1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________-------------------------
FORM 10 - Q
[X]10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2000
[ ]2001
| | 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. 1-8399
WORTHINGTON INDUSTRIES, INC.
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(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]|X| NO [ ]| |
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock as of the latest practicable date.
As of September 30, 2000, 85,754,5252001, 85,391,225 of the Registrant'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 -
August 31, 2000 and May 31, 2000..............................3
Condensed Consolidated Statements of Earnings -
Three Months Ended August 31, 2000 and 1999 ..................5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended August 31, 2000 and 1999 ..................6
Notes to Condensed Consolidated Financial Statements..........7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............................14
SIGNATURES...................................................................14
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
August 31, 2001 and May 31, 2001.......................................................3
Condensed Consolidated Statements of Earnings -
Three Months Ended August 31, 2001 and 2000............................................4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended August 31, 2001 and 2000............................................5
Notes to Condensed Consolidated Financial Statements...................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........................................9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................................13
SIGNATURES ......................................................................................13
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3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS(IN THOUSANDS)
AugustAUGUST 31, MayMAY 31,
2000 2000
---------- ----------
(Unaudited) (Audited)2001 2001
----------------- -----------------
ASSETS (UNAUDITED) (AUDITED)
CURRENT ASSETSCurrent Assets
Cash and cash equivalents $ 240816 $ 538194
Accounts receivable, net 272,028 301,175130,091 169,330
Inventories
Raw materials 158,548 144,903100,822 102,051
Work in process 74,194 81,63262,469 59,735
Finished products 68,404 64,669
---------- ----------64,995 65,720
----------------- -----------------
Total Inventories 301,146 291,204228,286 227,506
Other current assets 30,578 31,312
---------- ----------
TOTAL CURRENT ASSETS 603,992 624,229
Property, plant and equipment 1,196,871 1,180,622
Less accumulated depreciation 333,856 318,110
---------- ----------
Property, plant and equipment, net 863,015 862,51247,092 52,689
----------------- -----------------
Total Current Assets 406,285 449,719
Investments in Unconsolidated Affiliates 59,314 58,638
Goodwill 76,264 76,439
Other Assets 191,564 187,132
---------- ----------
TOTAL ASSETS $1,658,571 $1,673,873
========== ==========54,904 54,317
Property, Plant and Equipment 1,216,795 1,201,190
Less Accumulated Depreciation 381,472 364,441
----------------- -----------------
Property, Plant and Equipment, net 835,323 836,749
----------------- -----------------
Total Assets $ 1,432,090 $ 1,475,862
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 185,335 $ 207,568
Notes payable 9,528 13,794
Current maturities of long-term debt 1,503 1,748
Other current liabilities 80,314 83,509
----------------- -----------------
Total Current Liabilities 276,680 306,619
Other Liabilities 70,728 69,396
Long-Term Debt 292,447 309,208
Deferred Income Taxes 142,817 140,974
Shareholders' Equity 649,418 649,665
----------------- -----------------
Total Liabilities and Shareholders' Equity $ 1,432,090 $ 1,475,862
================= =================
See notes to condensed consolidated financial statements.
