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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended May 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from______________ to _____________
Commission File No. 0-4016
WORTHINGTON INDUSTRIES, INC.
(Exact name of Registrant as specified in its Charter)
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OHIO 31-1189815
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1205 Dearborn Drive, Columbus, Ohio 43085
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (614) 438-3210
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Securities Registered Pursuant to Section 12(b) of the Act: None
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Securities Registered Pursuant to Section 12(g) of the Act:
Common Shares, no par value (89,733,956 shares outstanding at August 6, 1999)
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the common shares held by non-affiliates
of the Registrant at August 6, 1999 was approximately $1,054,093,361 (computed
by reference to the closing price for such shares on such date).
Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended May 31, 1999 are incorporated by reference into Part I and
Part II. Portions of the definitive proxy statement furnished to shareholders of
the Registrant in connection with the Annual Meeting of Shareholders to be held
on September 23, 1999 are incorporated by reference into Part III.
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PART I
Certain statements contained in this FORM 10-K, including, without
limitation, the statements incorporated by reference into "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations",
constitute "forward-looking statements" that are based on management's beliefs,
estimates, assumptions and currently available information. Such forward-looking
statements include, without limitation, statements relating to future operating
results, growth, stock appreciation, plant start-ups, capabilities, the impact
of year 2000 and other non-historical information. Because they are based on
beliefs, estimates and assumptions, forward-looking statements are inherently
subject to risks and uncertainties that could cause actual results to differ
materially from those projected. Any number of factors could affect actual
results, including, without limitation, product demand, changes in product mix
and market acceptance of products; changes in pricing or availability of raw
materials, particularly steel; capacity restraints and efficiencies; conditions
in major product markets; delays in construction or equipment supply; inherent
risks of international development, including foreign currency risks; the
ability to improve processes and business practices to keep pace with the
economic, competitive and technological environment; year 2000 issues; general
economic conditions, business environment and the impact of governmental
regulations, both in the United States and abroad; and other risks described
from time to time in filings with the Securities and Exchange Commission.
ITEM 1. - BUSINESS
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Worthington Industries, Inc. is referred to herein individually as the
"Registrant" or "Worthington" or, together with its subsidiaries, as the
"Company". Founded in 1955, the Company is a diversified steel processor that
focuses on steel processing and metals-related businesses. It operates 39
facilities worldwide and its corporate headquarters are located at 1205 Dearborn
Drive, Columbus, Ohio, 43085. The Company also holds equity positions in seven
joint ventures, which operate 14 facilities worldwide.
For the fiscal year ended May 31, 1999 ("fiscal 1999"), the Company's
continuing operations are reported principally in three business segments:
Processed Steel Products, Metal Framing and Pressure Cylinders. The Processed
Steel Products segment includes The Worthington Steel Company business unit and
The Gerstenslager Company business unit. The Metal Framing segment is made up of
Dietrich Industries, Inc. and the Pressure Cylinders segment consists of
Worthington Cylinder Corporation. In addition, the Company holds an equity
position in seven joint ventures as described below. During fiscal 1999, in
keeping with its strategy to focus on steel processing and metals-related
businesses, the Company divested its Worthington Custom Plastics, Inc.,
Worthington Precision Metals, Inc. and Buckeye Steel Castings Company
operations. The divested operations, which previously made
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up the Company's Custom Products and Cast Products segments, have been reported
as discontinued operations for fiscal 1999.
During fiscal 1999, Worthington reincorporated from the State of
Delaware into the State of Ohio. On October 13, 1998, Worthington Industries,
Inc., a Delaware corporation ("Worthington Delaware"), was merged (the "Merger")
with and into Worthington, an Ohio corporation and, at the time, a wholly-owned
subsidiary of Worthington Delaware. Each share of common stock, par value $0.01
per share (the "Worthington Delaware Shares"), of Worthington Delaware was
converted into one common share, without par value, of Worthington. By virtue of
the Merger, Worthington succeeded to all the business, properties, assets and
liabilities of Worthington Delaware and the directors, officers and employees of
Worthington Delaware became directors, officers and employees of Worthington.
PROCESSED STEEL PRODUCTS
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The Processed Steel Products segment consists of two business units,
The Worthington Steel Company ("Worthington Steel") and The Gerstenslager
Company ("Gerstenslager"), which was acquired by the Company in a
pooling-of-interests transaction in February 1997. For fiscal 1999, and the
fiscal years ended May 31, 1998 ("fiscal 1998") and May 31, 1997 ("fiscal
1997"), the percentage of sales from continuing operations generated by the
Processed Steel Products segment was 63.2%, 64.6% and 64.6%, respectively.
As an intermediate processor of flat-rolled steel, the Company's
Processed Steel Products segment focuses on specialized products requiring exact
specifications, which typically cannot be supplied as efficiently by steel
mills, metal service centers or steel end users. The Company believes that
Worthington Steel is the largest independent flat rolled steel processor in the
United States. Gerstenslager is a leading independent supplier of Class A
exterior body panels to the North American automotive original equipment and
service part markets.
The Company's Processed Steel Products segment operates 12 processing
facilities as well as Spartan Steel Coating, L.L.C., the Company's consolidated
joint venture with Rouge Steel Company. These facilities are concentrated in the
Michigan, Ohio and Indiana market, the largest flat rolled steel consuming
market in the United States. The segment serves over 1,000 industrial customers,
principally in the automotive, automotive supply, appliance, electrical,
communications, construction, office furniture, office equipment, agricultural,
machinery and leisure time industries.
The two newest processed steel products facilities are located in
Decatur, Alabama ("Decatur") and Delta, Ohio ("Delta"). Decatur began commercial
slitting and pickling operations in May 1998 and produced its first commercially
saleable cold-rolled coils in August 1998, contributing to the Company's fiscal
1999 increase in sales. Delta completed its first full year of
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operation during fiscal 1998, contributing to the Company's fiscal 1998 increase
in sales. In addition, the Monroe, Ohio facility resumed pickling operations
during fiscal 1999, marking the completion of its recovery from an August 1997
fire that caused extensive damage to the plant.
The Company buys coils of wide, open-tolerance steel from major
integrated steel mills and mini-mills and processes it to the precise type,
thickness, length, width, shape, temper and surface quality customer
specifications. The Company'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; cut-to-length, which flattens the steel and cuts it to exact
lengths; 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; configured blanking, through which steel is cut into specific
shapes; painting; hot dipped galvanizing; nickel and zinc/nickel plating; and
annealing, a thermal process that changes the hardness and certain metallurgical
characteristics of steel. The Company also stamps, assembles, primes and
packages exterior automotive body panels. In addition, the Company "toll
processes" steel for steel mills and large end users. Toll processing is similar
to the Company's normal steel processing, except the mill or end user retains
the title to the steel and has the responsibility for selling the end product.
Toll processing enables the Company 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.
Steel processing is highly competitive and the Company competes with
many other independent intermediate processors. With respect to automotive
stamping, the Company competes with captive processors owned by the automotive
companies, independent tier one suppliers of current model components, who are
generally unwilling to keep tooling for low volume past model service business,
and a number of smaller competitors. The Company believes it is unique in its
ability to handle a very large number of low volume aftermarket automotive body
parts, managing over 3,000 die sets for component parts on past and current
automobile and truck production models. Despite the competitive nature of the
processed steel products industry, the Company knows of no other intermediate
processor offering the same type and extent of technical service support
provided by the Company relating to material testing and application of material
to the particular needs of customers (see "Technical Services"). The Company is
unable to gauge, however, the extent to which its technical service capability
has improved its competitive position.
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METAL FRAMING
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The Metal Framing segment consists of one business unit, Dietrich
Industries, Inc. ("Dietrich"), which was acquired by the Company in February
1996. Dietrich is the largest supplier of metal framing products for the
commercial and residential construction markets in the United States. For fiscal
1999, fiscal 1998 and fiscal 1997, the percentage of sales from continuing
operations generated by Dietrich was 19.1%, 20.7% and 20.9%, respectively.
Dietrich's products include steel studs, floor joists and other metal accessory
products. Dietrich has over 2,000 customers, primarily consisting of building
products distributors, commercial and residential contractors and gypsum
producers.
The Company believes that Dietrich is the only national supplier of
metal framing products and supplies approximately 45% of the metal framing
products sold in the United States. It has five large regional competitors and
numerous small, more localized competitors. Dietrich operates 18 facilities in
thirteen states.
PRESSURE CYLINDERS
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The Pressure Cylinders segment consists of one business unit,
Worthington Cylinder Corporation ("Worthington Cylinders"). For fiscal 1999,
fiscal 1998 and fiscal 1997, the percentage of sales from continuing operations
generated by Worthington Cylinders was 17.3%, 13.8% and 13.9%, respectively.
During fiscal 1999, the Company expanded its Pressure Cylinders segment
by acquiring the cylinder operations of Jos. Heiser vormals J. Winter's Sohn,
GmbH ("Heiser"), based in Kienberg, Austria, in June 1998; Metalurgica Progresso
de Vale de Cambra, Lda., based in Vale de Cambra, Portugal, in May 1999; and a
majority interest in Gastec spol. s.r.o., based in Hustopece, Czech Republic, in
February 1999.
Worthington Cylinders is the nation's largest producer of portable low
pressure liquid propane and refrigerant gas cylinders, and is a global leader in
the production of portable high pressure cylinders. Worthington Cylinders'
primary low pressure cylinder 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. These cylinders are designed and
produced in accordance with safety requirements prescribed by the U.S.
Department of Transportation which specify materials, design limitations, and
marking, inspection and testing procedures. Low pressure cylinders are produced
by precision stamping, drawing and welding of component parts to customer
specifications. They are then tested, painted and packaged as required.
The Company's refrigerant gas 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 and distributors of
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barbecue grills and propane, mass merchandisers and manufacturers and users of
material handling, heating, cooking and camping equipment. The Company
manufactures other low pressure cylinder products, including recapture and
recycling tanks for refrigerant gases, helium tanks, and cylinders to hold other
gases.
Worthington Cylinders' high pressure cylinders are manufactured by deep
drawing, billet piercing and hot spinning. They are sold primarily to gas
suppliers and fillers as containers for acetylene, medical, industrial, halon
and electronics gases.
While a large percentage of cylinder sales are made to major accounts,
Worthington Cylinders has over 3,000 customers. It operates eight wholly-owned
manufacturing facilities throughout the United States, Austria, Canada and
Portugal; and two joint venture facilities, Worthington S.A. in Itu, Brazil and
Worthington Gastec a.s. in the Czech Republic.
The Company has two principal domestic competitors in its major low
pressure cylinder markets, of which management believes the Company has the
largest domestic share. The Company also has two principal domestic competitors
in its high pressure cylinder markets, both of which have a larger domestic
share than the Company. The Company believes that Heiser has the largest share
of the European industrial gas cylinder market. However, the Company otherwise
has no reliable information with respect to the size of any of its various
product markets or its relative position therein.
SEGMENT DATA
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For financial information about the Company's segments, see "Note H -
Industry Segment Data" of the Company's Notes to Consolidated Financial
Statements included in Worthington's 1999 Annual Report to Shareholders, which
is incorporated herein by reference.
CUSTOMERS
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During fiscal 1999, the Company's Processed Steel Products, Metal
Framing and Pressure Cylinders segments served over 1,000, 2,000 and 3,000
customers, respectively. The Company's customers are located primarily in the
United States, Canada and Europe and operate in a variety of industries,
including without limitation, the automotive, automotive supply, appliance,
electrical, building products distribution, communications, commercial and
residential construction, office furniture and equipment, agricultural,
machinery and leisure industries. See "Item 1 - Business - Processed Steel
Products," "--Metal Framing," and "--Pressure Cylinders" for a discussioN
regarding customers within the Company's segments.
Only one customer, General Motors Corporation ("General Motors"),
accounted for over 10% of the Company's consolidated net sales. Fiscal 1999
sales from continuing operations in the Processed Steel Products segment include
$112 million
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to General Motors, which purchases through decentralized divisions and
subsidiaries in different geographic areas. Fiscal 1999 sales from discontinued
operations also include $107 million to General Motors. The General Motors'
strike in the first quarter of fiscal 1999 contributed to the decrease in
operating income for the Processed Steel Products segment for the year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Processed Steel Products" included in Worthington's 1999 Annual
Report to Shareholders, which is incorporated herein by reference. The loss of
General Motors as a customer could have an adverse effect on the Processed Steel
Products segment, but, given the Company's long-standing relationship with
General Motors, the Company has no reason to believe that the loss of this
customer is likely.
SUPPLIERS
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In fiscal 1999, the Company purchased in excess of three million tons
of steel for use as raw material for its Processed Steel Products, Pressure
Cylinders and Metal Framing segments. It purchases steel in large quantities at
regular intervals from major primary producers, both domestically and globally.
The Company primarily purchases and supplies steel based on the specific orders
of customers and does not typically process steel for inventory. The Company
purchases the majority of its raw materials in the open market at prevailing
market prices, but, occasionally, will enter into long-term fixed-price
contracts. During fiscal 1999, the Company's major suppliers of steel were
Bethlehem Steel Corporation, Inland Steel Company, LTV Steel Corporation,
Northstar BHP Steel, Rouge Industries, Inc. (in which the Company holds a
minority equity position), TRICO Steel, USX Corporation and WCI Steel, Inc. In
addition, the Company's primary aluminum suppliers in fiscal 1999 for its
Pressure Cylinders segment were Alcoa, Inc. and Specialty Blanks Incorporated.
Management believes that its supplier relationships are good.
MARKETING AND COMPETITION
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The Company believes that it has established and maintains customer
relationships primarily because of its tradition of leadership in value-added
steel processing and metals-related industries. The Company's products and
services are sold primarily by Company sales personnel, who receive orders on
both an order-by-order basis and through long-term program commitments. Foreign
operations and exports represent less than 10% of the Company's production,
sales and assets.
The Company competes primarily on the basis of quality of product,
ability to meet delivery requirements and price. Geographic proximity to
customers has a significant effect upon relative ability to meet customer
delivery schedules and impacts the freight charge portion of overall product
price.
See "Item 1 - Business - Processed Steel Products," "--Metal Framing,"
and "--Pressure Cylinders" for a discussion regarding marketing and competition
within the Company's segments.
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TECHNICAL SERVICES
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The Company employs a staff of engineers and other technical personnel
and maintains fully-equipped, modern laboratories to support its operations. The
facilities enable the Company to verify, analyze and document the physical,
chemical, metallurgical and mechanical properties of its raw materials and
products. Technical service personnel also work in conjunction with the sales
force to determine the types of flat rolled steel required for the particular
needs of the Company's customers. In order to provide such services, the Company
maintains a continuing program of developmental engineering with respect to the
characteristics and performance of its products under varying conditions.
Laboratory facilities are also used to perform the quality control and extensive
testing of all low pressure cylinders required by the regulations of the U. S.
Department of Transportation and associated agencies, as well as varying
customer requirements.
EMPLOYEES
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As of May 31, 1999, the Company employed approximately 7,500 employees
in its continuing operations, excluding unconsolidated joint ventures.
Approximately 20% of the Company's labor force is covered by collective
bargaining agreements. The Company believes that it has good relationships with
its employees.
JOINT VENTURES
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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, the Company
participates in three consolidated and four unconsolidated joint ventures.
Worthington Armstrong Venture ("WAVE"), a 50%-owned joint venture with
Armstrong World Industries, Inc., is one of the three leading global
manufacturers of suspended ceiling systems for concealed and lay-in panel
ceilings. WAVE operates facilities in Pennsylvania, Maryland, Michigan, Nevada,
England, France, Spain and China.
TWB Company, L.L.C., a 33%-owned joint venture with Thyssen Krupp,
Rouge Steel, LTV Steel and Bethlehem Steel, is located in Monroe, Michigan. It
produces laser welded blanks for use in the auto industry for products such as
inner door frames.
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 in Jackson, Michigan, operates primarily as a toll processor for USX
Corporation.
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Worthington Gastec a.s., a 51%-owned consolidated joint venture with a
local Czech Republic entrepreneur, operates a pressure cylinder manufacturing
facility in Hustopece, Czech Republic.
Spartan Steel Coating, L.L.C., a 52%-owned consolidated joint venture
with Rouge Steel Company, operates a cold rolled hot dipped galvanizing facility
near Monroe, Michigan.
Worthington S.A., a 52%-owned consolidated joint venture with three
Brazilian propane producers, operates a cylinder manufacturing facility in Itu,
Brazil.
See "Note J - Investment in Unconsolidated Affiliates" of the Company's
Notes to Consolidated Financial Statements included in Worthington's 1999 Annual
Report to Shareholders for additional information on the Company's
unconsolidated joint ventures.
INVESTMENT IN ROUGE INDUSTRIES, INC.
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The Company also owns a minority interest (27%) in Rouge Industries,
Inc. ("Rouge"), which operates an integrated steel mill located in Dearborn,
Michigan.
In March 1997, the Company issued 5,999,600 DECS SM (Debt Exchangeable
for Common Stock SM). Under the DECS, the Company issued $93 million principal
amount of 7-1/4% exchangeable notes due March 1, 2000. At maturity of the Notes,
the principal amount of each DECS will be mandatorily exchanged by Worthington
into shares of Rouge Class A Common Stock or, at the Company's option, cash
equivalent for all or part thereof. Worthington's current Rouge stockholdings
are sufficient to settle the DECS liability and the Company intends to settle
the liability with those holdings.
DISCONTINUED OPERATIONS
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CUSTOM PLASTICS. The Company completed the divestiture of its
Worthington Custom Plastics businesses in the fourth quarter of fiscal 1999.
While operated by the Company, Worthington Custom Plastics manufactured and
supplied injection molded plastic parts to automobile manufacturers and their
suppliers, and to manufacturers of appliances, lawn and garden products,
recreational products, business equipment, audio equipment, furniture and other
items. Worthington Custom Plastics operated six manufacturing facilities in
Ohio, Kentucky, North Carolina and South Carolina.
PRECISION METALS. The Company completed the divestiture of its
Worthington Precision Metals operations in the second quarter of fiscal 1999.
While operated by the Company, Worthington Precision Metals produced extremely
close tolerance metal components for use by automobile manufacturers and their
suppliers in power steering, transmission, anti-lock brake and other automotive
mechanical systems. This business operated two facilities located in Ohio and
Tennessee.
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STEEL CASTINGS. The Company completed the divestiture of its Buckeye
Steel Castings operations in the third quarter of fiscal 1999. While operated by
the Company, Buckeye Steel Castings designed, produced and machined a broad line
of railcar and industrial steel castings. The Company believes Buckeye is North
America's leading designer and producer of undercarriages for mass transit cars.
Buckeye's facility in Columbus, Ohio is the largest single site steel foundry in
the United States.
ENVIRONMENTAL REGULATION
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The Company's manufacturing facilities, generally in common with those
of similar industries making similar products, are subject to many federal,
state and local requirements relating to the protection of the environment. The
Company continually examines ways to reduce emissions and waste and to effect
cost savings related to environmental compliance. Management does not anticipate
that capital expenditures for environmental control facilities required in order
to meet environmental requirements will be material when compared with the
Company's overall capital expenditures and, accordingly, will not be material to
its financial position or results of operations.
ITEM 2. - PROPERTIES
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The Company's corporate offices are located in Columbus, Ohio. Its
principal properties consist of 41 manufacturing facilities, excluding those of
unconsolidated joint ventures. These facilities are well maintained and in good
operating condition. The Company's manufacturing facilities contain in excess of
9,000,000 sq. ft. in the aggregate and are adequate to meet the Company's
present needs.
