<PAGE> 1
Rule 424(b)(2)
Registration File No. 333-03087
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND IS SUBJECT TO COMPLETION
OR AMENDMENT.
Subject to Completion
November , 1996
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 14, 1996)
4,294,149 DECS(SM)
(DEBT EXCHANGEABLE FOR COMMON STOCK(SM))
WORTHINGTON INDUSTRIES, INC.
% EXCHANGEABLE NOTES DUE , 1999.
(SUBJECT TO EXCHANGE INTO SHARES OF CLASS A COMMON STOCK, PAR VALUE
$.01 PER SHARE, OF ROUGE STEEL COMPANY)
The principal amount of each of the % Exchangeable Notes Due , 1999
(each, a "DECS") of Worthington Industries, Inc. ("Worthington") being offered
hereby will be $ (the last sale price of the Class A Common Stock, par value
$.01 per share (the "Rouge Class A Common Stock"), of Rouge Steel Company
("Rouge Steel") on , 1996, as reported on the New York Stock Exchange
Composite Tape) (the "Initial Price"). The DECS will mature on , 1999.
Interest on the DECS, at the rate of % of the principal amount per annum, is
payable quarterly on , , and, beginning , 1996. The
DECS are not subject to redemption or any sinking fund prior to maturity.
At maturity (including as a result of acceleration or otherwise), the principal
amount of each DECS will be mandatorily exchanged by Worthington into a number
of shares of Rouge Class A Common Stock (or, at Worthington's option under the
circumstances described herein, the cash equivalent) at the Exchange Rate (as
defined herein). The Exchange Rate is equal to, subject to certain adjustments,
(a) if the Maturity Price per share of Rouge Class A Common Stock is greater
than or equal to $ per share of Rouge Class A Common Stock, shares of
Rouge Class A Common Stock per DECS, (b) if the Maturity Price is less than
$ but is greater than the Initial Price, a fractional share of Rouge Class A
Common Stock per DECS so that the value thereof at the Maturity Price equals the
Initial Price and (c) if the Maturity Price is less than or equal to the Initial
Price, one share of Rouge Class A Common Stock per DECS. The "Maturity Price"
means the average Closing Price (as defined herein) per share of Rouge Class A
Common Stock on the 20 Trading Days (as defined herein) immediately prior to
maturity, except as otherwise described herein. Accordingly, the value of the
Rouge Class A Common Stock to be received by holders of the DECS (or the cash
equivalent) at maturity will not necessarily equal the principal amount thereof.
The DECS will be unsecured obligations of Worthington ranking pari passu with
all of its other unsecured and unsubordinated indebtedness. Rouge Steel will
have no obligations with respect to the DECS. See "Description of the DECS."
SEE "RISK FACTORS RELATING TO DECS" BEGINNING ON PAGE S-3 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS.
Attached hereto is a prospectus of Rouge Steel relating to the shares of Rouge
Class A Common Stock that may be received by holders of DECS at maturity. The
Rouge Class A Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "ROU."
For a discussion of certain United States federal income tax consequences for
holders of DECS, see "Certain United States Federal Income Tax Considerations."
"DECS" and "Debt Exchangeable for Common Stock" are service marks of Salomon
Brothers Inc.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT WORTHINGTON (1)(2)
<S> <C> <C> <C>
Per DECS.................................... $ $ $
Total (3)................................... $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1996 to the date of
delivery.
(2) Before deducting expenses payable by Worthington, estimated to be
$ .
(3) Worthington has granted the Underwriter an option, exercisable within 30
days following the date hereof, to purchase up to an additional 644,123 DECS
at the Price to Public, less the Underwriting Discount, solely to cover
over-allotments, if any. If the Underwriter exercises such option in full,
the total Price to Public, Underwriting Discount and Proceeds to Worthington
will be $ , $ and $ , respectively. See "Plan of
Distribution."
The DECS are offered subject to receipt and acceptance by the Underwriter, to
prior sales and to the Underwriter's right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the DECS will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1996.
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SALOMON BROTHERS INC
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The date of this Prospectus Supplement is , 1996.
WORTHINGTON
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DECS AND THE
ROUGE CLASS A COMMON STOCK AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE (WITH RESPECT TO THE ROUGE CLASS A COMMON STOCK), IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
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RISK FACTORS RELATING TO DECS
As described in more detail below, the trading price of the DECS may vary
considerably prior to maturity (including by acceleration or otherwise,
"Maturity") due to, among other things, fluctuations in the market price of
Rouge Class A Common Stock and other events that are difficult to predict and
beyond Worthington's control.
COMPARISON TO OTHER DEBT SECURITIES; RELATIONSHIP OF THE DECS TO ROUGE CLASS A
COMMON STOCK
The terms of the DECS differ from those of ordinary debt securities in that
the value of the Rouge Class A Common Stock (or cash equivalent thereof) that a
holder of the DECS will receive upon mandatory exchange of the principal amount
thereof at Maturity (the "Amount Receivable at Maturity") is not fixed, but is
based on the market price of the Rouge Class A Common Stock as specified in the
Exchange Rate (as defined under "Description of the DECS"). There can be no
assurance that the Amount Receivable at Maturity will be equal to or greater
than the principal amount of the DECS. For example, if the Maturity Price of the
Rouge Class A Common Stock is less than the Initial Price, the Amount Receivable
at Maturity will be less than the principal amount paid for the DECS, in which
case an investment in the DECS would result in a loss and, if Rouge Steel became
insolvent or bankrupt, could result in a total loss. Holders of the DECS,
therefore, bear the full risk of a decline in the value of the Rouge Class A
Common Stock prior to Maturity.
In addition, the opportunity for equity appreciation afforded by an
investment in the DECS is less than the opportunity for equity appreciation
afforded by an investment in Rouge Class A Common Stock because the Amount
Receivable at Maturity will only exceed the principal amount of such DECS if the
Maturity Price exceeds the Threshold Appreciation Price (as defined under
"Description of the DECS"), which represents an appreciation of % of the
Initial Price. Moreover, holders of the DECS will only be entitled to receive
upon exchange at Maturity % of any appreciation of the value of Rouge Class
A Common Stock in excess of the Threshold Appreciation Price. See "Description
of the DECS" for an illustration of the Amount Receivable at Maturity that a
DECS holder would receive at various Maturity Prices. Because the market price
of the Rouge Class A Common Stock is subject to market fluctuations, the Amount
Receivable at Maturity may be more or less than the principal amount of the
DECS.
The market price of the DECS at any time will be affected primarily by
changes in the price of Rouge Class A Common Stock. It is impossible to predict
whether the price of Rouge Class A Common Stock will rise or fall. Trading
prices of Rouge Class A Common Stock will be influenced by Rouge's operational
results and by complex and interrelated political, economic, financial and other
factors that can affect the capital markets generally, the stock exchange on
which Rouge Class A Common Stock is traded and the market segment of which Rouge
Steel is a part. See the prospectus relating to Rouge Steel and to the Rouge
Class A Common Stock attached hereto as Appendix A and included as part of this
Prospectus Supplement. Trading prices of Rouge Class A Common Stock also may be
influenced if Worthington, another principal shareholder of Rouge Steel or other
persons hereafter issue securities with terms similar to those of the DECS or if
Worthington or another principal shareholder of Rouge Steel otherwise transfers
shares of Rouge Class A Common Stock. As of the date hereof, Worthington held an
aggregate of 5,527,600 shares of Rouge Class A Common Stock, shares of
which ( shares if the Underwriter's over-allotment option is exercised in
full) Worthington may deliver to holders of the DECS at Maturity.
IMPACT OF THE DECS ON THE MARKET FOR THE ROUGE CLASS A COMMON STOCK
It is not possible to predict accurately how or whether the DECS will trade
in the secondary market or whether such market will be liquid. Any market that
develops for the DECS is likely to influence and be influenced by the market for
the Rouge Class A Common Stock. For example, the price of the Rouge Class A
Common Stock could become more volatile and could be depressed by investors'
anticipation of the potential distribution into the market of substantial
additional amounts of Rouge Class A Common Stock at the maturity of the DECS, by
possible sales of the Rouge
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Class A Common Stock by investors who view the DECS as a more attractive means
of equity participation in Rouge Steel and by hedging or arbitrage trading
activity that may develop involving the DECS and the Rouge Class A Common Stock.
DILUTION OF ROUGE CLASS A COMMON STOCK
The Amount Receivable at Maturity is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends and certain
other actions of Rouge Steel that modify its capital structure. See "Description
of the DECS -- Dilution Adjustments; Reorganization Events." Such Amount
Receivable at Maturity may not be adjusted for other events, such as offerings
of Rouge Class A Common Stock for cash or in connection with acquisitions, that
may adversely affect the price of Rouge Class A Common Stock and, because of the
relationship of such Amount Receivable at Maturity to the price of Rouge Class A
Common Stock, such other events may adversely affect the trading price of the
DECS. There can be no assurance that Rouge Steel will not make offerings of
Rouge Class A Common Stock or take such other action in the future or as to the
amount of such offerings, if any.
In addition, until such time, if any, as Worthington shall deliver shares
of Rouge Class A Common Stock to holders of the DECS at Maturity thereof,
holders of the DECS will not be entitled to any rights with respect to Rouge
Class A Common Stock (including, without limitation, voting rights and the
rights to receive any dividends or other distributions in respect thereof).
NO OBLIGATION ON THE PART OF ROUGE STEEL WITH RESPECT TO THE DECS
Rouge Steel has no obligations with respect to the DECS or the Amount
Receivable at Maturity, including any obligation to take the needs of
Worthington or of holders of the DECS into consideration for any reason. Rouge
Steel will not receive any of the proceeds of the offering of the DECS made
hereby and is not responsible for, and has not participated in, the
determination of the time of sale of, quantities of or prices for the DECS to be
issued or the determination or calculation of the Amount Receivable at Maturity.
Rouge Steel is not involved with the administration or trading of the DECS.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how or whether the DECS will trade in the
secondary market or whether such market will be liquid. The DECS are novel and
innovative securities and there is currently no secondary market for the DECS.
The DECS will not be listed or traded on any securities exchange or trading
market. Accordingly, pricing information for the DECS may be difficult to obtain
and the liquidity of the DECS may be limited. The Underwriter currently intends,
but is not obligated, to make a market in the DECS. See "Plan of Distribution."
There can be no assurance that a secondary market will develop or, if a
secondary market does develop, that it will provide the holders of the DECS with
liquidity or that it will continue for the life of the DECS.
UNCERTAINTY OF FEDERAL INCOME TAX CONSEQUENCES
No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service with respect to the DECS and
no assurance can be given that the Internal Revenue Service will agree with the
conclusions expressed under "Certain United States Federal Income Tax
Considerations."
RISK FACTORS RELATING TO ROUGE STEEL
Investors in the DECS should carefully consider the information in the
prospectus of Rouge Steel attached hereto, including the information contained
therein under "Risk Factors."
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WORTHINGTON INDUSTRIES, INC.
OVERVIEW
Worthington Industries, Inc. is a leading manufacturer of metal and plastic
products, that conducts its business through three segments: processed steel
products, custom products, and cast products. Worthington's net sales for its
fiscal year ended May 31, 1996 were $1.5 billion.
Worthington, through its subsidiaries, is the largest independent flat
rolled steel processor in the United States. Worthington's steel processing
operations do not make steel, but rather, they purchase it from steel producers
and then process it to exact specifications for over 1,700 industrial customers
primarily in the automotive, automotive supply, appliance, electrical,
communication, construction, office furniture, office equipment, agricultural,
machinery and leisure time industries. Worthington believes it offers the widest
array of steel processing services in the industry, which include slitting,
roller leveling, cold reduction, edge rolling, blanking, coating, annealing,
pickling and other services. Worthington currently operates ten steel processing
facilities and is a partner in three steel processing joint ventures, most of
which are located in the largest steel consuming regions of the United States.
For the fiscal year ended May 31, 1996, net sales of Worthington's
processed steel products segment were approximately $1.0 billion, representing
approximately 68% of Worthington's total fiscal year 1996 sales. This segment
also includes Worthington's pressure cylinder business and Dietrich Industries,
Inc. ("Dietrich"). Management believes the pressure cylinder business to be the
largest producer of portable low pressure liquid propane gas cylinders and
refrigerant gas cylinders in North America. In February 1996, Worthington
acquired Dietrich, the nation's largest producer and supplier of metal framing
products for the commercial and residential markets. Dietrich is a large user of
galvanized steel and services a product market not previously supplied by
Worthington.
Worthington's other operations comprise the custom products and cast
product segments. Custom products includes Worthington Custom Plastics, Inc.,
which management believes to be the ninth largest plastic injection molding
company in the United States, which sells primarily to the automotive, lawn and
garden and appliance industries, and Worthington Precision Metals, Inc., which
supplies components primarily for automotive transmission, power steering and
brake applications. Worthington's cast products business is one of the two
largest suppliers of large railcar castings in the United States and is the
leading North American designer and producer of undercarriages for mass transit
cars.
STRATEGY
Worthington considers its operating philosophy and growth strategies to be
key elements of its success. Worthington's operating philosophy emphasizes
decentralized decision making, strong customer and supplier relationships, a
focus on quality and customer service and a significant employee cash profit
sharing plan. Under Worthington's profit sharing program, a fixed percentage of
each location's earnings are shared every fiscal quarter by virtually all
regular, full-time, non-union employees regardless of position.
Worthington's growth strategy focuses on increasing market share,
developing new products, services and niche markets, and expanding
geographically, both domestically and internationally. Worthington has pursued
these goals by selectively investing in new and existing facilities and
equipment, joint ventures and acquisitions, while maintaining a high degree of
financial flexibility. Worthington is a partner in five joint ventures, which
have enabled it to develop new products, markets and technological capabilities
and to expand its international presence, while mitigating the risks and costs
associated with such activities.
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BUSINESSES
Worthington was founded by John H. McConnell in 1955 as an Ohio
corporation, and was reincorporated in Delaware in 1986. Worthington conducts
its business through three segments: processed steel products, custom products
and cast products.
Processed Steel Products
Worthington's processed steel products segment includes its steel
processing businesses and its pressure cylinder business. For the fiscal year
ended May 31, 1996, sales of the processed steel products segment were $1.0
billion, representing approximately 68% of Worthington's total sales. Commencing
with its acquisition in February 1996, Dietrich has been included in this
segment.
Worthington's steel processing operations are conducted through its
Worthington Steel Company subsidiaries ("Worthington Steel"). Worthington Steel
occupies a niche in the steel industry by focusing on more specialized products
requiring more exact specifications, which typically cannot be supplied as
efficiently by steel mills, metal service centers or steel end users.
Worthington Steel is the largest independent flat rolled steel processor in the
United States and operates ten processing facilities, with a concentration in
the Michigan, Ohio and Indiana markets, the largest flat rolled steel consuming
region in the United States. Worthington's eleventh steel processing facility,
located in Delta, Ohio, is scheduled to start up late in calendar year 1996.
This facility will be Worthington's largest steel processing plant, and will
include a hot dip galvanizing operation, a new product for Worthington, as well
as pickling and slitting capabilities. A portion of this facility's steel
requirements will be supplied pursuant to a long term supply contract with the
North Star/BHP mini-mill which is located adjacent to, and is expected to be
completed shortly after, Worthington's Delta facility.
Worthington Steel buys coils of wide, open tolerance steel from major
integrated steel mills and mini-mills and processes such steel to the precise
type, thickness, length, width, shape, temper and surface quality specified by
more than 1,700 industrial customers principally in the automotive, automotive
supply, appliance, electrical, communications, construction, office furniture,
office equipment, agricultural, machinery and leisure time industries.
Worthington purchases and supplies steel based on the specific orders of
customers and does not process steel for inventory, which reduces its exposure
to steel price movements. Worthington Steel's computer-aided processing
capabilities include among others: pickling, a chemical process using an acidic
solution to remove surface oxide which develops on hot rolled steel; slitting,
which cuts steel to specific widths; roller leveling, a method of applying
pressure to achieve precise flatness tolerances for steel which is cut into
exact lengths; cold reduction, which achieves close tolerances of thickness and
temper by rolling; edge rolling, which conditions the edges of the steel by
imparting round, smooth or knurled edges; blanking, through which steel is cut
into specific shapes; coating which includes producing painted, galvanized or
nickel plated steel; and annealing, a thermal process that changes the hardness
and certain metallurgical characteristics of steel.
