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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 August 31, 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. 1-8399
WORTHINGTON INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Ohio 31-1189815
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(State of Incorporation) (IRS Employer Identification No.)
1205 Dearborn Drive, Columbus, Ohio 43085
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 438-3210
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Not Applicable
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(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 September 30, 2000, 85,754,525 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
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
August 31, May 31,
2000 2000
---------- ----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 240 $ 538
Accounts receivable, net 272,028 301,175
Inventories
Raw materials 158,548 144,903
Work in process 74,194 81,632
Finished products 68,404 64,669
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Total Inventories 301,146 291,204
Other current assets 30,578 31,312
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TOTAL CURRENT ASSETS 603,992 624,229
Property, plant and equipment 1,196,871 1,180,622
Less accumulated depreciation 333,856 318,110
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Property, plant and equipment, net 863,015 862,512
Other Assets 191,564 187,132
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TOTAL ASSETS $1,658,571 $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
August 31, May 31,
2000 2000
--------------- --------------
(Unaudited) (Audited)
CURRENT LIABILITIES
Accounts payable $ 160,752 $ 157,998
Notes payable 173,517 160,194
Current maturities of long-term debt 2,546 2,688
Other current liabilities 79,033 112,390
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TOTAL CURRENT LIABILITIES 415,848 433,270
Long-Term Debt 361,721 362,190
Other Liabilities 79,410 79,117
Deferred Income Taxes 129,619 125,942
Shareholders' Equity 671,973 673,354
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,658,571 $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
August 31,
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2000 1999
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Net sales $ 484,224 $ 462,911
Cost of goods sold 420,346 379,736
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GROSS MARGIN 63,878 83,175
Selling, general & administrative expense 41,991 41,879
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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
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EARNINGS BEFORE INCOME TAXES 19,649 38,813
Income taxes 7,172 14,555
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NET EARNINGS $ 12,477 $ 24,258
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AVERAGE COMMON SHARES OUTSTANDING - DILUTED 85,755 89,953
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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)
Three Months Ended
August 31,
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2000 1999
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OPERATING ACTIVITIES
Net Earnings $ 12,477 $ 24,258
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 17,843 17,251
Other adjustments (1,068) (864)
Changes in current assets and liabilities (8,512) 21,535
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Net Cash Provided By Operating Activities 20,740 62,180
INVESTING ACTIVITIES
Investment in property, plant and equipment, net (18,165) (13,914)
Proceeds from sale of assets 221 523
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Net Cash Used By Investing Activities (17,944) (13,391)
FINANCING ACTIVITIES
Proceeds from (payments on) short-term borrowings 13,323 (20,368)
Proceeds from long-term debt 482 86
Principal payments on long-term debt (1,001) (3,798)
Repurchase of common shares (737) (11,597)
Dividends paid (13,721) (13,492)
Other (1,440) (207)
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Net Cash Used By Financing Activities (3,094) (49,376)
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Decrease in cash and cash equivalents (298) (587)
Cash and cash equivalents at beginning of period 538 7,641
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Cash and cash equivalents at end of period $ 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)
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, 2000 are not necessarily indicative of the results that may be
expected for the year ended May 31, 2001. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Worthington Industries, Inc. 2000 Annual Report to Shareholders and incorporated
by reference in the Form 10-K for the fiscal year ended May 31, 2000 of
Worthington Industries, Inc.
NOTE B - INDUSTRY SEGMENT DATA
Three Months Ended
August 31,
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($000) 2000 1999
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NET SALES:
Processed Steel Products $ 318,113 $ 300,404
Metal Framing 95,010 88,487
Pressure Cylinders 69,976 73,040
Other 1,125 980
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$ 484,224 $ 462,911
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OPERATING INCOME:
Processed Steel Products $ 9,364 $ 23,761
Metal Framing 9,027 10,602
Pressure Cylinders 5,313 8,202
Other (1,817) (1,269)
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$ 21,887 $ 41,296
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NOTE C - COMPREHENSIVE INCOME
Total comprehensive income was $12,340 and $22,398 for the three months
ended August 31, 2000 and 1999, respectively.
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NOTE D - SUBSEQUENT EVENT
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 the second
fiscal quarter of Worthington Industries, Inc. Under the terms of the agreement,
the purchase price 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
financing satisfactory to the Company and other typical closing conditions.
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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 Form 10-Q, 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 the SEC.
OVERVIEW
Worthington Industries, Inc. is a diversified steel processor that
focuses on value-added steel processing and metals-related businesses. We
operate 40 facilities worldwide, principally in three reportable business
segments: Processed Steel Products, Metal Framing and Pressure Cylinders. We
also hold equity positions in seven joint ventures, which operate 15 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, includes additional
information about Worthington, our operations and our financial position, and
should be read in conjunction with this Quarterly Report on Form 10-Q.
For the first quarter ended August 31, 2000 (the "first quarter") of
the fiscal year ending May 31, 2001 ("fiscal 2001"), net sales increased 5% to
$484.2 million, up $21.3 million from the comparable quarter of the fiscal year
ended May 31, 2000 ("fiscal 2000"). The overall increase in net sales was due to
volume growth within the Processed Steel Products and Metal Framing segments
partially offset by lower volume
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in the Pressure Cylinders segment. The following provides further information on
net sales by segment:
- Processed Steel Products. Net sales increased 6% to $318.1
million for the first quarter of fiscal 2001 from $300.4
million in the comparable quarter of fiscal 2000. Net sales
were up due to increased volume at the Decatur, Alabama
facility where our recently completed annealing expansion is
allowing us to ship additional tons 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% decline in our toll processing volume.
