Framing 247,427 256,505
Pressure Cylinders 198,451 215,873
Other 184,992 151,916
------------------ ----------------
$ 1,508,649 $ 1,673,873
================== ================
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NOTE C - COMPREHENSIVE INCOME
(LOSS)
Total comprehensive income (loss) was $22,243$5,842 and $(542)$25,386 for the three months
ended February 29,November 30, 2000 and February 28, 1999, respectively. Total comprehensive income was
$70,027$18,182 and $38,461$47,784 for the ninesix months ended February 29,November 30, 2000 and February 28, 1999,
respectively.
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NOTE D - SUBSEQUENT EVENTSALE OF ACCOUNTS RECEIVABLE
On March 1,November 30, 2000, Worthington Industries, Inc. (the "Company") and
certain of its subsidiaries entered into a revolving trade receivables
securitization facility. Pursuant to the terms of the facility, such
subsidiaries of the Company satisfied its 7.25% exchangeable noteswill sell their accounts receivable to a
wholly-owned, bankruptcy-remote subsidiary, Worthington Receivables Corporation
("DECS"WRC"). In turn, WRC will sell, on a revolving basis, up to $120.0 million
undivided ownership interest in the purchased accounts receivable to independent
third parties. The Company will continue to service the receivables. No
servicing asset or liability has been recognized as the Company's cost to
service the receivables is expected to approximate the servicing income.
In accordance with its sharesthe facility, WRC has sold $107.0 million of
Class A Common Stockundivided interest in accounts receivable as of RougeNovember 30, 2000. The proceeds
from the sale were reflected as a reduction of accounts receivable on the
condensed consolidated balance sheet and as operating cash flows in the
condensed consolidated statement of cash flows. The sale proceeds were used to
pay down short-term debt.
NOTE E - ACQUISITION
On October 13, 2000, Worthington Techs, L.P., a subsidiary of
Worthington Industries, Inc. The
DECS liability was valued at $46.1 million at February 29, 2000. The exchange
transaction reduces, signed an agreement to acquire substantially all
of the net income approximately $5.3 million in the fourth quarterassets of fiscal 2000.MetalTech, NexTech and GalvTech (collectively "the Techs").
This agreement has been terminated by mutual consent of both parties.
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WORTHINGTON INDUSTRIES, INC.ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statementsStatements contained in this Quarterly Report on Form 10-Q, as filed
with the SEC,Securities and Exchange Commission (the SEC), including, without
limitation, the Management's Discussion and Analysis that follows, constitute
"forward looking"forward-looking statements" that are based on management's beliefs, estimates,
assumptions and currently available information. Such forward lookingforward-looking statements
include, without limitation, statements relating to future operating results,
growth, stock appreciation, projected capacity levels, pricing trends,
anticipated capital expenditures, plant start-ups and capabilities and other
non-historical information. Because they are based on beliefs, estimates and
assumptions, forward lookingforward-looking statements are inherently subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Any number of factors could affect actual results, including, without
limitation, product demand, changes in product mix and market acceptance of
products; changes in pricing or availability of raw materials, particularly
steel; capacity restraints and efficiencies; conditions in major product
markets; delays in construction or equipment supply; ability to integrate recent
acquisitions; inherent risks of international development, including foreign
currency risks; the ability to improve processes and business practices to keep
pace with the economic, competitive and technological environment; general
economic conditions, business environment and the impact of governmental
regulations, both in the United States and abroad; and other risks described
from time to time in filings with the SEC.
OVERVIEW
Worthington Industries, Inc. (the "Company") is a diversified steel processor that
focuses on value-added steel processing and metals relatedmetals-related businesses. It operates 39 wholly ownedWe
operate 40 facilities worldwide, principally in three reportable business
segments: Processed Steel Products, Metal Framing and Pressure Cylinders. The CompanyWe
also holdshold equity positions in seven joint ventures which operate 1415 facilities
worldwide.