Worthington Steel also "toll processes" steel for steel mills and large end
users. Toll processing is similar to Worthington's normal steel processing,
except the mill or end user retains the title to the steel and has the
responsibility for selling the product. Toll processing enables Worthington to
participate in the market for wide sheet steel and large standard orders, which
is a market generally served by steel mills, rather than by intermediate steel
processors. For the fiscal year ended May 31, 1996, Worthington processed
approximately 2.5 million tons of steel, including 1.2 million tons of toll
processed steel.
On February 5, 1996, Worthington acquired Dietrich, the largest supplier of
metal framing products for the commercial and residential construction markets
in the United States. Worthington believes that Dietrich is the only national
supplier of metal framing products and supplies approximately 35% of the metal
framing products sold in the United States. Dietrich is a large user of
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galvanized steel and services a product market not previously supplied by
Worthington. Dietrich operates 19 facilities in 14 states.
Worthington's processed steel products segment also includes Worthington
Cylinder Corporation ("Worthington Cylinders"), the nation's largest producer of
portable low pressure liquid propane gas and refrigerant cylinders. Worthington
Cylinders' primary products are steel cylinders with refrigerant gas capacities
of 15 to 1,000 lbs. and steel and aluminum cylinders with liquid propane gas
capacities of 4 1/4 to 420 lbs. Worthington's refrigerant cylinders are used
primarily by major refrigerant gas producers to contain refrigerant gases for
use in charging residential, commercial, automotive and other air conditioning
and refrigeration systems. Reusable steel and aluminum liquid propane gas
cylinders are sold to manufacturers of barbecue grills, propane and gas grill
distributors, mass merchandisers, and manufacturers and users of material
handling, heating, cooking and camping equipment. Worthington manufactures other
low pressure cylinder products, including recapture and recycling tanks for
refrigerant gases, helium tanks and cylinders to hold other gases. Worthington
also produces high pressure acetylene, industrial, medical, halon and electronic
gas cylinders. Worthington Cylinders has over 2,000 customers. It operates seven
manufacturing facilities located in Ohio, Oklahoma, Alabama, Georgia and
Ontario.
Custom Products
Worthington's custom products segment includes its custom plastics business
and its precision metals business. Sales by the custom products segment totaled
$321 million for the year ended May 31, 1996, representing approximately 22% of
Worthington's net sales. Worthington's injection molded plastics business
represents the major portion of these sales.
Worthington's custom plastics business is conducted through Worthington
Custom Plastics, Inc., which Worthington believes to be the ninth largest
producer of injection molded plastic products in the United States.
Historically, sales to the automotive market have dominated the custom plastics
business, although in recent years Worthington has increased sales to
manufacturers of appliances, lawn and garden equipment, audio equipment,
recreational products, and other items. Worthington believes it is now one of
the two largest suppliers of injection molded plastic parts for non-automotive
uses. Worthington Custom Plastics operates five plants located in Ohio, Kentucky
and South Carolina.
Worthington's precision metals business is conducted through Worthington
Precision Metals, Inc. which supplies metal components requiring extremely
precise tolerances for use primarily in the automotive industry for
transmission, power steering and brake applications. This business operates two
facilities located in Ohio and Tennessee.
Cast Products
Worthington's cast products segment is operated through Buckeye Steel
Castings Company ("Buckeye Steel") which operates the largest single site steel
foundry in the United States. Buckeye Steel manufactures a diverse line of cast
steel products ranging in size from 100 lbs. to 30 tons. These products are
offered to the railroad, mass transit, construction and off-highway equipment
markets. Worthington believes Buckeye Steel is one of the two largest suppliers
of large railcar castings in the United States and is the leading North American
designer and producer of undercarriages for mass transit cars. The cast products
segment had sales of $144 million for the fiscal year ended May 31, 1996,
representing approximately 10% of total Company sales.
Joint Ventures and Investments
As part of its strategy to selectively develop new products, markets and
technological capabilities and to expand its international presence while
mitigating the risks and costs associated with such activities, Worthington is a
partner in five unconsolidated joint ventures.
Worthington/Armstrong Venture ("WAVE"), a 50% owned joint venture with
Armstrong World Industries, is one of the three leading United States
manufacturers of suspended ceiling systems for concealed and lay-in panel
ceilings. WAVE operates facilities in Pennsylvania, Maryland, Nevada and
France and expects to expand into China in 1996.
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Acerex S.A. de C.V., a 50% owned joint venture with Hylsa S.A. de
C.V., is a steel processing company located in Monterrey, Mexico.
Worthington Specialty Processing, a 50% owned joint venture with USX
Corporation, operates primarily as a toll processor for USX Corporation.
London Industries, Inc., a 60% owned joint venture with Sumitomo and
Nissen Chemitech of Japan, produces injection molded plastics parts,
concentrating on sales to foreign transplant automakers.
TWB Company, currently a 50% owned joint venture with Thyssen Stahl of
Germany, produces laser welded blanks for use in the auto industry for
products such as inner door frames. TWB Company has reached an agreement in
principle by which Rouge Steel and two other steel companies would become
minority owners of TWB Company, and the interests of Worthington and
Thyssen would be reduced to 33% each.
Worthington also owns an approximate 28% interest in Rouge Steel, an
integrated steel mill located in Dearborn, Michigan. This relationship, along
with a long term steel supply agreement, has assured Worthington a steady supply
of high quality steel at competitive prices regardless of market conditions.
Since Worthington acquired its equity position in 1990, Rouge Steel has been
Worthington's largest steel supplier. See "Rouge Steel" and "Relationship
Between Worthington and Rouge Steel."
Worthington has also reached an agreement in principle with Rouge Steel
with respect to a joint venture and a processing agreement. The joint venture
would construct a cold rolled hot dipped galvanizing facility near Monroe,
Michigan, which would galvanize steel for the members on a for profit tolling
basis. Worthington would operate and have a 52% interest in the facility and be
entitled to 20% of the output. Rouge Steel would have a 48% interest and be
entitled to 80% of the output. It is expected that this facility will be placed
in service by mid-1998. Under the processing agreement, Worthington would
allocate 20% of the line time of its hot rolled hot dipped galvanizing line
being built in Delta, Ohio for the toll processing of Rouge steel products.
RECENT DEVELOPMENTS
During the first quarter of fiscal 1997, Worthington took steps relative to
its investment in Rouge Steel which resulted in Worthington changing the
accounting for this from the equity method to the cost method. Accordingly
Worthington's results for fiscal 1997 will not reflect equity earnings from
Rouge Steel. Worthington believes that, to appropriately compare periods, fiscal
1996 results should be adjusted to eliminate the impact of the Rouge Steel
equity earnings. This is done in the table below. The percent change column
compares historical first quarter fiscal 1997 (with Rouge Steel's being
accounted for on the cost method) with first quarter fiscal 1996 (as if Rouge
Steel were accounted for on the cost method).
<TABLE>
<CAPTION>
FIRST QUARTER ENDED AUGUST 31
--------------------------------------------------
1995 1995 WITHOUT PERCENT
1996 AS REPORTED ROUGE STEEL CHANGE
-------- ----------- ------------ -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C>
Net Sales......................................... $402,571 $ 325,736 $325,736 24%
Gross Margin.................................... 57,675 47,005 47,005 23%
Operating Income................................ 32,451 27,136 27,136 20%
Interest Expense/Misc. Income..................... 3,301 1,160 1,160 185%
Affiliate Earnings................................ 2,615 8,436 1,214 115%
Earnings Before Taxes........................... 31,765 34,412 27,190 17%
Income Taxes...................................... 12,166 12,904 10,376 17%
Net Earnings.................................... 19,599 21,508 16,814 17%
Earnings Per Share .22 .24 .19 16%
Capital Expenditures.............................. $ 55,057 $ 26,587 $ 26,587 107%
</TABLE>
On September 19, 1996 Worthington's Board of Directors elected John P.
McConnell, Worthington's Chief Executive Officer, as Chairman of the Board.
Former Chairman, John H. McConnell, will remain with Worthington with the title
Chairman Emeritus and Founder. He will also continue to serve on the Board and
as Chairman of the Executive Committee.
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ROUGE STEEL
Rouge Steel is an integrated producer of high quality, flat rolled carbon
steel products consisting of hot rolled, cold rolled and electrogalvanized
steel. In recent years, Rouge Steel has emphasized the production of value-added
flat rolled carbon steel products which require additional processing and
generally command higher margins than commodity flat rolled carbon steel
products. Rouge Steel's products generally, and its value-added products
specifically, are sold primarily to customers in the automotive industry who
have exacting quality, delivery and service requirements. Rouge Steel's ability
to meet these standards and its extensive participation in the development of
new products designed for automobile applications have enabled it to expand its
sales to automotive customers. Rouge Steel also sells its products to steel
converters, service centers and other end users.
Rouge Steel has been in the steel manufacturing business since the 1920's,
first as a division of Ford Motor Company ("Ford") and later as a subsidiary of
Ford. In 1989, a corporation owned by Carl L. Valdiserri, Rouge Steel's chairman
and chief executive officer, a subsidiary of Worthington and certain other
corporate investors acquired all of the issued and outstanding stock of Rouge
Steel from Ford. In the seven years since such acquisition, Rouge Steel's
management has transformed Rouge Steel from an adjunct to Ford's automotive
manufacturing business into an independent, debt-free, market-driven business
that has reported net income in each year since such acquisition except 1992
when the impact of changes in accounting principles resulted in a $5.1 million
loss.
During the past 15 years, approximately $1.0 billion has been invested in
Rouge Steel to modernize its facilities and tighten control over its
manufacturing processes. These capital improvements have contributed in lower
production costs through better utilization of its facilities and have permitted
Rouge Steel to produce a broader range of higher margin steel products. During
the five-year period commencing January 1, 1996, Rouge Steel's strategic plan
provides for approximately $390 million in capital expenditures for facilities
improvement and investment in joint ventures.
Rouge Steel has stated that its objective is to be a leading domestic
producer of value-added, flat rolled carbon steel by increasing the range,
quality and quantity of products Rouge Steel offers. To achieve this objective,
Rouge Steel has stated that it will continue to pursue a business strategy
consisting of the following key elements: (i) increase value-added product
capabilities; (ii) increase production capacity; (iii) continuously improve
product quality; (iv) reduce costs and improve productivity; (v) establish
long-term customer relationships; and (vi) maintain financial flexibility.
------------------------
For additional information about Rouge Steel, see the prospectus of Rouge
Steel attached hereto. Rouge Steel is subject to the informational requirements
of the 1934 Act (as defined in the accompanying Prospectus) and in accordance
therewith files reports, proxy statements and other information with the
Commission (as defined in the accompanying Prospectus). The prospectus of Rouge
Steel attached hereto incorporates its Annual Report on Form 10-K for the year
ended December 31, 1995, its Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996 and all documents
filed by Rouge Steel pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934
Act subsequent to the date of such prospectus and prior to the termination of
the DECS offering. Such documents may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the following regional offices of the
Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Such material may also be accessed electronically by
means of the
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<PAGE> 10
Commission's home page on the Internet at http://www.sec.gov. Such documents,
without exhibits, may also be obtained by writing to Investor Relations, Rouge
Steel Company, 3001 Miller Road, P.O. Box 1699, Dearborn, Michigan 48121-1699
(telephone number (313) 317-8900). See "Available Information" and
"Incorporation of Certain Documents by Reference" in the prospectus of Rouge
Steel attached hereto.
The prospectus of Rouge Steel is attached hereto and delivered to
prospective purchasers of DECS together with the Prospectus Supplement and
accompanying Prospectus for convenience of reference only. The prospectus of
Rouge Steel does not constitute a part of this Prospectus Supplement or the
accompanying Prospectus, nor is it incorporated by reference herein.
RELATIONSHIP BETWEEN WORTHINGTON AND ROUGE STEEL
An indirect, wholly-owned subsidiary of Worthington owns 5,527,600 shares
of the outstanding Rouge Class A Common Stock and 472,000 shares of the
outstanding Class B Common Stock, par value $.01 per share ("Rouge Class B
Common Stock" and, together with Rouge Class A Common Stock, "Rouge Common
Stock"), of Rouge Steel, representing an aggregate 27.5% ownership interest and
a 19.9% voting interest. Pursuant to a stockholders' agreement that became
effective as of March 1994 (as amended, the "Rouge Stockholders' Agreement")
between Worthington, Rouge Steel and Carl L. Valdiserri (the chairman and chief
executive officer of Rouge Steel), the parties have agreed, among other things,
that (i) Worthington and its affiliates will be subject to certain standstill
provisions with respect to acquisitions of Rouge Common Stock that would result
in a percentage ownership interest in Rouge Common Stock in excess of 35%, (ii)
Mr. Valdiserri and his permitted transferees will be restricted as to the number
of shares that they may transfer or agree to transfer annually unless Mr.
Valdiserri gives Worthington 30 days' prior written notice; (iii)(1) if and so
long as Worthington owns at least 18% or 9% of the total number of outstanding
shares of Rouge Common Stock, Mr. Valdiserri will vote his shares of Rouge
Common Stock in favor of two directors or one director, respectively, designated
by Worthington and (2) if and as long as Mr. Valdiserri holds 27%, 18% or 9% of
the total number of outstanding shares of Rouge Common Stock, Worthington will
vote its shares of Rouge Common Stock in favor of three directors, two directors
or one director, respectively, designated by Mr. Valdiserri. Effective August 1,
1996, Worthington caused both of the directors designated by it to resign and
agreed that it would not designate successors to fill these vacancies as long as
any of the DECS remain outstanding.
For more information concerning the Rouge Stockholders' Agreement and for a
description of a supply agreement to which Worthington and Rouge are parties and
various joint ventures to which they may become parties, see "Certain
Relationships and Related Transactions," "Business -- Joint Ventures" and
"Business -- Markets and Customers" in the prospectus of Rouge Steel attached
hereto. Neither the Rouge Stockholders' Agreement nor the aforementioned supply
agreement will be affected by the offering of the DECS, and Worthington
anticipates it will continue to maintain a close working relationship with Rouge
Steel for the foreseeable future following such offering.
Although Worthington currently intends to retain its current holdings of
shares of Rouge Common Stock for the term of the DECS, Worthington is not
required to do so in connection with the DECS or otherwise and may sell some or
all of such shares from time to time. Accordingly, there can be no assurance
that Worthington will have any influence over the actions and decisions taken
and made by Rouge, including with respect to the supply contract and joint
venture agreements referred to above.
During the first quarter of its 1997 fiscal year, Worthington took steps
relative to its investment in Rouge Steel which resulted in Worthington changing
the accounting for this investment from the equity method to the cost method.
The steps included causing the resignation of two directors designated by
Worthington to the Board of Directors of Rouge Steel, as described above, and
converting certain shares of Rouge Class B Common Stock (which are entitled to
2.5 votes per
S-10
<PAGE> 11
share) to Rouge Class A Common Stock (which are entitled to one vote per share),
resulting in Worthington's voting interest decreasing to 19.9%. Under the equity
method of accounting, Rouge Steel contributed $21.7 million, $32.1 million and
$19.4 million to Worthington's pre-tax earnings during the fiscal years ended
May 31, 1996, 1995 and 1994, respectively. Under the cost method of accounting,
only dividends received by Worthington from its Rouge Common Stock will be
credited to pre-tax earnings.
In connection with the offering of the DECS, Rouge Steel has agreed to
indemnify Worthington against certain liabilities, including liabilities under
the Securities Act (as defined in the accompanying Prospectus). Rouge Steel has
no obligations with respect to the DECS. See "Risk Factors Relating to
DECS -- No Obligation on the Part of Rouge Steel with Respect to the DECS."
S-11
<PAGE> 12
CAPITALIZATION
The following table sets forth the current maturities of long-term debt and
the consolidated debt and shareholders' equity of Worthington at August 31,
1996, and as adjusted to reflect the application of the estimated net proceeds
from the sale of the DECS (assuming the Underwriter's over-allotment option is
not exercised). See "Use of Proceeds."
<TABLE>
<CAPTION>
AT AUGUST 31, 1996
---------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN MILLIONS)
<S> <C> <C>
Current maturities of long-term debt....................... $ 2 $ 2
---- ----
Long-term debt, less current maturities:
Conventional long-term debt:
7 1/8% notes due 2006................................. 200 200
Revolver debt......................................... 85
Industrial development revenue bonds.................. 13 13
Other................................................. 1 1
---- ----
Total conventional long-term debt................... 299
---- ----
DECS..................................................