The locations of these facilities, as well as the Company's joint
ventures, are set forth on page 36 of the Company's 1999 Annual Report to
Shareholders, which information is incorporated herein by reference.
See "Item 1 - Business - Processed Steel Products," "- Metal Framing,"
and "- Pressure Cylinders" for further discussion on properties owned within
particular segments.
ITEM 3. - LEGAL PROCEEDINGS
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Various legal actions arising in the ordinary course of business are
pending against the Company. None of the litigation pending against the Company,
individually or collectively, is expected to have a material adverse effect on
the Company.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
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EXECUTIVE OFFICERS OF THE COMPANY
The following table lists the names, positions held, and ages of all
executive officers of the Company:
<TABLE>
<CAPTION>
PRESENT OFFICE HELD
NAME AGE POSITIONS WITH THE COMPANY SINCE
---- --- -------------------------- -----
<S> <C> <C> <C>
John H. McConnell 76 Chairman Emeritus & Founder 1996
John P. McConnell 45 Chairman & Chief Executive Officer 1996
John S. Christie 49 President & Chief Operating Officer 1999
Edward A. Ferkany 62 Executive Vice President 1998
Ralph V. Roberts 52 President, The Worthington Steel Company 1998
John T. Baldwin 42 Vice President & Chief Financial Officer 1998
Dale T. Brinkman 46 Vice President-Administration, General Counsel & 1998
Assistant Secretary
Mark H. Stier 52 Vice President-Human Resources 1997
Michael R. Sayre 42 Controller 1996
Gregory P. Youngblood 40 Treasurer 1999
</TABLE>
John H. McConnell founded the Company in 1955 and served as its Chief
Executive Officer and Chairman of the Board of Directors until May 1993. Mr.
McConnell retired from the position of Chief Executive Officer in May 1993 and
as Chairman of the Board in September 1996, when he assumed the title of
Chairman Emeritus and Founder.
John P. McConnell has served as Chief Executive Officer of the Company
since June 1993 and Chairman of the Board of Directors since September 1996. Mr.
McConnell served on the Board of Directors of the Company since 1990 and as Vice
Chairman of the Company from 1992 through 1996.
John S. Christie succeeded Donal H. Malenick as President and Chief
Operating Officer of the Company in June 1999. Prior to joining the Company, Mr.
Christie served as President of JMAC, Inc., a private investment company, from
1995 through 1999. From 1988 through 1995, Mr. Christie served as Senior Vice
President, Corporate Development for Battelle Memorial Institute, a non-profit
research and development institute.
Edward A. Ferkany has served as Executive Vice President of the Company
since June 1998. Prior to June 1998, Mr. Ferkany served as Group Vice President-
Processed Steel for the Company since 1985.
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Ralph V. Roberts has served as President, The Worthington Steel Company
since June 1998. Prior thereto, Mr. Roberts served as Vice President-Corporate
Development from June 1997 through May 1998, and as President of the Company's
WAVE joint venture from its formation in June 1992 through June 1997.
John T. Baldwin has served as Vice President and Chief Financial
Officer of the Company since December 1998. Prior to that time, Mr. Baldwin
served as Treasurer of the Company since September 1997. Before joining the
Company, Mr. Baldwin served as Assistant Treasurer of Tenneco, Inc. from 1994
through September 1997.
Dale T. Brinkman has served as Vice President-Administration, General
Counsel and Assistant Secretary of the Company since December 1998. Prior to
that time, Mr. Brinkman served as General Counsel and Assistant Secretary for
the Company.
Mark H. Stier has served as Vice President-Human Resources of the
Company since August 1997. Prior to that time, Mr. Stier served for more than
ten years as General Manager of The Worthington Steel Company, Porter, Indiana.
Michael R. Sayre has served as Controller of the Company since February
1996. Prior to 1996, Mr. Sayre served as Controller of The Worthington Steel
Company, Columbus, Ohio since November 1993.
Gregory P. Youngblood has served as Treasurer of the Company since he
joined the Company in January 1999. Prior thereto, Mr. Youngblood served in
various Treasury capacities, including as Assistant Treasurer, for Cardinal
Health, Inc., a healthcare products company from October 1995 through January
1999. Prior to October 1995, Mr. Youngblood served in various capacities for
Lyondell Petrochemical Co., a chemical company, including Treasury Management
Consultant, from 1994 through 1995.
Executive officers serve at the pleasure of the directors. John H.
McConnell is the father of John P. McConnell. There are no other family
relationships among the executive officers of the Company. No arrangements or
understandings exist pursuant to which any person has been, or is to be,
selected as an officer.
PART II
ITEM 5. - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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The information called for by this Item 5 is incorporated herein by
reference to the information set forth under the caption "Stock Trading, Price
and Dividend Information" on page 3 of the Worthington Industries, Inc.
1999 Annual Report to Shareholders (the "1999 Annual Report").
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ITEM 6. - SELECTED FINANCIAL DATA
- ---------------------------------
The information called for by this Item 6 is incorporated herein by
reference to the information set forth under the caption "Five Year Selected
Financial Data" on page 4 of the 1999 Annual Report.
ITEM 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
- ---------------------
The information called for by this Item 7 is incorporated herein by
reference to the information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 5 through 13 of the 1999 Annual Report and should be read in conjunction
with the information incorporated by reference into Item 8 of this Form 10-K.
ITEM 7A. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Because the Company's exposures to market risk are not material, no
response to this item is required.
ITEM 8. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------
The following Consolidated Financial Statements of Worthington
Industries, Inc. and Subsidiaries, Notes to Consolidated Financial Statements
and Report of Independent Auditors, set forth on pages 14 through 19, 20 through
33 and 35, respectively, of the 1999 Annual Report are incorporated herein by
reference:
Consolidated Balance Sheets--May 31, 1999 and 1998
Consolidated Statements of Earnings--Years ended May 31, 1999, 1998 and
1997.
Consolidated Statements of Shareholders' Equity--Years ended May 31,
1999, 1998 and 1997.
Consolidated Statements of Cash Flows--Years ended May 31, 1999, 1998
and 1997.
Notes to Consolidated Financial Statements
Report of Independent Auditors
ITEM 9. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None.
13
<PAGE> 14
PART III
ITEM 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------------------------------
In accordance with General Instruction G(3) of Form 10-K, the
information required by this Item 10 with respect to the identification of
directors is incorporated herein by reference to the material under the heading
"Election of Directors" contained on pages 2 through 6 of the Worthington
Industries, Inc. definitive Proxy Statement (the "Proxy Statement") for the 1999
Annual Meeting of Shareholders to be held on September 23, 1999, a copy of which
was filed with the Securities and Exchange Commission on August 16, 1999. The
information regarding executive officers required by Item 401 of Regulation S-K
is included in Part I hereof under the heading "Executive Officers of the
Company." The information required by Item 405 of Regulation S-K is incorporated
herein by reference to the material under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance" contained on page 6 of the Proxy Statement.
ITEM 11. - EXECUTIVE COMPENSATION
- ---------------------------------
In accordance with General Instruction G(3) of Form 10-K, the
information required by this Item 11 is incorporated herein by reference to the
information contained in the Proxy Statement under the headings "Election of
Directors --Compensation of Directors" on page 5, "Executive Compensation --
Summary of Cash and Certain OtheR Compensation" on pages 7 and 8, "--Option
Grants" on page 8, "--Option Exercises and Holdings" on pages 8 and 9, anD
"--Long-Term Incentive Plan Awards" on page 9.
ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------
In accordance with General Instruction G(3) of Form 10-K, the
information required by this Item 12 is incorporated herein by reference to the
material contained in the Proxy Statement under the headings "Voting Securities
and Principal Holders Thereof - Security Ownership of Certain Beneficial Owners"
on page 2 and "Election of Directors" contained on pages 2 through 5.
ITEM 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
In accordance with General Instruction G(3) of Form 10-K, the
information required by this Item 13 is incorporated herein by reference to
footnote (3) and the second paragraph after footnote (7) to the table under the
heading "Election of Directors," both contained on page 4 of the Proxy
Statement.
14
<PAGE> 15
PART IV
ITEM 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- ----------------------------------------------------------------------------
(a) (1) and (2) The response to this portion of Item 14 is submitted as a
separate section of this report--See "List of Financial Statements and
Financial Statement Schedules" on page F-1 of this report.
(3) Listing of Exhibits--See "Index to Exhibits" beginning on page E-1
of this report. The index to exhibits specifically identifies each
management contract or compensatory plan required to be filed as an
Exhibit to this Form 10-K.
(b) None.
(c) Exhibits filed with this report are attached hereto.
(d) Financial Statement Schedules--The response to this portion of Item 14
is submitted as a separate section of this report--See "List of
Financial Statements and Financial Statement Schedules" on Page F-1.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WORTHINGTON INDUSTRIES, INC.
Date: August 27, 1999 By: /s/John S. Christie
-------------------------
John S. Christie
President & Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
SIGNATURE DATE TITLE
--------- ---- -----
* * Director, Chairman &
- --------------------- Chief Executive Officer
John P. McConnell
* * Director, Chairman Emeritus
- --------------------- & Founder
John H. McConnell
/s/John S. Christie August 27, 1999 Director, President &
- --------------------- Chief Operating Officer
John S. Christie
s/John T. Baldwin August 27, 1999 Vice President & Chief
- --------------------- Financial Officer
John T. Baldwin
/s/Michael R. Sayre August 27, 1999 Controller
- ---------------------
Michael R. Sayre
* * Director, Secretary
- ---------------------
Charles D. Minor
* * Director
- ---------------------
John B. Blystone
* * Director
- ---------------------
Charles R. Carson
16
<PAGE> 17
* * Director
- ---------------------
William S. Dietrich
* * Director
- ---------------------
John F. Havens
* * Director
- ---------------------
Peter Karmanos, Jr.
* * Director
- ---------------------
Pete A. Klisares
* * Director
- ---------------------
Donal H. Malenick
* * Director
- ---------------------
Robert B. McCurry
* * Director
- ---------------------
Gerald B. Mitchell
* * Director
- ---------------------
James Petropoulos
* * Director
- ---------------------
Mary Fackler Schiavo
*By: /s/John S. Christie Date: August 27, 1999
-------------------------- -----------------
John S. Christie
Attorney-In-Fact
17
<PAGE> 18
F-1
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a) (1) AND (2) AND ITEM 14 (d)
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
The following Consolidated Financial Statements of Worthington Industries, Inc.,
and Subsidiaries, Notes to Consolidated Financial Statements and Report of
Independent Auditors, are set forth on pages 14 through 19, 20 through 33 and
page 35, respectively, of Worthington Industries, Inc.'s 1999 Annual Report to
Shareholders, are incorporated by reference in Item 8:
Consolidated Balance Sheets -- May 31, 1999 and 1998
Consolidated Statements of Earnings -- Years ended May 31, 1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity -- Years ended May 31, 1999,
1998 and 1997
Consolidated Statements of Cash Flows -- Years ended May 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Auditors
The following consolidated financial statement schedules of Worthington
Industries, Inc. and Subsidiaries are included in Item 14 (d):
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted, or
the required information is provided in the Consolidated Financial Statements of
Worthington Industries, Inc. and its Subsidiaries or the Notes thereto.
F-1
<PAGE> 19
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
Additions
--------------------------------------
Balance (1) (2) Balance at
DESCRIPTION at beginning Charged to Cost Charged to Other Deductions End of
of Period and Expenses Accounts - Describe -Describe Period
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
You Ended May 31, 1999:
Deducted from asset accounts: $ 140,927
Allowance for possible (269,467)(C)
losses on trade accounts 307,705(D)
---------
receivable $4,130,000 $ 290,365 $ 179,210 $390,575(A) $4,209,000
========== ========== ========= ======== ==========
You Ended May 31, 1998:
Deducted from asset accounts:
Allowance for possible
losses on trade accounts
receivable $3,900,000 $1,098,713 $ 0 $868,713(A) $4,130,000
========== ========== ========= ======== ==========
You Ended May 31, 1997:
Deducted from asset accounts:
Allowance for possible
losses on trade accounts
receivable $2,792,000 $ 947,368 $ 300,000(E) $139,368(A) $3,900,000
========== ========== ========= ======== ==========
</TABLE>
Note A - Uncollectible accounts charged to the allowance.
Note B - Amount from Heiser acquisition.
Note C - Amount from discontinued operations.
Note D - Miscellaneous amounts
Note E - Amount from PMI acquisition
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
2 Agreement of Merger, dated as Incorporated herein by reference to
of August 20, 1998, between Exhibit 2 of the Registrant's Quarterly
Worthington Industries, Inc., Report on Form 10-Q for the quarter
the Delaware corporation, and ended August 31, 1998
Worthington Industries, Inc.,
the Ohio corporation.
3(a) Amended Articles of Incorporated herein by reference to
Incorporation of Worthington Exhibit 3(a) of the Registrant's
Industries, Inc. Quarterly Report on Form 10-Q for the
quarter ended August 31, 1998
3(b) Code of Regulations of Incorporated herein by reference to
Worthington Industries, Inc. Exhibit 3(b) of the Registrant's
Quarterly Report on Form 10-Q for the
quarter ended August 31, 1998
4(a) Form of Indenture dated as of May 15, Incorporated herein by reference to
1996 between the Exhibit 4(a) of the Registrant's Annual
Company and PNC Bank, Report on Form 10-K for fiscal year
Ohio, National Association, as ended May 31, 1997
Trustee, relating to up to
$450,000,000 of debt securities
4(b) Form of 7-1/8% Notes due Incorporated herein by reference to
2006 Exhibit 4(b) of the Registrant's Annual
Report on Form 10-K for fiscal year
ended May 31, 1997
4(c) First Supplemental Indenture, Incorporated herein by reference to
dated as of February 27, 1997 Exhibit 4(c) of the Registrant's Annual
between the Company and Report on Form 10-K for fiscal year
PNC Bank, Ohio, National ended May 31, 1997
Association, as Trustee
</TABLE>
E-1
<PAGE> 21
<TABLE>
<S> <C> <C>
4(d) Form of 7-1/4% Exchangeable Incorporated herein by reference to
Note Due March 1, 2000 Exhibit 4(d) of the Registrant's Annual
Report on Form 10-K for fiscal year ended
May 31, 1997
4(e) Second Amended and Restated Loan
Agreement, dated as of October 14, 1998,
between Worthington Industries, Inc., The
Bank of Nova Scotia, PNC Bank, National
Association, NationsBank, N.A., Wachovia
Bank of Georgia, N.A., NBD Bank, Bank
One, N.A. and National City Bank
4(f) Form of 6.7% Notes due 2009 Incorporated herein by reference to Exhibit 4(f)
of the Registrant's Annual Report on Form 10-K for
the fiscal year ended May 31, 1998.
4(g) Second Supplemental Indenture, dated as Incorporated herein by reference to Exhibit 4(g) the
of December 12,1997, between Worthington Registrant's Annual Report on Form 10-K for of the
Industries, Inc. and PNC Bank, Ohio, fiscal year ended May 31, 1998
National Association, as Trustee
4(h) Third Supplemental Indenture, dated as of
October 13, 1998, between Worthington
Industries, Inc., a Delaware corporation,
Worthington Industries, Inc., an Ohio
corporation, and PNC Bank, National
Association, as Trustee
</TABLE>
E-2
<PAGE> 22
<TABLE>
<S> <C> <C>
4(i) Assignment and Assumption Agreement, dated
as of October 14, 1998, between
Worthington Industries, Inc., a Delaware
corporation, Worthington Industries, Inc.,
an Ohio corporation, The Bank of Nova
Scotia and PNC Bank, Ohio, National
Association, as Agents.
4(j) Agreement to furnish instruments defining
rights of holders of long-term debt
10(a) Amended 1980 Stock Option Plan, as Incorporated herein by reference to Annex B to the
amended* Prospectus filed as part of Post-Effective
Amendment No. 1 to the Registrant's Registration
Statement on Form S-8 (Registration No. 2-80094)
10(b) 1990 Stock Option Plan, as amended*
10(c) Executive Deferred Compensation Plan* Incorporated herein by reference to Exhibit
10(e) of the Registrant's Annual Report on
Form 10-K for the fiscal year ended May 31, 1984
10(d) Deferred Compensation Plan for Incorporated herein by reference to Exhibit
Directors* 10(f) of the Registrant's Annual Report on Form 10-K
for the fiscal year ended May 31, 1984
10(e) 1997 Long-Term Incentive Plan* Incorporated herein by reference to Exhibit 10(e)
of the Registrant's Annual Report on Form 10-K for
the fiscal year ended May 31, 1997
13 1999 Annual Report to Shareholders
21 Subsidiaries of the Registrant
</TABLE>
E-3
<PAGE> 23
23 Consent of Ernst & Young LLP
24 Powers of Attorney
27 Financial Data Schedule
*Management Compensation Plan
E-4
<PAGE> 1
EXHIBIT 4(e)
------------
SECOND AMENDED AND RESTATED LOAN AGREEMENT
------------------------------------------
<PAGE> 2
SECOND AMENDED AND RESTATED
LOAN AGREEMENT
$300,000,000
CREDIT FACILITY
FROM
THE BANK OF NOVA SCOTIA
PNC BANK, NATIONAL ASSOCIATION
NATIONSBANK, N.A.
WACHOVIA BANK OF GEORGIA, N.A.
NBD BANK
BANK ONE, N.A.