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WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITYSTATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE)
(UNAUDITED)
AugustTHREE MONTHS ENDED
AUGUST 31,
May 31,--------------------------------------
2001 2000
2000
--------------- --------------
(Unaudited) (Audited)----------------- -----------------
CURRENT LIABILITIES
Accounts payableNet sales $ 160,752409,558 $ 157,998
Notes payable 173,517 160,194
Current maturities484,224
Cost of long-term debt 2,546 2,688goods sold 349,561 420,346
----------------- -----------------
Gross Margin 59,997 63,878
Selling, general & administrative expense 37,411 41,991
----------------- -----------------
Operating Income 22,586 21,887
Other current liabilities 79,033 112,390
---------- ----------
TOTAL CURRENT LIABILITIES 415,848 433,270
Long-Term Debt 361,721 362,190
Other Liabilities 79,410 79,117
Deferredincome (expense):
Miscellaneous income 527 83
Interest expense (5,497) (9,357)
Equity in net income of unconsolidated affiliates 4,880 7,036
----------------- -----------------
Earnings Before Income Taxes 129,619 125,942
Shareholders' Equity 671,973 673,354
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,658,571 $1,673,873
========== ==========22,496 19,649
Income taxes 8,211 7,172
----------------- -----------------
Net Earnings $ 14,285 $ 12,477
================= =================
Average Common Shares Outstanding - Diluted 85,799 85,755
----------------- -----------------
Earnings Per Common Share - Basic & Diluted $ 0.17 $ 0.15
================= =================
Cash Dividends Declared Per Common Share $ 0.16 $ 0.16
================= =================
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
August 31,
--------------------------------------
2000 1999
------------- -------------
Net sales $ 484,224 $ 462,911
Cost of goods sold 420,346 379,736
--------- ---------
GROSS MARGIN 63,878 83,175
Selling, general & administrative expense 41,991 41,879
--------- ---------
OPERATING INCOME 21,887 41,296
Other income (expense):
Miscellaneous income 83 962
Interest expense (9,357) (10,215)
Equity in net income of unconsolidated affiliates 7,036 6,770
--------- ---------
EARNINGS BEFORE INCOME TAXES 19,649 38,813
Income taxes 7,172 14,555
--------- ---------
NET EARNINGS $ 12,477 $ 24,258
========= =========
AVERAGE COMMON SHARES OUTSTANDING - DILUTED 85,755 89,953
--------- ---------
EARNINGS PER COMMON SHARE - BASIC & DILUTED $ 0.15 $ 0.27
========= =========
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.16 $ 0.15
========= =========
See notes to condensed consolidated financial statements.
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WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
AugustTHREE MONTHS ENDED
AUGUST 31,
---------------------------------------------------------------------------
2001 2000
1999
-------------- ------------------------------- -----------------
OPERATING ACTIVITIESACTIVITIES:
Net Earningsearnings $ 12,47714,285 $ 24,25812,477
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 16,988 17,843 17,251
Other adjustments (327) (1,068) (864)
Changes in current assets and liabilities 9,493 (8,512)
21,535
-------- ------------------------- -----------------
Net Cash Provided Byby Operating Activities 40,439 20,740
62,180
INVESTING ACTIVITIESACTIVITIES:
Investment in property, plant and equipment, net (12,748) (18,165) (13,914)
Proceeds from sale of assets 7,882 221
523
-------- ------------------------- -----------------
Net Cash Used Byby Investing Activities (4,866) (17,944)
(13,391)
FINANCING ACTIVITIESACTIVITIES:
Proceeds from (payments on) short-term borrowings (4,266) 13,323 (20,368)
Proceeds from long-term debt - 482 86
Principal payments on long-term debt (17,219) (1,001) (3,798)
Repurchase of common shares - (737) (11,597)
Dividends paid (13,660) (13,721)
(13,492)
Other 194 (1,440)
(207)
-------- ------------------------- -----------------
Net Cash Used Byby Financing Activities (34,951) (3,094)
(49,376)
-------- --------
Decrease----------------- -----------------
Increase (decrease) in cash and cash equivalents 622 (298) (587)
Cash and cash equivalents at beginning of period 194 538
7,641
-------- ------------------------- -----------------
Cash and cash equivalentsCash Equivalents at endEnd of periodPeriod $ 816 $ 240
$ 7,054
======== ========================= =================
See notes to condensed consolidated financial statements.
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WORTHINGTON INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)(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 months ended
August 31, 20002001 are not necessarily indicative of the results that may be
expected for the fiscal year endedending May 31, 2001.2002. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Worthington Industries, Inc. 20002001 Annual Report to Shareholders and incorporated
by reference in the Form 10-K of Worthington Industries, Inc. for the fiscal
year ended May 31, 2000 of
Worthington Industries, Inc.2001.
NOTE B - INDUSTRY SEGMENT DATA
Three Months Ended
AugustTHREE MONTHS ENDED
AUGUST 31,
--------------------------------
($000)--------------------------------------
IN THOUSANDS 2001 2000
1999
------------- ------------------------------- -----------------
NET SALES:
Processed Steel Products $ 318,113265,571 $ 300,404318,113
Metal Framing 79,546 95,010 88,487
Pressure Cylinders 61,602 69,976
73,040
Other 2,839 1,125
980
--------- -------------------------- -----------------
$ 409,558 $ 484,224
$ 462,911
========= ========================== =================
OPERATING INCOME:
Processed Steel Products $ 9,36413,538 $ 23,7619,364
Metal Framing 6,566 9,027 10,602
Pressure Cylinders 1,817 5,313
8,202
Other 665 (1,817)
(1,269)
--------- -------------------------- -----------------
$ 22,586 $ 21,887
================= =================
AUGUST 31, MAY 31,
2001 2001
----------------- -----------------
TOTAL ASSETS:
Processed Steel Products $ 41,296
========= =========893,512 $ 908,090
Metal Framing 240,663 239,890
Pressure Cylinders 158,195 178,866
Other 139,720 149,016
----------------- -----------------
$ 1,432,090 $ 1,475,862
================= =================
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NOTE C - COMPREHENSIVE INCOME
Total comprehensive income was $12,340$13,215,000 and $22,398$12,340,000 for the
three months ended August 31, 2001 and 2000, and 1999, respectively.