---- ----
Total long-term debt, less current maturities.... 299
---- ----
Total shareholders' equity................................. 670 670
---- ----
Total capitalization....................................... $969 $
---- ----
</TABLE>
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<PAGE> 13
SELECTED FINANCIAL INFORMATION
(DOLLARS IN MILLIONS)
The selected financial information below should be read in conjunction with
the historical consolidated financial statements and notes thereto included in
Worthington's Annual Report on Form 10-K for the year ended May 31, 1996 and
Quarterly Report on Form 10-Q for the three months ended August 31, 1996. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus. The historical selected financial information as of and for each of
the five years in the period ended May 31, 1996 is derived from the historical
consolidated financial statements of Worthington which have been audited by
Ernst & Young LLP, independent auditors. The selected financial information at
August 31, 1996 and 1995 and for the three months ended August 31, 1996 and 1995
is derived from the unaudited consolidated financial statements of Worthington,
which have been prepared on the same basis as Worthington's audited consolidated
financial statements and, in the opinion of management, contain all adjustments,
consisting only of normal, recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the three months ended August 31, 1996 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending May 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
AUGUST 31, YEAR ENDED MAY 31,
---------------- ----------------------------------------------
1996 1995 1996 1995 1994 1993 1992
------ ------ YEAR ENDED ------ ------ ------ ------ ------
MAY 31,
1996
------------
PRO FORMA(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Net sales:
Processed steel products................. $ 297 $ 223 $1,196 $1,013 $1,029 $ 920 $ 768 $668
Custom products.......................... 81 68 321 321 302 250 242 218
Cast products............................ 25 35 144 144 153 115 103 85
------ ------ ------ ------ ------ ------ ------ ----
Total net sales........................ 403 326 1,661 1,478 1,484 1,285 1,113 971
Operating income(2):
Processed steel products................. 27 20 104 93 112 98 79 70
Custom products.......................... 4 3 18 18 20 15 20 14
Cast products............................ 1 4 15 15 22 6 7 4
------ ------ ------ ------ ------ ------ ------ ----
Total operating income................. 32 27 137 126 154 119 106 88
Interest expense......................... 4 1 16 8 6 3 3 4
Equity in net income of unconsolidated
affiliates -- joint ventures........... 3 1 7 7 6 -- 2 1
Equity in net income of unconsolidated
affiliate -- Rouge(3).................. -- 7 22 22 32 19 3 4
Net earnings............................. 20 22 93 91 117 85 68 58
AT END OF PERIOD:
Total assets............................... 1,284 917 1,220 917 799 694 628
Long-term debt............................. 299 83 299 53 54 56 57
Total debt(4).............................. 312 84 300 92 66 57 60
Shareholders' equity....................... 670 602 640 590 504 438 392
RATIO OF EARNINGS TO FIXED CHARGES(5)........ 6.2x 10.0x 7.1x(6) 10.6x 16.5x 24.4x 27.3x 19.2x
</TABLE>
- ---------------
(1) The pro forma dollar amounts give effect to the purchase by Worthington of
the stock of Dietrich as if the transaction occurred at the beginning of the
fiscal year ended May 31, 1996. Pro forma balance sheet information at the
end of the period is not presented since the transaction has been reflected
in Worthington's May 31, 1996 consolidated balance sheet.
(2) Corporate expenses are allocated on a consistent basis among industry
segments.
(3) During the first quarter of its 1997 fiscal year, Worthington took steps
relative to its investment in Rouge Steel which resulted in Worthington
changing the accounting for the investment from the equity method to the
cost method.
(4) Represents long-term debt (including current maturities) and notes payable.
(5) For the purpose of this ratio: (i) earnings consist of income from
continuing operations before fixed charges (reduced by capitalized interest)
and income taxes for Worthington and its majority-owned subsidiaries and its
proportionate share of the income of unconsolidated affiliated companies,
reduced by undistributed earnings of less than 50%-owned unconsolidated
affiliated companies; and (ii) fixed charges consist of interest on all
indebtedness (without reduction of interest capitalized) for Worthington and
its majority-owned subsidiaries (consolidated and unconsolidated), and its
proportionate share of the interest on indebtedness of 50%-owned
unconsolidated affiliates.
(6) Represents supplemental ratio to give effect to the purchase by Worthington
of the stock of Dietrich.
S-13
<PAGE> 14
PRICE RANGE AND DIVIDEND HISTORY
OF ROUGE CLASS A COMMON STOCK
The following table sets forth, for the periods indicated, the high and low
sales prices of the Rouge Class A Common Stock on the NYSE as reported in the
consolidated transaction reporting system, and the dividends paid.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS PAID
------ ------ --------------
<S> <C> <C> <C>
1994
First Quarter (from March 29)................................ $23.00 $21.00 $ --
Second Quarter............................................... 29.63 19.75 --
Third Quarter................................................ 34.25 27.00 .02
Fourth Quarter............................................... 32.38 24.25 .02
1995
First Quarter................................................ $30.75 $21.88 $ .02
Second Quarter............................................... 25.88 20.75 .02
Third Quarter................................................ 27.38 23.13 .02
Fourth Quarter............................................... 24.50 19.75 .03
1996
First Quarter................................................ $25.13 $22.00 $ .03
Second Quarter............................................... 23.38 21.13 .03
Third Quarter................................................ 23.13 19.13 .03
Fourth Quarter (through November 14, 1996)................... 22.13 20.13 .03
</TABLE>
As of August 31, 1996, there were (i) 13,987,929 shares of Rouge Class A
Common Stock issued and outstanding and held by approximately 7,000 stockholders
of record, and (ii) 7,862,400 shares of Rouge Class B Common Stock issued and
outstanding and held by two stockholders of record. As of August 31, 1996, Carl
L. Valdiserri and Worthington held 7,390,400 and 472,000 shares, respectively,
of Rouge Class B Common Stock. The principal market for the Rouge Class A Common
Stock is the NYSE where it has been listed for trading under the symbol "ROU"
since March 29, 1994. The Rouge Class B Common Stock is not listed for trading
on any securities exchange.
For a recent sales price of the Rouge Class A Common Stock, see the cover
page of this Prospectus Supplement. See also "Price Range of Class A Common
Stock and Dividends" in the prospectus of Rouge Steel attached hereto.
Worthington makes no representation as to the amounts of dividends, if any,
that Rouge Steel will pay in the future. In any event, holders of the DECS will
not be entitled to receive any dividends that may be payable on the Rouge Class
A Common Stock until such time as Worthington, if it so elects, delivers Rouge
Class A Common Stock at Maturity of the DECS, and then only with respect to
dividends having a record date on or after the date of delivery of such Rouge
Class A Common Stock. See "Description of the DECS."
USE OF PROCEEDS
Worthington intends to apply the net proceeds from the sale of the DECS to
repay debt under its Revolving Credit Agreement ("Revolver Debt") and for
general corporate purposes. The Revolver Debt bears variable interest rates
based on LIBOR plus a fixed percent. The interest rate on Revolver Debt was 5.7%
at August 31, 1996. The commitment for the Revolver Debt expires April 2001.
S-14
<PAGE> 15
DESCRIPTION OF THE DECS
The following description of the particular terms of the DECS supplements,
and to the extent inconsistent therewith supersedes, the description of the
general terms and provisions of the Debt Securities set forth in the
accompanying Prospectus, to which description reference is hereby made.
GENERAL
The DECS are a series of Debt Securities (as defined in the accompanying
Prospectus), to be issued under an indenture dated as of May 15, 1996, as
supplemented by the First Supplemental Indenture, dated as of , 1996
(the indenture dated as of May 15, 1996, as supplemented from time to time, the
"Indenture"), between Worthington and PNC Bank, Ohio, National Association, as
Trustee (the "Trustee"). The Indenture is subject to and is governed by the
Trust Indenture Act of 1939, as amended (the "TIA"), and the terms of the DECS
include those made part of the Indenture by reference to the TIA as an effect of
the date of the Indenture. The following description and the description in the
accompanying Prospectus do not purport to be complete and are subject to and
qualified in their entirety by reference to the TIA and all the provisions of
the DECS and the Indenture.
The DECS will be unsecured and will rank on a parity with all other
unsecured and unsubordinated indebtedness of Worthington. Worthington is a
holding company that conducts all its operations through subsidiaries, and the
DECS will be structurally subordinated to all obligations of its subsidiaries.
At , 1996, after giving effect to the use of net proceeds from this
offering as described in "Use of Proceeds," Worthington would have had
approximately $ million of indebtedness for borrowed money ranking pari
passu in right of payment with the DECS and subsidiaries of Worthington would
have had aggregate balance sheet liabilities of approximately $ million,
excluding intercompany obligations. The aggregate number of DECS to be issued
will be plus such additional number of DECS as may be issued pursuant to
the over-allotment option granted by Worthington to the Underwriter (see "Plan
of Distribution"). The DECS will mature on , 1999. The Indenture
does not limit the amount of Debt Securities that may be issued thereunder. In
the future, Worthington may issue additional Debt Securities or other securities
with terms similar to those of the DECS.
Each DECS, which will be issued with a principal amount of $ ,
will bear interest at the annual rate of % of the principal amount per annum
(or $ per annum) from , 1996, or from the most recent
Interest Payment Date (as defined below) to which interest has been paid or
provided for until the principal amount thereof is exchanged at Maturity
pursuant to the terms of the DECS. Certificates evidencing DECS will be issued
in denominations of $ and any integral multiple thereof. Interest on
the DECS will be payable quarterly in arrears on , , and
, commencing , 1996 (each, an "Interest Payment Date"),
to the persons in whose names the DECS are registered at the close of business
on the last day of the calendar month immediately preceding such Interest
Payment Date, provided that interest payable at Maturity shall be payable to the
person to whom the principal is payable. Interest on the DECS will be computed
on the basis of a 360-day year of twelve 30-day months. If an Interest Payment
Date falls on a day that is not a Business Day (as defined below), the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment.
At Maturity (including as a result of acceleration or otherwise), the
principal amount of each DECS will be mandatorily exchanged by Worthington into
a number of shares of Rouge Class A Common Stock at the Exchange Rate (as
defined below) or the equivalent amount in cash. The "Exchange Rate" is equal
to, (a) if the Maturity Price (as defined below) is greater than or equal to
$ (the "Threshold Appreciation Price"), shares of Rouge Class
A Common Stock per DECS, (b) if the Maturity Price is less than the Threshold
Appreciation Price but is greater than
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<PAGE> 16
the Initial Price, a fractional share of Rouge Class A Common Stock per DECS so
that the value thereof (determined at the Maturity Price) is equal to the
Initial Price and (c) if the Maturity Price is less than or equal to the Initial
Price, one share of Rouge Class A Common Stock per DECS. ACCORDINGLY, THE VALUE
OF THE ROUGE CLASS A COMMON STOCK TO BE RECEIVED BY HOLDERS OF THE DECS (OR, AS
DISCUSSED BELOW, THE CASH EQUIVALENT TO BE RECEIVED IN LIEU OF SUCH SHARES) AT
MATURITY WILL NOT NECESSARILY EQUAL THE PRINCIPAL AMOUNT OF SUCH DECS. The
numbers of shares of Rouge Class A Common Stock per DECS specified in clauses
(a) and (c) above of the Exchange Rate definition are hereinafter referred to as
the "Share Components." Any shares of Rouge Class A Common Stock delivered by
Worthington to the holders of the DECS that are not affiliated with Rouge Steel
shall be free of any transfer restrictions and the holders of the DECS will be
responsible for the payment of any and all brokerage costs upon the subsequent
sale of such shares. No fractional shares of Rouge Class A Common Stock will be
issued at Maturity as provided under "-- Fractional Shares" below. Although it
is Worthington's current intention to deliver shares of Rouge Class A Common
Stock at Maturity, Worthington may at its option deliver cash, in lieu of
delivering such shares of Rouge Class A Common Stock, except where such delivery
would violate applicable state law. The amount of cash deliverable in respect of
each DECS shall be equal to the product of the number of shares of Rouge Class A
Common Stock otherwise deliverable in respect of such DECS on the date of
Maturity multiplied by the Maturity Price. In the event Worthington elects to
deliver cash in lieu of shares at Maturity, it will be obligated pursuant to the
Indenture to deliver cash to all holders of DECS except those holders with
respect to whom it has determined delivery of cash may violate applicable state
law and as to whom it will deliver shares of Rouge Class A Common Stock. On or
prior to the seventh Business Day prior to , 1999, Worthington will
notify the Trustee, which in turn will notify The Depository Trust Company, and
publish a notice in a daily newspaper of national circulation stating whether
the principal amount of each DECS will be exchanged for shares of Rouge Class A
Common Stock or cash; provided, however, that if Worthington intends to deliver
cash, Worthington shall have the right, as a condition to delivery of such cash,
to require certification as to the domicile and residency of each beneficial
holder of DECS.
Notwithstanding the foregoing, (i) in the case of certain dilution events,
the Exchange Rate will be subject to adjustment and (ii) in the case of certain
reorganization events, the consideration received by holders of DECS at Maturity
will be cash or other property. See "-- Dilution Adjustments; Reorganization
Events" below.
The "Maturity Price" is defined as the average Closing Price per share of
Rouge Class A Common Stock on the 20 Trading Days immediately prior to (but not
including) the date of Maturity; provided, however, that if there are not 20
Trading Days for the Rouge Class A Common Stock following the 60th calendar day
immediately prior to, but not including, the date of Maturity, "Maturity Price"
is defined as the market value per share of Rouge Class A Common Stock as of
Maturity as determined by a nationally recognized independent investment banking
firm retained for such purpose by Worthington. The "Closing Price" of any
security on any date of determination means the closing sale price (or, if no
closing price is reported, the last reported sale price) of such security
(regular way) on the NYSE on such date or, if such security is not listed for
trading on the NYSE on any such date, as reported in the composite transactions
for the principal United States securities exchange on which such security is so
listed, or if such security is not so listed on a United States national or
regional securities exchange, as reported by the Nasdaq Stock Market, or, if
such security is not so reported, the last quoted bid price for such security in
the over-the-counter market as reported by the National Quotation Bureau or
similar organization. A "Trading Day" is defined as a day on which the security
the Closing Price of which is being determined (A) is not suspended from trading
on any national or regional securities exchange or association or over-the-
counter market at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of such security. "Business
Day" means any day that is not a Saturday, a Sunday or a day
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<PAGE> 17
on which the NYSE, banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to close.
For illustrative purposes only, the following chart shows the number of
shares of Rouge Class A Common Stock or, where permitted by applicable law, the
amount of cash that a holder of DECS would receive for each DECS at various
Maturity Prices. The table assumes that there will be no adjustments to the
Exchange Rate described under "-- Dilution Adjustments; Reorganization Events"
below. There can be no assurance that the Maturity Price will be within the
range set forth below. Given the Initial Price of $ per DECS and the
Threshold Appreciation Price of $ , a DECS holder would receive at
Maturity the following number of shares of Rouge Class A Common Stock or amount
of cash (if Worthington elects to pay the DECS in cash):
<TABLE>
<CAPTION>
MATURITY PRICE OF NUMBER OF SHARES OF
ROUGE CLASS A ROUGE CLASS A AMOUNT OF
COMMON STOCK COMMON STOCK CASH
- ----------------- ------------------- ---------
<S> <C> <C>
$ $
</TABLE>
As the foregoing chart illustrates, if at Maturity, the Maturity Price is
greater than or equal to $ , Worthington will be obligated to deliver
shares of Rouge Class A Common Stock per DECS, resulting in Worthington
receiving percent of the appreciation in market value above $ and
the DECS holder receiving percent of the appreciation in market value above
$ . If at Maturity, the Maturity Price is greater than $ and
less than $ , Worthington will be obligated to deliver only a fraction
of a share of Rouge Class A Common Stock having a market value equal to
$ , resulting in Worthington retaining all appreciation in the market
value of the Rouge Class A Common Stock from $ to $ . If at
Maturity, the Maturity Price is less than or equal to $ , Worthington
will be obligated to deliver one share of Rouge Class A Common Stock per DECS,
regardless of the market price of such share, resulting in the DECS holder
realizing the entire loss on the decline in market value of the Rouge Class A
Common Stock.
Interest on the DECS will be payable, and delivery of Rouge Class A Common
Stock (or, at the option of Worthington, its cash equivalent) in exchange for
the DECS at Maturity will be made upon surrender of such DECS, at the office or
agency of Worthington maintained for such purposes; provided, however, that
payment of interest may be made at the option of Worthington by check mailed to
the persons in whose names the DECS are registered at the close of business on
the last day of the calendar month immediately preceding the relevant Interest
Payment Date. See "-- Book-Entry System." Initially such office will be the
principal corporate trust office of the Trustee, in the City and State of New
York.