AND
NATIONAL CITY BANK
(COLLECTIVELY, THE "LENDERS")
AND
THE BANK OF NOVA SCOTIA
AND
PNC BANK, NATIONAL ASSOCIATION
AS AGENT FOR THE LENDERS
TO
WORTHINGTON INDUSTRIES, INC. ("BORROWER")
DATED AS OF OCTOBER 14, 1998
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<C> <S> <C>
1. Definitions..............................................................................1
1.1 Defined Terms.....................................................................1
1.2 Other Definitional Provisions....................................................20
1.3 Additional Definitional Provisions...............................................20
2. Credit Facilities.......................................................................20
2.1 Revolving Credit Facility........................................................20
2.2 The Competitive Bid Facility.....................................................23
2.3 Secondary Revolving Credit Facility..............................................27
2.4 Additional Provisions Regarding Funding..........................................29
2.5 Principal Payments...............................................................30
2.6 Default Rate.....................................................................31
2.7 Termination or Reduction of Revolving Commitments................................31
2.8 Termination or Reduction of Secondary Revolving Credit Commitments...............31
2.9 Records..........................................................................32
2.10 Assumptions Regarding Notices....................................................32
2.11 Computations, Fees, Payments, Etc................................................33
2.12 Additional Costs.................................................................36
2.13 Obligation to Indemnify..........................................................37
2.14 Extension........................................................................38
2.15 Increase of Total Revolving Credit Commitment....................................39
3. Conditions Precedent....................................................................39
3.1 Closing..........................................................................40
3.2 Each Advance.....................................................................40
</TABLE>
-i-
<PAGE> 4
<TABLE>
<C> <S> <C>
4. Representations and Warranties..........................................................40
4.1 Organization.....................................................................40
4.2 Latest Financials................................................................40
4.3 Recent Adverse Changes...........................................................40
4.4 Litigation, Etc..................................................................41
4.5 Taxes............................................................................41
4.6 Authority........................................................................41
4.7 Other Defaults...................................................................41
4.8 Licenses, Etc....................................................................41
4.9 ERISA............................................................................42
4.10 Regulation U.....................................................................42
4.11 Closing Memo.....................................................................42
4.12 Environmental Matters............................................................42
5. Affirmative Covenants...................................................................42
5.1 Books and Records................................................................42
5.2 SEC Filings and Shareholders Reports.............................................42
5.3 Quarterly Statements.............................................................42
5.4 Annual Statements................................................................43
5.5 Taxes............................................................................43
5.6 Insurance........................................................................43
5.7 Compliance with Laws.............................................................43
5.8 Environmental Violations.........................................................44
5.9 ERISA Compliance.................................................................44
5.10 Notice of Default................................................................44
5.11 Change in Business...............................................................44
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<C> <S> <C>
6. Negative Covenants......................................................................44
6.1 Liens............................................................................44
6.2 Restrictions on Indebtedness of Consolidated Subsidiaries........................44
6.3 Ownership........................................................................44
6.4 Consolidated Indebtedness to Capitalization......................................45
6.5 Net Worth........................................................................45
6.6 Merger...........................................................................45
6.7 Sale of Assets...................................................................45
6.8 Transactions with Unrestricted Subsidiaries......................................45
6.9 Governance Documents.............................................................45
7. Events of Default.......................................................................45
7.1 Payment..........................................................................46
7.2 Covenants........................................................................46
7.3 Representations and Warranties...................................................46
7.4 Bankruptcy, Etc., of Borrower or an Active Consolidated Subsidiary...............46
7.5 Bankruptcy, Etc., of Unrestricted Subsidiary.....................................46
7.6 Judgments........................................................................46
7.7 Other Indebtedness...............................................................47
8. Intercreditor Lien and Payment Provisions...............................................47
8.1 Sharing of Payments, Etc.........................................................47
8.2 Receipt of Payments by Lenders...................................................49
8.3 Distributions, Etc...............................................................49
8.4 Benefit..........................................................................50
9. Representations and Warranties to Survive...............................................50
10. Environmental Indemnification...........................................................50
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<C> <S> <C>
11. Agents..................................................................................50
11.1 Authorization and Action.........................................................50
11.2 Agents' Reliance, Etc............................................................51
11.3 Agents and Their Affiliates......................................................52
11.4 Lender Credit Decision...........................................................52
11.5 Indemnification..................................................................52
11.6 Successor Agent..................................................................53
11.7 Relations Among Lenders..........................................................53
11.8 Benefit..........................................................................53
12. General.................................................................................53
12.1 Waiver...........................................................................53
12.2 Notices..........................................................................54
12.3 Successors and Assigns...........................................................56
12.4 Modifications....................................................................60
12.5 Illegality.......................................................................60
12.6 Gender, Etc......................................................................60
12.7 Headings.........................................................................61
12.8 Liability of Lenders.............................................................61
12.9 Execution in Counterparts........................................................61
12.10 Remedies Cumulative..............................................................61
12.11 Costs, Expenses and Legal Fees...................................................61
12.12 Indemnity........................................................................62
12.13 Continuing Agreement.............................................................62
12.14 Complete Agreement...............................................................62
12.15 No Third Party Beneficiaries.....................................................62
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<C> <S> <C>
12.16 Tax Withholding Clause...........................................................63
12.17 No Partnership or Joint Venture..................................................63
12.18 Governing Law and Jurisdiction; Waiver of Jury Trial.............................64
Exhibit A.......................................................................................67
</TABLE>
-v-
<PAGE> 8
SECOND
AMENDED AND RESTATED
LOAN AGREEMENT
--------------
WORTHINGTON INDUSTRIES, INC., an Ohio corporation, the successor in
interest to Worthington Industries, Inc., a Delaware corporation ("Borrower"),
the banks listed on the Amended and Restated Schedule 1 (each individually
"Revolving Credit Lender" and collectively "Revolving Credit Lenders"), the
banks listed on Schedule 2 (each individually "Secondary Revolving Credit
Lender" and collectively, "Secondary Revolving Credit Lenders") and THE BANK OF
NOVA SCOTIA and PNC BANK, NATIONAL ASSOCIATION, the successor in interest to PNC
Bank, Ohio, National Association, as agents for the Lenders (as hereinafter
defined) and individually as Revolving Credit Lenders and Secondary Revolving
Credit Lenders (individually, the "Agent" and jointly and severally, "Agents"),
hereby agree as set forth in the following sections of this Agreement. This
Agreement completely amends and restates the Amended and Restated Loan Agreement
between Borrower, Lenders and Agents dated as of May 30, 1997. All references in
the Loan Documents (as hereinafter defined) to the "Loan Agreement" will mean
this Agreement and all amendments hereto and restatements hereof.
1. DEFINITIONS.
1.1 DEFINED TERMS. For purposes of this Agreement the following
terms will have the following meanings:
1.1.1 "Active Consolidated Subsidiary(ies)" will mean a
Consolidated Subsidiary having a net worth in excess
of $1,000,000.
1.1.2 "Advance" or "Advances" will mean Revolving Loans,
Secondary Revolving Credit Loans, and Competitive Bid
Loans made pursuant to this Agreement.
1.1.3 "Administrative Agent" will mean The Bank of Nova
Scotia, its successors and assigns.
1.1.4 "Administrative Agent's Account" will mean the
account of Administrative Agent maintained by
Administrative Agent at its office for purpose of
receipt of funds hereunder and as designated by
Administrative Agent in a written notice to Borrower
and Lenders.
1.1.5 "Affiliate(s)" will mean, with respect to any Person
(a) any other Person directly or indirectly
controlling, controlled by or under common control
with such Person, or (b) any Person who is a director
or officer of such Person or any Subsidiary thereof.
A Person will be deemed to control another Person if
such Person possesses, directly or indirectly, the
power to (i) vote ten percent (10%) or more of the
voting equity of such other Person, or (ii) direct or
cause the direction of the management and policies of
such other Person, whether through voting securities,
by contract or otherwise.
<PAGE> 9
1.1.6 "Aggregate Outstanding Revolving Credit" will mean an
amount equal to the aggregate unpaid principal amount
of all Revolving Loans and of all Competitive Bid
Loans.
1.1.7 "Aggregate Outstanding Secondary Revolving Credit"
will mean an amount equal to the aggregate unpaid
principal amount of all Secondary Revolving Credit
Loans.
1.1.8 "Agreement" will mean this Loan Agreement and any
amendments or supplements thereto made from time to
time in accordance with the terms of this Agreement.
1.1.9 "Alternate Base Rate" will mean the higher of: (i)
the average of the Base Rate of each of the Agents or
(ii) the Federal Funds Rate plus 0.5% per annum. Any
change in the Alternate Base Rate due to a change in
the Base Rate or the Federal Funds Rate will be
effective on the effective date of such change in the
Base Rate or the Federal Funds Rate without notice to
Borrower. The Administrative Agent will provide
Borrower notice of any change in the Alternate Base
Rate as soon as practicable but in any event within
24 hours, provided, however, that any failure of
Administrative Agent to provide such notice will not
affect the effectiveness of the change in the
Alternate Base Rate.
1.1.10 "Alternate Base Rate Advance" will mean any Advance
or Converted Advance that bears interest based upon
the Alternate Base Rate.
1.1.11 "Alternate Secondary Revolving Credit Base Rate" will
mean the higher of: (i) the average of the Base Rate
of each of the Agents or (ii) the Federal Funds Rate
plus 0.55% per annum. Any change in the Alternate
Secondary Revolving Credit Base Rate due to a change
in the Base Rate or the Federal Funds Rate will be
effective on the effective date of such change in the
Base Rate or the Federal Funds Rate without notice to
Borrower. The Administrative Agent will provide
Borrower notice of any change in the Alternate
Secondary Revolving Credit Base Rate as soon as
practicable but in any event within 24 hours,
provided, however, that any failure of Administrative
Agent to provide such notice will not affect the
effectiveness of the change in the Alternate
Secondary Revolving Credit Base Rate.
1.1.12 "Alternate Secondary Revolving Credit Base Rate
Advance" will mean any Advance or Converted Advance
that bears interest based upon the Alternate
Secondary Revolving Credit Base Rate.
1.1.13 "Applicable Margin" will mean:
-2-
<PAGE> 10
1.1.13.1 as to Revolving Loans that bear interest at
the Euro-Rate, initially 18.5 basis points;
provided that such rate will be adjusted as
follows based on Borrower's Senior Unsecured Debt
Rating determined as of the end of the Borrower's
previous quarter:
<TABLE>
<CAPTION>
SENIOR UNSECURED DEBT RATING APPLICABLE MARGIN
(IN BASIS POINTS)
<S> <C>
greater than or equal to A/A2 17.0
A-/A3 18.5
BBB+/Baa1 20.0
BBB/Baa2 22.5
less than BBB/Baa2 25.0
</TABLE>
The Applicable Margin as to Revolving Loans that bear
interest at the Euro-Rate will be adjusted as of the
first day of the fiscal quarter based upon the Senior
Unsecured Debt Rating as determined by Administrative
Agent. In the event that Borrower's Senior Unsecured
Debt Rating by Moody's Investor Service, Inc. is
different from the rating received from Standard &
Poors Ratings Service, a division of McGraw-Hill
Companies, Inc. ("Standard & Poors"), the higher of
the two ratings will control. Such adjustments will
apply to all outstanding Revolving Loans that bear
interest at the Euro-Rate and to any such Advances
made or converted on or after such date.
1.1.13.2 as to Competitive Bid Loans that bear
interest at the Euro-Rate, the margin specified
in the related Competitive Bid accepted by
Borrower.
1.1.14 "Applicable Secondary Revolving Credit Margin" will
mean as to Secondary Revolving Credit Loans that bear
interest at the Euro-Rate, initially 20.0 basis
points; provided that such rate will be adjusted as
follows based on Borrower's Senior Unsecured Debt
Rating determined as of the end of the Borrower's
previous quarter:
<TABLE>
<CAPTION>
SENIOR UNSECURED DEBT RATING APPLICABLE SECONDARY
REVOLVING CREDIT
MARGIN
(IN BASIS POINTS)
<S> <C>
greater than or equal to A/A2 18.5
</TABLE>
-3-
<PAGE> 11
<TABLE>
<S> <C>
A-/A3 20.0
BBB+/Baa1 21.5
BBB/Baa2 24.0
less than BBB/Baa2 26.5
</TABLE>
The Applicable Secondary Revolving Credit Margin as
to Secondary Revolving Credit Loans that bear
interest at the Euro-Rate will be adjusted as of the
first day of the fiscal quarter based upon the Senior
Unsecured Debt Rating as determined by Administrative
Agent. In the event that Borrower's Senior Unsecured
Debt Rating by Moody's Investor Service, Inc. is
different from the rating received from Standard &
Poors Ratings Service, a division of McGraw-Hill
Companies, Inc. ("Standard & Poors"), the higher of
the two ratings will control. Such adjustments will
apply to all outstanding Secondary Revolving Credit
Loans that bear interest at the Euro-Rate and to any
such Advances made or converted on or after such
date.
1.1.15 "Assignment and Acceptance" will mean a form
substantially in the form of the Amended and Restated
Assignment and Acceptance form delivered to each
Revolving Credit Lender to transfer interests in its
Loans.
1.1.16 "Attorneys Fees" will mean the reasonable value of
the services (and all costs and expenses related
thereto) of the attorneys (and all paralegals and
other staff employed by such attorneys) employed by
Lender from time to time to: (i) take any action in
or with respect to any suit or proceedings
(bankruptcy or otherwise) relating to this Agreement;
(ii) enforce any of Lender's rights to collect any of
the Obligations; (iii) give Lender advice with
respect to this Agreement, including but not limited
to advice in connection with any default, workout or
bankruptcy; and (iv) prepare any amendments,
restatements, or waivers to this Agreement or any of
the documents executed in connection with any of the
Obligations.
1.1.17 "Available Commitment" will mean, as to any Revolving
Credit Lender at any time, an amount equal to the
excess, if any, of (a) such Revolving Credit Lender's
Revolving Commitment over (b) the then outstanding
Revolving Loans made by such Revolving Credit Lender.
1.1.18 "Available Secondary Revolving Credit Commitment"
will mean, as to any Secondary Revolving Credit
Lender at any time, an amount equal to the excess, if
any, of (a) such Secondary Revolving Credit Lender's
Secondary Revolving Credit Commitment over (b) the
then outstanding
-4-
<PAGE> 12
Secondary Revolving Credit Loans made by such
Secondary Revolving Credit Lender.
1.1.19 "Base Rate" will mean the rates established by each
of the Administrative Agent and the Documentation
Agent from time to time based on its consolidation of
various factors, including money market, business and
competitive factors, and is not necessarily its most
favored interest rate, provided that in no event will
the Base Rate of either Agent exceed such Agent's
announced "prime rate".
1.1.20 "Borrower's Account" will mean the account of
Borrower at Administrative Agent designated by
Administrative Agent for use hereunder.
1.1.21 "Borrowing" will mean an Advance made on a given
Borrowing Date.
1.1.22 "Borrowing Date" will mean the date on which an
Advance is made.
1.1.23 "Business Day" will mean a day of the year on which
banks located in New York, New York are not required
or authorized to close and, if the applicable
Business Day relates to any Euro-Rate Advance, such
day must also be a day on which dealings are carried
on in the London interbank market.
1.1.24 "Capitalization" will mean Consolidated Indebtedness
plus Net Worth.
1.1.25 "Closing" will mean the execution and delivery of the
documents listed on the Closing Memo.
1.1.26 "Closing Date" will mean April 28, 1995.
1.1.27 "Closing Memo" will mean the Amended and Restated
Closing Memorandum between Borrower and Documentation
Agent in connection with the transactions represented
by this Agreement.
1.1.28 "Code" will mean the Internal Revenue Code of 1986,
as amended or supplemented from time to time.
1.1.29 "Competitive Bid Borrowings" will mean the amount of
Competitive Bid Loans outstanding at any particular
time.
1.1.30 "Competitive Bid Conditions" will mean the conditions
set forth in Section 2.2 and 3, below, and in the
Competitive Bid Notes.
1.1.31 "Competitive Bid Facility" will mean the credit
facility described in Section 2.2 below.
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1.1.32 "Competitive Bid Lender" will mean any Lender that
makes a Competitive Bid Loan, its successors and
assigns.
1.1.33 "Competitive Bid Loans" will mean the Advances
described in Section 2.2, below.
1.1.34 "Competitive Bid Notes" will mean collectively the
Amended and Restated Competitive Bid Notes evidencing
the Competitive Bid Facility described in Section
2.2, below, and will include all amendments thereto
and any future restatements thereof.
1.1.35 "Competitive Bid Rate" will mean the interest rate
applicable to a Competitive Bid or a Competitive Bid
Loan.
1.1.36 "Competitive Bid Request(s)" will mean the form for
requesting Competitive Bid Loans in the form of the
Amended and Restated Competitive Bid Requests
delivered by Documentation Agent to Borrower, and all
amendments thereto and any future restatements
thereof.
1.1.37 "Competitive Bids" will mean offers by Revolving
Credit Lenders to make Competitive Bid Loans made in
accordance with Section 2.2, below, pursuant to the
form for requesting Competitive Bid Loans delivered
by Documentation Agent to Revolving Credit Lenders in
connection with the Closing and all amendments
thereto and restatements thereof.
1.1.38 "Compliance Certificate" will mean the Amended and
Restated Compliance Certification in the form
delivered to Borrower by Documentation Agent.
1.1.39 "Consolidated Group" will mean Borrower and those of
its Subsidiaries treated as Consolidated Subsidiaries
for purposes of this Agreement.
1.1.40 "Consolidated Indebtedness" will mean at any date,
the Indebtedness of Borrower and its Consolidated
Subsidiaries, determined on a consolidated basis as
of such date.
1.1.41 "Consolidated Subsidiary(ies)" will mean at any date
any Subsidiary the accounts of which would be
consolidated with those of Borrower in its
consolidated financial statements if such statements
were prepared as of such date, but excluding any
Unrestricted Subsidiary.
1.1.42 "Conversion" or "Converted" will mean the switching
from one rate mode to another for a particular
Advance or Converted Advance in accordance with the
terms of this Agreement.
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1.1.43 "Converted Advance" will mean a Revolving Advance or
Secondary Revolving Credit Advance where the rate of
interest originally elected has been converted by
means of a Conversion.
1.1.44 "Credit Facilities" will mean the Revolving Credit
Facility, the Secondary Revolving Credit Facility and
the Competitive Bid Facility evidenced by this
Agreement as described in Section 2, below.
1.1.45 "Current Audited Financial Statements" will mean
Borrower's audited consolidated balance sheet dated
May 31, 1994 and Borrower's related audited
consolidated statements of earnings, shareholders'
equity and cash flows for the fiscal year ended May
31, 1994, all as set forth in Borrower's Form 10-K
for the year ended May 31, 1994.
1.1.46 "Current Financial Statements" will mean the Current
Audited Financial Statements and Borrower's unaudited
consolidated balance sheet dated November 30, 1994
and Borrower's related unaudited consolidated
statements of earnings, shareholders' equity and cash
flows for the six months ended November 30, 1994, all
as set forth in Borrower's Form 10-Q for the six
months ended November 30, 1994 (subject to normal
year-end adjustments).
1.1.47 "Default" will mean any event or condition which,
with the passage of time or the giving of notice or
both, would constitute an Event of Default.
1.1.48 "Default Rate" will mean the Alternate Base Rate in
effect, from time to time, plus two percent (2%) per
annum, but not more than the highest rate permitted
by applicable law.
1.1.49 "Designated Lender" will mean any Person who has been
designated by a Revolving Credit Lender to fund
Competitive Bid Loans and has executed a Designation
Agreement and thereby become a party to this
Agreement pursuant to Section 12.3.7.
1.1.50 "Designating Lender" shall have the meaning assigned
to such term in Section 12.3.7.
1.1.51 "Designation Agreement" means a designation agreement
entered into by a Revolving Credit Lender and a
Designated Lender and accepted by the Agent, in
substantially the form of Exhibit A hereto.
1.1.52 "Documentation Agent" will mean PNC Bank, National
Association, its successors and assigns.
1.1.53 "Dollars" will mean lawful money of the United States
of America.
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1.1.54 "Environmental Laws" will mean any and all federal,
state, local and foreign statutes, laws, judicial
decisions, regulations, ordinances, rules, judgments,
orders, decrees, injunctions, permits, concessions,
grants, franchises, licenses, agreements and other
governmental restrictions relating to the
environment, the effect of the environment on human
health or to the emission, discharge or release of
pollutants, contaminants, Hazardous Wastes or
substances into the environment including, without
limitation, ambient air, surface water, ground water,
or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants,
contaminants, Hazardous Wastes or substances or the
clean-up or other remediation thereof.
1.1.55 "ERISA" will mean the Employee Retirement Income
Security Act of 1974, or any successor statute, as
amended or supplemented from time to time.
1.1.56 "ERISA Affiliate" will mean any person (as defined in
Section 3.1 of ERISA) including each trade or
business (whether or not incorporated) that together
with Borrower, or any Subsidiary thereof, would be
deemed to be a "single employer" or member of the
same "controlled group" within the meaning of Section
414 of the Code.
1.1.57 "Event of Default" will have the meaning set forth in
Section 7.