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NOTE D - SUBSEQUENT EVENT
On October 13, 2000, Worthington Techs, L.P.,RESTRUCTURING EXPENSE
During the quarter ended February 28, 2001, the Company recorded a
subsidiaryrestructuring expense of Worthington Industries, Inc., signed an agreement to acquire substantially all$6,474,000, comprised of $2,000,000 for severance and
employee related costs and $4,474,000 for the write-down of the idled assets to
net assetsrealizable value. As of MetalTech, NexTechAugust 31, 2001, 110 employees had been terminated,
and GalvTech (collectively "the Techs")
for $260 million in cash.cash payments totaling $977,000 had been made against the severance reserve.
The acquisition is expected to close during the second
fiscal quarter of Worthington Industries, Inc. Under the termsestimated net realizable value of the agreement,equipment being idled of $2,600,000
was reclassified to other current assets as equipment held for sale. The Company
anticipates that the termination of employees and the sale of the idled
equipment will be completed by the end of the 2001 calendar year.
NOTE E - GOODWILL
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 141, BUSINESS COMBINATIONS, and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE
ASSETS, effective June 2001. SFAS No. 141 requires the use of the purchase
price may increasemethod of accounting for any business combinations initiated after June 30, 2001
and further clarifies the criteria to recognize intangible assets separately
from goodwill. Under SFAS No. 142, goodwill and indefinite-lived intangible
assets are no longer amortized but will be reviewed for impairment. Separable
intangible assets with a definite life will continue to be amortized over their
useful lives. The adoption of this Statement did not have a material effect on
the Company's results of operations; therefore, transitional pro forma
disclosures are not presented. During the fiscal year ended May 31, 2002
("fiscal 2002"), the Company will perform the first of the required impairment
tests of goodwill. The impact of these impairment tests has not yet been
determined.
Goodwill by upsegment is summarized as follows:
AUGUST 31, MAY 31,
IN THOUSANDS 2001 2001
----------------- -----------------
Processed Steel Products $ - $ 17
Metal Framing 57,752 57,752
Pressure Cylinders 17,946 18,104
Other 566 566
----------------- -----------------
$ 76,264 $ 76,439
================= =================
NOTE F - DERIVATIVES
In June 2001, the Company adopted SFAS No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. The Statement requires
derivatives to $60 million overbe carried on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a three-year period
followinghedge, depending on the closing, depending upon capacity utilization and certain market
conditions. The cash purchase price is also subject to adjustment based upon
certainnature of the hedge, changes in working capital.the fair value of
the derivative will either be offset against the change in fair value of the
hedged assets, liabilities or
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firm commitments through earnings, or recognized in other comprehensive income
until the hedged item is recognized in earnings. The transaction is contingent upon obtaining
financing satisfactorychange in a derivative's
fair value related to the ineffective portion of a hedge, if any, will be
immediately recognized in earnings. Adoption of SFAS No. 133 resulted in an
immaterial cumulative effect adjustment to miscellaneous expense and an
unfavorable adjustment to other comprehensive income of $1,928,000, net of tax.
COMMODITY SWAP CONTRACTS: The Company is exposed to market risk for
price fluctuations on purchases of steel, natural gas, zinc, nickel and other
typical closing conditions.raw materials and utility requirements. To limit this exposure, the Company
negotiates the best prices for its commodities and competitively prices its
products and services to reflect the fluctuations in commodity market prices. To
a limited extent, the Company has entered into commodity derivative instruments
(cash flow hedges) to hedge purchases of steel and zinc. The steel hedge matures
January 2002, and the zinc hedges mature at various dates through December 2003.