RESULTS FROM CONTINUING OPERATIONS
The following discussion and analysis of financial condition and
results of operations of the Company should be read in conjunction with theour Condensed
Consolidated Financial Statements of the Company included elsewhere in this report. The Company'sOur Annual
Report on Form 10-K as filed with the SEC for the fiscal year ended May 31, 1999,2000, includes additional
information about the
Company, itsWorthington, our operations and itsour financial position, and
should be read in conjunction with this Quarterly Report on Form 10-Q.
SECOND QUARTER - FISCAL 2001 COMPARED TO FISCAL 2000
For the thirdsecond quarter ended February 29,November 30, 2000 (the "third"second quarter")
of the fiscal year ending May 31, 20002001 ("fiscal 2000"2001"), net sales increased 15%decreased 3%
to $486.5$457.4 million, up $64.4down $15.9 million from the comparable quarter of the fiscal
year ended May 31, 19992000 ("fiscal 9
10
1999"2000"). For the first nine months of fiscal 2000, net sales increased 12% to
$1,422.8 million, up $155.0 million compared to the same period of fiscal 1999. The overall increasedecrease in net sales was
due to higher volumes primarily from growth in
the start-up facilitiessoftening demand within the Processed Steel Products segmentand Pressure
Cylinders segments as well
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as competitive pricing pressure in all segments. The following provides further
information on net sales by segment:
- Processed Steel Products. Net sales decreased 3% to $306.6
million for the second quarter of fiscal 2001 from $316.0
million in the comparable quarter of fiscal 2000. The decline
in net sales primarily was due to a general economic slow-down
resulting in lower shipments from every plant, except Monroe
and Decatur. In addition, toll-processing shipments decreased
16% as integrated steel mills experienced lower demand and
retained much of this business. The dry lube line at our
Monroe facility continued to provide substantial volume
increases and the prior year acquisitions byexpanded annealing capabilities of Decatur
allowed for additional shipments.
- Metal Framing. Net sales of $89.2 million for the second
quarter of fiscal 2001 increased 6% from $84.3 million in the
comparable quarter of fiscal 2000. The increase in net sales
was mainly attributable to continued strength in the building
products line of business. However, severe competitive
pressures reduced the average selling prices, partially
offsetting the volume increases.
- Pressure Cylinders segment.Cylinders. Net sales decreased 16% to $59.8 million
for the second quarter of fiscal 2001 from $71.4 million in
the comparable quarter of fiscal 2000. The decrease was due to
lower sales volumes in the portable LPG, refrigerant and
industrial gas cylinders resulting from the weakening economy
and the competitive pressure in the European market.
Gross margin on sales decreased to 16.4%12.4% for the thirdsecond quarter of
fiscal 20002001 from 17.1%18.0% in the comparable quarter of fiscal 1999.2000. Most of the
decline occurred in the Processed Steel Products segment due to the lower spread
between selling prices and raw material costs and the decrease in toll
processing.
For the first
nine monthssecond quarter of fiscal 2000, the gross margin2001, selling, general and
administrative ("SG&A") costs of 17.4% was up 1.4 percentage
points over$42.0 million were virtually unchanged from the
comparable periodquarter of fiscal 2000. Higher health care and salary expenses were
offset by the lack of Y2K consulting expenses in fiscal 1999.2001.
