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, 2000
[ ] 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. 0-4016
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's
classes of common stock as of the latest practicable date.
As of March 31, 2000, 86,200,225 of the Issuer's common shares, without
par value, were outstanding.
1
2
WORTHINGTON INDUSTRIES, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
February 29, 2000 and May 31, 1999................................3
Condensed Consolidated Statements of Earnings -
Three and Nine Months Ended February 29, 2000 and
February 28,1999..................................................5
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended February 29, 2000 and February 28, 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 6. EXHIBIT AND REPORTS ON FORM 8-K.............................15
SIGNATURES...............................................................15
2
3
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
February 29, May 31,
2000 1999
---------------------- ---------------------
(Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 18,077 $ 7,641
Accounts receivable, net 293,390 281,706
Inventories
Raw materials 216,860 163,277
Work in process 70,081 39,786
Finished products 68,603 53,947
---------------------- ---------------------
Total Inventories 355,544 257,010
Investment in Rouge 46,122 52,497
Other current assets 14,136 25,401
---------------------- ---------------------
TOTAL CURRENT ASSETS 727,269 624,255
Property, plant and equipment 1,170,386 1,131,761
Less accumulated depreciation 304,405 260,414
---------------------- ---------------------
Property, Plant and Equipment, net 865,981 871,347
Other Assets 171,420 191,349
---------------------- ---------------------
TOTAL ASSETS $1,764,670 $1,686,951
====================== =====================
See notes to condensed consolidated financial statements.
3
4
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
February 29, May 31,
2000 2000
--------------------- ---------------------
(Unaudited) (Audited)
CURRENT LIABILITIES
Accounts payable $ 174,904 $ 161,264
Notes payable 208,654 122,277
Current maturities of long-term debt 2,325 5,234
Debt exchangeable for common stock 46,122 52,497
Other current liabilities 106,000 86,453
--------------------- ---------------------
TOTAL CURRENT LIABILITIES 538,005 427,725
Long-Term Debt 363,015 365,802
Other Liabilities 80,617 79,331
Deferred Income Taxes 113,749 124,444
Shareholders' Equity 669,284 689,649
--------------------- ---------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,764,670 $ 1,686,951
===================== =====================
See notes to condensed consolidated financial statements.
4
5
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In Thousands, Except Per Share)
(Unaudited)
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
Feb. 29 Feb. 28 Feb. 29 Feb. 28
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net sales $ 486,535 $ 422,074 $ 1,422,777 $ 1,267,782
Cost of goods sold 406,894 349,737 1,174,919 1,064,597
----------- ----------- ----------- -----------
GROSS MARGIN 79,641 72,337 247,858 203,185
Selling, general & administrative
Expense 39,385 37,246 123,096 104,638
----------- ----------- ----------- -----------
OPERATING INCOME 40,256 35,091 124,762 98,547
Other income (expense):
Miscellaneous income 947 1,268 1,933 4,592
Interest Expense (10,313) (11,384) (30,607) (32,070)
Equity in net income of unconsolidated
affiliates 6,250 5,336 19,426 16,463
----------- ----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES 37,140 30,311 115,514 87,532
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)
----------- ----------- ----------- -----------
NET EARNINGS $ 23,212 $ 2,225 $ 72,196 $ 33,071
=========== =========== =========== ===========
AVERAGE COMMON SHARES 88,847 92,588 89,412 93,687
OUTSTANDING - DILUTED
EARNINGS PER COMMON SHARE - BASIC
& DILUTED
Earnings From Continuing
Operations $ 0.26 $ 0.21 $ 0.81 $ 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
=========== =========== =========== ===========
CASH DIVIDENDS DECLARED PER
COMMON SHARE $ 0.15 $ 0.14 $ 0.45 $ 0.42
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
5
6
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine Months Ended
-----------------------------------------
Feb. 29 Feb. 28
2000 1999
------------------ ------------------
OPERATING ACTIVITIES
Net Earnings $ 72,196 $ 33,071
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 53,983 58,757
Other adjustments 23,648 (2,507)
Changes in current assets and liabilities (81,580) 2,265
------------------ ------------------
Net Cash Provided By Operating Activities 68,247 91,586
INVESTING ACTIVITIES
Investment in property, plant and equipment, net (56,882) (96,098)
Acquisitions, net of cash acquired - (26,718)
Proceeds from sale of assets 2,403 117,056
------------------ ------------------
Net Cash Used By Investing Activities (54,479) (5,760)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 86,463 24,499
Proceeds from long-term debt - 2,600
Principal payments on long-term debt (5,429) (5,649)
Repurchase of common shares (51,239) (59,422)
Dividends paid (40,231) (39,426)
Other 7,104 4,534
------------------ ------------------
Net Cash Used By Financing Activities (3,332) (72,864)
------------------ ------------------
Increase in cash and cash equivalents 10,436 12,962
Cash and cash equivalents at beginning of period 7,641 3,788
------------------ ------------------
Cash and cash equivalents at end of period $ 18,077 $ 16,750
================== ==================
See notes to condensed consolidated financial statements.