Ineffectiveness has been immaterial for fiscal 2002. The majority of the losses
in other comprehensive income will be reclassified to earnings within 12 months
as the commodities are purchased.
FOREIGN CURRENCY SWAP CONTRACTS: The translation of the Company's
foreign operations from local currencies to the U.S. dollar subjects the Company
to exposure related to fluctuating exchange rates. The Company does not use
derivative instruments to manage this risk. However, the Company does make
limited use of forward contracts to manage its exposure on certain intercompany
loans with foreign affiliates. The hedges are 100% effective against the amounts
recorded in the foreign affiliates' foreign currency translation balances in
other comprehensive income.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements contained in this Quarterly Report on FormSELECTED STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q, as filed
with the Securities and Exchange Commission (the SEC)AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), including, without
limitation, the Management's Discussion and Analysis that follows, constitute
"forward-looking statements" that are based on management's beliefs, estimates,
assumptions and currently available information. Such forward-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-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 theINCLUDING,
WITHOUT LIMITATION, THE MANAGEMENT'S DISCUSSION AND ANALYSIS THAT FOLLOWS, THAT
ARE NOT HISTORICAL FACT, CONSTITUTE "FORWARD-LOOKING STATEMENTS" THAT ARE BASED
ON MANAGEMENT'S BELIEFS, ESTIMATES, ASSUMPTIONS AND CURRENTLY AVAILABLE
INFORMATION. THESE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION,
STATEMENTS RELATING TO FUTURE SALES AND OPERATING RESULTS, GROWTH, STOCK
APPRECIATION, PROJECTED CAPACITY LEVELS, PRICING TRENDS, ANTICIPATED CAPITAL
EXPENDITURES, PLANT START-UPS, CAPABILITIES, NEW PRODUCTS AND MARKETS AND OTHER
NON-HISTORICAL INFORMATION. BECAUSE THEY ARE BASED ON BELIEFS, ESTIMATES AND
ASSUMPTIONS, FORWARD-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; FINANCIAL DIFFICULTIES OF
CUSTOMERS AND SUPPLIERS; 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. is a diversified steel processor that
focuses on value-added steel processing and metals-related businesses. We
operate 4043 facilities worldwide, principally in three reportable business
segments: Processed Steel Products, Metal Framing and Pressure Cylinders. We
also hold equity positions in seveneight joint ventures, which operate 15as of August 31, 2001
operated 16 facilities worldwide.
RESULTS FROM OPERATIONS
The following discussion and analysis of financial condition and
results of operations should be read in conjunction with our Condensed
Consolidated Financial Statements included elsewhere in this report. Our Annual
Report on Form 10-K for the fiscal year ended May 31, 2000,2001, includes additional
information about Worthington,our company, our operations and our financial position, and
should be read in conjunction with this Quarterly Report on Form 10-Q.
FIRST QUARTER - FISCAL 2002 COMPARED TO FISCAL 2001
For the first quarter ended August 31, 20002001 (the "first quarter") of
the fiscal year ending May 31, 20012002 ("fiscal 2001"2002"), net sales increased 5%decreased 15% to
$484.2$409.6 million, up $21.3down $74.6 million from the comparable quarter of the fiscal
year ended May 31, 20002001 ("fiscal 2000"2001"). The overall increasedecrease in net sales was
due to volume growthweaker demand within each segment, especially Processed Steel Products,
and competitive pricing pressure in the Processed Steel Products and Metal
Framing segments
partially offset by lower volume
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in the Pressure Cylinders segment.segments. The following provides further information on net sales by
segment:
9
- Processed Steel Products.PROCESSED STEEL PRODUCTS. Net sales increased 6%decreased 17% to $318.1$265.6
million for the first quarter of fiscal 20012002 from $300.4$318.1
million in the comparable quarter of fiscal 2000. Net sales
were up2001. The
continued economic slowdown, particularly in the automotive
industry, led to lower direct volumes at every plant except
Delta, Ohio. In addition, average selling prices decreased due
to increased volume at the Decatur, Alabama
facility where our recently completed annealing expansion is
allowing us to ship additional tonscompetition and at our Monroe, Ohio
facility where our dry-lube line started to make a significant
contribution. Volume increases from these newer facilities
helped offset a 19% declineshifting product mix. An increase in our toll
processing volume.shipments partially offset the decrease in direct
sales.