The DECS will be transferable at any time or from time to time at the
aforementioned office. No service charge will be made to the holder for any such
transfer except for any tax or governmental charge incidental thereto.
The Indenture does not contain any restriction on the ability of
Worthington to sell, pledge or convey all or any portion of the Rouge Class A
Common Stock held by it or its subsidiaries, and no such shares of Rouge Class A
Common Stock will be pledged or otherwise held in escrow for use at Maturity of
the DECS. Consequently, in the event of a bankruptcy, insolvency or liquidation
of Worthington or its subsidiaries, the Rouge Class A Common Stock, if any,
owned by Worthington or its subsidiaries will be subject to the claims of the
creditors of Worthington or its subsidiaries, respectively. In addition, as
described herein, Worthington will have the option, exercisable in its sole
discretion, to satisfy its obligations pursuant to the mandatory exchange for
the principal amount of each DECS at Maturity by delivering to holders of the
DECS either the number of shares of Rouge Class A Common Stock specified above
or, subject to applicable law, cash in an amount equal to the product of such
number of shares multiplied by the Maturity Price. In the event of such a sale,
pledge or conveyance, a holder of the DECS may be more likely to receive cash in
lieu of Rouge Class A Common Stock. As a result, there can be no assurance that
Worthington will elect at
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<PAGE> 18
Maturity to deliver Rouge Class A Common Stock or, if it so elects, that it will
use all or any portion of its current holdings of Rouge Class A Common Stock to
make such delivery. Holders of the DECS will not be entitled to any rights with
respect to Rouge Class A Common Stock (including, without limitation, voting
rights and rights to receive any dividends or other distributions in respect
thereof) until such time, if any, as Worthington shall have delivered shares of
Rouge Class A Common Stock to holders of the DECS at Maturity thereof and the
applicable record date, if any, for the exercise of such rights occurs after
such date.
DILUTION ADJUSTMENTS; REORGANIZATION EVENTS
The Exchange Rate is subject to adjustment if Rouge Steel shall (i) pay a
stock dividend or make a distribution with respect to Rouge Class A Common Stock
in shares of such stock, (ii) subdivide or split its outstanding shares of Rouge
Class A Common Stock, (iii) combine its outstanding shares of Rouge Class A
Common Stock into a smaller number of shares, (iv) issue by reclassification
(other than a reclassification upon a Reorganization Event, described in the
following paragraph) of its shares of Rouge Class A Common Stock any shares of
common stock of Rouge Steel, (v) issue rights or warrants (other than rights to
purchase Rouge Class A Common Stock pursuant to a plan for the reinvestment of
dividends or interest) to all holders of Rouge Class A Common Stock entitling
them to subscribe for or purchase shares of Rouge Class A Common Stock at a
price per share less than the Market Price (as defined below) of the Rouge Class
A Common Stock on the Business Day next following the record date for the
determination of holders of Rouge Class A Common Stock entitled to receive such
rights or warrants, or (vi) pay a dividend or make a distribution to all holders
of Rouge Class A Common Stock of evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to in clause (i) above, any
shares of common stock issued pursuant to a reclassification referred to in
clause (iv) above and any cash dividends other than any Extraordinary Cash
Dividends (as defined below)) or issue to all holders of Rouge Class A Common
Stock rights or warrants to subscribe for or purchase any of its securities
(other than those referred to in clause (v) above). In the case of the events
referred to in clauses (i), (ii), (iii) and (iv) above, the Exchange Rate shall
be adjusted by adjusting each of the Share Components of the Exchange Rate in
effect immediately prior to such event so that a holder of any DECS shall be
entitled to receive, upon mandatory exchange of the principal amount of such
DECS at Maturity pursuant to either Share Component of the Exchange Rate, the
number of shares of Rouge Class A Common Stock (or, in the case of a
reclassification referred to in clause (iv) above, the number of shares of other
common stock of Rouge Steel issued pursuant thereto) which such holder of such
DECS would have owned or been entitled to receive immediately following such
event had such DECS been exchanged pursuant to either Share Component of the
Exchange Rate immediately prior to such event or any record date with respect
thereto. In the case of the event referred to in clause (v) above, the Exchange
Rate shall be adjusted by multiplying each of the Share Components of the
Exchange Rate in effect on the record date for the issuance of the rights or
warrants referred to in clause (v) above, by a fraction, of which the numerator
shall be the number of shares of Rouge Class A Common Stock outstanding on the
record date for the issuance of such rights or warrants, plus the number of
additional shares of Rouge Class A Common Stock offered for subscription or
purchase pursuant to such rights or warrants, and of which the denominator shall
be the number of shares of Rouge Class A Common Stock outstanding on the record
date for the issuance of such rights or warrants, immediately prior to such
issuance, plus the number of additional shares of Rouge Class A Common Stock
which the aggregate offering price of the total number of shares of Rouge Class
A Common Stock so offered for subscription or purchase pursuant to such rights
or warrants would purchase at the Market Price of the Rouge Class A Common Stock
on the Business Day next following the record date for the determination of
holders of Rouge Class A Common Stock entitled to receive such rights or
warrants, which number of additional shares shall be determined by multiplying
such total number of shares by the exercise price of such rights or warrants and
dividing the product so obtained by such market price. To the extent that shares
of Rouge Class A Common Stock are not delivered after the
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expiration of such rights or warrants, the Exchange Rate shall be readjusted to
the Exchange Rate which would then be in effect had such adjustments for the
issuance of such rights or warrants been made upon the basis of delivery of only
the number of shares of Rouge Class A Common Stock actually delivered. In the
case of the event referred to in clause (vi) above, the Exchange Rate shall be
adjusted by multiplying each of the Share Components of the Exchange Rate in
effect on the record date with respect to such dividend or distribution referred
to in clause (vi) above, by a fraction of which the numerator shall be the
Market Price for the Rouge Class A Common Stock on the record date for the
determination of stockholders entitled to receive the dividend or distribution
referred to in clause (vi) above, and of which the denominator shall be such
Market Price per share of Rouge Class A Common Stock less the fair market value
(as determined by the Board of Directors of Worthington, whose determination
shall be conclusive, and described in a resolution adopted with respect thereto)
as of such record date of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights or warrants applicable to one
share of Rouge Class A Common Stock. An "Extraordinary Cash Dividend" means,
with respect to any one-year period, all cash dividends on the Rouge Class A
Common Stock during such period to the extent such dividends exceed on a per
share basis 10% of the average Closing Prices of the Rouge Class A Common Stock
over such period (less any such dividends for which a prior adjustment to the
Exchange Rate was previously made). For purposes of this paragraph, dividends
will be deemed to be paid as of the record date for such dividend. "Market
Price" means, as of any date of determination the average Closing Price per
share of Rouge Class A Common Stock on the 20 Trading Days immediately prior to
(but not including) the date of determination; provided, however, that if there
are not 20 Trading Days for the Rouge Class A Common Stock occurring later than
the 60th calendar day immediately prior to, but not including, such date, such
market price shall be determined as the market value per share of Rouge Class A
Common Stock as of such date as determined by a nationally recognized investment
banking firm retained for such purpose by Worthington. All adjustments to the
Exchange Rate will be calculated to the nearest 1/10,000th of a share of Rouge
Class A Common Stock (or, if there is not a nearest 1/10,000th of a share, to
the next lower 1/10,000th of a share). No adjustment in the Exchange Rate shall
be required unless such adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. If an adjustment is made to the
Exchange Rate pursuant to clauses (i), (ii), (iii), (iv), (v) or (vi) above, an
adjustment shall also be made to the Maturity Price solely to determine which of
clauses (a), (b) or (c) of the Exchange Rate definition will apply at Maturity.
The required adjustment to the Maturity Price shall be made at Maturity by
multiplying the Maturity Price by the number or fraction determined pursuant to
the Exchange Rate adjustment procedure described above. In the case of the
reclassification of any shares of Rouge Class A Common Stock into any shares of
common stock of Rouge Steel other than Rouge Class A Common Stock, such shares
of common stock shall be deemed shares of Rouge Class A Common Stock solely to
determine the Maturity Price and to apply the Exchange Rate at Maturity. Each
such adjustment to the Exchange Rate and the Maturity Price shall be made
successively.
In the event of (A) any consolidation or merger of Rouge Steel, or any
surviving entity or subsequent surviving entity of Rouge Steel (a "Rouge
Successor"), with or into another entity (other than a merger or consolidation
in which Rouge Steel is the continuing corporation and in which the Rouge Class
A Common Stock outstanding immediately prior to the merger or consolidation is
not exchanged for cash, securities or other property of Rouge Steel or another
corporation), (B) any sale, transfer, lease or conveyance to another corporation
of the property of Rouge Steel or any Rouge Successor as an entirety or
substantially as an entirety, (C) any statutory exchange of securities of Rouge
Steel or any Rouge Successor with another corporation (other than in connection
with a merger or acquisition) or (D) any liquidation, dissolution or winding up
of Rouge Steel or any Rouge Successor (any such event, a "Reorganization
Event"), each holder of DECS will receive at Maturity, in lieu of shares of
Rouge Class A Common Stock, as described above, cash
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<PAGE> 20
in an amount equal to (a) if the Transaction Value (as defined below) is greater
than or equal to the Threshold Appreciation Price, multiplied by the
Transaction Value, (b) if the Transaction Value is less than the Threshold
Appreciation Price but greater than the Initial Price, the Initial Price and (c)
if the Transaction Value is less than or equal to the Initial Price, the
Transaction Value. "Transaction Value" means (i) for any cash received in any
such Reorganization Event, the amount of cash received per share of Rouge Class
A Common Stock, (ii) for any property other than cash or securities received in
any such Reorganization Event, an amount equal to the market value at Maturity
of such property received per share of Rouge Class A Common Stock as determined
by a nationally recognized independent investment banking firm retained for this
purpose by Worthington and (iii) for any securities received in any such
Reorganization Event, an amount equal to the average Closing Price per share of
such securities on the 20 Trading Days immediately prior to Maturity multiplied
by the number of such securities received for each share of Rouge Class A Common
Stock; provided, however, that in the case of clause (iii), if there are not 20
Trading Days for such securities occurring later than the 60th calendar day
immediately prior to, but not including, the date of Maturity, Transaction Value
means the market value per share of such securities as of Maturity as determined
by a nationally recognized independent investment banking firm retained for such
purpose by Worthington multiplied by the number of such securities received for
each share of Rouge Class A Common Stock. Notwithstanding the foregoing, in lieu
of delivering cash as provided above, Worthington may at its option deliver an
equivalent value of securities or other property received in such Reorganization
Event, determined in accordance with clause (ii) or (iii) above, as applicable.
If Worthington elects to deliver securities or other property, holders of the
DECS will be responsible for the payment of any and all brokerage and other
transaction costs upon the sale of such securities or other property. The kind
and amount of securities into which the DECS shall be exchangeable after
consummation of such transaction shall be subject to adjustment as described in
the immediately preceding paragraph following the date of consummation of such
transaction. For purposes of calculating the Transaction Value, any cash,
securities or other property receivable in a Reorganization Event shall be
deemed to have been received immediately prior to the close of business on the
record date for such Reorganization Event or, if there is no record date for
such Reorganization Event, on the effective date therefor.
No adjustments will be made for certain other events, such as offerings of
Rouge Class A Common Stock by Rouge Steel for cash or in connection with
acquisitions.
Worthington is required, within ten Business Days following the occurrence
of an event that requires an adjustment to the Exchange Rate or the occurrence
of a Reorganization Event (or, in either case, if Worthington is not aware of
such occurrence, as soon as practicable after becoming so aware), to provide
written notice to the Trustee and to each holder of DECS of the occurrence of
such event including a statement in reasonable detail setting forth the method
by which the adjustment to the Exchange Rate or change in the consideration to
be received by holders of DECS following the Reorganization Event was determined
and setting forth the revised Exchange Rate or consideration, as the case may
be; provided, however, that, in respect of any adjustment to the Maturity Price,
such notice will only disclose the factor by which the Maturity Price is to be
multiplied in order to determine which clause of the Exchange Rate definition
will apply at Maturity.
FRACTIONAL SHARES
No fractional shares of Rouge Class A Common Stock will be issued if
Worthington exchanges the DECS for shares of Rouge Class A Common Stock. If more
than one DECS shall be surrendered for exchange at one time by the same holder,
the number of full shares of Rouge Class A Common Stock which shall be delivered
upon exchange, in whole or in part, as the case may be, shall be computed on the
basis of the aggregate number of DECS so surrendered at Maturity. In lieu of any
fractional share otherwise issuable in respect of all DECS of any holder which
are exchanged at Maturity, such holder shall be entitled to receive an amount in
cash equal to the value of such fractional share at the Maturity Price.
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REDEMPTION AND SINKING FUND
The DECS are not subject to redemption prior to Maturity and do not contain
sinking fund or other mandatory redemption provisions. The DECS are not subject
to payment prior to the date of Maturity at the option of the holder.
SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
The Indenture shall generally cease to be of any further effect (the
"satisfaction and discharge" of the Indenture) with respect to the DECS if (a)
Worthington has delivered to the Trustee for cancellation all of the DECS (with
certain limited exceptions) or (b) all the DECS not theretofore delivered to the
Trustee for cancellation shall have become due and payable and Worthington shall
have deposited with the Trustee as trust funds the entire amount in cash
sufficient to pay all such DECS (and if, in either case, Worthington shall also
pay or cause to be paid all other sums payable under the Indenture by
Worthington). The Indenture is not subject to satisfaction and discharge with
respect to the DECS in any other circumstances and the DECS are not subject to
the legal defeasance or covenant defeasance options described in the
accompanying Prospectus.
BOOK-ENTRY SYSTEM
It is expected that the DECS will be issued in the form of one or more
global securities (the "Global Securities") deposited with The Depository Trust
Company (the "Depositary") and registered in the name of a nominee of the
Depositary.
The Depositary has advised Worthington and the Underwriter as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system also is
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective DECS represented by such Global Security to the accounts
of participants. The accounts to be credited shall be designated by the
Underwriter. Ownership of beneficial interests in the Global Securities will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global Securities will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depositary or its nominee for such Global
Securities. Ownership of beneficial interests in such Global Securities by
persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the DECS for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in such Global Securities will not be entitled to have the DECS
registered in their names, will not receive or be entitled to receive physical
delivery of the DECS in definitive form and will not be considered the owners or
holders thereof under the Indenture.
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Payment of principal of and any interest on the DECS registered in the name
of or held by the Depositary or its nominee will be made to the Depositary or
its nominee, as the case may be, as the registered owner or the holder of the
Global Security. None of Worthington, the Trustee, any Paying Agent or any
securities registrar for the DECS will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Worthington expects that the Depositary, upon receipt of any payment of
principal or interest in respect of a permanent Global Security, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of such Global
Security as shown on the records of the Depositary. Worthington also expects
that payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the Depositary is
at any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by Worthington within ninety days, Worthington will
issue DECS in definitive registered form in exchange for the Global Security
representing such DECS. In addition, Worthington may at any time and in its sole
discretion determine not to have any DECS represented by one or more Global
Securities and, in such event, will issue DECS in definitive form in exchange
for all of the Global Securities representing the DECS. Further, if Worthington
so specifies with respect to the DECS, an owner of a beneficial interest in a
Global Security representing DECS may, on terms acceptable to Worthington and
the Depositary for such Global Security, receive DECS in definitive form. In any
such instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of DECS represented by such
Global Security equal in number to that represented by such beneficial interest
and to have such DECS registered in its name.
SAME-DAY FUNDS SETTLEMENT SYSTEM AND PAYMENT
Settlement for the DECS will be made by the Underwriter in immediately
available funds. All payments of principal and interest will be made by
Worthington in immediately available funds.
The DECS will trade in the Depositary's Same-Day Funds Settlement System
until maturity, and secondary market trading activity in the DECS will therefore
be required by the Depositary to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the DECS.