6
7
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 nine months
ended February 29, 2000 are not necessarily indicative of the results that may
be expected for the year ended May 31, 2000. For further information, refer to
the consolidated financial statements and footnotes thereto included in
Worthington Industries, Inc.'s 1999 Annual Report to Shareholders and
incorporated by reference in its Form 10-K for the fiscal year ended May 31,
1999.
NOTE B - INDUSTRY SEGMENT DATA
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
Feb. 29 Feb. 28 Feb. 29 Feb. 28
($000) 2000 1999 2000 1999
---------------- ---------------- ----------------- ----------------
NET SALES:
Processed Steel Products $313,090 $266,947 $929,506 $809,128
Metal Framing 85,201 76,955 258,003 252,975
Pressure Cylinders 86,640 76,417 231,123 201,034
Other 1,604 1,755 4,145 4,645
---------------- ---------------- ----------------- ----------------
$486,535 $422,074 $1,422,777 $1,267,782
================ ================ ================= ================
OPERATING INCOME:
Processed Steel Products $21,163 $21,081 $72,415 $57,814
Metal Framing 10,772 3,799 31,680 15,687
Pressure Cylinders 9,426 10,158 24,557 25,151
Other (1,105) 53 (3,890) (105)
---------------- ---------------- ----------------- ----------------
$40,256 $35,091 $124,762 $98,547
================ ================ ================= ================
NOTE C - COMPREHENSIVE INCOME (LOSS)
Total comprehensive income (loss) was $22,243 and $(542) for the three months
ended February 29, 2000 and February 28, 1999, respectively. Total comprehensive
income was $70,027 and $38,461 for the nine months ended February 29, 2000 and
February 28, 1999, respectively.
7
8
NOTE D - SUBSEQUENT EVENT
On March 1, 2000, the Company satisfied its 7.25% exchangeable notes ("DECS")
liability with its shares of Class A Common Stock of Rouge Industries, Inc. The
DECS liability was valued at $46.1 million at February 29, 2000. The exchange
transaction reduces net income approximately $5.3 million in the fourth quarter
of fiscal 2000.
8
9
WORTHINGTON INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained in this Quarterly Report on Form 10-Q, as
filed with 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,
plant start-ups, 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; 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 related
businesses. It operates 39 wholly owned facilities worldwide, principally in
three reportable business segments: Processed Steel Products, Metal Framing, and
Pressure Cylinders. The Company also holds equity positions in seven joint
ventures, which operate 14 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 the
Condensed Consolidated Financial Statements of the Company included elsewhere in
this report. The Company's Annual Report on Form 10-K, as filed with the SEC for
the fiscal year ended May 31, 1999, includes additional information about the
Company, its operations and its financial position, and should be read in
conjunction with this Quarterly Report on Form 10-Q.