Operating income decreased 66% to $14.6 million for the second quarter
of fiscal 2001 from $43.2 million in the comparable quarter of fiscal 2000. The
current quarter decrease reflectsin operating income primarily was due to the impact of increasinginability to pass through
higher raw material pricescosts to customers in the Processed Steel Products and Metal
Framing segments, and due to shrinking demand in certain markets in the
Processed Steel Products and Pressure Cylinders segments. A gross margin summary follows:
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- ------------------------
FEB. 29 FEB. 28 FEB. 29 FEB. 28 % GROWTH RATES
DOLLARS IN MILLIONS 2000 1999 2000 1999 3 MONTHS 9 MONTHS
-------- -------- ---------- ---------- -----------------------
Net Sales $ 486.5 $ 422.1 $ 1,422.8 $ 1,267.8 15% 12%
Gross Margin 79.6 72.3 247.9 203.2 10% 22%
% of Sales 16.4% 17.1% 17.4% 16.0%
ForThe following provides
further information on operating income by segment:
- Processed Steel Products. Operating income decreased 82% to
$5.0 million for the thirdsecond quarter of fiscal 2000, selling, general, and
administrative ("SG&A") costs of $39.4 million increased 6% over the comparable
quarter of fiscal 1999. For the first nine months of fiscal 2000, SG&A expenses
increased 18% to $123.1 million over the comparable period of fiscal 1999. Year
2000 testing and remediation costs of $8.0 million and $5.7 million for the
first nine months of fiscal 2000 and fiscal 1999, respectively, combined with
increased expenses attributable to the start-ups in the Processed Steel Products
segment and recent acquisitions in the Pressure Cylinders segment, are the main
reasons for the increases.
Operating income increased 15% to $40.3 million for the third quarter
of fiscal 20002001 from $35.1$27.5
million in the comparable quarter of fiscal 1999. For
the first nine months2000. The higher
average cost of fiscal 2000raw materials, a shift to lower margin
products and reductions in direct and toll processing volumes
all negatively impacted operating income increased 27% to $124.8
million over the comparable period of fiscal 1999. Stronger sales and favorable
material costs on a year to date basis partially offset by the increase in SG&A
expenses resulted in an increase of operating income for the first nine months
of fiscal 2000. A summary of SG&A and operating income follows:
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- ------------------------ % GROWTH RATES
FEB. 29 FEB. 28 FEB. 29 FEB. 28 ----------------------
DOLLARS IN MILLIONS 2000 1999 2000 1999 3 MONTHS 9 MONTHS
------- ------- ------- ------- -------- --------
SG&A $ 39.4 $ 37.2 $ 123.1 $ 104.6 6% 18%
% of Sales 8.1% 8.8% 8.7% 8.3%
Operating Income $ 40.3 $ 35.1 $ 124.8 $ 98.5 15% 27%
% of Sales 8.3% 8.3% 8.8% 7.8%
income.
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Interest expense- Metal Framing. Operating income decreased 9%28% to $10.3$7.4 million
for the thirdsecond quarter of fiscal 20002001 from $11.4$10.3 million in
the comparable quarter of fiscal 1999.
Year-to-date interest2000. Despite the sales
volume increase, lower selling prices, increased raw material
costs and unfavorable product mix resulted in a decrease in
operating income.
- Pressure Cylinders. Operating income decreased 54% to $3.2
million for the second quarter of fiscal 2001 from $6.9
million in the comparable quarter of fiscal 2000. The decrease
was due to lower sales volumes and unfavorable overall product
mix.
Interest expense decreased 5% to $30.6$9.6 million for the second quarter of
fiscal 2001 from $10.1 million in the comparable quarter of fiscal 2000. The
DECS liability was paid off in the fourth quarter of fiscal 2000 resulting in no
comparable interest expense during fiscal 2001. However, this was partially
offset by higher average short-term debt levels and interest rates. The second
quarter average interest rate on short-term unsecured notes payable was 6.93%
for fiscal 2001 compared to 5.54% in the second quarter of fiscal 2000. At
November 30, 2000, approximately 86.5% of our $420.6 million of consolidated
debt was at fixed rates of interest.
Equity in net income of unconsolidated affiliates decreased 4% to
$6.2 million for the second quarter of fiscal 2001 from $6.4 million in the
comparable quarter of fiscal 2000. The main reason for the decrease from the
prior year was lower margins at the TWB and WSP joint ventures due to increases
in raw material costs and lower sales, respectively.