1.1.58 "Eurocurrency Liabilities" will have the meaning
assigned to that term in Regulation D of the Board of
Governors of the Federal Reserve System, as in effect
from time to time.
1.1.59 "Euro-Rate" will mean, with respect to the Revolving
Loans or Secondary Revolving Credit Loans comprising
any Advance or Converted Advance to which the
Euro-Rate applies for an Interest Period, the
interest rate per annum determined by the
Administrative Agent by dividing (the resulting
quotient will be rounded upward to the nearest
1/100th of 1% per annum): (i) the rate of interest
determined by the Administrative Agent in accordance
with its usual procedures (which determination will
be conclusive absent manifest error) to be the
average of the London interbank offered rates set
forth on the "LIBOR" page of the Reuters Monitor
Money Rate Service (or appropriate successor, or if
Reuters or its successor ceases to provide such
quotes, a comparable replacement determined by the
Administrative Agent) at approximately 11:00 a.m.
London time two (2) Business Days prior to the first
day of such Interest Period for an amount comparable
to such Advance or Converted Advance and having a
borrowing date and maturity comparable to such
Interest Period by (ii) a number equal to 1.00 minus
the Euro-Rate Reserve Percentage. The Euro-Rate may
also be expressed by the following formula:
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Average of London interbank offered rates on LIBOR
page of Euro-Rate =
Reuters Monitor Money Rate Service
or appropriate successor
-----------------------------------
1.00 - Euro-Rate Reserve Percentage
1.1.60 "Euro-Rate Advance" will mean any Advance or
Converted Advance that bears interest based upon the
Euro-Rate.
1.1.61 "Euro-Rate Competitive Bid Loan(s)" will mean a
Competitive Bid Loan with interest based upon the
Euro-Rate.
1.1.62 "Euro-Rate Reserve Percentage" of Lender for the
Interest Period for any Euro-Rate Advance will mean
the reserve percentage applicable, if any, as
determined by Administrative Agent, during such
Interest Period (or, if more than one such percentage
will be so applicable, the daily average of such
percentages for those days in such Interest Period
during which any such percentage are applicable)
under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve
requirement (including, without limitation, any
emergency, supplemental or other marginal reserve
requirement) for such Lender with respect to
liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such
Interest Period.
1.1.63 "Federal Funds Rate" will mean, for any period, a
fluctuating interest rate per annum equal for each
day during such period to the weighted average of the
rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the
quotations for such day for such transactions
received by Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
1.1.64 "Fixed Rate" will mean with respect to each Fixed
Rate Advance, the rate specified in the Competitive
Bid accepted by Borrower with respect to such Fixed
Rate Advance.
1.1.65 "Fixed Rate Advance" will mean any Advance that bears
interest based upon a Fixed Rate.
1.1.66 "Fixed Rate Competitive Bid Loan" will mean a
Competitive Bid Loan with interest based upon the
Fixed Rate.
1.1.67 "GAAP" will mean generally accepted accounting
principles.
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1.1.68 "Governmental Authority" will mean any nation or
government, any state or other political subdivision
thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative
functions of or pertaining to government, including,
without limitation, any department, commission,
board, bureau, agency, administration, service or
other instrumentality of the United States of
America, of any state, the District of Columbia,
municipality or any other governmental entity.
1.1.69 "Hazardous Wastes", "hazardous substances" and
"pollutants or contaminants" will mean any
substances, waste, pollutant or contaminant now or
hereafter included with any respective terms under
any now existing or hereinafter enacted or amended
federal, state or local statute, ordinance, code or
regulation designed to protect the environment,
including but not limited to the Comprehensive
Environmental Response, Compensation, and Liability
Act, 42 U.S.C. Section 9601 et seq. ("CERCLA").
1.1.70 "Indebtedness" will mean, for any Person at any date,
without duplication, (i) all obligations of such
Person for borrowed money, (ii) all obligations of
such Person evidenced by bond, debentures, notes or
other similar instruments, (iii) all obligations of
such Person to pay the deferred purchase price of
property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all
obligations of such Person as lessee that are
capitalized in accordance with generally accepted
accounting principles, (v) all Indebtedness of others
guaranteed by such Person and (vi) all contingent or
non-contingent obligations of such Person to
reimburse any bank or other Person in respect of
amounts paid or payable (currently or in the future,
on a contingent or non-contingent basis) under a
letter of credit or similar instrument; provided,
however, that in calculating Borrower's Indebtedness,
Borrower's "DECS" Exchangeable Notes relating to its
investment in Rouge Steel will be excluded from
Borrower's Indebtedness.
1.1.71 "Interest Period" will mean, for each Advance or
Converted Advance bearing interest at the Euro-Rate,
or each Advance bearing interest at the Fixed Rate,
the period commencing on the date of such Advance or
Converted Advance, through and including the last day
of the period selected by Borrower pursuant to the
provisions below. The duration of each such Interest
Period will be thirty, sixty, ninety or one hundred
eighty days for Euro-Rate Advances and the number of
days selected by Borrower for Fixed Rate Advances,
except as such is limited below, in each case as
Borrower may select; provided, however, that:
1.1.71.1 Borrower may not select any Interest Period
for any Advances or Converted Advances which end
after the Termination Date or the Secondary
Revolving Credit Termination Date, as applicable;
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<PAGE> 18
1.1.71.2 whenever the last day of any such Interest
Period would otherwise occur on a day other than
a Business Day, the last day of such Interest
Period will be extended to occur on the next
succeeding Business Day; and
1.1.71.3 Fixed Rate Advances will have a minimum
interest period of 7 days and a maximum Interest
Period of 180 days.
1.1.72 "Lender(s)" will mean any Revolving Credit Lender,
Secondary Revolving Credit Lender, or Designated
Lender.
1.1.73 "Loan Documents" will mean this Agreement, the Notes
and the documents listed on the Closing Memo.
1.1.74 "Loans" will mean any and all advances of funds under
this Agreement or any of the Notes.
1.1.75 "Majority Lenders" will mean, when taken in the
aggregate: (i) prior to any acceleration of the Loans
by Agents, Revolving Credit Lenders and Secondary
Revolving Credit Lenders holding at least fifty-one
percent (51%) of the Total Commitment and (ii) after
any acceleration of the Loans by Agents, Lenders
holding at least fifty-one percent (51%) of the
outstanding Loans, in any case, as adjusted from time
to time.
1.1.76 "Material Adverse Effect" will mean an effect on the
business, financial condition, assets or liabilities
of Borrower and its Consolidated Subsidiaries,
considered on a consolidated basis, which, when
combined on a cumulative basis with other changes in
the business, financial condition, assets and
liabilities of Borrower and its Consolidated
Subsidiaries, considered on a consolidated basis: (i)
would have an adverse effect on the ability of
Borrower to perform its obligations under the Loan
Documents or (ii) would result in a material adverse
change in the financial condition of Borrower and its
Consolidated Subsidiaries, considered on a
consolidated basis.
1.1.77 "Multiemployer Plan" will mean a multiemployer plan
as defined in Section 4001(a)(3) of ERISA to which
Borrower or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Code Section 414) is making
or accruing an obligation to make contributions, or
has within any of the preceding five plan years made
or accrued an obligation to make contributions.
1.1.78 "Net Worth," at any particular time, will mean assets
minus liabilities, as determined in accordance with
GAAP. Net Worth will be calculated on a consolidated
basis for Borrower and its Consolidated Subsidiaries.
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1.1.79 "Notes" will mean the Revolving Notes, the Secondary
Revolving Credit Notes and the Competitive Bid Notes
of Borrower to the Lenders outstanding by Borrower to
any Lender from time to time evidencing the Revolving
Loans, the Secondary Revolving Credit Loans, and the
Competitive Bid Loans, and will include any
amendments, extensions and renewals made thereto from
time to time.
1.1.80 "Notice(s) of Borrowing" will mean the notice
required under Section 2.1, below, in the form
delivered by Documentation Agent to Borrower in
connection with the Closing.
1.1.81 "Notice(s) of Prepayment" will mean the notice
required under Section 2.5, below, in connection with
a prepayment of any of the Loans in the form
delivered by Documentation Agent to Borrower in
connection with the Closing.
1.1.82 "Notice(s) of Secondary Revolving Credit Borrowing"
will mean the notice required under Section 2.3,
below, in the form delivered by Documentation Agent
to Borrower in connection with the Closing.
1.1.83 "Notices" will mean all Notices of Borrowing, Notices
of Prepayment, Competitive Bid Requests, any notice
of termination or reduction of Revolving Commitments
or the Secondary Revolving Credit Commitments and any
other notices under this Agreement.
1.1.84 "Obligations" will mean and include all loans,
advances, debts, liabilities, obligations, covenants
and duties owing to Agents and/or any or all of
Lenders from Borrower of any kind or nature arising
under this Agreement, the Notes or any of the Loan
Documents, whether direct or indirect, absolute or
contingent, joint or several, due or to become due,
now existing or hereafter arising, and all charges,
expenses, fees, including but not limited to
reasonable Attorneys Fees, and any other sums
chargeable to Borrower under any of the Obligations.
1.1.85 "PBGC" will mean the Pension Benefit Guaranty
Corporation referred to and defined in ERISA.
1.1.86 "Permitted Liens" will mean:
1.1.86.1 liens securing the payment of taxes, either
not yet due or the validity of which is being
contested by the Person being charged in good
faith by appropriate proceedings, and as to which
it has set aside on its books adequate reserves
to the extent required by GAAP;
1.1.86.2 deposits under workers' compensation,
unemployment insurance and social security laws,
or to secure the performance
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<PAGE> 20
of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to
secure statutory obligations or surety or appeal
bonds, or to secure indemnity, performance or
other similar bonds in the ordinary course of
business;
1.1.86.3 liens imposed by law, such as carriers',
warehousemen's or mechanics' liens, incurred by
it in good faith in the ordinary course of
business;
1.1.86.4 purchase money liens incurred in the
connection with the acquisition of capital assets
limited to the specific assets acquired with such
financing (subject to the acquisition of such
assets and incurrence of such debt being
otherwise permitted by the terms of this
Agreement);
1.1.86.5 liens existing on the date of this Agreement
securing Indebtedness outstanding on the date of
this Agreement in aggregate principal amount not
exceeding $10,700,000;
1.1.86.6 any lien existing on any asset of any
corporation at the time such corporation becomes
a Subsidiary and not created in contemplation of
such event;
1.1.86.7 any lien on any asset of any corporation
existing at the time such corporation is merged
or consolidated with or into Borrower or a
Subsidiary and not created in contemplation of
such event;
1.1.86.8 any lien existing on any asset prior to the
acquisition thereof by Borrower or a Subsidiary
and not created in contemplation of such event;
1.1.86.9 any lien arising out of the refinancing,
extension, renewal or refunding of any
Indebtedness secured by any lien permitted by any
of the foregoing Section 1.1.86.4 through
1.1.86.8 of this definition, provided that such
Indebtedness is not increased and is not secured
by any additional assets;
1.1.86.10 liens incidental to the conduct of its
business or the ownership of its assets which (i)
do not secure Indebtedness or derivative
obligations, (ii) do not secure any obligation,
or related series of obligations, in an amount
exceeding $20,000,000 and (iii) do not in the
aggregate materially detract from the value of
its assets or materially impair the use thereof
in the operation of its business;
1.1.86.11 liens on cash and cash equivalents securing
derivative obligations, provided that the
aggregate amount of cash
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<PAGE> 21
equivalents subject to such liens may at no time
exceed $10,000,000;
1.1.86.12 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;
1.1.86.13 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;
1.1.86.14 easements, rights-of-way, zoning
restrictions and other restrictions, charges or
encumbrances incurred in the ordinary course of
business and not materially interfering with the
ordinary conduct of the business;
1.1.86.15 any lien on property of a Subsidiary
securing Indebtedness of such Subsidiary owing to
Borrower or a Consolidated Subsidiary; and
1.1.86.16 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
Borrower or any Subsidiary under a security
agreement or trust or bailee receipt or
otherwise), and the proceeds of each and all of
the foregoing; (ii) the balance of every deposit
account, now or at any time hereafter existing,
of Borrower or any Subsidiary with the issuing
banks, and any other claims of Borrower or any
Subsidiary against the issuing banks; and all
property claims and demands and all rights and
interests therein of Borrower 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
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<PAGE> 22
transit to or from or set apart for the issuing
bank, any bailee for the issuing bank or any of
its correspondents for others 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.
1.1.87 "Person" will mean an individual, partnership,
corporation (including a business trust), joint stock
company, trust, unincorporated association, joint
venture or other entity, or a government or any
political subdivision or agency thereof.
1.1.88 "Plan" will mean any pension plan subject to the
provisions of Title IV of ERISA or Section 412 of the
Code and which is maintained for employees of
Borrower or any ERISA Affiliate.
1.1.89 "Prepayment Premium" will mean the following and will
be applicable regardless of whether or not such
prepayment is in full or in part, or voluntary, on
default or otherwise:
1.1.89.1 as to Euro-Rate Advances and Fixed Rate
Advances, an amount equal to the excess of the
interest that would have been received from
Borrower by Administrative Agent for the account
of Lender at the rate applicable to the portion
of the Advance prepaid during the remaining
portion of the relevant Interest Period, over the
return which Lender could have obtained if it
invested the amount of such prepayment at the
Euro-Rate that would have been in effect if an
Interest Period began on the date of such
prepayment; and such funds had remained invested
until the expiration of the relevant Interest
Period; and
1.1.89.2 as to Alternate Base Rate Advances or
Alternate Secondary Revolving Credit Base Rate
Advances, zero.
1.1.90 "Ratable Portion" will mean: (i) as to Revolving
Loans, with respect to any Revolving Credit Lender, a
fraction (expressed as a percentage), the numerator
of which will be the amount of such Revolving Credit
Lender's Revolving Commitment, and the denominator of
which will be the aggregate amount of all of
Revolving Credit Lenders' Revolving Commitments;
provided, however, that as to any Revolving Credit
Lender that fails or refuses to make its Ratable
Portion of any Advance, such Revolving Credit
Lender's Ratable Portion of payments
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<PAGE> 23
distributable to Revolving Credit Lenders will be
adjusted accordingly; (ii) as to Secondary Revolving
Credit Loans, with respect to any Secondary Revolving
Credit Lender, a fraction (expressed as a
percentage), the numerator of which will be the
amount of such Secondary Revolving Credit Lender's
Secondary Revolving Credit Commitment, and the
denominator of which will be the aggregate amount of
all of Secondary Revolving Credit Lenders' Secondary
Revolving Credit Commitments; provided, --------
however, that as to any Secondary Revolving Credit
Lender that fails or refuses to make its Ratable
Portion of any Advance, such Secondary Revolving
Credit Lender's Ratable Portion of payments
distributable to Secondary Revolving Credit Lenders
will be adjusted accordingly; and (iii) as to
Competitive Bid Loans, with respect to any Lender, a
fraction (expressed as a percentage), the numerator
of which will be the amount of such Lender's
outstanding Competitive Bid Loans, and the
denominator of which will be the aggregate amount of
all of Lenders' outstanding Competitive Bid Loans;
provided, however, that -------- as to any Revolving
Credit Lender that fails or refuses to make its
Ratable Portion of any Advance, such Revolving Credit
Lender's Ratable Portion of payments distributable to
Lenders will be adjusted accordingly and interest on
Competitive Bid Loans will be allocated pro rata
based on interest actually due each Lender.
1.1.91 "Reportable Event" will mean any reportable event as
defined in Section 4043(b) of ERISA or the
regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate
which is considered an ERISA Affiliate only pursuant
to subsection (m) or (o) of Code Section 414).
1.1.92 "Responsible Officer" will mean, with respect to any
Person its chairman, chief executive officer,
president, chief financial officer, controller,
treasurer or an assistant treasurer with respect to
Compliance Certificates and notices of termination or
reduction of the Total Commitments and with respect
to any other Notices hereunder, any officers or
employees authorized by resolutions delivered by
Borrower to Administrative Agent from time to time.
1.1.93 "Revolving Advance" or "Revolving Advances" will mean
Revolving Loans made pursuant to this Agreement.
1.1.94 "Revised Closing Date" will mean May 30, 1997.
1.1.95 "Revolving Commitment(s)" will mean, as to any
Revolving Credit Lender, the dollar amount set forth
opposite its name on the Amended and Restated
Schedule 1 hereto under the heading Revolving
Commitment, as such amount may be reduced from time
to time pursuant to this Agreement.
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<PAGE> 24
1.1.96 "Revolving Conditions" will mean the conditions set
forth in Sections 2.1 and 3, below, and in the
Revolving Notes.
1.1.97 "Revolving Credit Facility" will mean collectively
the credit facility described in Section 2.1, below.
1.1.98 "Revolving Credit Facility Fee" will mean the fee
specified in Section 2.11.2.1, below.
1.1.99 "Revolving Loans" will mean the Advances described in
Section 2.1, below.
1.1.100 "Revolving Notes" will mean collectively the notes
evidencing the evidencing the credit facility
described in Section 2.1, below, which will be in the
form of the Amended and Restated Revolving Credit
Notes delivered by Borrower to Revolving Credit
Lenders dated the Revised Closing Date 1997, and will
include all amendments, extensions and renewals made
thereto from time to time.
1.1.101 "Second Revised Closing Date" will mean October 14,
1998.
1.1.102 "Secondary Revolving Credit Advance" or "Secondary
Revolving Credit Advances" will mean Secondary
Revolving Credit Loans made pursuant to this
Agreement.
1.1.103 "Secondary Revolving Credit Commitment(s)" will mean,
as to any Secondary Revolving Credit Lender, the
dollar amount set forth opposite its name on the
Schedule 2 hereto under the heading Secondary
Revolving Credit Commitment, as such amount may be
reduced from time to time pursuant to this Agreement.
1.1.104 "Secondary Revolving Credit Conditions" will mean the
conditions set forth in Sections 2.3 and 3, below,
and in the Secondary Revolving Credit Notes.
1.1.105 "Secondary Revolving Credit Facility" will mean
collectively the credit facility described in Section
2.3, below.
1.1.106 "Secondary Revolving Credit Facility Fee" will mean
the fee specified in Section 2.11.2.2, below.
1.1.107 "Secondary Revolving Credit Loans" will mean the
Advances described in Section 2.3, below.
1.1.108 "Secondary Revolving Credit Notes" will mean
collectively the notes evidencing the evidencing the
credit facility described in Section 2.3,
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below, which will be in the form of the Secondary
Revolving Credit Notes delivered by Borrower to
Secondary Revolving Credit Lenders dated the Second
Revised Closing Date, and will include all
amendments, extensions and renewals made thereto from
time to time.
1.1.109 "Secondary Revolving Credit Notice of Borrowing" will
mean the notice required under Section 2.3, below, in
the form delivered by Documentation Agent to Borrower
in connection with the Closing.
1.1.110 "Secondary Revolving Credit Termination Date" will
mean September 30, 1999; provided, however, that the
Secondary Revolving Credit Termination Date will in
no event be later than the date on which all of the
Secondary Revolving Credit Commitments for the Credit
Facilities will have been terminated in whole,
whether by expiration or upon acceleration.
1.1.111 "Senior Unsecured Debt Rating" will mean the rating
given to Borrower's senior unsecured debt by Moody's
Investors Service, Inc. (or any successor to its
securities ratings business) or by Standard & Poor's
Corporation (or any successor to its securities
ratings business).