- Metal Framing.METAL FRAMING. Net sales of $95.0$79.5 million for the first
quarter of fiscal 2001 increased 7%2002 decreased 16% from $88.5$95.0 million in the
comparable quarter of fiscal 2000. The increase in net sales2001. This decrease was primarily
due to increased volume particularlypricing pressures in the highly competitive building
products line of business partially offset bymarket, which led to lower selling prices resulting from competitive pressures.prices. Lower
volumes further contributed to the overall decline.
- Pressure Cylinders.PRESSURE CYLINDERS. Net sales decreased 4%12% to $70.0$61.6 million
for the first quarter of fiscal 20012002 from $73.0$70.0 million in the
comparable quarter of fiscal 2000. The decrease2001. Most of this shortfall was
due to reducedweak domestic demand andfor liquefied petroleum gas (LPG)
cylinders. However, net sales in Europe increased competition inconsiderably
compared to the European
market and lower domestic sales volume in the refrigerant
products line of business resulting from the unusually cool
summer season.prior year.
Gross margin on sales decreasedincreased to 13.2%14.6% for the first quarter of
fiscal 20012002 from 18.0% in13.2% for the comparable quarter of fiscal 2000.2001. The majority of
the decrease occurredmargin in
the Processed Steel Products segment because ofprior year quarter was depressed due to higher priced steel and the
inability to pass alongincrease sales prices. The improvement in the quarter reflects a
relationship between the sales price and the cost of higher priced steel in a declining market as
well as lower toll processing volumes.
For the first quarter of fiscal 2001, selling,material which is closer to
historical levels.
Selling, general and administrative ("SG&A") costs of $42.0 million were virtually unchanged from the
comparable quarter of fiscal 2000. Expenditures on Y2K in fiscal 2000 were
replaced by higher health care costs and spending on systems initiatives in
fiscal 2001.
Operating incomeexpense decreased 47%11% to
$21.9$37.4 million for the first quarter of fiscal 20012002 from $41.3$42.0 million in the
comparable quarter of fiscal 2000.2001. The majority of the decrease was due to a
$1.9 million pre-tax gain on the sale of an airplane.
Operating income increased 3% to $22.6 million for the first quarter of
fiscal 2002 from $21.9 million in the comparable quarter of fiscal 2001. The
increase in operating income decline resulted mostly from lower grosswas due to higher margins in the Processed Steel
Products segment higher raw material costsdespite the overall decrease in net sales combined with the
Metal Framing
segment and reduced demand in certain Pressure Cylinders' markets.previously mentioned gain on the sale of the airplane. The following provides
further information on operating income by segment:
- Processed Steel Products.PROCESSED STEEL PRODUCTS. Operating income decreased 61% to
$9.4of $13.5 million
for the first quarter of fiscal 20012002 increased 45% from $23.8$9.4
million in the comparable quarter of fiscal 2000. The
inability to pass along2001. While direct
sales volumes and selling prices declined significantly, a
decrease in the costaverage price of higher priced steel in a
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rapidly declining market as well asraw materials combined with
lower toll processing
volumes were the main reasons for the decrease.labor and SG&A expenses more than offset this decline.
- Metal Framing.METAL FRAMING. Operating income decreased 15%27% to $9.0$6.6 million
for the first quarter of fiscal 20012002 from $10.6$9.0 million in the
comparable quarter of fiscal 2000. The increase in net2001. Lower selling prices and
sales wasvolumes more than offset by unfavorablethe favorable impact of lower
raw material prices
resulting in decreased operating income.costs.
10
- Pressure Cylinders.PRESSURE CYLINDERS. Operating income decreased 35%66% to $5.3$1.8
million for the first quarter of fiscal 20012002 from $8.2$5.3 million
in the comparable quarter of fiscal 2000.2001. Lower netLPG cylinder
sales volumes and a $1.3 million charge to bad debt expense
related to the potential bankruptcy of a customer were the
major cause ofmain reasons for the decreased operating income.decline.
Interest expense decreased 8%41% to $9.4$5.5 million for the first quarter of
fiscal 20012002 from $10.2$9.4 million in the comparable quarter of fiscal 2000. The
decrease was mostly2001
principally due to the absence of the interest expense for the DECS paid
off during the fourth quarter of fiscal 2000, which was partially offset by
higher averagea reduction in short-term debt levels(see description in "Liquidity
and increased interest rates. The first
quarterCapital Resources"). In addition, our average interest rate on short-term
unsecured notes payable was 6.74%4.33% for fiscal 2001 compared to 5.25% in the first quarter of fiscal 2000.2002 compared
to 6.74% for the first quarter of fiscal 2001. At August 31, 2000,2001, approximately
68%97% of the Company's $537.8our $303.5 million of consolidated debt was at fixed rates of interest.