The effective tax rate for the second quarter of fiscal 2001 was 36.5%,
down from 37.5% in fiscal 2000, due to ongoing tax planning initiatives,
primarily in the state and local tax areas.
YEAR-TO-DATE - FISCAL 2001 COMPARED TO FISCAL 2000
For the first six months of fiscal 2001, net sales increased 1% to
$941.6 million, up $5.4 million from the comparable period of fiscal 1999.2000. The
overall increase in net sales was volume driven within the Processed Steel
Products and Metal Framing segments partially offset by lower selling prices in
all segments. The following provides further information on net sales by
segment:
- Processed Steel Products. Net sales increased 1% to $624.7
million for the first six months of fiscal 2001 from $616.4
million in the comparable period of fiscal 2000. The increase
in net sales was primarily due to higher volumes at our
Decatur plant, resulting from expanded annealing capacity and
at our Monroe plant, where the dry lube line continued to
provide volume increases. Lower volumes at most of the other
plants and an 18% decrease in toll processing almost offset
these increases.
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- Metal Framing. Net sales of $184.2 million for the first six
months of fiscal 2001 increased 7% from $172.8 million in the
comparable period of fiscal 2000. The increase in net sales
was principally volume driven in the building products line of
business partially offset by continuing decreases in sales
prices brought on by stiff competition.
- Pressure Cylinders. Net sales decreased 10% to $129.8 million
for the first six months of fiscal 2001 from $144.5 million in
the comparable period of fiscal 2000. The decrease was due to
softening global demand in the refrigerant, portable LPG and
industrial gas cylinders resulting from the weakening economy
and lower volumes in the competitive European market.
Gross margin on sales decreased to 12.8% for the first six months of
fiscal 2001 from 18.0% in the comparable period of fiscal 2000. The majority of
the decline occurred in the Processed Steel Products segment due to the
inability to pass on the cost of higher priced raw materials in a declining
market and due to lower toll processing volumes.
For the first six months of fiscal 2001, SG&A costs of $84.0 million
were flat compared to the first six months of fiscal 2000. Increased health care
and salary expenses were offset by the lack of Y2K consulting expenses in fiscal
2001.
Operating income decreased 57% to $36.5 million for the first six
months of fiscal 2001 from $84.5 million in the comparable period of fiscal
2000. The inability to pass through higher raw material costs to customers in
the Processed Steel Products and Metal Framing segments coupled with lower
demand in certain markets in the Pressure Cylinders segment, led to the overall
decrease in operating income. The following provides further information on
operating income by segment:
- Processed Steel Products. Operating income decreased 72% to
$14.4 million for the first six months of fiscal 2001 from
$51.3 million in the comparable period of fiscal 2000. The
main reasons for the reduction in operating income were higher
average debt levels,raw material prices, changes in sales mix to lower
margin products and lower toll processing volumes.
- Metal Framing. Operating income decreased 22% to $16.4 million
for the first six months of fiscal 2001 from $20.9 million in
the comparable period of fiscal 2000. Lower selling prices and
unfavorable raw material variances outweighed the sales volume
increases resulting in lower operating income.
- Pressure Cylinders. Operating income decreased 44% to $8.5
million for the first six months of fiscal 2001 from $15.1
million in the comparable period of fiscal 2000. The decrease
primarily was attributable to lower volumes and unfavorable
overall product mix.