1.1.112 "Side Letter" will mean the letter between the
Documentation Agent, Administrative Agent and
Borrower relating to certain fees executed in
connection with the arrangement of the Credit
Facilities.
1.1.113 "Subsidiary" will mean any corporation or other
entity of which securities or other ownership
interests having ordinary voting power to elect a
majority of the board of directors or other persons
performing similar functions are at the time directly
or indirectly owned by Borrower.
1.1.114 "Termination Date" will mean May 30, 2003; provided,
however, that the Termination Date will in no event
be later than the date on which all of the Revolving
Commitments for the Credit Facilities will have been
terminated in whole, whether by expiration or upon
acceleration.
1.1.115 "Total Commitment" will mean the sum of the Total
Revolving Credit Commitment plus the Total Secondary
Revolving Credit Commitment, as such amount may be
reduced, from time to time, in accordance with the
terms of this Agreement.
1.1.116 "Total Revolving Credit Commitment" will mean the
aggregate of the Revolving Commitments, which in no
event will exceed $190,000,000 in the aggregate,
except as otherwise provided in Section 2.15.
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1.1.117 "Total Secondary Revolving Credit Commitment" will
mean the aggregate of the Secondary Revolving Credit
Commitments, which in no event will exceed
$110,000,000 in the aggregate.
1.1.118 "UCC" will mean the Uniform Commercial Code as
adopted by the applicable state or states.
1.1.119 "Unrestricted Subsidiary" will mean any Subsidiary
which would otherwise be a Consolidated Subsidiary,
but which has been designated as an Unrestricted
Subsidiary by Borrower pursuant to the provisions
hereof. Borrower will deliver to Documentation Agent
a list of any Subsidiaries it wishes to designate as
Unrestricted Subsidiaries, if any, as of the closing
of this Agreement. Thereafter, from time to time
Borrower may at its option:
1.1.119.1 designate any Consolidated Subsidiary as an
Unrestricted Subsidiary but only if: (i)
immediately after giving effect to such change in
designation no condition or event will exist
which constitutes a Default or an Event of
Default and (ii) the elimination of the
Subsidiary from the Consolidated Group would not
have a Material Adverse Effect, provided,
however, that Borrower may not designate any
Consolidated Subsidiaries as Unrestricted
Subsidiaries if the aggregate operating income of
the Consolidated Subsidiaries so designated at
that time would account for more than 30% of the
consolidated operating income of the Borrower and
its Consolidated Subsidiaries for the most
recently completed four fiscal quarters.
Thereafter, for purposes of this calculation: (i)
operating income of Unrestricted Subsidiaries
will be excluded from the consolidated operating
income of the Borrower and its Consolidated
Subsidiaries and (ii) fiscal quarters used
previously will be excluded; and
1.1.119.2 designate any Unrestricted Subsidiary which
otherwise meets the definition of a Consolidated
Subsidiary, as a Consolidated Subsidiary, if but
only if, immediately after giving effect to such
change in designation: (i) any and all
outstanding Indebtedness of such Subsidiary could
then have been incurred in compliance with this
Agreement and (ii) no condition or event will
exist which constitutes a Default or an Event of
Default, provided, however, that if Borrower has
designated a Subsidiary which was previously
treated as a Consolidated Subsidiary as an
Unrestricted Subsidiary during the term of this
Agreement, Borrower may not again designate such
Subsidiary as a Consolidated Subsidiary without
the consent of the Majority Lenders.
Any change in designation will be made by Borrower
giving written notice to the Administrative Agent not
less than thirty nor more than
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sixty days prior to the date for such change in
designation, in each case specifying such date and
the name of the Subsidiary whose designation is to be
so changed, which notice will be accompanied by an
officer's certificate certifying that the conditions
required for such change in designation will not be
violated. Administrative Agent then in turn will send
a copy of such designation request to Lenders.
Notwithstanding the foregoing, if due to an
acquisition or other event which would cause an
entity which was not previously a Consolidated
Subsidiary to become a Consolidated Subsidiary,
Borrower may immediately elect to have such entity
not become a Consolidated Subsidiary, but instead to
be designated as an Unrestricted Subsidiary, without
regard to the notice period set forth above.
1.1.120 "Withdrawal Liability" will mean liability to a
Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of
Title IV of ERISA.
1.2 OTHER DEFINITIONAL PROVISIONS. Capitalized terms used herein
and not otherwise defined herein will have the meanings given
such terms in the Notes. Unless otherwise specified, all
accounting terms used herein will be interpreted, all
accounting determinations hereunder will be made, and all
financial statements required to be delivered hereunder will
be prepared in accordance with GAAP as in effect from time to
time, applied on a basis consistent (except for changes
concurred in by Borrower's independent public accountants)
with the Current Audited Financial Statements; provided that,
if Borrower notifies the Agents that Borrower wishes to amend
any covenant in Section 6 to eliminate a material variation in
the operation of such covenant by virtue of a change in GAAP
(or if Agents notify Borrower that the Majority Lenders wish
to amend Section 6 for such purpose), then Borrower's
compliance with such covenant will be determined on the basis
of GAAP in effect immediately before the relevant change in
GAAP became effective, until either such notice is withdrawn
or such covenant is amended in a manner satisfactory to
Borrower and the Majority Lenders.
1.3 ADDITIONAL DEFINITIONAL PROVISIONS. All terms defined in this
Agreement in the singular will have comparable meanings when
used in the plural and vice-versa. The words "hereof,"
"herein" and "hereunder" and words of similar import when used
in this Agreement will mean this Agreement as a whole and not
any particular provision of this Agreement.
2. CREDIT FACILITIES.
2.1 REVOLVING CREDIT FACILITY.
2.1.1 BORROWINGS. Each Revolving Credit Lender severally
agrees to make, subject to the terms and conditions
herein set forth, loans to Borrower on any Business
Day during the period from the Closing Date to the
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Business Day preceding the Termination Date upon the
request of Borrower in an amount not to exceed the
Available Commitment of such Revolving Credit Lender;
provided that:
2.1.1.1 the Aggregate Outstanding Revolving Credit
will not exceed at any time the Total Revolving
Credit Commitment, except as provided in Section
2.15;
2.1.1.2 the making of Competitive Bid Loans by a
Revolving Credit Lender will not change the
obligation of such Revolving Credit Lender to
make Revolving Loans hereunder up to its
Available Commitment;
2.1.1.3 within the above-described limits, Borrower
may borrow and reborrow under this Section; and
2.1.1.4 the Revolving Loans will be evidenced by the
Revolving Notes and will bear interest and be
payable in the manner set forth herein.
2.1.2 MANNER OF BORROWINGS. Borrower will give
Administrative Agent a Notice of Borrowing with
respect to each Borrowing under the Revolving Credit
Facility, not later than 11:00 a.m. (New York, New
York time) three Business Days prior to the proposed
Borrowing Date with respect to Euro-Rate Advances and
on the same Business Day as the proposed Borrowing
Date with respect to Alternate Base Rate Advances.
Administrative Agent will give to each Revolving
Credit Lender prompt notice thereof by telex,
telecopier or cable. Each Notice of Borrowing will be
by telex, telecopier or cable (or by telephonic
notice confirmed in writing by a Notice of Borrowing
delivered no later than the close of business on the
day on which such telephonic notice is given),
specifying therein all matters required by such
Notice, including but not limited to the requested:
(i) Borrowing Date and (ii) aggregate amount of such
Borrowing. Each Borrowing will be in an aggregate
principal amount of $5,000,000 or in integral
multiples of $1,000,000 in excess thereof. Each
Revolving Credit Lender will, before 11:00 a.m. (New
York, New York time) on the Borrowing Date, make
available for Administrative Agent's Account, in same
day funds, such Revolving Credit Lender's Ratable
Portion of such Borrowing. After Administrative
Agent's receipt of such funds and upon fulfillment of
the applicable conditions set forth in Section 3
hereof, Administrative Agent will make such funds
available to Borrower by crediting Borrower's
Account.
2.1.3 RATES OF INTEREST.
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2.1.3.1 Borrower will pay Administrative Agent for
the account of Revolving Credit Lenders interest
on the outstanding principal balance of each
Advance or Converted Advance under the Revolving
Credit Facility from the date of each such
Advance or Converted Advance until paid at a rate
of interest equal to: (i) the Alternate Base Rate
or (ii) the Applicable Margin plus the Euro-Rate,
as such rate is selected by Borrower in each
Notice of Borrowing and for the Interest Period
selected in such Notice of Borrowing.
2.1.3.2 Notwithstanding any of the foregoing to the
contrary, in the event that: (i) no interest rate
is selected, (ii) no Interest Period is selected,
or (iii) an Interest Period expires and no new
interest rate is selected in a Notice of
Borrowing with respect to an Advance or Converted
Advance, the rate of interest payable on such
Advance or Converted Advance under the Revolving
Credit Facility will be the rate for Alternate
Base Rate Advances until otherwise elected in
connection with a Conversion.
2.1.4 CONVERSIONS. Borrower may on any Business Day, upon
delivering to Administrative Agent a Notice of
Borrowing specifying a "Conversion" not later than
11:00 a.m. (New York, New York time) on the third
Business Day prior to the proposed conversion,
convert all or any portion of Euro-Rate Advances or
Alternate Base Rate Advances under the Revolving
Credit Facility into an Advance or Advances in a
different rate mode; provided, however, that: (i) any
conversion of any Euro-Rate Advances will be in a
minimum amount of $5,000,000 and integral multiples
of $1,000,000 in excess thereof and (ii) any
conversion of any Euro-Rate Advances will be made
effective only on the last day of the Interest Period
for such Advances. No conversion will be effective
unless a proper, timely and fully completed Notice of
Borrowing specifying a Conversion is delivered to
Administrative Agent.
2.1.5 INTEREST PAYMENTS. Interest will accrue from the date
of each Advance or Converted Advance under the
Revolving Credit Facility. Accrued interest on each
Alternate Base Rate Advance will be due and payable
quarterly commencing on the last day of each fiscal
quarter following such Alternate Base Rate Advance;
provided, however, that interest on Alternate Base
Rate Advances will be due and payable upon payment in
full of all such Advances. Accrued interest on each
Euro-Rate Advance will be due and payable at the end
of the applicable Interest Period; provided, however,
that interest on each Euro-Rate Advance will be due
and payable at least every ninety days.
2.2 THE COMPETITIVE BID FACILITY.
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2.2.1 COMPETITIVE BID PROCEDURE.
2.2.1.1 Borrower may request the Revolving Credit
Lenders to make Competitive Bids in respect of an
aggregate amount of Competitive Bid Borrowings at
any time outstanding not in excess of: (i) the
Total Revolving Credit Commitment in effect at
such time less (ii) the Aggregate Outstanding
Revolving Credit at such time. In order to
request Competitive Bids, Borrower will pay
Administrative Agent a fee as set forth in the
Side Letter and hand deliver or telecopy to the
Administrative Agent a duly completed Competitive
Bid Request: (a) by 11:00 a.m. (New York, New
York time) five Business Days prior to the
proposed Borrowing for a Euro-Rate Competitive
Bid Loan; (b) by 11:00 a.m. (New York, New York
time) three Business Days prior to the proposed
Borrowing for a Fixed Rate Competitive Bid Loan.
A Competitive Bid Request that does not conform
substantially to the format of the form delivered
by Documentation Agent to Borrower and Revolving
Credit Lenders in connection with the Closing may
be rejected in the Administrative Agent's sole
discretion, and the Administrative Agent will
promptly notify Borrower of such rejection by
telecopier. Promptly after its receipt of a
Competitive Bid Request that is not rejected as
aforesaid, the Administrative Agent will invite
by telecopier (in the form delivered by
Documentation Agent to Borrower and Revolving
Credit Lenders in connection with the Closing)
the Revolving Credit Lenders to bid, on the terms
and conditions of this Agreement, to make
Competitive Bid Loans pursuant to the Competitive
Bid Request.
2.2.1.2 Each Revolving Credit Lender may, in its sole
discretion, make one or more Competitive Bids to
Borrower responsive to any Competitive Bid
Request. Each Competitive Bid by a Revolving
Credit Lender must be received by the
Administrative Agent via telecopier, in the form
delivered by Documentation Agent to Borrower and
Revolving Credit Lenders in connection with the
Closing, (i) in the case of a Euro-Rate
Competitive Bid Loan, not later than 2:00 p.m.
(New York, New York time) four Business Days
before a proposed Competitive Bid Loan and (ii)
in the case of a Fixed Rate Competitive Bid Loan,
not later than 10:00 a.m. (New York, New York
time) one Business Day before the day of a
proposed Competitive Bid Loan. Multiple bids will
be accepted by the Administrative Agent.
Competitive Bids that do not conform
substantially to the form delivered by
Documentation Agent to Borrower and Revolving
Credit Lenders in connection with the Closing may
be rejected by the Administrative Agent after
conferring with, and upon the instruction of,
Borrower; and the Administrative Agent will
notify the Revolving Credit Lender
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making such nonconforming bid of such rejection
as soon as practicable. Each Competitive Bid will
refer to this Agreement and specify: (i) the
principal amount (which will be in a minimum
principal amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof and
which may equal the entire principal amount of
the Competitive Bid Loan requested by Borrower)
of the Competitive Bid Loan or Loans that the
Revolving Credit Lender is willing to make to
Borrower (such Competitive Bid Loan or Loans may
be funded by such Lender's Designated Lender as
provided in Section 2.2.1.5 and 12.3.7, however,
such Lender shall not be required to specify in
its Competitive Bid whether such Competitive Bid
Loans will be funded by such Designated Lender),
(ii) the Competitive Bid Rate or Rates at which
the Revolving Credit Lender is prepared to make
the Competitive Bid Loan or Loans and (iii) if
applicable, the Interest Period and the last day
thereof. If any Revolving Credit Lender will
elect not to make a Competitive Bid, such
Revolving Credit Lender will so notify the
Administrative Agent via telecopier: (i) in the
case of Euro-Rate Competitive Bid Loans, not
later than 2:00 p.m. (New York, New York time)
four Business Days before a proposed Competitive
Borrowing, and (ii) in the case of all other
Competitive Bid Loans, not later than 10:00 a.m.
(New York, New York time) one Business Day before
a proposed Competitive Bid Loan; provided,
however, that failure by any Revolving Credit
Lender to give such notice will not cause such
Revolving Credit Lender to be obligated to make
any Competitive Bid Loan as part of such
Competitive Bid Loan. A Competitive Bid submitted
by a Revolving Credit Lender pursuant to this
Section, if such bid has not been conveyed to
Borrower, will be irrevocable absent consent from
Administrative Agent.
2.2.1.3 The Administrative Agent will promptly notify
Borrower by telecopier of all the Competitive
Bids made, the Competitive Bid Rate, the Interest
Period and the principal amount of each
Competitive Bid Loan in respect of which a
Competitive Bid was made and the identity of the
Revolving Credit Lender that made each bid. The
Administrative Agent will send a copy of all
Competitive Bids to Borrower for its records as
soon as practicable after completion of the
bidding process set forth in this Section.
2.2.1.4 Borrower may in its sole and absolute
discretion, subject only to the provisions of
this subsection, accept or reject any Competitive
Bid or portion thereof. Borrower will notify the
Administrative Agent by telephone, confirmed by
telecopier in the form of a Competitive Bid
Accept/Reject Letter, whether and
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to what extent it has decided to accept or reject
any of or all the bids referred to in this
Section: (i) in the case of a Euro-Rate
Competitive Bid Loan, not later than 11:00 a.m.
(New York, New York time) three Business Days
before a proposed Competitive Bid Loan, and (ii)
in the case of all other Competitive Bid Loans,
not later than 11:00 a.m. (New York, New York
time) one Business Day before the day of proposed
Competitive Bid Loan; provided, however, that:
(i) the failure by Borrower to give such notice
will be deemed to be a rejection of all the bids,
(ii) Borrower will not accept a bid or portion
thereof made at a particular Competitive Bid Rate
if Borrower has decided to reject a bid made at a
lower Competitive Bid Rate, (iii) the aggregate
amount of the Competitive Bids accepted by
Borrower will not exceed the principal amount
specified in the Competitive Bid Request, (iv) if
Borrower will accept a bid or bids made at a
particular Competitive Bid Rate but the amount of
such bid or bids will cause the total amount of
bids to be accepted by Borrower to exceed the
amount specified in the Competitive Bid Request,
then Borrower will accept a portion of such bid
or bids in an amount equal to the amount
specified in the Competitive Bid Request less the
amount of all other Competitive Bids accepted
with respect to such Competitive Bid Request,
which acceptance, in the case of multiple bids at
such Competitive Bid Rate, will be made pro rata
in accordance with the amount of each such bid at
such Competitive Bid Rate, and (v) except
pursuant to clause (iv) above, no bid will be
accepted for a Competitive Bid Loan unless such
Competitive Bid Loan is in a minimum principal
amount of $5,000,000 or a whole multiple of
$1,000,000 in excess thereof; provided further,
however, that if a Competitive Bid Loan must be
in an amount less than $1,000,000 because of the
provisions of clause (iv) above, such Competitive
Bid Loan may be for a minimum of $1,000,000 or
any integral multiple thereof, and in calculating
the pro rata allocation of acceptances of
portions of multiple bids at a particular
Competitive Bid Rate pursuant to clause (iv) the
amounts will be rounded to integral multiples of
$1,000,000 in a manner which will be in the
discretion of Borrower. A notice given by
Borrower pursuant to this subsection will be
irrevocable.
2.2.1.5 The Administrative Agent will promptly notify
each bidding Revolving Credit Lender whether or
not its Competitive Bid has been accepted (and if
so, in what amount and at what Competitive Bid
Rate) by telecopy sent by the Administrative
Agent, and each successful bidder will thereupon
become bound, subject to the other applicable
conditions hereof, to make the Competitive Bid
Loan in respect of which its bid has been
accepted; provided however, that Lender may
designate its Designated Lender to
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fund a Competitive Bid Loan on its behalf as
described in Section 12.3.7. Any Designated
Lender which funds a Competitive Bid Loan will on
and after the time of such funding become the
obligee under such Competitive Bid Loan and be
entitled to receive payment thereof when due. No
Revolving Credit Lender shall be relieved of its
obligation to fund a Competitive Bid Loan, and no
Designated Lender shall assume such obligation,
prior to the time such Competitive Bid Loan is
funded.
2.2.1.6 A Competitive Bid Request will not be made
within three Business Days after the date of any
previous Competitive Bid Request.
2.2.1.7 If the Administrative Agent elects to submit
a Competitive Bid in its capacity as a Revolving
Credit Lender, it will submit such bid directly
to Borrower one half of an hour earlier than the
latest time at which the other Revolving Credit
Lenders are required to submit their bids to the
Administrative Agent pursuant to this Section.
2.2.2 RATES OF INTEREST.
2.2.2.1 Borrower will pay Administrative Agent for
the account of Lender interest on the outstanding
principal balance of each Competitive Bid Loan
hereunder from the date of each such Advance
until paid at a rate of interest equal to: (i)
the Fixed Rate or (ii) the Applicable Margin plus
the Euro-Rate, as such rate is accepted by
Borrower for each Competitive Bid Loan.
2.2.2.2 Notwithstanding anything to the contrary
contained herein, in the event that a Competitive
Bid Loan matures and is not repaid, it will bear
interest at the Default Rate.