Equity in net income of unconsolidated affiliates increased 4%decreased 31% to $7.0$4.9
million for the first quarter of fiscal 20012002 from $6.8$7.0 million in the comparable
quarter of fiscal 2000. Increased2001. The decrease was driven by lower sales and operating income for theat WAVE and Acerex joint ventures contributed to the increase over the prior year.
TheTWB
and higher material cost at Acerex.
Our effective tax rate for the first quarter of fiscal 2002 and fiscal
2001 was 36.5%,
down from 37.5% in fiscal 2000 due to ongoing tax planning initiatives,
primarily in state and local areas..
LIQUIDITY AND CAPITAL RESOURCES
For the first quarter of fiscal 2001,2002, we generated $20.7$40.4 million in
cash from operating activities, representing a $41.4$19.7 million decreaseincrease from the
comparable periodquarter of fiscal 2000.2001. The decreaseincrease primarily was due to lower
net earningsworking capital requirements, particularly accounts receivable and 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.
Duringinventory.
Our investing and financing activities during the first quarter of
fiscal 2001, we invested $18.22002 included retiring $17.2 million in
capital projects, paid our shareholdersof long-term debt, disbursing $13.7
million in dividends to shareholders and provided
for our workinginvesting $12.7 million in capital
requirements.projects. These transactions were funded by the cash flowflows from our operations
and short-term borrowings.$7.9 million in proceeds from the sale of assets.
Capital investmentsspending during the first quarter of fiscal 2002 included amounts for
expanding the
annealing capacity at the Decatur, Alabama plant, adding the
ability to apply a dry film
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lubricant at the Monroe, Ohio facility and continued construction on
Gerstenlager's Clyde facility all withinfollowing: in the Processed Steel Products segment.
Additional expenditures were madesegment, we continued the
construction on Gerstenslager's Clyde facility; in Pressure Cylinders segment's new
low-pressure cylinder linethe Metal Framing segment, we
completed the initial phase of our plant in PortugalSeattle; and for additional weld cells atin our steel pallet
business, SteelPac.
Netwe continued the installation of additional welding equipment.
In November 2000, we entered into a $120.0 million revolving trade
receivables securitization ("TRS") facility with a commercial bank which was
expanded to $190.0 million in May 2001. Under the TRS facility, certain of our
subsidiaries sell their accounts receivable, on a revolving basis, to
Worthington Receivables Corporation ("WRC"), a wholly-owned, bankruptcy-remote
subsidiary. WRC then sells undivided ownership interests in those accounts
receivable to independent third parties. As of August 31, 2001, $110.0 million
of accounts receivable had been sold. The proceeds from these sales have been
used to reduce short-term borrowings.
Consolidated net working capital decreased $2.8$13.5 million from May 31,
20002001 to $188.1$129.6 million onat August 31, 2000.2001. The decrease was mostlyprimarily the result
of a reduction in accounts
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receivable due to lower sales in Pressure Cylinders and Processed Steel
Products, partially offset by a $29.1 million decrease in accounts receivablepayable.
We maintain a $190.0 million revolving credit facility (the "Revolver")
with a group of commercial banks, which is normal forexpires in May 2003, to finance the first quarter of each
fiscal year offset by the previously mentioned tax payment.
During the first three months of fiscal 2001, we did not repurchase anycash
requirements of our common shares. However, we did disburse $737,000 in cash for shares that
were purchased inbusiness operations. We had no outstanding borrowings under
the fourth quarter of fiscal 2000. Approximately 2.9 million
common shares remain available for repurchase under programs authorized by our
Board of Directors. The timing and amount of any future repurchases will beRevolver at our discretion and will depend upon market conditions and our operating
performance and liquidity. Any repurchase willAugust 31, 2001. We also be subject to the covenants
contained in our credit facilities as well as our other debt instruments.