- Metal Framing. Net sales of $95.0 million for the first
quarter of fiscal 2001 increased 7% from $88.5 million in the
comparable quarter of fiscal 2000. The increase in net sales
was due to increased volume particularly in the building
products line of business partially offset by lower selling
prices resulting from competitive pressures.
- Pressure Cylinders. Net sales decreased 4% to $70.0 million
for the first quarter of fiscal 2001 from $73.0 million in the
comparable quarter of fiscal 2000. The decrease was due to
reduced demand and increased competition in the European
market and lower domestic sales volume in the refrigerant
products line of business resulting from the unusually cool
summer season.
Gross margin on sales decreased to 13.2% for the first quarter of
fiscal 2001 from 18.0% in the comparable quarter of fiscal 2000. The majority of
the decrease occurred in the Processed Steel Products segment because of the
inability to pass along 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, 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 income decreased 47% to $21.9 million for the first quarter
of fiscal 2001 from $41.3 million in the comparable quarter of fiscal 2000. The
operating income decline resulted mostly from lower gross margins in the
Processed Steel Products segment, higher raw material costs in the Metal Framing
segment and reduced demand in certain Pressure Cylinders' markets. The following
provides further information on operating income by segment:
- Processed Steel Products. Operating income decreased 61% to
$9.4 million for the first quarter of fiscal 2001 from $23.8
million in the comparable quarter of fiscal 2000. The
inability to pass along the cost of higher priced steel in a
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rapidly declining market as well as lower toll processing
volumes were the main reasons for the decrease.
- Metal Framing. Operating income decreased 15% to $9.0 million
for the first quarter of fiscal 2001 from $10.6 million in the
comparable quarter of fiscal 2000. The increase in net sales
was more than offset by unfavorable raw material prices
resulting in decreased operating income.
- Pressure Cylinders. Operating income decreased 35% to $5.3
million for the first quarter of fiscal 2001 from $8.2 million
in the comparable quarter of fiscal 2000. Lower net sales were
the major cause of the decreased operating income.
Interest expense decreased 8% to $9.4 million for the first quarter of
fiscal 2001 from $10.2 million in the comparable quarter of fiscal 2000. The
decrease was mostly 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 average short-term debt levels and increased interest rates. The first
quarter average interest rate on short-term unsecured notes payable was 6.74%
for fiscal 2001 compared to 5.25% in the first quarter of fiscal 2000. At August
31, 2000, approximately 68% of the Company's $537.8 million of debt was at fixed
rates of interest.
Equity in net income of unconsolidated affiliates increased 4% to
$7.0 million for the first quarter of fiscal 2001 from $6.8 million in the
comparable quarter of fiscal 2000. Increased sales and operating income for the
WAVE and Acerex joint ventures contributed to the increase over the prior year.
The effective tax rate for the first quarter of 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, we generated $20.7 million in
cash from operating activities representing a $41.4 million decrease from the
comparable period of fiscal 2000. The decrease was due to lower net earnings 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.
During the first quarter of fiscal 2001, we invested $18.2 million in
capital projects, paid our shareholders $13.7 million in dividends and provided
for our working capital requirements. These transactions were funded by the cash
flow from operations and short-term borrowings.
Capital investments during the first quarter 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 within the Processed Steel Products segment.
Additional expenditures were made in Pressure Cylinders segment's new
low-pressure cylinder line in Portugal and for additional weld cells at our
steel pallet business, SteelPac.
Net working capital decreased $2.8 million from May 31, 2000 to $188.1
million on August 31, 2000. The decrease was mostly due to a $29.1 million
decrease in accounts receivable which is normal for 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 any
of our common shares. However, we did disburse $737,000 in cash for shares that
were purchased in 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 be at
our discretion and will depend upon market conditions and our operating
performance and liquidity. Any repurchase will also be subject to the covenants
contained in our credit facilities as well as our other debt instruments.
We use short-term uncommitted lines of credit extended by various
commercial banks to finance our business operations. Maturities on 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 of
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. At August 31,
2000, there were no outstanding borrowings under the revolving credit facility.
At August 31, 2000, our total debt was $537.8 million compared to
$525.1 million at the end of fiscal 2000. Total debt to committed capital
increased to 44.5% from 43.8% at the end of fiscal 2000 due mainly to the
increase in short-term debt.
From time to time we engage in discussions with respect to selected
acquisitions and 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 price 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 financing 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 when required on satisfactory
terms. 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 existing businesses.
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. In connection with the meeting, proxies were solicited. Following are
the voting results on the proposals considered and voted upon.
1. All nominees for election to the class of directors whose terms expire in
2003 were elected by the following vote:
VOTES FOR VOTES WITHHELD
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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 and Mary Fackler Schiavo
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 LLP 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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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.
Reports on Form 8-K:
There were no reports on Form 8-K filed during the three months ended
August 31, 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: October 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)
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