2.2.3 PAYMENTS.
2.2.3.1 Interest will accrue from the date of each
Advance under the Competitive Bid Facility.
Accrued interest on each Advance under the
Competitive Bid Facility will be due and payable
at the end of the applicable Interest Period;
provided, however, that interest on each such
Advance will be due and payable at least every
ninety days.
2.2.3.2 Principal of each Competitive Bid Loan will
be due at the time specified in Section 2.5.1.
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2.2.4 PREPAYMENTS. The Borrower may not prepay the
Competitive Bid Loans unless specifically
provided to the contrary in the Competitive Bid
made by such Lender.
2.3 SECONDARY REVOLVING CREDIT FACILITY.
2.3.1 BORROWINGS. Each Secondary Revolving Credit Lender
severally agrees to make, subject to the terms and
conditions herein set forth, loans to Borrower on any
Business Day during the period from the Closing Date
to the Business Day preceding the Secondary Revolving
Credit Termination Date upon the request of Borrower
in an amount not to exceed the Available Secondary
Revolving Credit Commitment of such Secondary
Revolving Credit Lender; provided that:
2.3.1.1 the Aggregate Outstanding Secondary Revolving
Credit Loans will not exceed at any time the
Total Secondary Revolving Credit Commitment;
2.3.1.2 within the above-described limits, Borrower
may borrow and reborrow under this Section; and
2.3.1.3 the Secondary Revolving Credit Loans will be
evidenced by the Secondary Revolving Credit Notes
and will bear interest and be payable in the
manner set forth herein.
2.3.2 MANNER OF BORROWINGS. Borrower will give
Administrative Agent a Secondary Revolving Credit
Notice of Borrowing with respect to each Borrowing
under the Secondary Revolving Credit Facility, not
later than 11:00 a.m. (New York, New York time) three
Business Days prior to the proposed Borrowing Date
with respect to Euro-Rate Advances and on the same
Business Day as the proposed Borrowing Date with
respect to Alternate Secondary Revolving Credit Base
Rate Advances. Administrative Agent will give to each
Secondary Revolving Credit Lender prompt notice
thereof by telex, telecopier or cable. Each Secondary
Revolving Credit Notice of Borrowing will be by
telex, telecopier or cable (or by telephonic notice
confirmed in writing by a Secondary Revolving Credit
Notice of Borrowing delivered no later than the close
of business on the day on which such telephonic
notice is given), specifying therein all matters
required by such Notice, including but not limited to
the requested: (i) Borrowing Date and (ii) aggregate
amount of such Borrowing. Each Borrowing will be in
an aggregate principal amount of $5,000,000 or in
integral multiples of $1,000,000 in excess thereof.
Each Secondary Revolving Credit Lender will, before
11:00 a.m. (New York, New York time) on the Borrowing
Date, make available for Administrative Agent's
Account, in same day funds, such Secondary Revolving
Credit Lender's Ratable Portion of such Borrowing.
After Administrative Agent's receipt of such funds
and
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upon fulfillment of the applicable conditions set
forth in Section 3 hereof, Administrative Agent will
make such funds available to Borrower by crediting
Borrower's Account.
2.3.3 RATES OF INTEREST.
2.3.3.1 Borrower will pay Administrative Agent for
the account of Secondary Revolving Credit Lenders
interest on the outstanding principal balance of
each Advance or Converted Advance under the
Secondary Revolving Credit Facility from the date
of each such Advance or Converted Advance until
paid at a rate of interest equal to: (i) the
Alternate Secondary Revolving Credit Base Rate or
(ii) the Applicable Secondary Revolving Credit
Margin plus the Euro-Rate, as such rate is
selected by Borrower in each Secondary Revolving
Credit Notice of Borrowing and for the Interest
Period selected in such Secondary Revolving
Credit Notice of Borrowing.
2.3.3.2 Notwithstanding any of the foregoing to the
contrary, in the event that: (i) no interest rate
is selected, (ii) no Interest Period is selected,
or (iii) an Interest Period expires and no new
interest rate is selected in a Secondary
Revolving Credit Notice of Borrowing with respect
to an Advance or Converted Advance, the rate of
interest payable on such Advance or Converted
Advance under the Secondary Revolving Credit
Facility will be the rate for Alternate Secondary
Revolving Credit Base Rate Advances until
otherwise elected in connection with a
Conversion.
2.3.4 CONVERSIONS. Borrower may on any Business Day, upon
delivering to Administrative Agent a Secondary
Revolving Credit Notice of Borrowing specifying a
"Conversion" not later than 11:00 a.m. (New York, New
York time) on the third Business Day prior to the
proposed conversion, convert all or any portion of
Euro-Rate Advances or Alternate Secondary Revolving
Credit Base Rate Advances under the Secondary
Revolving Credit Facility into an Advance or Advances
in a different rate mode; provided, however, that:
(i) any conversion of any Euro-Rate Advances will be
in a minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess thereof and (ii)
any conversion of any Euro-Rate Advances will be made
effective only on the last day of the Interest Period
for such Advances. No conversion will be effective
unless a proper, timely and fully completed Secondary
Revolving Credit Notice of Borrowing specifying a
Conversion is delivered to Administrative Agent.
2.3.5 INTEREST PAYMENTS. Interest will accrue from the date
of each Advance or Converted Advance under the
Secondary Revolving Credit Facility.
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Accrued interest on each Alternate Secondary
Revolving Credit Base Rate Advance will be due and
payable quarterly commencing on the last day of each
fiscal quarter following such Alternate Secondary
Revolving Credit Base Rate Advance; provided,
however, that interest on Alternate Secondary
Revolving Credit Base Rate Advances will be due and
payable upon payment in full of all such Advances.
Accrued interest on each Euro-Rate Advance will be
due and payable at the end of the applicable Interest
Period; provided, however, that interest on each
Euro-Rate Advance will be due and payable at least
every ninety days.
2.4 ADDITIONAL PROVISIONS REGARDING FUNDING.
2.4.1 As to all Advances, Administrative Agent may assume
that each Lender (or its Designated Lender, if
applicable) will make its Advances available to
Administrative Agent on the Borrowing Date in
accordance with this Agreement, and Administrative
Agent may, but will not be obligated to, advance to
Borrower on such Lender's behalf such Lender's
Advance, or any portion of such share, for the
account of such Lender unless such Lender will have
notified Administrative Agent in writing prior to
10:00 a.m. (New York, New York time) on the Borrowing
Date that funds will not be made available by such
Lender for such Advance, in which case Administrative
Agent promptly will notify Borrower of such fact. If
any such funds are so advanced by Administrative
Agent, such Lender and Borrower severally agree to
pay such amount to Administrative Agent, forthwith on
demand, together with interest thereon for each day
from the date such amount is made available to
Borrower until the date such amount is paid to
Administrative Agent, at (i) in the case of Borrower,
a rate per annum equal to the interest rate payable
by Borrower with respect to such Loan in effect from
time to time while such Advance is outstanding and
(ii) in the case of such Lender, one percent (1%) in
excess of the Federal Funds Rate. If such Lender will
pay to Administrative Agent such amount, such amount
so paid will constitute such Lender's Advance as part
of such Borrowing.
2.4.2 No Lender's obligation to make any Advance will be
affected by any other Lender's failure to make funds
available for the same or any other Borrowing, nor
will any Lender be liable for the failure of any
other Lender to fulfill an obligation to make any
Advance.
2.4.3 Borrower will not be entitled to request any Advance
which, if made, would result in an aggregate of more
than twelve separate interest rates being applicable
under all of the Notes at any one time. For purposes
of the foregoing, Advances having different Interest
Periods, regardless of whether they have the same
interest rate, will be considered separate Advances.
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2.5 PRINCIPAL PAYMENTS.
2.5.1 LOANS. Borrower will pay: (i) to Administrative Agent
for the account of Revolving Credit Lenders the
outstanding principal amount of, and all accrued and
unpaid interest on, all Revolving Loans on the
Termination Date; (ii) to Administrative Agent for
the account of Secondary Revolving Credit Lenders the
outstanding principal amount of, and all accrued and
unpaid interest on, all Secondary Revolving Credit
Loans on the Secondary Revolving Credit Termination
Date; and (iii) to the Administrative Agent for the
account of each Competitive Bid Lender the
outstanding principal amount of each Competitive Bid
Loan on the earlier to occur of: (a) the maturity
date of each Competitive Bid Loan or (b) the
Termination Date.
2.5.2 OPTIONAL PREPAYMENT OF THE CREDIT FACILITIES. Subject
to the terms and conditions of this Agreement,
Borrower may elect to prepay all or any part of a
Revolving Loan or Secondary Revolving Credit Loan at
any time by delivering to Administrative Agent a
Notice of Prepayment, at least one Business Day prior
to the proposed prepayment date in the case of a
Alternate Base Rate Advance or an Alternate Secondary
Revolving Credit Base Rate Advance, and at least
three Business Days prior to the proposed date of
prepayment in the case of any other type of Revolving
Loan or Secondary Revolving Credit Loan, provided
that each such partial prepayment of any Revolving
Loan or Secondary Revolving Credit Loan will be in an
aggregate principal amount of $5,000,000 or in
integral multiples of $1,000,000 in excess thereof
and provided further that each prepayment of any
Revolving Loan or Secondary Revolving Credit Loan
will be accompanied by payment of the accrued
interest to the date of prepayment on the principal
amount prepaid and any applicable Prepayment Premium.
Each Notice of Prepayment must specify, as to each
Revolving Loan and each Secondary Revolving Credit
Loan being prepaid, the proposed prepayment date, the
Revolving Loan or Secondary Revolving Credit Loan
being prepaid and the aggregate principal amount of
the prepayment. All prepayments will be paid to
Administrative Agent.
2.5.3 MANDATORY PREPAYMENT OF THE CREDIT FACILITIES. In the
event that: (i) the Aggregate Outstanding Revolving
Credit Loans would in whole or in part exceed any
applicable Revolving Conditions or Competitive Bid
Conditions, whether after giving effect to any
reduction or termination of the Total Revolving
Credit Commitment or otherwise; or (ii) the Aggregate
Outstanding Secondary Revolving Credit Loans would in
whole or in part exceed any applicable Secondary
Revolving Credit Conditions, whether after giving
effect to any reduction or termination of the Total
Secondary Revolving Credit Commitment or
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<PAGE> 38
otherwise, then Borrower immediately will make a
prepayment of principal in an amount sufficient to
eliminate the excess, provided further that each such
prepayment (other than a prepayment of an Alternate
Base Rate Advance or an Alternate Secondary Revolving
Credit Base Rate Advance, in which case a interest
will be due on the next regularly scheduled payment
date for interest for Alternate Base Rate Advances or
Alternate Secondary Revolving Credit Base Rate
Advance and on the Termination Date or Secondary
Revolving Credit Termination Date, as applicable)
will be accompanied by payment of the accrued
interest to the date of prepayment on the principal
amount prepaid and any applicable Prepayment Premium.
2.6 DEFAULT RATE. At the option of the Required Lenders, upon the
occurrence of any Event of Default, the unpaid principal
amount of each Advance, and to the extent not paid when due,
the unpaid amount of all interest, fees, expenses and other
amounts payable hereunder, will bear interest at the Default
Rate in effect from time to time.
2.7 TERMINATION OR REDUCTION OF REVOLVING COMMITMENTS. Borrower
will have the right from time to time to terminate or reduce
the Total Revolving Credit Commitment, upon not less than
three days' prior notice by Borrower to Administrative Agent
in writing or by telecopy or facsimile transmission, which
notice will: (i) specify the effective date of such
termination or reduction, (ii) be irrevocable and effective
only upon receipt by Administrative Agent and (iii) be signed
by an Responsible Officer; provided, however, that after
giving effect to any such termination or reduction, all
Revolving Conditions set forth in Section 2.1.1 must be
satisfied. Any optional reduction of the amount of the Total
Commitment will be in the amount of $5,000,000 or in integral
multiples of $1,000,000 in excess thereof or in the full
amount of the Total Commitment as then in effect. Any
termination or reduction pursuant to this Section will be
permanent. Administrative Agent promptly will give notice to
each Revolving Credit Lender of any termination or reduction
hereunder. Any such termination or reduction will be
accompanied by a payment of the accrued but unpaid Revolving
Credit Facility Fee with respect to the amount of the Total
Commitment that is terminated or reduced.
2.8 TERMINATION OR REDUCTION OF SECONDARY REVOLVING CREDIT
COMMITMENTS. Borrower will have the right from time to time to
terminate or reduce the Total Secondary Revolving Credit
Commitment, upon not less than three days' prior notice by
Borrower to Administrative Agent in writing or by telecopy or
facsimile transmission, which notice will: (i) specify the
effective date of such termination or reduction, (ii) be
irrevocable and effective only upon receipt by Administrative
Agent and (iii) be signed by an Responsible Officer; provided,
however, that after giving effect to any such termination or
reduction, all Secondary Revolving Credit Conditions set forth
in Section 2.3.1 must be satisfied. Any optional reduction of
the amount of the Total Secondary Revolving Credit Commitment
will be in the amount of $5,000,000 or in integral multiples
of $1,000,000 in excess thereof or
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<PAGE> 39
in the full amount of the Total Secondary Revolving Credit
Commitment as then in effect. Any termination or reduction
pursuant to this Section will be permanent. Administrative
Agent promptly will give notice to each Secondary Revolving
Credit Lender of any termination or reduction hereunder. Any
such termination or reduction will be accompanied by a payment
of the accrued but unpaid Secondary Revolving Credit Facility
Fee with respect to the amount of the Total Secondary
Revolving Credit Commitment that is terminated or reduced.
2.9 RECORDS. Each Lender is hereby authorized by Borrower to
record in its books and records, the date, amount, Interest
Rate, and applicable Interest Period, if any, of each Advance
made to Borrower, the date and amount of each payment of
principal or interest thereon, which books and records will
constitute prima facie evidence of the accuracy of the
information so recorded, provided, however, that failure of
any Lender to record, or any error in recording, any such
information will not relieve Borrower of its obligations to
repay the outstanding principal amount of the Advances, all
accrued interest thereon, and other amounts payable with
respect thereto in accordance with the terms of the Notes and
this Agreement. The information as reflected by records
maintained by Administrative Agent related to Advances will
prevail, absent manifest error, in the event that the
information as reflected by the records maintained by Borrower
differs from Administrative Agent's records in any respect.
2.10 ASSUMPTIONS REGARDING NOTICES.
2.10.1 RESPONSIBLE OFFICERS. Any Responsible Officer of
Borrower may submit a Notice on behalf of Borrower.
Agents and each Lender will be entitled to rely
conclusively on each Responsible Officer's authority
to submit a Notice on behalf of Borrower until Agents
receive written notice from Borrower to the contrary.
Except in the case where Agents have reasonable cause
to believe a written or oral notice is unauthorized,
Agents will have no duty to verify the authenticity
of the signature appearing on any written Notice and,
with respect to an oral Notice, Agents will have no
duty to verify the identity of any Person
representing himself as one of the Responsible
Officers entitled to make such a request on behalf of
Borrower.
2.10.2 NO LIABILITY. Neither Agents nor any Lender will
incur any liability to Borrower in acting upon any
Notice which Agent or such Lender believes in good
faith to have been given by a Responsible Officer or
for otherwise acting in good faith in accordance with
this Section 2 and, upon Agents' accepting any
Notice, Borrower will have effectively elected the
Borrowing, conversion, continuation, prepayment,
reduction or termination thereunder.
2.10.3 NOTICE IRREVOCABLE. Any Notice (whether telephonic,
telecopy, or facsimile or otherwise) given or deemed
to have been given pursuant to this Section will be
irrevocable.
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<PAGE> 40
2.11 COMPUTATIONS, FEES, PAYMENTS, ETC.
2.11.1 COMPUTATIONS. All computations of interest and of
fees hereunder will be made by Administrative Agent
on the basis of: (i) for Alternate Base Rate
Advances, Alternate Secondary Revolving Credit Base
Rate Advances, Fixed Rate Advances and fees and
expenses due hereunder, a 365/366 day year and (ii)
in the case of Euro-Rate Advances, a 360 day year, in
each case for the actual number of days (including
the first day but excluding the last day) occurring
in the period for which such interest or fees are
payable. Each determination by Administrative Agent
of an Interest Rate or fee hereunder will be
conclusive and binding for all purposes, absent
manifest error. Whenever any payment to be made by
Borrower hereunder or under any of the other Loan
Documents is stated to be due on a day other than a
Business Day, such payment will be made on the next
succeeding Business Day, and such extension of time
will in such case be included in the computation of
payment of interest or fees, as the case may be.
2.11.2 FEES. The fees described in this subsection represent
compensation for services rendered and to be rendered
separate and apart from the lending of money or the
provision of credit and do not constitute
compensation for the use or forbearance of money, and
the obligation of Borrower to pay such fees will be
in addition to and not in lieu of the obligation of
Borrower to pay interest, other fees and expenses
otherwise described herein or in the other Loan
Documents. The following fees will be paid by
Borrower:
2.11.2.1 REVOLVING CREDIT FACILITY FEE. Borrower will
pay to Administrative Agent for the account of
Revolving Credit Lenders a Revolving Credit
Facility Fee from and including the Closing Date
to the Termination Date, computed based on the
Senior Unsecured Debt Rating; provided that, in
the event that Borrower's Senior Unsecured Debt
Rating by Moody's Investor Service, Inc. is
different from the rating received from Standard
& Poors Corporation, the higher of the two
ratings will control, which rating will be
determined as of the end of the previous fiscal
quarter and at the applicable rate set forth
below on the Total Revolving Credit Commitment,
such fee to be payable quarterly in arrears on
last day of each fiscal quarter of Borrower and
upon the Termination Date and to be shared by
Revolving Credit Lenders in their Ratable
Portions:
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<PAGE> 41
<TABLE>
<CAPTION>
SENIOR UNSECURED DEBT RATING REVOLVING CREDIT
FACILITY FEE (IN
BASIS POINTS)
<S> <C>
greater than or equal to A/A2 8.0
A-/A3 9.0
BBB+/Baa1 10.0
BBB/Baa2 12.5
less than BBB/Baa2 15.0
</TABLE>
2.11.2.2 SECONDARY REVOLVING CREDIT FACILITY FEE.
Borrower will pay to Administrative Agent for the
account of Secondary Revolving Credit Lenders a
Secondary Revolving Credit Facility Fee from and
including the Closing Date to the Secondary
Revolving Credit Termination Date, computed based
on the Senior Unsecured Debt Rating; provided
that, in the event that Borrower's Senior
Unsecured Debt Rating by Moody's Investor
Service, Inc. is different from the rating
received from Standard & Poors Corporation, the
higher of the two ratings will control, which
rating will be determined as of the end of the
previous fiscal quarter and at the applicable
rate set forth below on the Total Secondary
Revolving Credit Commitment, such fee to be
payable quarterly in arrears on last day of each
fiscal quarter of Borrower and upon the Secondary
Revolving Credit Termination Date and to be
shared by Secondary Revolving Credit Lenders in
their Ratable Portions:
<TABLE>
<CAPTION>
SENIOR UNSECURED DEBT RATING SECONDARY REVOLVING
CREDIT FACILITY FEE
(IN BASIS POINTS)
<S> <C>
greater than or equal to A/A2 6.5
A-/A3 7.5
BBB+/Baa1 8.5
BBB/Baa2 11.0
less than BBB/Baa2 13.5
</TABLE>
2.11.2.3 UTILIZATION FEE. In the event that and for
so long as Borrower has Secondary Revolving
Credit Loans outstanding at any time totaling
more than 50% of the Total Secondary Revolving
Credit Commitment, Borrower agrees that each tier
of the Applicable Secondary Revolving Credit
Margin as set forth in Section 1.1.14 will be
increased by five basis points (the "Utilization
Fee").