CERTAIN COVENANTS
Limitation on Liens. Except as provided below, Worthington may not, and may
not permit any of its Subsidiaries to, directly or indirectly, create or permit
to exist any Lien on any Principal Property or any shares of Capital Stock of or
any Indebtedness of any Restricted Subsidiary, whether owned on the date of
issuance of the DECS or thereafter acquired, securing any obligation, unless
Worthington contemporaneously secures the DECS equally and ratably with (or
prior to) such obligation. Worthington is not required to secure the DECS if the
Lien consists of the following: (i) a Permitted Lien; or (ii) Liens securing
Indebtedness if, after giving pro forma effect to the Incurrence of such
Indebtedness (and the receipt and application of the proceeds thereof) or the
securing of outstanding Indebtedness, the sum of (without duplication) (A) all
Indebtedness of Worthington and its Subsidiaries secured by Liens (other than
Permitted Liens) and (B) all Attributable Indebtedness in respect of
Sale/Leaseback Transactions with respect to any Principal Property, at the time
of determination, does not exceed 10% of Consolidated Net Tangible Assets.
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Limitation on Sale/Leaseback Transactions. Worthington shall not, and shall
not permit any of its Subsidiaries to, enter into any Sale/Leaseback Transaction
with respect to any Principal Property, unless (i) Worthington or such
Subsidiary would be entitled to create a Lien on such Principal Property
securing Indebtedness in an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction without securing the DECS pursuant to
the covenant described in "Limitation on Liens" above or (ii) Worthington,
within six months from the effective date of such Sale/Leaseback Transaction,
applies to the voluntary defeasance or retirement (excluding retirements of DECS
and other Indebtedness ranking pari passu with the DECS [as a result of
conversions], pursuant to mandatory sinking funds or mandatory prepayment
provisions or by payment at maturity) of DECS or other Indebtedness ranking pari
passu with the DECS an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction.
Limitation on Indebtedness of Restricted Subsidiaries. Worthington will not
permit any Restricted Subsidiary to issue, assume or guarantee any Indebtedness
for borrowed money other than (1) Indebtedness secured by a Lien which such
Restricted Subsidiary is permitted to create or assume pursuant to the
provisions regarding limitations on Liens, without securing the DECS, (2)
Indebtedness to Worthington or another Restricted Subsidiary, (3) Indebtedness
of any corporation that exists at the time such corporation becomes a Restricted
Subsidiary, provided that, such Indebtedness is not incurred in anticipation of
such corporation becoming a Restricted Subsidiary, (4) Indebtedness of a
corporation that exists at the time such corporation is merged with or into or
consolidated with a Restricted Subsidiary or at the time of a sale, lease or
other disposition of all or substantially all the properties of a corporation to
a Restricted Subsidiary, provided that, such Indebtedness is not incurred in
anticipation of such merger, consolidation or sale, lease or other disposition,
(5) Indebtedness incurred in connection with any industrial development bond
financing, (6) Indebtedness incurred by such Restricted Subsidiary in the
ordinary course of the business of such Restricted Subsidiary and which matures
not more than, and is not renewable or extendible at the option of the obligor
to a date more than, twelve months after the date such Indebtedness is incurred,
and (7) Indebtedness incurred by any Restricted Subsidiary to extend, renew or
replace, in whole or in part, any Indebtedness referred to in the foregoing
clauses (3) or (4) or Indebtedness of any Restricted Subsidiary existing at the
date of the Indenture, provided that, the principal amount of Indebtedness so
incurred shall not exceed the principal amount of Indebtedness outstanding at
the time of such extension, renewal or replacement. Worthington may permit one
or more Restricted Subsidiaries to issue, assume or guarantee any Indebtedness
for borrowed money which is not secured by a Lien upon any Principal Property or
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, provided
that, the aggregate amount of all such Indebtedness permitted by this paragraph
(together with all Liens created, assumed or incurred by Worthington and its
Subsidiaries (as measured by all Indebtedness secured by all such Liens then
outstanding or to be so created or assumed) and all Sale/Leaseback Transactions
entered into (as measured by the Attributable Indebtedness of all such
Transactions then outstanding or to be so entered into)) at any time outstanding
shall not exceed 10% of Consolidated Net Tangible Assets.
Limitation on Issuance of Preferred Stock by Restricted
Subsidiaries. Worthington will not permit any of its Restricted Subsidiaries to
issue any preferred or preference stock (except to Worthington or any wholly
owned Restricted Subsidiary) or permit any Person other than Worthington or any
wholly owned Restricted Subsidiary to hold any such preferred or preference
stock.
Certain Definitions. The following definitions, among others, are used in
the Indenture. Many of the definitions of terms used in the Indenture have been
negotiated specifically for the purposes of inclusion in the Indenture and may
not be consistent with the manner in which such terms are defined in other
contexts. Prospective purchasers of DECS are encouraged to read each of the
following definitions carefully and to consider such definitions in the context
in which they are used
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in the Indenture. Capitalized terms used herein but not defined have the
meanings assigned thereto in the Indenture.
"Attributable Indebtedness" with respect to a Sale/Leaseback Transaction
means, as of the time of determination, (i) if the obligation with respect to
such Sale/Leaseback Transaction is a Capitalized Lease Obligation, the amount of
such obligation determined in accordance with GAAP and included in the financial
statements of the lessee or (ii) if the obligation with respect to such
Sale/Leaseback Transaction is not a Capitalized Lease Obligation, the total Net
Amount of Rent required to be paid by the lessee under such lease during the
remaining term thereof (including any period for which the lease has been
extended), discounted from the respective due dates thereof to such
determination date at the rate per annum borne by the DECS compounded
semi-annually.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP; and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Commodity Price Protection Agreement" means, in respect of any Person, any
forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the sum of the amounts that would appear on a consolidated balance sheet of
Worthington and its Subsidiaries for the total assets (less accumulated
depletion, depreciation and amortization, allowances for doubtful receivables,
other applicable reserves and other properly deductible items) of Worthington
and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP, after giving effect to purchase accounting and after deducting therefrom,
to the extent included in total assets, in each case as determined on a
consolidated basis in accordance with GAAP (without duplication): (i) the
aggregate amount of liabilities of Worthington and its Subsidiaries that may
properly be classified as current liabilities (including taxes accrued as
estimated); (ii) current Indebtedness and current maturities of long-term
Indebtedness; (iii) minority interests in Worthington's Subsidiaries held by
Persons other than Worthington or a wholly-owned Subsidiary of Worthington; and
(iv) unamortized debt discount and expenses and other unamortized deferred
charges, goodwill, patents, trademarks, service marks, trade names, copyrights,
licenses, organization or developmental expenses and other intangible items.
"Currency Exchange Protection Agreement" means, in respect of any Person,
any foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
"Disqualified Stock" of a Person means Redeemable Stock of such Person as
to which the maturity, mandatory redemption, conversion or exchange or
redemption at the option of the holder thereof occurs, or may occur, on or prior
to the first anniversary of the Stated Maturity of the DECS.
"GAAP" means generally accepted accounting principles in the United States
as in effect as of the date on which the DECS are issued, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture will be computed in conformity with GAAP consistently applied.
"Government Contract Lien" means any Lien required by any contract,
statute, regulation or order in order to permit Worthington or any of its
Subsidiaries to perform any contract or subcontract made by it with or at the
request of the United States or any State thereof or any
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department, agency or instrumentality of either or to secure partial, progress,
advance or other payments by Worthington or any of its Subsidiaries to the
United States or any State thereof or any department, agency or instrumentality
of either pursuant to the provisions of any contract, statute, regulation or
order.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Protection Agreement, Currency Exchange Protection
Agreement, Commodity Price Protection Agreement or other similar agreement.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication); (i) the principal in respect of
indebtedness of such Person for borrowed money; (ii) the principal in respect of
obligations of such Person evidenced by bonds, DECS, DECS or other similar
instruments; (iii) all Capitalized Lease Obligations of such Person; (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except trade payables); (v) all obligations of such Person
in respect of letters of credit, banker's acceptances or other similar
instruments or credit transactions (including reimbursement obligations with
respect thereto), other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through (iv)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed not later than the third business day following
receipt by such Person of a demand for reimbursement following payment of the
letter of credit; (vi) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock, or
with respect to any Subsidiary of Worthington, any Preferred Stock (but
excluding, in each case, any accrued dividends); (vii) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided, however, that the amount of
such Indebtedness shall be the lesser of (A) the fair market value of such asset
at such date of determination and (B) the amount of such Indebtedness of such
other Persons; (viii) all Indebtedness of other Persons to the extent guaranteed
by such Person; and (ix) to the extent not otherwise included in this
definition, obligations in respect of Hedging Obligations except those secured
by Permitted Liens. For purposes of this definition, the maximum fixed
redemption, repayment or repurchase price of any Disqualified Stock or Preferred
Stock that does not have a fixed redemption, repayment or repurchase price shall
be calculated in accordance with the terms of such Stock as if such Stock were
redeemed, repaid or repurchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture; provided, however, that if
such stock is not then permitted to be redeemed, repaid or repurchased, the
redemption, repayment or repurchase price shall be the book value of such stock
as reflected in the most recent financial statements of such Person. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
"Interest Rate Protection Agreement" means, in respect of any Person, any
interest rate swap agreement, interest rate option agreement, interest rate cap
agreement, interest rate collar agreement, interest rate floor agreement or
other similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Amount of Rent" as to any lease for any period means the aggregate
amount of rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water rates and similar charges. In the case of any lease
that is terminable by the lessee upon the payment of a penalty, such net amount
shall also include the amount of such penalty, but no rent shall be considered
as payable under such lease subsequent to the first date upon which it may be so
terminated.
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"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure performance, surety or appeal bonds to which such Person is a party or
which are otherwise required of such Person, or deposits as security for
contested taxes or import duties or for the payment of rent or other obligations
of like nature, in each case incurred in the ordinary course of business; (b)
Liens imposed by law, such carriers', warehousemen's, laborers', materialmen's,
landlords', vendors', workmen's, operators', producers' and mechanics' Liens, in
each case for sums not yet due or being contested in good faith by appropriate
proceedings; (c) Liens for property taxes, assessments and other governmental
charges or levies not yet delinquent or subject to penalties for nonpayment or
which are being contested in good faith by appropriate proceedings; (d) minor
survey exceptions, minor encumbrances, easements or reservations of or with
respect to, or rights of others for or with respect to, licenses, rights-of-way,
sewers, electric and other utility lines and usages, telegraph and telephone
lines, pipelines, surface use, operation of equipment permits, servitudes and
other similar matters or zoning or other restrictions as to the use of real
property or Liens incidental to the conduct of the business of such Person or to
the ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of such properties or materially impair their use in the operation of the
business of such Person; (e) Liens existing on or provided for under the terms
of agreements existing on the date the DECS are issued (including, without
limitation, under Worthington's credit agreement as defined in the Indenture);
(f) Liens on property at the time Worthington or any of its Subsidiaries
acquired the property or the entity owning such property, including any
acquisition by means of a merger or consolidation with or into Worthington;
provided, however, that any such Lien may not extend to any other property owned
by Worthington or any of its Subsidiaries; (g) Liens securing a Hedging
Obligation so long as such Hedging Obligation is of the type customarily entered
into in connection with, and is entered into for the purpose of, limiting risk;
(h) Purchase Money Liens; (i) Liens securing only Indebtedness of a wholly-owned
Subsidiary of Worthington to Worthington or one or more wholly-owned
Subsidiaries of Worthington; (j) Liens on any property to secure Indebtedness
incurred in connection with the construction, installation or financing of
pollution control or abatement facilities or other forms of industrial revenue
bond financing or Indebtedness issued or Guaranteed by the United States, any
state or any department, agency or instrumentality thereof; (k) Government
Contract Liens; (l) Liens securing Indebtedness of joint ventures in which
Worthington or a Subsidiary has an interest to the extent such Liens are on
property or assets of such joint ventures; (m) Liens resulting from the deposit
of funds or evidences of Indebtedness in trust for the purpose of defeasing
Indebtedness of Worthington or any of its Subsidiaries; (n) legal or equitable
encumbrances deemed to exist by reason of negative pledges or the existence of
any litigation or other legal proceeding and any related lis pendens filing
(excluding any attachment prior to judgment lien or attachment lien in and of
execution on a judgment); (o) any attachment Lien being contested in good faith
and by proceedings promptly initiated and diligently conducted, unless the
attachment giving rise thereto will not, within sixty days after the entry
thereof, have been discharged or fully bonded or will not have been discharged
within sixty days after the termination of any such bond; (p) any judgment Lien,
unless the judgment it secures will not, within sixty days after the entry
thereof, have been discharged or execution thereof stayed pending appeal, or
will not have been discharged within sixty days after the expiration of any such
stay; (q) Liens to banks arising from the issuance of letters of credit issued
by such banks ("issuing banks") on the following: (i) any and all shipping
documents, warehouse receipts, policies or certificates of insurance and other
document accompanying or relative to drafts drawn under any credit, and any
draft drawn thereunder (whether or not such documents, goods or other property
be released to or upon the order of Worthington or any Subsidiary under a
security agreement or trustor bailee receipt of otherwise), and the proceeds of
each and all of the foregoing; (ii) the balance of every deposit account, now or
at the time hereafter existing, of Worthington or
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<PAGE> 27
any Subsidiary with the issuing banks, and any other claims of Worthington or
any Subsidiary against the issuing banks; and all property claims and demands
and all rights and interests therein of Worthington or any Subsidiary and all
evidences thereof and all proceeds thereof which have been or at any time will
be delivered to or otherwise come into the issuing bank's possession, custody or
control, or into the possession, custody or control of any bailee for the
issuing bank or of any of its agents or correspondents for the account of the
issuing bank, for any purpose, whether or not the express purpose of being used
by the issuing bank as collateral security or for the safekeeping or for any
other or different purpose, the issuing bank being deemed to have possession or
control of all of such property actually in transit to or from or set apart for
the issuing bank, any bailee for the issuing bank or any of its correspondents
for other acting in its behalf, it being understood that the receipt at any time
by the issuing bank, or any of its bailees, agents or correspondents, or other
security, of whatever nature, including cash, will not be deemed a waiver of any
of the issuing bank's rights or power hereunder; (iii) all property shipped
under or pursuant to or in connection with any credit or drafts drawn thereunder
or in any way related thereto, and all proceeds thereof; (iv) all additions to
and substitutions for any of the property enumerated above in this subsection;
(r) rights of a common owner of any interest in property held by such Person;
(s) farmout, carried working interest, joint operating, unitization, royalty,
overriding royalty, sales and similar agreements relating to the exploration or
development of, or production from, oil and gas properties entered into the
ordinary course of business; (t) any defects, irregularities or deficiencies in
title to easements, rights-of-way or other properties that do not in the
aggregate materially adversely affect the value of such properties or materially
impair their use in the operation of the business of such Person; and (u) Liens
to secure any refinancing; refunding, extension, renewal or replacement (or
successive refinancings, refundings, extensions, renewals or replacements), as a
whole or in part, of any Indebtedness secured by any Lien referred to in the
foregoing clauses (e) through (l); provided, however, that (i) such new Lien
shall be limited to all or part of the same property that secured the original
Lien, plus improvements on such property and (ii) the Indebtedness secured by
such Lien at such time is not increased to any amount greater than the sum of
(A) the outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (e) through (l) at the time the original
Lien became a Permitted Lien and (B) an amount necessary to pay any fees and
expenses, including premiums, relating to such refinancing, refunding,
extension, renewal or replacement.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Principal Property" means any manufacturing plant or other similar
facility (including production machinery and equipment located thereon) or
warehouse, owned or leased by Worthington or any Subsidiary, which is located
within the United States other than (a) any such plant or facility which the
Board of Directors determines in good faith by board resolution is not of
material importance to the total business conducted, or assets owned, by
Worthington and its Subsidiaries as an entirety, or (b) any portion of any such
plant or facility which the Board of Directors determines by Board Resolution in
good faith not to be of material importance to the use or operation thereof.
"Production machinery and equipment" means production machinery and equipment in
such manufacturing plants used directly in the production of Worthington's or
any Subsidiary's products.
"Purchase Money Lien" means a Lien on property securing Indebtedness
Incurred by Worthington or any of its Subsidiaries to provide funds for all or
any portion of the cost of acquiring, constructing, altering, expanding,
improving or repairing such property or assets used in connection with such
property.
"Redeemable Stocks" means, with respect to any person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund
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<PAGE> 28
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness
(other than Preferred Stock) or Disqualified Stock or (iii) is redeemable at the
option of the holder thereof, in whole or in part.