Interest expense decreased 7% to $18.9 million for the first six months
of fiscal 2001 from $20.3 million in the comparable period of fiscal 2000. The
DECS liability was paid off in the fourth quarter of fiscal 2000 resulting in no
comparable interest expense
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during fiscal 2001. However, this was partially offset by lower capitalizedhigher average
short-term debt levels and interest in fiscal 2000.rates. The year-to-date average interest ratesrate on
short termshort-term unsecured notes payable for the first six months of 5.67%fiscal 2001 was
6.84% compared to 5.39% for the first six months of fiscal 2000 is comparable to the 5.60% experienced in fiscal 1999. The higher
capitalized interest in fiscal 1999 was mainly due to financing the construction
of the Decatur, Alabama plant and rebuilding the Monroe, Ohio facility. At
February 29, 2000, approximately 64% of the Company's $574.0 million of debt
(excluding debt exchangeable for common stock (the "DECS")) was at fixed rates
of interest. A summary of interest cost follows:
Three Months Ended Nine Months Ended
----------------------- ---------------------- % Growth Rates
Feb. 29 Feb. 28 Feb. 29 Feb. 28 ----------------------
Dollars in Millions 2000 1999 2000 1999 3 Months 9 Months
------- ------- ------- ------- -------- --------
Interest Expense $ 10.3 $ 11.4 $ 30.6 $ 32.1 -9% -5%
Capitalized Interest 0.1 0.1 0.4 3.8
Total Interest Cost $ 10.4 $ 11.5 $ 31.0 $ 35.9 -9% -14%
2000.
Equity in net income of unconsolidated affiliates increased 17% to $6.3was unchanged at
$13.2 million for the third quarterfirst six months of both fiscal 2000 from $5.3 million in the comparable
quarter of2001 and fiscal 1999. Year-to-date equity in net income of unconsolidated
affiliates increased 18% to $19.4 million from $16.5 million in the comparable
period of fiscal 1999. Strong sales and favorable material costs in the WAVE
joint venture contributed to the increase over the prior quarter. TWB, Acerex
and WAVE all contributed to the nine-month increase as they continued to post
increases2000.
Increases in sales and earnings.operating income at the WAVE and Acerex joint ventures
were offset by lower margins at the TWB and WSP joint ventures due to increases
in raw material costs and lower sales, respectively.
The effective tax rate for fiscal 2000 is 37.5%, up from 37.0% in
fiscal 1999 due to increased business in higher-taxed foreign and domestic
locations, the result of divestiture and acquisition activity concluded in
fiscal 1999.
PROCESSED STEEL PRODUCTS
Processed Steel Products sales increased 17% to $313.1 million for the
quarter ended February 29, 2000 from $266.9 million in the comparable quarter of
fiscal 1999. For the first ninesix months of fiscal 2000, sales increased 15% to
$929.5 million2001 was
36.5%, down from $809.1 million in the comparable period of fiscal 1999. In
spite of lower selling prices for the first nine months, sales were up due to
increased volume from the new facilities in Delta, Ohio, in Decatur, Alabama and
at Spartan Steel. Also impacting the increase was the recovery of prior period
sales missed during the General Motors strike in the first quarter of fiscal
1999 partially offset by $3.9 and $5.5 million business interruption proceeds
related to the Monroe fire37.5% in fiscal 1998 and recorded in net sales for the
third quarter and nine months of fiscal 1999, respectively. Operating income of
$21.2 million was comparable to the same quarter of fiscal 1999. For the first
nine months of fiscal 2000, operating income increased 25% to $72.4 million from
$57.8 million in the comparable period of fiscal 1999. In addition to the
favorable sales impact, year-to-date
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operating income increased over fiscal 1999 due to lower material costs. While
material prices are favorable on a year-to-date basis, recent increases have
started to affect the margins as is evidenced in the quarter to quarter
comparison. The following table sets forth the Processed Steel Products
segment's sales and operating income:
Three Months Ended Nine Months Ended
----------------------- ----------------------- % Growth Rates
Feb. 29 Feb. 28 Feb. 29 Feb. 28 ----------------------
Dollars in Millions 2000 1999 2000 1999 3 Months 9 Months
------- ------- ------- ------- -------- --------
Sales $ 313.1 $ 266.9 $ 929.5 $ 809.1 17% 15%
Operating Income $ 21.2 $ 21.1 $ 72.4 $ 57.8 0% 25%
% of Sales 6.8% 7.9% 7.8% 7.1%
METAL FRAMING
Metal Framing sales of $85.2 million for the third quarter of fiscal
2000 increased 11% from $77.0 million in the comparable quarter of fiscal 1999.