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<PAGE> 42
2.11.2.4 DOCUMENTATION AGENT CLOSING EXPENSES. All
out-of-pocket expenses, including reasonable
legal expenses incurred by Documentation Agent in
connection with the preparation, negotiation,
execution and delivery of this Agreement and the
other Loan Documents and the closing of the
Credit Facilities, will be paid by Borrower to
Documentation Agent for the account of
Documentation Agent on the Closing Date.
2.11.2.5 AGENTS FEES. The fees for the Agents will be
set forth in the Side Letter.
2.11.3 PAYMENTS. Borrower will make each payment hereunder
and under the Notes, as the case may be, not later
than 11:00 a.m. (New York, New York time) on the day
when due by deposit to Administrative Agent's Account
in same day funds. Amounts received by Administrative
Agent after 11:00 a.m. (New York, New York time) on
any Business Day will be deemed to have been received
on the next Business Day. Subject to the foregoing,
Administrative Agent will cause to be distributed to
each Lender on the Business Day of receipt by
Administrative Agent an amount equal to the amount of
such payment then due such Lender. Payments when
received will be applied in the following order: (i)
to charges, fees and expenses (including Attorneys'
Fees) due Agents and/or Lenders, (ii) to accrued
interest and (iii) to principal.
2.11.4 FAILURE TO MAKE PAYMENTS BY BORROWER. Unless
Administrative Agent will have received notice from
Borrower prior to the date on which any payment is
due to Administrative Agent hereunder that Borrower
will not make such payment in full, Administrative
Agent may assume that Borrower has made such payment
in full to Administrative Agent on such date and
Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due
such Lender. If and to the extent Borrower will not
have so made such payment in full to Administrative
Agent, each Lender will repay to Administrative Agent
forthwith on demand such amount distributed to such
Lender together with interest thereon, for each day
from the date such amount is distributed to such
Lender until the date such Lender repays such amount
to Administrative Agent, at the Federal Funds Rate.
If and to the extent Borrower makes only partial
payment to Administrative Agent, each Lender will
repay to Administrative Agent, in accordance with
this Section, only the amount distributed to such
Lender by Administrative Agent, with interest
thereon, that exceeds the Ratable Portion of the
partial payment received by Administrative Agent from
Borrower.
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<PAGE> 43
2.12 ADDITIONAL COSTS.
2.12.1 TAXES, RESERVE REQUIREMENTS, ETC. In the event that
any applicable law, rule or regulation now or
hereafter in effect and whether or not presently
applicable to any of Lenders, or any interpretation
or administration thereof by any Governmental
Authority charged with the interpretation or
administration thereof, or compliance by Lenders with
any guideline, request or directive of any such
authority (whether or not having the force of law),
will (i) subject any Lender to any tax or affect the
basis of taxation of payments to any of Lenders of
any amounts payable by Borrower under this Agreement
(other than taxes imposed on the overall net income
of any of Lenders, by the jurisdiction, or by any
political subdivision or taxing authority of any such
jurisdiction, in which any Lender has its principal
office), or (ii) will impose, modify or deem
applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for
the account of, or credit extended by any of Lenders
(including but not limited to a request or
requirement which affects the manner in which any of
Lenders allocates capital resources to its
commitments or obligations, including without
limitation its obligations under this Agreement, the
Loans and other obligations) or (iii) will impose any
other condition affecting this Agreement, any of the
Obligations or any of the Loan Documents, and the
result of any of the foregoing is to increase the
direct or indirect cost of making, funding or
maintaining the Loans or the other Obligations or to
reduce the amount of any sum received or receivable
by any of Lenders thereon, calculated on a net basis
for any one or related series of the foregoing
events, then Borrower will pay to such Lenders from
time to time, upon request by any of such Lenders,
with a copy of such request to be provided to
Administrative Agent, additional amounts sufficient
to compensate such Lenders for such increased cost or
reduced sum receivable.
2.12.2 CAPITAL ADEQUACY. If either: (i) the introduction of,
or any change in or in the interpretation or
administration of, any United States or foreign law,
rule or regulation, or (ii) compliance with any
directive, guidelines or request from any central
bank or other governmental authority (whether or not
having the force of law), promulgated, made, or that
becomes effective (in whole or in part) after the
date hereof affects or would affect the amount of
capital required or expected to be maintained by any
of Lenders or any corporation directly or indirectly
owning or controlling any of Lenders and any Lender
determines that such introduction, change or
compliance has or would have the effect of reducing
the rate of return on Lender's capital or on the
capital of such owning or controlling corporation as
a consequence of its obligations hereunder or under
any of the Loans, or other Obligations or any
commitment to lend thereunder or relating thereto,
calculated on a net basis for any one or related
series of the foregoing events, to a level
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<PAGE> 44
below that which any Lender or such owning or
controlling corporation could have achieved but for
such introduction, change or compliance (after taking
into account such Lender's policies or the policies
of such owning or controlling corporation, as the
case may be, regarding capital adequacy) by an amount
deemed by such Lender (in its sole discretion) to be
material, then, from time to time, Borrower will pay
to such Lender such additional amount or amounts as
will compensate such Lender for such reduction.
2.12.3 CERTIFICATE OF LENDER. To the extent reasonably
practicable, each Lender will give Borrower prompt
written notice of any claim under this Section 2.12
and will take steps to minimize the impact of any of
the events described in Sections 2.12.1 and/or
2.12.2, above, by transferring its Revolving
Commitment, Secondary Revolving Credit Commitment,
and its Revolving Loans and Secondary Revolving
Credit Loans outstanding, as applicable, hereunder to
another office, branch, subsidiary or affiliate of
such Lender, so long as such action is not
disadvantageous to such Lender. A certificate of a
Lender setting forth such amount or amounts as will
be necessary to compensate Lender as specified in
Sections 2.12.1 and/or 2.12.2, above, which will
include detailed explanations and calculations, will
be delivered to Borrower and will be conclusive
absent manifest error. Borrower will pay
Administrative Agent for the account of Lender the
amount shown as due on any such certificate within
five (5) days after its receipt of the same. Failure
on the part of any Lender to deliver any such
certificate will not constitute a waiver of such
Lender's rights to demand compensation for any
particular period or any future period. The
protection of this Section will be available to any
Lender regardless of any possible contention of
invalidity or inapplicability of the law, regulation,
etc., that results in the claim for compensation
under this Section, but if any law, regulation, etc.,
is later found to be invalid or inapplicable, each
Lender promptly will return to Borrower any sums
received under this Section. The agreements and
obligations contained in this Section will survive
the payment in full of the Obligations and any
termination of this Agreement.
2.13 OBLIGATION TO INDEMNIFY. In the event of Borrower's failure to
accept the proceeds from an Advance after making a request
therefor, Administrative Agent will immediately prepay such
Advance and Borrower will pay to Administrative Agent for the
account of Lenders on written demand an amount equal to
interest that would have accrued on such Advance plus any
applicable Prepayment Premium, calculated through the date of
such prepayment by Administrative agent of such amounts. The
obligations of Borrower under this Section will survive the
payment in full of the Obligations and any termination of this
Agreement.
2.14 EXTENSION. Upon the written request of Borrower to the Agents
at least sixty but not more than ninety days prior to the
first and second anniversary of the Revised
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Closing Date, each Revolving Credit Lender in its sole
discretion may extend its Revolving Commitment in each case
for an additional period of one year. In no event, however,
will any Revolving Credit Lender be under any obligation to
extend its Revolving Commitment beyond the initial Termination
Date. Each Revolving Credit Lender will have thirty days from
its receipt of an extension request to respond to Borrower and
Administrative Agent in writing; and if no such written
response is so received, such Revolving Credit Lender will be
deemed to have elected not to extend its Revolving Commitment.
In the event that any Revolving Credit Lender elects not to
extend its Revolving Commitment, such Revolving Credit Lender,
on the written request of Borrower, will resign its position
as an Agent hereunder if such Revolving Credit Lender is an
Agent, and Borrower will have the following options, provided
that: (i) no Event of Default or Default exists hereunder and
(ii) Revolving Credit Lenders holding at least 40% of the
Total Commitment have agreed to extend their Revolving
Commitments:
2.14.1 upon thirty days prior written notice to Revolving
Credit Lenders: (i) terminate upon the expiration of
such thirty days the Revolving Commitment of the
Revolving Credit Lender or Revolving Credit Lenders
that do not agree to extend, (ii) pay Administrative
Agent upon the expiration of such thirty days for the
account of such Revolving Credit Lender or Revolving
Credit Lenders all sums due hereunder, which payment
will not be shared by Revolving Credit Lenders
hereunder, (iii) permanently reduce the Total
Commitment by the Revolving Commitments of such
Revolving Credit Lender or Revolving Credit Lenders
who do not agree to extend and (iv) extend the
Revolving Commitments of the Revolving Credit Lenders
who have agreed to extend;
2.14.2 upon thirty days prior written notice to Revolving
Credit Lenders: (i) terminate effective upon the
initial Termination Date the Revolving Commitment of
the Revolving Credit Lender or Revolving Credit
Lenders that do not agree to extend, (ii) pay
Administrative Agent on the initial Termination Date
for the account of such Revolving Credit Lender or
Revolving Credit Lenders that do not agree to extend
all sums due hereunder, which payment will not be
shared by Revolving Credit Lenders hereunder, (iii)
permanently reduce effective upon the initial
Termination Date the Total Commitment by the
Revolving Commitments of such Revolving Credit Lender
or Revolving Credit Lenders who do not agree to
extend and (iv) extend the Revolving Commitments of
the Revolving Credit Lenders who have agreed to
extend;
2.14.3 upon ninety days prior written notice to Revolving
Credit Lenders: (i) terminate effective upon the
expiration of such ninety days the Revolving
Commitment of the Revolving Credit Lender or
Revolving Credit Lenders that do not agree to extend,
(ii) pay Administrative
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<PAGE> 46
Agent on the expiration of such ninety days for the
account of such Revolving Credit Lender or Revolving
Credit Lenders all sums due hereunder, which payment
will not be shared by Revolving Credit Lenders
hereunder, (iii) within such ninety day period find a
replacement Revolving Credit Lender or Revolving
Credit Lenders acceptable to Borrower that will
execute a counterpart of this Agreement and other
documents reasonably acceptable to Agents and (iv)
extend the Revolving Commitments of the Revolving
Credit Lenders who have agreed to extend.
2.15 INCREASE OF TOTAL REVOLVING CREDIT COMMITMENT.Upon the written
request of Borrower in the form of the Advice Of Increase
given to the Agents at least forty-five but not more than
ninety days prior to the effective date of the requested
increase, Borrower may request an increase in the amount of
the Total Revolving Credit Commitment to an amount not in
excess of $250,000,000 (the "Increased Commitment"). Each
Revolving Credit Lender in its sole discretion may participate
pro rata in the Increased Commitment; provided, however that
in no event will any Revolving Credit Lender be under any
obligation to increase its Revolving Commitment beyond its
Revolving Commitment as set forth on Amended and Restated
Schedule 1. Each Revolving Credit Lender will have twenty-one
days from its receipt of an increase request to respond to
Borrower and Administrative Agent in writing; and if no such
written response is so received, such Revolving Credit Lender
will be deemed to have elected not to increase its Revolving
Commitment. In the event that one or more of the Revolving
Credit Lenders elect not to increase such Revolving Credit
Lender's Revolving Commitment, then Borrower and the Agents
may distribute such unsubscribed portion of the Increased
Commitment among one or more of the other Revolving Credit
Lenders who elect to participate in the Increased Commitment
in such a fashion as Borrower and the Agents decide in the
exercise of their reasonable discretion. In the event that any
of the Revolving Credit Lenders elect to make any portion of
the Increased Commitment available to Borrower, each such
Revolving Credit Lender agrees to provide Documentation Agent
with such documentation as may be reasonably requested by such
Documentation Agent to document the additional extension, as
determined by such Documentation Agent in the exercise of its
reasonable discretion.
3. CONDITIONS PRECEDENT.
3.1 CLOSING. Lenders' obligations to close this Agreement are
subject to the fulfillment of each of the following
conditions:
3.1.1 CLOSING MEMO. Lenders have received each of the
documents listed on the Closing Memo, all in form and
substance reasonably satisfactory to Agents.
3.1.2 OTHER CONDITIONS. The conditions set forth in Section
3.2, below, will have been fully satisfied whether or
not an initial Advance is taken.
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3.2 EACH ADVANCE. The obligation of each Lender to make any
Advance is subject to the fulfillment of each of the following
conditions to the reasonable satisfaction of Administrative
Agent:
3.2.1 NO DEFAULTS. There does not exist any Default or
Event of Default either before or after giving effect
thereto.
3.2.2 ACCURACY. The representations and warranties
contained in this Agreement and in the other Loan
Documents are true, correct and complete in all
respects on and as of the day of the making of any
Borrowing.
3.2.3 NOTICES. Agents will have received all required
Notices.
4. REPRESENTATIONS AND WARRANTIES. To induce Lenders to extend the Credit
Facilities herein contemplated, Borrower hereby represents and warrants
as follows:
4.1 ORGANIZATION. Borrower and each of its Active Consolidated
Subsidiaries is a corporation duly organized and in good
standing under the laws of the state of its incorporation, is
duly qualified in all jurisdictions where required by the
conduct of its business or ownership of its assets, except
where the failure to so qualify would not have a Material
Adverse Effect, and has the power and authority to own and
operate its assets and to conduct its business as is now done.
4.2 LATEST FINANCIALS. The Current Financial Statements as
delivered to Lenders, fairly present in conformity with GAAP
the consolidated financial position of Borrower and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such
period.
4.3 RECENT ADVERSE CHANGES. Between the date of the Current
Audited Financial Statements and Closing, neither Borrower nor
any Consolidated Subsidiary has, to the extent it would have a
Material Adverse Effect: (i) suffered any damage, destruction
or loss, (ii) incurred any material obligations or
liabilities, whether accrued, absolute, contingent or
otherwise, (iii) discharged or satisfied any material lien or
encumbrance of any kind or (iv) suffered any other materially
adverse event or condition of any character.
4.4 LITIGATION, ETC. As of the date hereof, there are no actions,
suits, proceedings or governmental investigations pending, or,
to its knowledge, threatened against Borrower or any of its
Consolidated Subsidiaries which, in the reasonable judgment of
Borrower, would result in a Material Adverse Effect.
4.5 TAXES. United States Federal income tax returns of Borrower
and its Consolidated Subsidiaries have been examined and
closed through the fiscal year ended May 31, 1990. Borrower
and its Consolidated Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns
which
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are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment
received by Borrower or any Consolidated Subsidiary. The
charges, accruals and reserves on the books of Borrower and
its Consolidated Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of Borrower,
adequate.
4.6 AUTHORITY. Borrower has full power and authority to enter into
the transactions provided for in this Agreement. The documents
to be executed by it in connection with this Agreement, when
executed and delivered by it will constitute the legal, valid
and binding obligations of it enforceable in accordance with
their respective terms except as such enforceability may be
limited by applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws in effect from time to time
affecting the rights of creditors generally and except as such
enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in law or in equity).
4.7 OTHER DEFAULTS. There does not now exist any material default
or violation by Borrower or any Consolidated Subsidiary of or
under any of the terms, conditions or obligations of: (i) its
Articles or Certificate of Incorporation and Regulations or
Bylaws, as applicable, (ii) any indenture, mortgage, deed of
trust, franchise, permit, contract, agreement, or other
instrument to which it is a party or by which it is bound or
(iii) any law, regulation, ruling, order, injunction, decree,
condition or other requirement applicable to or imposed upon
it by any law or by any governmental authority, court or
agency; and the transactions contemplated by this Agreement
and the Loan Documents will not result in any such default or
violation. As used herein, a material default or violation
will mean one which would result in a Material Adverse Effect.
4.8 LICENSES, ETC. Borrower and each of its Consolidated
Subsidiaries has obtained any and all licenses, permits,
franchises, or other governmental authorizations necessary for
the ownership of its properties and the conduct of its
business, except where failure to obtain any such item would
not cause a Material Adverse Effect.
4.9 ERISA. Borrower and each of its Consolidated Subsidiaries is
in compliance with the applicable provisions of ERISA and the
regulations and published interpretations thereunder, to the
extent necessary to avoid a Material Adverse Effect.
4.10 REGULATION U. No part of the proceeds of any Loans will be
used to purchase or carry any margin stock (as such term is
defined in Regulation U of the Board of Governors of the
Federal Reserve System).
4.11 CLOSING MEMO. The information contained in each of the
documents listed on the Closing Memo to be executed or
delivered by it or relating to it is complete and correct in
all material respects.
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4.12 ENVIRONMENTAL MATTERS. Borrower and its Consolidated
Subsidiaries are in material compliance with Environmental
Laws and neither Borrower nor any of its Consolidated
Subsidiaries are subject to any liability or obligation under
any Environmental Laws which would have a Material Adverse
Effect.
5. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that from the date
of execution of this Agreement until all Obligations to Lenders have
been fully paid and this Agreement terminated, Borrower will:
5.1 BOOKS AND RECORDS. Maintain proper books of account and other
records and enter therein complete and accurate entries and
records of all of its transactions and give representatives of
Agents, at Revolving Credit Lenders' expense, reasonable
access thereto at all reasonable times, including permission
to examine, copy and make abstracts from any of such books and
records and such other information as it may from time to time
reasonably request. In addition, it will be available to
Agents, or cause its officers to be available from time to
time upon reasonable notice to discuss the status of the
Loans, its business and any statements, records or documents
furnished or made available to Agents in connection with this
Agreement.
5.2 SEC FILINGS AND SHAREHOLDERS REPORTS. Deliver to each
Revolving Credit Lender within 14 days of the filing or
distribution thereof: (i) copies of all periodic reports on
Forms 10-K, 10-Q and 8-K which it may make to or file with the
Securities Exchange Commission, and with its 10-K and 10-Q
filings, a Compliance Certificate and (ii) its quarterly and
annual reports to its shareholders.
5.3 QUARTERLY STATEMENTS. If Borrower is not required to file 10-Q
filings with the Securities Exchange Commission or does not
file the same within forty-five days after the end of each
fiscal quarter, furnish Revolving Credit Lenders within
forty-five days after the end of each fiscal quarter
internally prepared financial statements with respect to such
fiscal quarter, which financial statements will include a
balance sheet as of the end of such period and earnings,
shareholders' equity and cash flow statements for such period
and: (i) be accompanied by a Compliance Certificate, and (ii)
be on a consolidated basis for Borrower and its Consolidated
Subsidiaries, if any, in accordance with GAAP, subject to
normal year-end adjustments.