"Restricted Subsidiary" means any Subsidiary of Worthington, which shall at
the time, directly or indirectly, through one or more Subsidiaries or in
combination with one or more other Subsidiaries or Worthington, own or lease a
Principal Property.
"Sale/Leaseback Transaction" means an arrangement relating to property
owned on the date of issuance of the DECS or thereafter acquired whereby
Worthington or any of its Subsidiaries transfers such property to a Person and
Worthington or any of its Subsidiaries leases it from such Person.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regarding to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based upon the advice of Worthington's counsel,
Vorys, Sater, Seymour and Pease, as to certain of the material U.S. federal
income tax consequences that may be relevant to a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
under the laws of the United States or any political subdivision thereof, an
estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source (any of the foregoing, a "U.S. person") who is the
beneficial owner of a DECS (a "U.S. Holder"). All references to "holders"
(including U.S. Holders) are to beneficial owners of the DECS. This summary is
based on U.S. federal income tax laws, regulations, rulings and decisions in
effect as of the date of this Prospectus Supplement, all of which are subject to
change at any time (possibly with retroactive effect). As the law is technical
and complex, the discussion below necessarily represents only a general summary.
This summary addresses the U.S. federal income tax consequences to holders
who are initial holders of the DECS, who purchase the DECS at par, and who will
hold the DECS and, if applicable, Rouge Class A Common Stock as capital assets.
This summary does not address all aspects of federal income taxation that may be
relevant to a particular holder in light of his or its individual investment
circumstances or to certain types of holders subject to special treatment under
the U.S. federal income tax laws, such as dealers in securities or foreign
currency, financial institutions, insurance companies, tax-exempt organizations
and taxpayers holding the DECS as part of a "straddle", "hedge", "conversion
transaction", "synthetic security", or other integrated investment. Moreover,
the effect of any applicable state, local or foreign tax laws is not discussed.
No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. No ruling is
being requested from the Internal Revenue Service (the "IRS") with respect to
the DECS and no assurance can be given that the IRS will agree with the
conclusions expressed herein. ACCORDINGLY, A PROSPECTIVE INVESTOR (INCLUDING A
TAX-EXEMPT INVESTOR) IN THE DECS SHOULD CONSULT ITS TAX ADVISOR IN DETERMINING
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE DECS, INCLUDING THE APPLICATION OF
STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
Pursuant to the terms of the Indenture, Worthington and every holder of a
DECS will be obligated (in the absence of an administrative determination or
judicial ruling to the contrary) to
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<PAGE> 29
characterize a DECS for all tax purposes as a forward purchase contract to
purchase Rouge Class A Common Stock at Maturity (including as a result of
acceleration or otherwise), under the terms of which contract (a) at the time of
issuance of the DECS the holder deposits irrevocably with Worthington a fixed
amount of cash equal to the purchase price of the DECS to assure the fulfillment
of the holder's purchase obligation described in clause (c) below, which deposit
will unconditionally and irrevocably be applied at Maturity to satisfy such
obligation, (b) until Maturity Worthington will be obligated to pay interest on
such deposit at a rate equal to the stated rate of interest on the DECS as
compensation for Worthington's use of such cash deposit during the term of the
DECS and (c) at Maturity such cash deposit unconditionally and irrevocably will
be applied by Worthington in full satisfaction of the holder's obligation under
the forward purchase contract, and Worthington will deliver to the holder the
number of shares of Rouge Class A Common Stock that the holder is entitled to
receive at that time pursuant to the terms of the DECS (subject to Worthington's
right to deliver cash in lieu of the Rouge Class A Common Stock). (Prospective
investors should note that cash proceeds of this offering will not be segregated
by Worthington during the term of the DECS, but instead will be commingled with
Worthington's other assets and applied in a manner consistent with the "Use of
Proceeds" discussion above.) Consistent with the above characterization, (i)
amounts paid to Worthington in respect of the original issue of a DECS will be
treated as allocable in their entirety to the amount of the cash deposit
attributable to such DECS, and (ii) amounts denominated as interest that are
payable with respect to the DECS will be characterized as interest payable on
the amount of such deposit, includible annually in the income of a U.S. Holder
as interest income in accordance with such holder's method of accounting.
Under the above characterization of the DECS, a holder's tax basis in a
DECS generally will equal the holder's cost for that DECS. Upon the sale or
other taxable disposition of a DECS, a U.S. Holder generally will recognize gain
or loss equal to the difference between the amount realized on the sale or other
taxable disposition and the U.S. Holder's tax basis in the DECS. Such gain or
loss generally will be long-term capital gain or loss if the U.S. Holder has
held the DECS for more than one year at the time of disposition.
Under the above characterization of the DECS, if Worthington delivers Rouge
Class A Common Stock at Maturity, a U.S. Holder will recognize no gain or loss
on the purchase of the Rouge Class A Common Stock against application of the
monies received by Worthington in respect of the DECS. A U.S. Holder will have a
tax basis in such stock equal to the U.S. Holder's tax basis in the DECS (less
the portion of the tax basis of the DECS allocable to any fractional share, as
described in the next sentence). A U.S. Holder will recognize gain or loss
(which will be short-term capital gain or loss) with respect to cash received in
lieu of fractional shares, in an amount equal to the difference between the cash
received and the portion of the basis of the DECS allocable to fractional shares
(based on the relative number of fractional shares and full shares delivered to
the holder). If at Maturity Worthington pays the DECS in cash, a U.S. Holder
will recognize capital gain or loss equal to any difference between the amount
of cash received from Worthington and the U.S. Holder's tax basis in the DECS at
that time. Such gain or loss generally will be long-term capital gain or loss if
the U.S. Holder has held the DECS for more than one year at Maturity.
Due to the absence of authority as to the proper characterization of the
DECS, no assurance can be given that the IRS will accept, or that a court will
uphold, the characterization and tax treatment described above. In particular,
the IRS could seek to analyze the federal income tax consequences of owning a
DECS under Treasury regulations promulgated in June 1996 governing contingent
payment debt instruments (the "Contingent Payment Regulations"). The Contingent
Payment Regulations apply to debt instruments issued on or after August 13,
1996. The Contingent Payment Regulations are complex, but very generally apply
the original issue discount rules of the Internal Revenue Code to a contingent
payment debt instrument by requiring that original issue discount be accrued
every year at a "comparable yield" for the issuer of the instrument, determined
at the time of issuance of the obligation. In addition, the Contingent Payment
Regulations require that a projected payment schedule, which results in such a
"comparable yield", be determined, and that adjustments to income accruals be
made to account for differences between actual payments
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<PAGE> 30
and projected amounts. To the extent that the comparable yield as so determined
exceeds the interest actually paid on a contingent debt instrument, the owner of
that instrument will recognize ordinary interest income in excess of the cash
the owner receives. In addition, any gain realized on the sale, exchange or
redemption of a contingent payment debt instrument will be treated as ordinary
income. Any loss realized on such sale, exchange or redemption will be treated
as an ordinary loss to the extent the holder's original issue discount
inclusions with respect to the obligation exceed prior reversals of such
inclusions required by the adjustment mechanism described above. Any loss
realized in excess of such amount generally will be treated as a capital loss.
Worthington believes that the Contingent Payment Regulations should not
apply to the DECS, because those Regulations apply only to debt instruments that
provide for contingent payments. The DECS are payable by the delivery of Rouge
Class A Common Stock (unless Worthington exercises its option to deliver cash at
Maturity) and provide economic returns that are indexed to the performance of
Rouge Class A Common Stock. The DECS therefore offer no assurance that a
holder's investment will be returned to the holder at Maturity. Accordingly,
Worthington believes that the DECS properly should be characterized for tax
purposes, not as debt instruments, but as forward purchase contracts in respect
of which holders have deposited a fixed amount of cash with Worthington, on
which interest is payable at a fixed rate. If, however, the IRS were
successfully to maintain that the Contingent Payment Regulations applied to the
DECS, then, among other matters, (i) gain realized by a holder on the sale or
other taxable disposition of a DECS (including as a result of payments made at
maturity) generally would be characterized as ordinary income, rather than as
short- or long-term capital gain (depending on whether the DECS had been held
for more than one year at the time of such disposition), and (ii) a U.S. Holder
would recognize ordinary income, or ordinary or capital loss (as the case may
be, under the rules summarized above) on the receipt of Rouge Class A Common
Stock, rather than capital gain or loss upon the ultimate sale of such stock.
Even if the Contingent Payment Regulations do not apply to the DECS, it is
possible that the IRS could seek to characterize the DECS in a manner that
results in tax consequences to initial holders of the DECS different from those
reflected in the Indenture and described above. Under alternative
characterizations of the DECS, it is possible, for example, that (i) a U.S.
Holder could be required to account for the interest-bearing element of the DECS
as a note to which the bond premium, original issue discount or market discount
rules of the Internal Revenue Code could apply, (ii) a U.S. Holder may be
taxable upon the receipt of Rouge Class A Common Stock with a value in excess of
the holder's tax basis in the DECS, rather than upon the ultimate sale of such
stock, or (iii) a DECS could be treated as including a forward contract and one
or more options.
NON-UNITED STATES PERSONS
In the case of a holder of the DECS that is not a U.S. person, payments
made with respect to the DECS should not be subject to U.S. withholding tax;
PROVIDED that such holder complies with applicable certification requirements.
Any capital gain realized upon the sale or other disposition of the DECS by a
holder that is not a U.S. person will generally not be subject to U.S. federal
income tax if (i) such gain is not effectively connected with a U.S. trade or
business of such holder and (ii) in the case of an individual, such individual
is not present in the United States for 183 days or more in the taxable year of
the sale or other disposition or the gain is not attributable to a fixed place
of business maintained by such individual in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of the DECS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the holder unless
such holder provides proof of an applicable exemption or a correct taxpayer
identification number, and otherwise complies with applicable requirements of
the backup withholding rules. Any amounts withheld under the backup withholding
rules are not an additional tax and may be refunded or credited against the U.S.
Holder's U.S. federal income tax liability, provided the required information is
furnished to the IRS.
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<PAGE> 31
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among Worthington, Rouge Steel and Salomon
Brothers Inc, Worthington has agreed to sell to the Underwriter, and the
Underwriter has agreed to purchase, the number of DECS set forth below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER DECS
----------- -----------
<S> <C>
Salomon Brothers Inc.................................................
</TABLE>
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will be
obligated to purchase all of the DECS offered hereby if any of the DECS are
purchased.
Worthington has been advised by the Underwriter that it proposes to offer
the DECS directly to the public initially at the public offering price set forth
on the cover of this Prospectus Supplement and to certain dealers at such price
less a concession not in excess of $ per DECS. The Underwriter may
allow, and such dealers may reallow, a concession not in excess of $
per DECS to other dealers. After the initial public offering, such public
offering price may be changed.
Worthington, Rouge Steel and Carl L. Valdiserri (the chairman and chief
executive officer of Rouge Steel) have agreed not to offer for sale, sell or
contract to sell, or otherwise dispose of, or announce the offering of, or file
or cause the filing of any registration statement under the Securities Act with
respect to, any shares of Rouge Class A Common Stock or any securities
convertible into or exchangeable for, or warrants to acquire, Rouge Class A
Common Stock for a period of 90 days after the date of this Prospectus
Supplement without the prior written consent of the Underwriter; provided,
however, that such restrictions shall not affect the ability of (i) Worthington,
Rouge Steel or their respective subsidiaries to take any such actions in
connection with the offering of the DECS made hereby or any exchange at Maturity
pursuant to the terms of the DECS or in connection with loans of shares of Rouge
Class A Common Stock pursuant to the Securities Loan Agreement (as defined
below) or (ii) Rouge Steel to take any such actions in connection with any
employee stock option plan, stock ownership plan or dividend reinvestment plan
of Rouge Steel in effect at the date of this Prospectus Supplement. Worthington
has agreed not to offer for sale, sell or contract to sell, or otherwise dispose
of, directly or indirectly, without the prior written consent of the
Underwriter, any debt securities issued or guaranteed by Worthington during the
period that ends on the closing of the offering made hereby.
Worthington has granted the Underwriter an option, exercisable for the
30-day period after the date of this Prospectus Supplement, to purchase up to an
additional DECS from Worthington, at the same price per DECS as the initial DECS
to be purchased by the Underwriter. The Underwriter may exercise such option
only for the purpose of covering over-allotments, if any, incurred in connection
with the sale of DECS offered hereby.
The DECS will be a new issue of securities with no established trading
market. The DECS will not be listed or traded on any securities exchange or
trading market. The Underwriter intends to make a market in the DECS, subject to
applicable laws and regulations. However, the Underwriter is not obligated to do
so and any such market-making may be discontinued at any time at the sole
discretion of the Underwriter without notice. Accordingly, no assurance can be
given as to the liquidity of such market.
The Underwriting Agreement provides that Worthington and Rouge Steel will
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act, or contribute to payments the Underwriter may be
required to make in respect thereof.
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<PAGE> 32
In connection with the offering of the DECS, Worthington or an affiliate
thereof (referred to herein as the "Lender") and Salomon Brothers intend to
enter into a Securities Loan Agreement (the "Securities Loan Agreement") which
provides that, subject to certain restrictions and with the agreement of the
Lender, Salomon Brothers may from time to time borrow, return and reborrow
shares of Class A Common Stock from the Lender (the "Borrowed Securities");
provided, however, that the number of Borrowed Securities at any time may not
exceed shares, subject to adjustment for certain dilutive events. The
Securities Loan Agreement is intended to facilitate market-making activity in
the DECS by Salomon Brothers. Salomon Brothers may from time to time borrow
shares of Class A Common Stock under the Securities Loan Agreement to settle
short sales of Class A Common Stock entered into by Salomon Brothers to hedge
any long position in the DECS resulting from its market-making activities. Such
sales will be made on the NYSE or in the over-the-counter market at market
prices prevailing at the time of sale or at prices related to such market
prices. Market conditions will dictate the extent and timing of Salomon
Brothers' market-making transactions in the DECS and the consequent need to
borrow shares of Class A Common Stock. The availability of shares of Class A
Common Stock under the Securities Loan Agreement at any time is not assured and
any such availability does not assure market making activity with respect to the
DECS and any market-making actually engaged in by Salomon Brothers may cease at
any time. The foregoing description of the Securities Loan Agreement does not
purport to be complete and is qualified in its entirety by reference to such
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part.
The Underwriter has from time to time performed various investment banking
and financial advisory services for Worthington and its affiliates, for which
customary compensation has been received.
LEGAL MATTERS
Certain legal matters with respect to the DECS are being passed upon for
Worthington by Dale T. Brinkman, General Counsel of Worthington and Vorys,
Sater, Seymour and Pease, counsel to Worthington. The validity of the DECS will
be passed upon for the Underwriters by Cleary, Gottlieb, Steen & Hamilton.
Certain tax matters with respect to the DECS also will be passed upon by Vorys,
Sater, Seymour and Pease. Mr. Brinkman beneficially owns 10,702 shares of
Worthington Common Stock and also has exercisable options to purchase an
additional 24,250 shares of Worthington Common Stock. Pursuant to its By-laws,
Worthington is required to indemnify Mr. Brinkman to the fullest extent
permitted by Delaware law against any expenses actually and reasonably incurred
by him in connection with any action, suit or proceeding in which he is made
party by reason of his being an officer of Worthington.
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<PAGE> 33
PROSPECTUS [WORTHINGTON IND. LOGO]
WORTHINGTON INDUSTRIES, INC.
DEBT SECURITIES
Worthington Industries, Inc. ("Worthington") may offer and sell from time to
time unsecured debentures, notes or other evidences of indebtedness ("Debt
Securities"), with an initial offering price not to exceed $450,000,000 in the
aggregate (or the equivalent in foreign denominated currency or units based on
or related to currencies, including European Currency Units). All specific terms
of the offering and sale of the Debt Securities, including the specific
designation, rights and restrictions and whether the Debt Securities are senior
or subordinated, the currencies or composite currencies in which the Debt
Securities are denominated, the aggregate principal amount, the maturity, rate
and time of payment of interest, and any conversion, exchange, redemption or
sinking fund provisions, and initial public offering price, listing on any
securities exchange, and the agents, dealers or underwriters, if any, to be
utilized in connection with the sale of the Debt Securities, will be set forth
in an accompanying Prospectus Supplement (the "Prospectus Supplement"). The Debt
Securities may be sold for U. S. Dollars or foreign denominated currency or
currency units; principal of and any interest may likewise be payable in U.S.