We usehave short-term uncommitted lines of
credit extended by various commercial banks to finance our business operations. Maturities onavailable as needed. Outstanding
borrowings under these borrowings typically range from one to ninety days. In addition, we maintain a
$300 million revolving credit facility with a group of commercial banks. As ofuncommitted lines at August 31, 2000, our $300 million revolving credit facility included a $190
million tranche expiring May 2003 and a $110 million facility expiring September
2000. The $110 million tranche expired in September and was not renewed. The
Company intends to negotiate a new $300 million credit facility.2001 were $9.5 million.
At August 31, 2000, there were no outstanding borrowings under the revolving credit facility.
At August 31, 2000,2001, our total debt was $537.8$303.5 million compared to
$525.1$324.8 million at the end of fiscal 2000. Total2001 primarily due to the previously
mentioned retirement of long-term debt. As a result, our debt to committed capital increasedratio
decreased to 44.5%31.8% from 43.8%33.3% at the end of fiscal 2000 due mainly to the
increase in short-term debt.2001.
From time to time, we engage in discussions with respect to selected
acquisitions, and we expect to continue to assess these and other acquisition opportunities as
they arise. Accordingly, 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") for $260 million in cash. The acquisition is
expected to close during our second fiscal quarter. Under the terms of the
agreement, the purchase priceAdditional financing may increase by up to $60 million over a
three-year period following the closing, depending upon capacity utilization and
certain market conditions. The cash purchase price is also subject to adjustment
based upon certain changes in working capital. The transaction is contingent
upon obtaining satisfactory financing and other typical closing conditions. We
currently plan to issue long-term debt to finance this acquisition.
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We may also require additional financingbe required if we decide to make additional
acquisitions. There can be no assurance, however, that any such opportunities
will arise, that any such acquisitions will be consummated or that any needed
additional financing will be available when required on satisfactory terms.terms when required.
Absent any acquisitions, we anticipate that cash flows from operations, working
capital and unused short-term borrowing capacity should be more than sufficient
to fund expected normal operating costs, dividends, and capital expenditures for
our existing businesses.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Registrant's Annual Meeting of Shareholders was held on September
28, 2000.27, 2001. In connection with the meeting, proxies were solicited. Following are
the voting results on the proposalsproposal considered and voted upon.upon:
1. All nominees for election to the class of directors whose terms expire in
20032004 were elected by the following vote:
VOTES FOR VOTES WITHHELD
------------------- --------------
John B. Blystone 72,455,698 1,563,792
William S. Dietrich 72,455,089 1,564,400
Sidney A. Ribeau 72,218,982 1,800,508
Continuing directors through 2001 are as follows:
John P. McConnell Robert B. McCurry, Gerald B. Mitchell and59,928,259 14,855,384
John R. Kasich 73,845,352 938,291
Mary Fackler Schiavo 73,997,719 785,924
Continuing directors through 2002 are as follows: John S. Christie,
Michael J. Endres, Peter Karmanos, Jr. and John H. McConnell.
2. The amendment to Section 1.10 of the Registrant's Code of Regulations to
permit the Registrant's shareholders to appoint proxies in any manner permitted
under Ohio law was adopted by the following vote (there were no broker
non-votes):
FOR: 72,088,069 AGAINST: 606,643 ABSTAIN: 1,324,778
3. The Worthington Industries, Inc. 2000 Stock Option Plan for Non-Employee
Directors was approved by the following vote (there were no broker non-votes):
FOR: 67,303,586 AGAINST: 5,004,386 ABSTAIN: 1,711,518
4. The selection of Ernst & Young LLPContinuing directors through 2003 are as auditors of the Registrant for the
fiscal year ending May 31, 2001 was ratified by the following vote (there were
no broker non-votes):
FOR: 72,581,433 AGAINST: 272,287 ABSTAIN: 1,165,769
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14follows: John B. Blystone,
William S. Dietrich, II and Sidney A. Ribeau.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits:
3(b) Code of Regulations of Worthington Industries, Inc., as
amended through September 28, 2000, for SEC reporting
compliance purposes only.
10(g) Worthington Industries, Inc. 2000 Stock Option Plan for
Non-Employee Directors.*
27 Financial Data Schedule
* Management Compensation Plan.None
Reports on Form 8-K:
There were noNo reports on Form 8-K were filed during the three monthsfiscal quarter ended
August 31, 2000.2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WORTHINGTON INDUSTRIES, INC.
Date: October 13, 200015, 2001 By: /s/John T. Baldwin
-------------------- ---------------------------------------------------------- -------------------------
John T. Baldwin
Vice President & Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)
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