The increase in sales was due to continued strength in the building products
market, partially offset by lower selling prices. For the first nine months of
fiscal 2000, sales increased 2% to $258.0 million from $253.0 million in the
comparable period of fiscal 1999. The lower rate of increase for the nine-month
period was primarily due to the sale of the garage door operations in November
1998. Operating income increased 184% to $10.8 million for the third quarter of
fiscal 2000 from $3.8 million in the comparable quarter of fiscal 1999. For the
first nine months of fiscal 2000, operating income increased 102% to $31.7
million from $15.7 million in the comparable period of fiscal 1999. The increase
in sales combined with favorable raw material pricesongoing state and manufacturing
efficiencies were the reasons for the increased operating income. The following
table sets forth the Metal Framing segment's sales and operating income:
Three Months Ended Nine Months Ended
----------------------- ----------------------- % Growth Rates
Feb. 29 Feb. 28 Feb. 29 Feb. 28 ----------------------
Dollars in Millions 2000 1999 2000 1999 3 Months 9 Months
------- ------- ------- ------- -------- --------
Sales $ 85.2 $ 77.0 $ 258.0 $ 253.0 11% 2%
Operating Income $ 10.8 $ 3.8 $ 31.7 $ 15.7 184% 102%
% of Sales 12.6% 4.9% 12.3% 6.2%
PRESSURE CYLINDERS
Pressure Cylinders sales increased 13% to $86.6 million for the third
quarter of fiscal 2000 from $76.4 million in the comparable quarter of fiscal
1999. For the first nine months of fiscal 2000, sales increased 15% to $231.1
million from $201.0 million in the comparable period of fiscal 1999. The
increases were due to the recent acquisitions in Europe and to higher domestic
sales volumes in the steel portables, refrigerant and helium product lines.
Operating income decreased 7% to $9.4 million for the third quarter of fiscal
2000 from $10.2 million in the comparable quarter of fiscal 1999. For the first
nine months of fiscal 2000, operating income decreased 2% to $24.6 million
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from $25.2 million in the comparable period of fiscal 1999. Lower operating
margins in the acquired European operations caused by reduced demand, was the
principal reason for the decline. In addition, recent raw material price
increases have begun to reduce the margins. The following table sets forth the
Pressure Cylinders segment's sales and operating income:
Three Months Ended Nine Months Ended
----------------------- ----------------------- % Growth Rates
Feb. 29 Feb. 28 Feb. 29 Feb. 28 ----------------------
Dollars in Millions 2000 1999 2000 1999 3 Months 9 Months
------- ------- ------- ------- -------- --------
Sales $ 86.6 $ 76.4 $ 231.1 $ 201.0 13% 15%
Operating Income $ 9.4 $ 10.2 $ 24.6 $ 25.2 -7% -2%
% of Sales 10.9% 13.3% 10.6% 12.5%
local
tax planning initiatives.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $18.1 million at February
29, 2000, an increase of $10.4 million from May 31, 1999. For the first ninesix months of fiscal 2000, the Company2001, we generated $68.2$168.6 million in
cash from operating activities representing a $23.3$77.4 million decreaseincrease from the
comparable period of fiscal 1999. Compared2000. The increase primarily was due to the prior ninesale of
$107.0 million in accounts receivable and a reduction in inventories. Partially
offsetting these factors were a $31.0 million tax payment relating to the tax
gain from the disposition of our investment in the common shares of Rouge
Industries (which occurred in the fourth quarter of fiscal 2000) and lower net
income.