Dollars, foreign denominated currency or currency units -- in each case, as
Worthington specifically designates. The managing underwriters with respect to
each series sold to or through underwriters will be named in the Prospectus
Supplement.
The Debt Securities may be offered through dealers, through underwriters or
through agents designated from time to time as set forth in the Prospectus
Supplement. Net proceeds to Worthington will be the purchase price in the case
of a dealer, the public offering price less discount in the case of an
underwriter or the purchase price less commission in the case of an agent -- in
each case, less other expenses attributable to issuance and distribution. See
"Plan of Distribution" for possible indemnification arrangements for dealers,
underwriters and agents.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OTHER THAN THE DEBT SECURITIES DESCRIBED IN
THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
The date of this Prospectus is May 14, 1996
<PAGE> 34
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY WORTHINGTON OR ANY UNDERWRITER,
DEALER OR AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
WORTHINGTON SINCE THE DATE OF THIS PROSPECTUS. NEITHER THIS PROSPECTUS NOR THE
ACCOMPANYING PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE DEBT SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
AVAILABLE INFORMATION
Worthington is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission") all of which may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the following regional
offices of the Commission: Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W. Room 1024, Washington, D.C. 20549.
Worthington has filed a registration statement on Form S-3 (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement and the exhibits filed as part thereof. Statements
contained herein are qualified in their entirety by reference to the
Registration Statement and such exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the following
documents and information heretofore filed with the Commission: (i)
Worthington's Annual Report on Form 10-K for the fiscal year ended May 31, 1995
filed pursuant to the 1934 Act; (ii) Worthington's Quarterly Reports on Form
10-Q for the quarters ended August 31, 1995, November 30, 1995 and February 29,
1996 filed pursuant to the 1934 Act; and (iii) Worthington's Current Report on
Form 8-K dated February 20, 1996 together with the Form 8-K/A dated April 19,
1996.
All documents filed by Worthington pursuant to Section 13, 14 or 15(d) of
the 1934 Act after the date of this Prospectus and prior to the termination of
the offering of the Debt Securities shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained herein or in a document, all or a
portion of which is incorporated or deemed to be incorporated by reference
herein, shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement.
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<PAGE> 35
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. Worthington
will provide without charge to each person, including any beneficial owner, to
whom a copy of this Prospectus is delivered, upon written or oral request of
such person, a copy (without exhibits unless such documents are specifically
incorporated by reference into such documents) of any or all of the documents
that have been incorporated by reference in this Prospectus. Such requests
should be made to Shareholder Relations, Worthington Industries, Inc., 1205
Dearborn Drive, Columbus, Ohio 43085 (telephone 614/438-3210).
WORTHINGTON
Worthington is incorporated under the laws of the State of Delaware and is
a holding company with its operations carried on by various subsidiary
corporations. Through its subsidiaries, Worthington is a leading manufacturer of
metal and plastic products. Worthington processes flat rolled steel to close
tolerances for sale to industrial customers who require steel of precise
specifications for their own product fabrications. It also manufactures metal
pressure cylinders, cast steel products, precision metal parts, injection molded
plastic parts, and metal framing products for use in construction.
Worthington's principal executive offices are located at 1205 Dearborn
Drive, Columbus, Ohio 43085; and its telephone number is (614) 438-3210.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds from the sale of the Debt Securities will be used for general corporate
purposes, which may include funding of Worthington's capital expenditures,
repayment of indebtedness, additions to working capital and acquisitions.
Worthington anticipates that it will raise additional funds from time to time
through debt financings, including borrowings under its revolving credit
facilities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table represents Worthington's consolidated ratio of earnings
to fixed charges for the periods shown.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------- YEAR ENDED MAY 31,
FEB. 29, FEB. 28, ----------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Actual............................. 12.3 16.3 16.5 24.4 27.3 19.2 9.6
Supplemental(1).................... 6.8 8.8
<FN>
- ---------------
(1) To give effect to the purchase by Worthington of the stock of Dietrich
Industries, Inc. as reflected in the pro forma condensed consolidated
statements of income included in Worthington's Form 8-K/A filed on April 19,
1996.
</TABLE>
For the purpose of this ratio: (i) earnings consist of income from
continuing operations before fixed charges (reduced by capitalized interest) and
income taxes for Worthington and its majority-owned subsidiaries and its
proportionate share of the income of unconsolidated affiliated companies,
reduced by undistributed earnings of less than 50%-owned unconsolidated
affiliated companies; and (ii) fixed charges consist of interest on all
indebtedness (without reduction of interest capitalized) for Worthington and its
majority-owned subsidiaries (consolidated and unconsolidated), and its
proportionate share of the interest on indebtedness of 50%-owned unconsolidated
affiliates.
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<PAGE> 36
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered will be described
in the Prospectus Supplement relating to such Debt Securities. Accordingly, for
a description of the terms of a particular issue of Debt Securities, reference
must be made to both the Prospectus Supplement relating thereto and to the
following description.
The Debt Securities will be general obligations of Worthington and may be
either senior debt or subordinated debt of Worthington to the extent set forth
in the Prospectus Supplement relating thereto. See "Description of Debt
Securities -- Subordination" below. Debt Securities that will be senior debt
will be issued under an indenture (the "Indenture") between Worthington and PNC
Bank, Ohio, National Association (the "Trustee"). A copy of the form of
Indenture has been filed as an exhibit to the Registration Statement filed with
the Commission. Debt Securities that will be subordinated debt will be issued
under an indenture that will be entered into by Worthington and one or more
commercial banks to be selected as trustees prior to the issuance of such
subordinated debt. The following discussion of certain provisions of the
Indenture is a summary only and does not purport to be a complete description of
the terms and provisions of the Indenture. Accordingly, the following discussion
is qualified in its entirety by reference to the provisions of the Indenture,
including the definition therein of terms used below with their initial letters
capitalized.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that can be issued thereunder. The Debt Securities may be issued in
one or more series as may be authorized from time to time by Worthington.
Reference is made to the applicable Prospectus Supplement for the following
terms of the Debt Securities of the series with respect to which such Prospectus
Supplement is being delivered:
(a) The title of the Debt Securities of the series;
(b) Any limit on the aggregate principal amount of the Debt Securities
of the series that may be authenticated and delivered under the Indenture;
(c) The date or dates on which the principal and premium with respect
to the Debt Securities of the series are payable;
(d) The rate or rates (which may be fixed or variable) at which the
Debt Securities of the series shall bear interest (if any) or the method of
determining such rate or rates, the date or dates from which such interest
shall accrue, the interest payment dates on which such interest shall be
payable or the method by which such dates will be determined, the record
dates for the determination of holders thereof to whom such interest is
payable (in the case of Registered Securities), and the basis upon which
interest will be calculated if other than that of a 360-day year of twelve
30-day months;
(e) The place or places, if any, in addition to or instead of the
corporate trust office of the Trustee where the principal, premium, and
interest with respect to Debt Securities of the series shall be payable;
(f) The price or prices at which, the period or periods within which,
and the terms and conditions upon which Debt Securities of the series may
be redeemed, in whole or in part, at the option of Worthington or
otherwise;
(g) The obligation, if any, of Worthington to redeem, purchase, or
repay Debt Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a holder thereof and the price or
prices at which, the period or periods within which, and the terms and
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<PAGE> 37
conditions upon which Debt Securities of the series shall be redeemed,
purchased, or repaid, in whole or in part, pursuant to such obligations;
(h) If other than denominations of $1,000 or any integral multiple
thereof, the denominations in which Debt Securities of the series shall be
issuable;
(i) If the amount of principal, premium, or interest with respect to
the Debt Securities of the series may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts will be
determined;
(j) If the principal amount payable at the stated maturity of Debt
Securities of the series will not be determinable as of any one or more
dates prior to such stated maturity, the amount that will be deemed to be
such principal amount as of any such date for any purpose, including the
principal amount thereof which will be due and payable upon any maturity
other than the stated maturity or which will be deemed to be outstanding as
of any such date (or, in any such case, the manner in which such deemed
principal amount is to be determined), and if necessary, the manner of
determining the equivalent thereof in United States currency;
(k) The coin or currency or currencies or units of two or more
currencies in which payment of the principal, premium, and interest with
respect to Debt Securities of the series shall be payable;
(l) If the Debt Securities of the series shall be issued in whole or
in part in the form of a Global Security, the terms and conditions, if any,
upon which such Global Security may be exchanged in whole or in part for
other individual Debt Securities in definitive registered form and the
Depositary for such Global Security;
(m) The classification of such Debt Securities as senior debt or
subordinated debt; and
(n) Any other specific terms of the Debt Securities including any
additional events of default or covenants provided for with respect to such
Debt Securities, and any term which may be required by or advisable under
U.S. Courts and regulations.
The Prospectus Supplement will also describe any material United States
federal income tax consequences or other special considerations applicable to
the series of Debt Securities to which such Prospectus Supplement relates,
including those applicable to (a) Debt Securities with respect to which payments
of principal, premium, or interest are determined with reference to an index or
formula (including changes in prices of particular securities, currencies, or
commodities), (b) Debt Securities with respect to which principal, premium, or
interest is payable in a foreign or composite currency, (c) Debt Securities that
are issued at a discount below their stated principal amount, bearing no
interest or interest at a rate that at the time of issuance is below market
rates ("Original Issue Discount Debt Securities"), and (d) variable rate Debt
Securities that are exchangeable for fixed rate Debt Securities.
Payments of interest on Debt Securities may be made at the option of
Worthington by check mailed to the registered holders thereof or, if so provided
in the applicable Prospectus Supplement, at the option of a holder by wire
transfer to an account designated by such holder.
Unless otherwise provided in the applicable Prospectus Supplement,
Securities may be transferred or exchanged at the office of the Trustee at which
its corporate trust business is principally administered in the United States or
at the office of the Trustee or the Trustee's agent in the Borough of Manhattan,
the City and State of New York, at which its corporate agency business is
conducted, subject to the limitations provided in the Indenture, without the
payment of any service charge, other than any tax or governmental charge payable
in connection therewith.
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<PAGE> 38
REGISTERED GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered global securities (a "Global Security")
that will be deposited with a depositary (the "Depositary"), or with a nominee
for a Depositary identified in the Prospectus Supplement relating to such
series. In such case, one or more Global Securities will be issued in a
denomination or aggregate denomination equal to the portion of the aggregate
principal amount of outstanding registered Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive registered form,
a Global Security may not be transferred except as a whole by the Depositary for
such Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee of
such successor.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the Prospectus Supplement relating to such series.
Worthington anticipates that the following provisions will apply to all
depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of persons that have accounts with such Depositary
("participants"). The accounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Debt
Securities. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary for such Global Security (with respect to interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participants). So long as the
Depositary for a Global Security, or its nominee, is the registered owner of
such Global Security, such Depositary or such nominee, as the case may be, will
be considered the sole owner or Holder of the Debt Securities represented by
such Global Security for all purposes under the applicable indenture. Except as
set forth below, owners of beneficial interests in a Global Security will not be
entitled to have the Debt Securities represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of such Debt Securities in definitive form and will not be considered
the owners or Holders thereof under the applicable indenture.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Global Security registered in the name of a Depositary or its
nominee will be made to such Depositary or its nominee, as the case may be, as
the registered owner of such Global Security. None of Worthington, the Trustee
or any paying agent for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Worthington expects that the Depositary for any Debt Securities represented
by a Global Security, upon receipt of any payment of principal, premium or
interest, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary.
Worthington also expects that payments by participants to owners of beneficial
interest in such Global Security held through such participants will be governed
by standing instructions and customary practices, as is now the case with the
securities held for the accounts of customers registered in "street names" and
will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by
6
<PAGE> 39
Worthington within ninety (90) days, Worthington will issue such Debt Securities
in definitive form in exchange for such Global Security. In addition,
Worthington may at any time and in its sole discretion determine not to have any
of the Debt Securities of a series represented by one or more Global Securities
and, in such event, will issue Debt Securities of such series in definitive form
in exchange for all of the Global Security or Securities representing such Debt
Securities.
SUBORDINATION
Debt Securities may be subordinated ("Subordinated Debt Securities") to
senior debt to the extent set forth in the Prospectus Supplement and indenture
relating thereto. Worthington currently conducts substantially all its
operations through Subsidiaries and the holders of Debt Securities (whether or
not Subordinated Debt Securities) will be structurally subordinated to the
creditors of Worthington's Subsidiaries.
Subordinated Debt Securities will be subordinate in right of payment, to
the extent and in the manner set forth in the indenture and the Prospectus
Supplement relating to such Subordinated Debt Securities, to the prior payment
of all Indebtedness of Worthington that is designated as "Senior Indebtedness"
(as defined in the indenture relating to such Subordinated Debt Securities) with
respect to such Subordinated Debt Securities. By reason of such subordination,
in the event of insolvency, creditors of Worthington who are holders of Senior
Indebtedness, as well as certain general creditors of Worthington, may recover
more, ratably, than the holders of the Subordinated Debt Securities.
EVENTS OF DEFAULT AND REMEDIES
The following events are defined in the Indenture as "Events of Default"
with respect to a series of Debt Securities:
(a) Default in the payment of any installment of interest on any Debt
Securities of that series as and when the same shall become due and payable
and continuance of such default for a period of 30 days;
(b) Default in the payment of principal or premium with respect to any
Debt Securities of that series as and when the same become due and payable,
whether at maturity, upon redemption, by declaration, upon required
repurchase, or otherwise;
(c) Default in the payment of any sinking fund payment with respect to
any Debt Securities of that series as and when the same shall become due
and payable;
(d) Failure on the part of Worthington to comply with the provisions
of the Indenture relating to consolidations, mergers and sales of assets;
(e) Failure on the part of Worthington duly to observe or perform any
other of the covenants or agreements on the part of Worthington in the Debt
Securities of that series, in any resolution of the Board of Directors of
Worthington authorizing the issuance of that series of Debt Securities, in
the Indenture with respect to such series, or in any supplemental Indenture
with respect to such series (other than a covenant a default in the
performance of which is otherwise specifically dealt with) continuing for a
period of 60 days after the date on which written notice specifying such
failure and requiring Worthington to remedy the same shall have been given
to Worthington by the Trustee or to Worthington and the Trustee by the
holders of at least 25% in aggregate principal amount of the Debt
Securities of that series at the time outstanding;
(f) Indebtedness of Worthington or any Subsidiary of Worthington is
not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default, the total amount
of such Indebtedness unpaid or accelerated exceeds $20 million or the
United States dollar equivalent thereof at the time, and such default
remains uncured or such
7
<PAGE> 40
acceleration is not rescinded for 10 days after the date on which written
notice specifying such failure and requiring Worthington to remedy the same
shall have been given to Worthington by the Trustee or to Worthington and
the Trustee by the holders of at least 25% in aggregate principal amount of
the Debt Securities of that series at the time outstanding;
(g) Worthington or any of its Restricted Subsidiaries shall (1)
voluntarily commence any proceeding or file any petition seeking relief
under the United States Bankruptcy Code or other federal or state
bankruptcy, insolvency, or similar law, (2) consent to the institution of,
or fail to controvert within the time and in the manner prescribed by law,
any such proceeding or the filing of any such petition, (3) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator,
or similar official for Worthington or any such Restricted Subsidiary or
for a substantial part of its property, (4) file an answer admitting the
material allegations of a petition filed against it in any such proceeding,
(5) make a general assignment for the benefit of creditors, (6) admit in
writing its inability or fail generally to pay its debts as they become
due, (7) take corporate action for the purpose of effecting any of the
foregoing, or (8) take any comparable action under any foreign laws
relating to insolvency;
(h) The entry of an order or decree by a court having competent
jurisdiction for (1) relief with respect to Worthington or any of its
Restricted Subsidiaries or a substantial part of any of their property
under the United States Bankruptcy Code or any other federal or state
bankruptcy, insolvency, or similar law, (2) the appointment of a receiver,
trustee, custodian, sequestrator, or similar official for Worthington or
any such Restricted Subsidiary or for a substantial part of any of their
property (except any decree or order appointing such official of any
Restricted Subsidiary pursuant to a plan under which the assets and
operations of such Restricted Subsidiary are transferred to or combined
with another Restricted Subsidiary or Subsidiaries of Worthington or to
Worthington), or (3) the winding-up or liquidation of Worthington or any
such Restricted Subsidiary (except any decree or order approving or
ordering the winding-up or liquidation of the affairs of a Restricted
Subsidiary pursuant to a plan under which the assets and operations of such
Restricted Subsidiary are transferred to or combined with another
Restricted Subsidiary or Subsidiaries of Worthington or to Worthington),
and such order or decree shall continue unstayed and in effect for 60
consecutive days, or any similar relief is granted under any foreign laws
and the order or decree stays in effect for 60 consecutive days;
(i) Any judgment or decree for the payment of money in excess of $20
million or the United States dollar equivalent thereof at the time is
entered against Worthington or any Subsidiary of Worthington by a court of
competent jurisdiction, which judgment is not covered by insurance, and is
not discharged and either (1) an enforcement proceeding has been commenced
by any creditor upon such judgment or decree or (2) there is a period of 60
days following the entry of such judgment or decree during which such
judgment or decree is not discharged or waived or the execution thereof
stayed and, in either case, such default continues for 10 days after the
date on which written notice specifying such failure and requiring
Worthington to remedy the same shall have been given to Worthington by the
Trustee or to Worthington and the Trustee by the holders of at least 25% in
aggregate principal amount of the Debt Securities of that series at the
time outstanding; and
(j) Any other Event of Default provided with respect to Debt
Securities of that series.