For the third quarter ended February 29, 2000 (the "third quarter") of
the fiscal year ending May 31, 2000 ("fiscal 2000"), net sales increased 15% to
$486.5 million, up $64.4 million from the comparable quarter of the fiscal year
ended May 31, 1999 ("fiscal
9
10
1999"). 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 increase in sales was due to higher volumes primarily from growth in
the start-up facilities within the Processed Steel Products segment and the
prior year acquisitions by the Pressure Cylinders segment.
Gross margin on sales decreased to 16.4% for the third quarter of
fiscal 2000 from 17.1% in the comparable quarter of fiscal 1999. For the first
nine months of fiscal 2000, the gross margin of 17.4% was up 1.4 percentage
points over the comparable period in fiscal 1999. The current quarter decrease
reflects the impact of increasing material prices 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%
For the third 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 2000 from $35.1 million in the comparable quarter of fiscal 1999. For
the first nine months of fiscal 2000 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%
10
11
Interest expense decreased 9% to $10.3 million for the third quarter of
fiscal 2000 from $11.4 million in the comparable quarter of fiscal 1999.
Year-to-date interest expense decreased 5% to $30.6 million from the comparable
period of fiscal 1999. The decrease was due to lower average debt levels,
partially offset by lower capitalized interest in fiscal 2000. The year-to-date
average interest rates on short term unsecured notes payable of 5.67% for 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%
Equity in net income of unconsolidated affiliates increased 17% to $6.3
million for the third quarter of fiscal 2000 from $5.3 million in the comparable
quarter of 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
increases in sales and earnings.
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 nine months of fiscal 2000, sales increased 15% to
$929.5 million 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 fire 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
11
12
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 prices 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
12
13
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%
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 nine
months of fiscal 2000, the Company generated $68.2 million in cash from
operating activities representing a $23.3 million decrease from the comparable
period of fiscal 1999. Compared to the prior nine 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 Company invested $56.9
million in capital projects, repurchased $51.2 million of the Company's common
shares, paid shareholders $40.2 million in dividends and provided for the
working capital requirements of the Company. These transactions were funded by
the cash flow from the operations and short-term borrowings.
Capital investments during the first nine months included amounts for
expanding 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, 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
million 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 in the Processed Steel Products segment.
Inventories and accounts payable both increased due to the
13
14
growth in the Processed Steel Products segment and the anticipation of increased
sales in that segment for the next quarter.
During the first nine months of fiscal 2000, the Company repurchased
approximately 3.8 million of its common shares. Approximately 3.7 million common
shares remain available for repurchase under the Board of Directors'
authorization. The timing and amount of any future repurchases will be at the
Company's discretion and will depend upon market conditions and the Company's
operating performance and liquidity. Any repurchase will also be subject to the
covenants contained in the Company's credit facilities.
In March 1997, 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 uses short-term uncommitted lines of credit extended by
various commercial banks to finance its business operations. Maturities on these
borrowings typically range from one to ninety days. To ensure liquidity, the
Company maintains a $300 million revolving credit facility with a group of
commercial banks. The $300 million revolving credit facility includes a $190
million tranche expiring May 2003 and a $110 million, 364-day facility expiring
September 2000. At February 29, 2000, there were no outstanding borrowings under
the revolving credit facility.
At February 29, 2000, the Company's total debt (excluding the DECS) was
$574.0 million compared to $493.3 million at the end of fiscal 1999. Total debt
to committed capital (excluding the DECS) increased to 46.2% from 41.7% at the
prior fiscal year end.
The Company's immediate borrowing capacity, in addition to cash
generated from operations, should be sufficient to fund expected normal
operating costs, dividends, and capital expenditures for 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
14
15
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 Schedule
Reports on Form 8-K:
There were no reports on Form 8-K filed during the three months ended
February 29, 2000.
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, 2000 By: /s/John T. Baldwin
------------------ -----------------------------
John T. Baldwin
Vice President & Chief Financial
Officer
(On behalf of the Registrant
and as Principal Financial Officer)
15