In November 2000, we entered into a $120.0 million revolving trade
receivables securitization ("TRS") facility with a commercial bank. Under the
TRS, certain of our subsidiaries sell receivables to Worthington Receivables
Corporation ("WRC"), a wholly-owned, bankruptcy-remote subsidiary. WRC will sell
undivided ownership interests in the receivables to third parties. As of
November 30, 2000, $107.0 million of accounts receivable had been sold. The
proceeds from this sale were used to reduce short-term borrowings.
During the first six months of fiscal 1999, the
Company had increased net income from operations and a non-recurring $25 million
dividend from WAVE which were offset by the Company's increased net working
capital requirements, particularly inventory, causing a decrease in cash
generated from operating activities.
In the first nine months of fiscal 2000, the Company2001, we invested $56.9$32.7 million
in capital projects, repurchased $51.2 million of the Company's common
shares, paid our shareholders $40.2$27.4 million in dividends and
provided for theour working capital requirements of the Company.requirements. These transactions were funded by
the cash flow from the operations and short-term borrowings.operations.
Capital investments during the first ninesix months included amounts for
expandingcompleting the Processed Steel Products segment's annealing capacity at the Decatur, Alabama plant, and adding the
ability to apply a dry film lubricant at the Monroe Ohio facility. The expenditures also provided for continuing
implementation of the Pressure Cylinders segment's new business information
system,plant and for the further development of the Metal Framing segment's
structural design software as well as the acquisition of a new corporate
facility.
Net working capital decreased $7.3 million from May 31, 1999 to $189.3
millioncontinued
construction on February 29, 2000. The decrease was due to an $86.4 million increase
in short-term notes payable and a net reclassification of $17.7 million to
current liabilities from long-term deferred taxes (related to the settlement of
the DECS liability) and current deferred tax assets, partially offset by a $98.5
million increase in inventory. Accounts receivable increased over the prior year
end level due mainly to increased sales inGerstenslager's Clyde facility, all within the Processed Steel
Products segment. InventoriesExpenditures were made in the Metal Framing segment for plant
startups in Seattle and accounts payable both increasedHawaii, in the Pressure Cylinders segment for a new
low-pressure cylinder line in Portugal, and in our steel pallet business,
SteelPac, for additional weld cells.
Net working capital decreased $12.2 million from May 31, 2000 to $178.7
million at November 30, 2000. The majority of the decrease was due to thea
reduction in
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growthaccounts receivable caused by lower sales levels and a planned decrease in
inventory levels, partially offset by the Processed Steel Products segment and the anticipation of increased
sales in that segment for the next quarter.previously mentioned tax payment.
During the first ninesix months of fiscal 2000, the Company repurchased
approximately 3.8 million2001, we did not repurchase any
of itsour common shares. Approximately 3.7However, we did disburse $737,000 in cash for common
shares that were purchased in the fourth quarter of fiscal 2000. As of November
30, 2000, approximately 2.9 million common shares remain available for
repurchase under theprograms authorized by our Board of Directors'
authorization.Directors. The timing and
amount of any future repurchases will be at the
Company'sour discretion and will depend upon
market conditions and the Company'sour operating performance and liquidity. Any repurchase
will also be subject to the covenants contained in the Company'sour credit facilities.
In March 1997,facilities and our
other debt exchangeable for common stock ("DECS"), payable in
Rouge stock, was issued by the Company. The DECS liability as of February 29,
2000 was $46.1 million, as compared to $52.5 million at May 31,1999, the result
of a decrease in the value of the Rouge common stock.
As planned, the Company satisfied its DECS liability on March 1, 2000
by exchanging the related shares of Rouge stock. The impact of this transaction
will be to decrease net income by approximately $5.3 million in the fourth
quarter of fiscal 2000.
The Company usesinstruments.
We use short-term uncommitted lines of credit extended by various
commercial banks as part of our strategy to finance itsour business operations.