An Event of Default with respect to one series of Debt Securities is not
necessarily an Event of Default for another series.
If an Event of Default described in clause (a), (b), (c), (d), (e), (f),
(i), or (j) above occurs and is continuing with respect to any series of Debt
Securities, unless the principal and interest with respect to all the Debt
Securities of such series shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Debt Securities
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<PAGE> 41
of such series then outstanding may declare the principal of (or, if Original
Issue Discount Debt Securities, such portion of the principal amount as may be
specified in such series) and interest on all the Debt Securities of such series
due and payable immediately. If an Event of Default described in clause (g) or
(h) above occurs, unless the principal and interest with respect to all the Debt
Securities of the series shall have become due and payable, the principal of
(or, if any series are Original Issue Discount Debt Securities, such portion of
the principal amount as may be specified in such series) and interest on all
Debt Securities of all series then outstanding shall become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any holder of Debt Securities.
If an Event of Default occurs and is continuing, the Trustee shall be
entitled and empowered to institute any action or proceeding for the collection
of the sums so due and unpaid or to enforce the performance of any provision of
the Debt Securities of the affected series or the Indenture, to prosecute any
such action or proceeding to judgment or final decree, and to enforce any such
judgment or final decree against Worthington or any other obligor on the Debt
Securities of such series. In addition, if there shall be pending proceedings
for the bankruptcy or reorganization of Worthington or any other obligor on the
Debt Securities, or if a receiver, trustee, or similar official shall have been
appointed for its property, the Trustee shall be entitled and empowered to file
and prove a claim for the whole amount of principal, premium, and interest (or,
in the case of Original Issue Discount Debt Securities, such portion of the
principal amount as may be specified in the terms of such series) owing and
unpaid with respect to the Debt Securities. No holder of any Debt Security of
any series shall have any right to institute any action or proceeding upon or
under or with respect to the Indenture, for the appointment of a receiver or
trustee, or for any other remedy, unless (a) such holder previously shall have
given to the Trustee written notice of an Event of Default with respect to Debt
Securities of that series and of the continuance thereof, (b) the holders of not
less than 25% in aggregate principal amount of the outstanding Debt Securities
of that series shall have made written request to the Trustee to institute such
action or proceeding with respect to such Event of Default and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses, and liabilities to be incurred therein or thereby, and (c) the
Trustee, for 60 days after its receipt of such notice, request, and offer of
indemnity shall have failed to institute such action or proceeding and no
direction inconsistent with such written request shall have been given to the
Trustee pursuant to the provisions of the Indenture.
Prior to the acceleration of the maturity of the Debt Securities of any
series, the holders of a majority in aggregate principal amount of the Debt
Securities of that series at the time outstanding may, on behalf of the holders
of all Debt Securities of that series, waive any past default or Event of
Default and its consequences for that series, except (a) a default in the
payment of the principal, premium, or interest with respect to such Debt
Securities or (b) a default with respect to a provision of the Indenture that
cannot be amended without the consent of each holder affected thereby. In case
of any such waiver, such default shall cease to exist, any Event of Default
arising therefrom shall be deemed to have been cured for all purposes, and
Worthington, the Trustee, and the holders of the Debt Securities of that series
shall be restored to their former positions and rights under the Indenture.
The Trustee shall, within 90 days after the occurrence of a default known
to it with respect to a series of Debt Securities, give to the holders of the
Debt Securities of such series notice of all uncured defaults with respect to
such series known to it, unless such defaults shall have been cured or waived
before the giving of such notice; provided, however, that except in the case of
default in the payment of principal, premium, or interest with respect to the
Debt Securities of such series or in the making of any sinking fund payment with
respect to the Debt Securities of such series, the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the interest of the holders of such Debt Securities.
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<PAGE> 42
MODIFICATION OF THE INDENTURE
Worthington and the Trustee may enter into supplemental indentures without
the consent of the holders of Debt Securities issued under the Indenture for one
or more of the following purposes:
(a) To evidence the succession of another person to Worthington
pursuant to the provisions of the Indenture relating to consolidations,
mergers, and sales of assets and the assumption by such successor of the
covenants, agreements, and obligations of Worthington in the Indenture and
in the Debt Securities;
(b) To surrender any right or power conferred upon Worthington by the
Indenture, to add to the covenants of Worthington such further covenants,
restrictions, conditions, or provisions for the protection of the holders
of all or any series of Debt Securities as the Board of Directors of
Worthington shall consider to be for the protection of the holders of such
Debt Securities, and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants,
restrictions, conditions, or provisions a default or an Event of Default
under the Indenture (provided, however, that with respect to any such
additional covenant, restriction, condition, or provision, such
supplemental Indenture may provide for a period of grace after default,
which may be shorter or longer than that allowed in the case of other
defaults, may provide for an immediate enforcement upon such default, may
limit the remedies available to the Trustee upon such default, or may limit
the right of holders of a majority in aggregate principal amount of any or
all series of Debt Securities to waive such default);
(c) To cure any ambiguity or to correct or supplement any provision
contained in the Indenture, in any supplemental indenture, or in any Debt
Securities that may be defective or inconsistent with any other provision
contained therein, to convey, transfer, assign, mortgage, or pledge any
property to or with the Trustee, or to make such other provisions in regard
to matters or questions arising under the Indenture as shall not adversely
affect the interests of any holders of Debt Securities of any series;
(d) To modify or amend the Indenture in such a manner as to permit the
qualification of the Indenture or any supplemental indenture under the
Trust Indenture Act as then in effect;
(e) To add or change any of the provisions of the Indenture to change
or eliminate any restrictions on the payment or principal or premium with
respect to Debt Securities so long as any such action does not adversely
affect the interests of the holders of Debt Securities in any material
respect or permit or facilitate the issuance of Debt Securities of any
series in uncertificated form;
(f) To comply with the provisions of the Indenture relating to
consolidations, mergers, and sales of assets;
(g) To add guarantees with respect to the Debt Securities or to secure
the Debt Securities;
(h) To make any change that does not adversely affect the rights of
any holder;
(i) To add to, change, or eliminate any of the provisions of the
Indenture with respect to one or more series of Debt Securities, so long as
any such addition, change, or elimination not otherwise permitted under the
Indenture shall (1) neither apply to any Debt Security of any series
created prior to the execution of such supplemental indenture and entitled
to the benefit of such provision nor modify the rights of the holders of
any such Debt Security with respect to such provision or (2) become
effective only when there is no such Debt Security outstanding;
(j) To evidence and provide for the acceptance of appointment by a
successor or separate Trustee with respect to the Debt Securities of one or
more series and to add to or change any of the provisions of the Indenture
as shall be necessary to provide for or facilitate the administration of
the Indenture by more than one Trustee; and
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(k) To establish the form or terms of Debt Securities of any series,
as described under "Description of Debt Securities -- General" above.
With the consent of the holders of a majority in aggregate principal amount
of the outstanding Debt Securities of each series affected thereby, Worthington
and the Trustee may from time to time and at any time enter into a supplemental
indenture for the purpose of adding any provisions to, changing in any manner,
or eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Debt
Securities of such series; provided, however, that without the consent of the
holders of each Debt Security so affected, no such supplemental indenture shall
(a) reduce the percentage in principal amount of Debt Securities of any series
whose holders must consent to an amendment, (b) reduce the rate of or extend the
time for payment of interest on any Debt Security, (c) reduce the principal of
or extend the stated maturity of any Debt Security, (d) reduce the premium
payable upon the redemption of any Debt Security or change the time at which any
Debt Security may or shall be redeemed, (e) make any Debt Security payable in a
currency other than that stated in the Debt Security, (f) release any security
that may have been granted with respect to the Debt Securities, or (g) make any
change in the provisions of the Indenture relating to waivers of defaults or
amendments that require unanimous consent.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
Worthington may not consolidate with or merge with or into any person, or
convey, transfer, or lease all or substantially all of its assets, unless the
following conditions have been satisfied:
(a) Either (1) Worthington shall be the continuing person in the case
of a merger or (2) the resulting, surviving, or transferee person, if other
than Worthington (the "Successor Company"), shall be a corporation
organized and existing under the laws of the United States, any State, or
the District of Columbia and shall expressly assume all of the obligations
of Worthington under the Debt Securities and the Indenture;
(b) Immediately after giving effect to such transaction (and treating
any Indebtedness that becomes an obligation of the Successor Company or any
subsidiary of Worthington as a result of such transaction as having been
incurred by the Successor Company or such subsidiary at the time of such
transaction), no Default or Event of Default would occur or be continuing;
and
(c) Worthington shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that such
consolidation, merger, or transfer complies with the Indenture.
SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
The Indenture shall generally cease to be of any further effect with
respect to a series of Debt Securities if (a) Worthington has delivered to the
Trustee for cancellation all Debt Securities of such series (with certain
limited exceptions) or (b) all Debt Securities of such series not theretofore
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year, and Worthington shall have deposited with the
Trustee as trust funds the entire amount in the currency in which the Debt
Securities are denominated sufficient to pay at maturity or upon redemption all
such Debt Securities (and if, in either case, Worthington shall also pay or
cause to be paid all other sums payable under the Indenture by Worthington).
In addition, Worthington shall have a "legal defeasance option" (pursuant
to which it may terminate, with respect to the Debt Securities of a particular
series, all of its obligations under such Debt Securities and the Indenture with
respect to such Debt Securities) and "covenant defeasance option" (pursuant to
which it may terminate, with respect to the Debt Securities of a particular
series, its obligations with respect to such Debt Securities under certain
specified covenants contained in the Indenture). If Worthington exercises its
legal defeasance option with respect to a
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series of Debt Securities, payment of such Debt Securities may not be
accelerated because of an Event of Default. If Worthington exercises its
covenant defeasance option with respect to a series of Debt Securities, payment
of such Debt Securities may not be accelerated because of an Event of Default
related to the specified covenants.
Worthington may exercise its legal defeasance option or its covenant
defeasance option with respect to the Debt Securities of a series only if (a)
Worthington irrevocably deposits in trust with the Trustee cash or U.S.
Government Obligations (as defined in the Indenture) for the payment of
principal, premium, and interest with respect to such Debt Securities to
maturity or redemption, as the case may be, (b) Worthington delivers to the
Trustee a certificate from a nationally recognized firm of independent
accountants expressing their opinion that the payments of principal and interest
when due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such times and
in such amounts as will be sufficient to pay the principal, premium, and
interest when due with respect to all the Debt Securities of such series to
maturity or redemption, as the case may be, (c) 123 days pass after the deposit
is made and during the 123-day period no default described in clause (g) or (h)
under "Description of Debt Securities -- Events of Default and Remedies" above
with respect to Worthington occurs that is continuing at the end of such period,
(d) no Default has occurred and is continuing on the date of such deposit and
after giving effect thereto, (e) the deposit does not constitute a default under
any other agreement binding on Worthington, (f) Worthington delivers to the
Trustee an opinion of counsel to the effect that the trust resulting from the
deposit does not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940, (g) Worthington shall have delivered
to the Trustee an opinion of counsel addressing certain federal income tax
matters relating to the defeasance, and (h) Worthington delivers to the Trustee
an officers' certificate and an opinion of counsel, each stating that all
conditions precedent to the defeasance and discharge of the Debt Securities of
such series as contemplated by the Indenture have been complied with.
The Trustee shall hold in trust cash or U.S. Government Obligations
deposited with it as described above and shall apply the deposited cash and the
proceeds from deposited U.S. Government Obligations to the payment of principal,
premium, and interest with respect to the Debt Securities of the defeased
series.
THE TRUSTEE
Worthington may maintain banking and other commercial relationships with
the Trustee and its affiliates in the ordinary course of business and the
Trustee may own Debt Securities.
PLAN OF DISTRIBUTION
Worthington may sell the Debt Securities in the following ways: (i) through
agents; (ii) through underwriters; (iii) through dealers; and (iv) directly to
purchasers.
Offers to purchase the Debt Securities may be solicited by agents
designated by Worthington from time to time. Any such agent, who may be deemed
to be an underwriter as that term is defined in the Securities Act, involved in
the offer or sale of the Debt Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by Worthington to such
agent set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.
If any underwriters are utilized in the sale, Worthington will enter into
an underwriting agreement with such underwriters at the time of sale to them and
the names of the underwriters and the terms of the transaction will be set forth
in the Prospectus Supplement, which will be used by the underwriters to make
resales to the public of the Debt Securities in respect of which this Prospectus
is delivered.
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<PAGE> 45
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, Worthington will sell such Debt Securities
to the dealer, as principal. The dealer may then resell such Debt Securities to
the public at varying prices to be determined by such dealer at the time of
resale.
Agents, dealers and underwriters may be entitled under agreements entered
into with Worthington to indemnification by Worthington against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for Worthington
in the ordinary course of business.
If so indicated in the Prospectus Supplement, Worthington will authorize
agents and underwriters or dealers to solicit offers by certain purchasers to
purchase the Debt Securities from Worthington at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject to only those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission payable
for solicitation of such offers.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities will be passed upon for Worthington by
Dale T. Brinkman, General Counsel of Worthington. Mr. Brinkman beneficially owns
10,702 shares of Worthington's Common Stock and also has exercisable options to
purchase an additional 24,250 shares of Worthington's Common Stock. Pursuant to
its By-laws, Worthington is required to indemnify Mr. Brinkman to the fullest
extent permitted by Delaware law against any expenses actually and reasonably
incurred by him in connection with any action, suit or proceeding in which he is
made party by reason of his being an officer of Worthington.
EXPERTS
The consolidated financial statements and financial statement schedule of
Worthington (Worthington Industries, Inc. and Subsidiaries) at May 31, 1995 and
1994, and for each of the three years in the period ended May 31, 1995,
incorporated by reference or, in the case of the financial statement schedule,
included in Worthington Industries, Inc.'s Annual Report on Form 10-K for the
year ended May 31, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference or, in
the case of their report on the financial statement schedule, included therein
and incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Dietrich Industries, Inc. and
subsidiaries incorporated in this Prospectus by reference from Worthington
Industries, Inc.'s Amendment No. 1 to Current Report on Form 8-K/A dated April
19, 1996 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS SUPPLEMENT, AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY WORTHINGTON OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF WORTHINGTON SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS ARE NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors Relating to DECS........ S-3
Worthington Industries, Inc.......... S-5
Recent Developments.................. S-8
Rouge Steel.......................... S-9
Relationship Between Worthington and
Rouge Steel........................ S-10
Capitalization....................... S-12
Selected Financial Information....... S-13
Price Range and Dividend History of
Rouge Class A Common Stock......... S-14
Use of Proceeds...................... S-14
Description of the DECS.............. S-15
Certain United States Federal Income
Tax Considerations................. S-28
Plan of Distribution................. S-31
Legal Matters........................ S-32
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Worthington.......................... 3
Use of Proceeds...................... 3
Ratio of Earnings to Fixed Charges... 3
Description of Debt Securities....... 4
Plan of Distribution................. 12
Validity of Debt Securities.......... 13
Experts.............................. 13
</TABLE>
4,294,149 DECS(SM)
(DEBT EXCHANGEABLE FOR
COMMON STOCK(SM))
WORTHINGTON INDUSTRIES, INC.
% EXCHANGEABLE NOTES
DUE , 1999
[WORTHINGTON IND. LOGO]
SALOMON BROTHERS INC
PROSPECTUS SUPPLEMENT
DATED , 1996