Maturities on these borrowings typically range from one to ninety days. To ensure liquidity, the
Company maintainsWe also
maintain a $300$190.0 million revolving credit facility (the "Revolver") with a
group of commercial banks. The $300 million revolving credit facility includes a $190
million tranche expiringbanks, which expires in May 2003 and a $110 million, 364-day facility expiring
September 2000. At February 29, 2000, there2003. There were no outstanding
borrowings under the revolving credit facility.Revolver at November 30, 2000.
At February 29,November 30, 2000, the Company'sour total debt (excluding the DECS) was $574.0$420.6 million compared to
$493.3$525.1 million at the end of fiscal 1999. Total2000 due to the previously mentioned
reduction of short-term debt from the proceeds of the accounts receivable sale.
This decreased the debt to committed capital (excluding the DECS) increasedratio to 46.2%38.8% from 41.7%43.8% at the
priorend of fiscal year end.
The Company's immediate2000.
On October 13, 2000, Worthington Techs, L.P., a subsidiary of
Worthington Industries, Inc., signed an agreement to acquire substantially all
of the net assets of MetalTech, NexTech and GalvTech (collectively "the Techs").
This agreement was terminated by mutual consent of both parties.
From time to time, we engage in discussions with respect to selected
acquisitions and expect to continue to assess acquisition opportunities as they
arise. Additional financing may be required if we decide to make additional
acquisitions. There can be no assurance, however, that any such opportunities
will arise, any such acquisitions will be consummated or that any needed
additional financing will be available on satisfactory terms when required.
Absent any acquisitions, we anticipate that cash flows from operations, working
capital and unused short-term borrowing capacity in addition to cash
generated from operations, should be more than sufficient
to fund expected normal operating costs, dividends, and capital expenditures for
our existing businesses.
While there are no specific needs at this time, the Company regularly considers
long-term debt issuance an alternative depending on financial market conditions.
IMPACT OF YEAR 2000
The Company continues to monitor any potential impact to its systems
from the affects of computer technology using two-digit years ("Y2K"). Due to
the testing and remediation of it systems performed prior to December 31, 1999,
the Company has not experienced any Y2K problems as of April 13, 2000. While the
Company does not believe there will be any future impact to its operations, it
will continue to monitor its
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systems to ensure that no problems arise. No additional spending above the
previously reported $21.2 million has been incurred related to Y2K.
THE YEAR 2000 STATEMENTS CONTAINED HEREIN ARE YEAR 2000 READINESS
DISCLOSURES (AS DEFINED UNDER THE YEAR 2000 INFORMATION AND READINESS DISCLOSURE
ACT) AND SHALL BE TREATED AS SUCH FOR ALL PURPOSES PERMISSIBLE UNDER SUCH ACT.
THESE STATEMENTS ARE BASED ON AVAILABLE INFORMATION OBTAINED TO DATE AND USE
WHAT MANAGEMENT BELIEVES TO BE REASONABLE ASSUMPTIONS RELATIVE TO THE OCCURRENCE
OF FUTURE EVENTS. THERE CAN BE NO ASSURANCE THAT ALL POSSIBLE YEAR 2000 ISSUES
HAVE BEEN RESOLVED OR THAT THERE WILL BE NO FUTURE ADVERSE IMPACT ON THE COMPANY
DUE TO SYSTEM FAILURES CAUSED BY EITHER INTERNAL OR EXTERNAL YEAR 2000 ISSUES.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits:
27 Financial Data ScheduleNone
Reports on Form 8-K:
There were no reportsA Current Report on Form 8-K, dated October 13, 2000, was filed during
the three months ended
February 29, 2000.second quarter of fiscal 2001 to summarize the material provisions
of the agreement to acquire the Techs' net assets and to provide
historical financial statements of the Techs and pro forma financial
information regarding the acquisition. This information was provided
under Item 5 - Other Events.
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: April 13, 2000January 15, 2001 By: /s/John T. Baldwin
------------------ ------------------------------------------------
John T. Baldwin
Vice President & Chief Financial Officer
(On behalf of the Registrant and as Principal
Financial Officer)Officer
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