5.4 ANNUAL STATEMENTS. If Borrower is not required to file 10-K
filings with the Securities Exchange Commission or does not
file the same within ninety days after the end of each fiscal
year, furnish each Revolving Credit Lender within ninety days
after the end of each fiscal year Borrower's annual audited
financial statements with respect to such fiscal year, which
financial statements will include a balance sheet as of the
end of such period and earnings, shareholders' equity and cash
flow statements for such period and: (i) be accompanied by a
Compliance Certificate, (ii) be on a consolidated basis for
Borrower and its Consolidated Subsidiaries, if any, in
accordance with GAAP, and (iii) contain the unqualified
opinion of an independent certified public accountant
reasonably acceptable to
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Administrative Agent; examination will have been made in
accordance with generally accepted auditing standards and such
opinion will contain a report reasonably satisfactory to
Administrative Agent setting forth any inconsistency in the
application of generally accepted accounting principles with
the preceding years' statements, if any.
5.5 TAXES. Pay and discharge when due all material taxes,
assessments, charges, levies and other similar liabilities
imposed upon it, its income, profits, property or business,
except those which currently are being contested in good faith
by appropriate proceedings and for which it has set aside
adequate reserves or made other adequate provision with
respect thereto. As used herein, material will mean those
items which could result in a Material Adverse Effect if not
so paid or discharged.
5.6 INSURANCE. Keep its insurable real and personal property
insured with responsible insurance companies against loss or
damage from hazards and maintain public liability insurance,
all in an amount reasonably consistent with Borrower's current
practices.
5.7 COMPLIANCE WITH LAWS. Comply in all material respects with all
laws and regulations applicable to it and to the operation of
its business, including without limitation those relating to
environmental and health matters, and do all things necessary
to maintain, renew and keep in full force and effect all
rights, permits, licenses, certificates, satisfactory
clearances and franchises necessary to enable it to continue
its business, to the extent its failure to comply with or do
any of the foregoing could result in a Material Adverse
Effect.
5.8 ENVIRONMENTAL VIOLATIONS. Promptly notify Administrative Agent
of any violation by it of any Environmental Law; to the extent
such violation would, in the reasonable judgment of Borrower,
have a Material Adverse Effect.
5.9 ERISA COMPLIANCE. To the extent necessary to prevent a
Material Adverse Effect, Borrower will, and will cause each of
its Consolidated Subsidiaries to, comply in all material
respects with the applicable provisions of ERISA. Borrower
will promptly furnish to Administrative Agent, information
relating to: (i) any Reportable Event, (ii) any Plan
termination or any intention of Plan termination, (iii) any
failure to make any payment to the PBGC or any other payment
with respect to a Plan or (iv) any possible Withdrawal
Liability with respect to a Multiemployer Plan, to the extent
any of the foregoing could have a Material Adverse Effect.
5.10 NOTICE OF DEFAULT. Notify Administrative Agent in writing
within five Business Days after it knows or has reason to know
of the occurrence of an Event of Default.
5.11 CHANGE IN BUSINESS. Not make any change in its business which
would cause the type of business primarily conducted by
Borrower and its Consolidated
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Subsidiaries, considered on a consolidated basis, to be
materially different from the type of business primarily being
conducted on the date hereof.
6. NEGATIVE COVENANTS. Borrower covenants and agrees that from the date of
execution of this Agreement until all of the Obligations have been
fully paid and this Agreement terminated:
6.1 LIENS. Borrower will not and will cause its Consolidated
Subsidiaries to not incur, create, assume, become or be liable
in any way, or suffer to exist any mortgage, pledge, lien,
charge, or other encumbrance of any nature whatsoever on any
of its assets, now or hereafter owned, other than Permitted
Liens.
6.2 RESTRICTIONS ON INDEBTEDNESS OF CONSOLIDATED SUBSIDIARIES..
Borrower will not permit any Consolidated Subsidiary to become
or to be liable in respect of any Indebtedness, other than:
(i) Indebtedness of a corporation existing at the time such
corporation becomes a Subsidiary and not created in
contemplation of such event, (ii) Indebtedness to Borrower or
another Consolidated Subsidiary, and (iii) other Indebtedness
of Consolidated Subsidiaries in an aggregate principal amount
at any time outstanding not exceeding 15% of Borrower's Net
Worth.
6.3 OWNERSHIP. Borrower will not permit or suffer any Person or
its Affiliates (other than John H. McConnell, John P.
McConnell, their Affiliates or a group in which the foregoing
are a principal participant) to acquire 30% or more of the
stock (or equivalent ownership or controlling interest) having
by the terms thereof ordinary voting power to elect a majority
of the directors of Borrower (irrespective of whether or not
at the time stock of any class or classes of Borrower will
have or might have voting power by reason of the happening of
any contingency).
6.4 CONSOLIDATED INDEBTEDNESS TO CAPITALIZATION. Borrower will not
permit the ratio of Borrower's Consolidated Indebtedness to
Borrower's Capitalization to be greater than 50% calculated as
of the end of each fiscal quarter of Borrower.
6.5 NET WORTH. Borrower will not permit Borrower's Net Worth to be
less than $450,000,000 calculated as of the end of each fiscal
quarter of Borrower.
6.6 MERGER. Borrower will not merge or consolidate with or into
any other Person unless either (i) Borrower is the surviving
entity or (ii) Borrower merges or consolidates with a
Consolidated Subsidiary and the surviving corporation: (a) is
organized and existing under the laws of a state of the United
States, (b) has the majority of its property and assets within
the continental limits of the United States of America, and
(c) assumes in writing all of the obligations and liabilities
of Borrower under the Loan Documents; and immediately after
giving effect to such transaction, no condition or event
exists which constitutes a Default or an Event of Default.
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6.7 SALE OF ASSETS. Borrower will not sell, lease, or otherwise
dispose of all or substantially all of Borrower's assets
calculated on a consolidated basis for Borrower and its
Consolidated Subsidiaries.
6.8 TRANSACTIONS WITH UNRESTRICTED SUBSIDIARIES. Borrower and its
Consolidated Subsidiaries will not enter into any material
transaction, including, without limitation, any purchase,
sale, lease or exchange of property or the rendering of any
service, with any Unrestricted Subsidiary unless such
transaction is otherwise permitted under this Agreement and is
on fair and reasonable terms not materially less favorable to
it than it would obtain in a comparable arm's length
transaction with an unrelated entity.
6.9 GOVERNANCE DOCUMENTS. Borrower will not amend or change its
Certificate of Incorporation or its Bylaws in any manner which
is materially adverse to the Lenders.
7. EVENTS OF DEFAULT. Upon the occurrence of any of the following events:
7.1 PAYMENT. The non-payment by Borrower of: (i) any principal
amount of any of the Advances when due, whether by
acceleration or otherwise or (ii) the non-payment by Borrower
of any interest, fees or other amounts owing hereunder or
under any of the other Loan Documents within five days of when
the same is due;
7.2 COVENANTS. The default in the due observance of any covenant
or agreement to be kept or performed by Borrower under the
terms of this Agreement or any of the Loan Documents and the
failure or inability of it to cure such default: (i) within
forty-five (45) days after written notice thereof from
Borrower to Administrative Agent if given within the period
provided in Section 5.10, above, or (ii) if such notice is not
given by Borrower within the period specified in Section 5.10,
within forty-five days of the date Borrower was required to
give notice thereof pursuant to Section 5.10; provided that
such forty-five day grace period will not apply to: (i) any
default which in Administrative Agent's good faith
determination is incapable of cure or (ii) any default in any
covenants listed in Sections 6.3 through 6.7;
7.3 REPRESENTATIONS AND WARRANTIES. Any representation or warranty
made by Borrower in this Agreement is false or erroneous in
any material respect as of the date made;
7.4 BANKRUPTCY, ETC., OF BORROWER OR AN ACTIVE CONSOLIDATED
SUBSIDIARY. Borrower or an Active Consolidated Subsidiary that
is material to the business, operations or financial condition
of Borrower and its Consolidated Subsidiaries considered on a
consolidated basis: (i) dissolves or is the subject of any
dissolution, a winding up or liquidation; (ii) makes a general
assignment for the benefit of creditors; or (iii) files or has
filed against it a petition in bankruptcy, for a
reorganization or an arrangement, or for a receiver, trustee
or similar creditors'
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representative for its property or assets or any part thereof,
or any other proceeding under any federal or state insolvency
law, and if filed against it, the same has not been dismissed
or discharged within sixty days thereof;
7.5 BANKRUPTCY, ETC., OF UNRESTRICTED SUBSIDIARY. An Unrestricted
Subsidiary: (i) makes a general assignment for the benefit of
creditors or (ii) files or has filed against it a petition in
bankruptcy, for a reorganization or an arrangement, or for a
receiver, trustee or similar creditors' representative for its
property or assets or any part thereof, or any other
proceeding under any federal or state insolvency law, and if
filed against it, the same has not been dismissed or
discharged within sixty days thereof, but only if such event
would result in a Material Adverse Effect;
7.6 JUDGMENTS. Unless adequately insured or bonded, the entry of a
final judgment for the payment of money involving more than
$10,000,000 against Borrower and the failure by Borrower: (i)
to discharge the same, or cause it to be discharged, within
thirty days from the date of the order, decree or process
under which or pursuant to which such judgment was entered or
(ii) to secure a stay of execution pending appeal of such
judgment; or the entry of one or more final monetary or
non-monetary judgments or orders against Borrower which,
singly or in the aggregate, does or could reasonably be
expected to cause a Material Adverse Effect; or
7.7 OTHER INDEBTEDNESS. A default by Borrower with respect to any
evidence of Indebtedness in excess of $5,000,000 by it for
borrowed money (other than to Lenders pursuant to this
Agreement), if the effect of such default is to accelerate the
maturity of such Indebtedness or to permit the holder thereof
to cause such Indebtedness to become due prior to the stated
maturity thereof, or if any Indebtedness of it in excess of
$5,000,000 for borrowed money (other than to Lenders pursuant
to this Loan Agreement) is not paid when due and payable,
whether at the due date thereof or a date fixed for prepayment
or otherwise (after the expiration of any applicable grace
period);
then in any such event ("Event of Default"), the Agents, acting
jointly, may, or upon the request of the Majority Lenders will, take
any or all of the following actions (provided that if any Event of
Default specified in Section 7.4, above, as to Borrower, occurs, the
results described in clauses (i) and (ii), below, will occur
automatically): (i) declare the Revolving Commitments terminated, (ii)
declare the Secondary Revolving Credit Commitments terminated, (iii)
declare all principal, interest and other amounts due and payable
hereunder and under the Loan Documents to be immediately due and
payable, without presentment, demand, protest or notice of any kind,
all of which hereby are waived by Borrower, and (iv) exercise any other
rights and remedies provided hereunder, under any of the Loan Documents
and/or by applicable law. After the occurrence of any Event of Default
Lenders are authorized at any time and from time to time without notice
to Borrower to offset, appropriate and apply to all or any part of the
Obligations all moneys, credits, deposits (general or special, demand
or time, provisional or final) and other property of any nature
whatsoever of Borrower now or at any time hereafter in the possession
of, in transit to or from, under the control or custody of, or on
deposit with
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(whether held by Borrower individually or jointly with another party)
any of Lenders and any or all indebtedness at any time owing by such
Lender to or for the credit or account of Borrower. The rights and
remedies of Lenders upon the occurrence of any Event of Default will
include but not be limited to all rights and remedies provided in the
Loan Documents and all rights and remedies provided under applicable
law. Borrower irrevocably waives any right to direct the application of
any payments received by any Lender or Agents from or on behalf of
Borrower after the occurrence of any Event of Default.
8. INTERCREDITOR LIEN AND PAYMENT PROVISIONS.
8.1 SHARING OF PAYMENTS, ETC.
8.1.1 Except as otherwise expressly required by the terms
of this Agreement, each payment or prepayment of
principal, interest, fees, expenses and other charges
under the Credit Facilities and each reduction of the
Total Commitment will be applied pro-rata among
Lenders in accordance with their respective Ratable
Portions applicable thereto.
8.1.2 If any Revolving Credit Lender as to Revolving Loans,
Secondary Revolving Credit Lender as to Secondary
Revolving Credit Loans, or Lender as to Competitive
Bid Loans at any time obtains any payment (whether
voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of
Advances owing to it (other than payments pursuant to
Section 2.13, and payments of fees and expenses to
Agents pursuant to Sections 2.11.2.4 and 2.11.2.5 and
of indemnities and expenses to Agents pursuant to the
terms of this Agreement), in excess of its Ratable
Portion, such Lender will forthwith purchase from the
other Lenders such participations in the Advances, as
applicable, owing to them as will be necessary to
cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender,
such purchase from each Lender will be rescinded and
such Lender will repay to the purchasing Lender the
purchase price to the extent of such recovery
together with an amount equal to such Lender's
ratable share (according to the proportion of (i) the
amount of such Lender's required payment to (ii) the
total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount
so recovered. Borrower agrees that any Lender so
purchasing a participation from another Lender
pursuant to this Section may, to the fullest extent
permitted by law, exercise all of its rights of
payment (including the right of set-off) with respect
to such participation as fully as if such Lender were
the direct creditor of Borrower in the amount of such
participation.
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8.1.3 Borrower and Lenders further acknowledge that
Administrative Agent will not be obligated to make
any Advances to the extent that any of the other
Lenders do not contribute their Ratable Portion of
any Advance.
8.1.4 Each Lender's Ratable Portion of any payment
hereunder will be reduced to the extent that such
Lender has not contributed its Ratable Portion of any
amount owing to Administrative Agent hereunder.
8.1.5 Each Lender's obligation to purchase participation
interests pursuant to this Agreement will be absolute
and unconditional.
8.1.6 Each Lender will be entitled to receive from
Administrative Agent its Ratable Portion of interest
on Advances of such Lender only as calculated based
upon funds actually received by Administrative Agent
from each Lender by 11:00 a.m. (New York, New York
time) on the day due from such Lender. Funds received
by Administrative Agent after such cut off time will
be treated as having been received by Administrative
Agent on the next Business Day following the day on
which received.
8.1.7 To the extent that Administrative Agent will have
disbursed a Borrowing on a day prior to receipt by
Administrative Agent of a Lender's Ratable Portion of
such Borrowing, interest accrued and paid on such
unfunded sums will be for the account of
Administrative Agent.
8.2 RECEIPT OF PAYMENTS BY LENDERS. Should any payment or
distribution not permitted by the provisions of this Agreement
or the Loan Documents or proceeds thereof be received by any
Lender upon or with respect to all or any part of the Notes or
Obligations prior to the full payment and satisfaction of the
Obligations in the priority set forth in this Section and the
termination of all financing arrangements between Lenders and
Borrower, such Lender will deliver the same to Administrative
Agent in precisely the form received (except for the
endorsement or assignment of Lender where necessary), for
application to the Obligations (whether due or not due in such
order and manner as set forth herein), and, until so
delivered, the same will be held in trust by such Lender as
property of Administrative Agent on behalf of all of Lenders.
In the event of the failure of any Lender to make any such
endorsement or assignment, Administrative Agent on behalf of
all of Lenders, or any of its officers or employees on behalf
of Administrative Agent on behalf of all of Lenders, is hereby
irrevocably authorized in its own name or in the name of
Lenders to make the same, and is hereby appointed each
Lender's attorney-in-fact for those purposes, that appointment
being coupled with an interest and irrevocable.
8.3 DISTRIBUTIONS, ETC. In the event of any distribution, division
or application, partial or complete, voluntary or involuntary,
by operation of law or otherwise, of all or any part of the
assets of Borrower or the proceeds thereof to creditors of
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Borrower or to any indebtedness, liabilities and obligations
of Borrower, or upon any liquidation, dissolution or other
winding up of Borrower or Borrower's business, or in the event
of any sale (singly or in the aggregate) of all or any
substantial part of the assets of Borrower, or in the event of
any receivership, insolvency or bankruptcy proceeding, or
assignment for the benefit of creditors, or any proceeding by
or against Borrower for any relief under any bankruptcy or
insolvency law or other laws relating to the relief of
debtors, readjustment of indebtedness, reorganization,
compositions or extensions, then and in any such event any
payment or distribution of any kind or character, either in
cash, securities or other property, which will be payable or
deliverable upon or with respect to all or any part of the
Obligations will be paid or delivered directly to
Administrative Agent for application to the Obligations
(whether due or not due in order and manner as set forth
herein) until the Obligations will have been fully paid and
satisfied. Lenders hereby irrevocably authorize and empower
Administrative Agent to demand, sue for, collect and receive
every such payment or distribution and give acquittance
therefor and to file claims and take such other proceedings in
Administrative Agent's own name or in the name of Lenders or
otherwise, as Lender may deem necessary or advisable to carry
out the provisions of this Section. Lenders hereby agree to
execute and deliver to Agents such limited powers of attorney,
assignments, endorsements or other instruments as may be
requested by Agents in order to enable Agents to enforce any
and all claims upon or with respect to the Obligations, and to
collect and receive any and all payments or distributions
which may be payable or deliverable at any time upon or with
respect to the Obligations.
8.4 BENEFIT. The provisions of this Section are solely for the
benefit of Lenders, and may at any time or times be changed by
Lenders pursuant to the terms of this Agreement, as they may
elect but without necessity of notice to or consent or
approval by Borrower or any other Person (other than Lenders
pursuant to the terms of this Agreement with respect to
amendments, modifications, etc.); and neither Borrower nor any
other Person will have any right to rely on or enforce any of
the provisions hereof.
9. REPRESENTATIONS AND WARRANTIES TO SURVIVE. All representations,
warranties, covenants and agreements made by Borrower herein and in the
other Loan Documents will survive the execution and delivery of this
Agreement, the Loan Documents and the issuance of the Notes.
10. ENVIRONMENTAL INDEMNIFICATION. Borrower agrees that it will indemnify
and hold harmless Agents and Lenders from any costs, expenses, clean-up
costs, waste disposal costs, litigation costs, fines, penalties
including without limitation those costs, expenses, and fines within
the meaning of CERCLA and other related liabilities which may arise
under Environmental Laws in connection with the assets of Borrower or
its Consolidated Subsidiaries or the operation of their businesses, to
the extent Agents or Lenders may be held responsible for such items as
a result of this Loan Agreement, any acts or omissions in connection
therewith, or any matters relating thereto. The provisions of this
Section will survive any termination of this Agreement.
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11. AGENTS.
11.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints and
irrevocably authorizes Agents to take such action as agent on
its behalf and to exercise such powers and discretion under
this Agreement and the other Loan Documents as are delegated
to Agents by the terms hereof or thereof, together with such
powers as are reasonably incidental thereto. Without
limitation of the foregoing, each Lender hereby expressly
authorizes Agents to execute, deliver and perform its
obligations hereunder and under each of the Loan Documents to
which either of Agents are a party, and to exercise hereunder
or thereunder all rights, powers and remedies that Agents may
have hereunder or thereunder. Each Lender agrees that any
action taken by Agents in accordance with the provisions of
this Agreement or the Loan Documents, and the exercise by
Agents of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto,
will be authorized and binding upon all Lenders. As to any
matters not expressly provided for hereunder or by the Loan
Documents (including, without limitation, enforcement or
collection of the Obligations), Agents will not be required to
exercise any discretion or take any action, but will be
required to act or to refrain from acting (and will be fully
protected in so acting or refraining from acting) upon the
instructions of the Majority Lenders (or if applicable under
Section 12.4 below, all Lenders), and such instructions will
be binding upon all Lenders. The duties of Agents will be
mechanical and administrative in nature and Agents will have
no fiduciary relationship in respect of any Lender. If Agents
will request instructions from any Lenders with respect to any
act or failure to act in connection with this Agreement, the
Credit Facilities or any of the Loan Documents, Agents will be
entitled to refrain from such act or taking such action unless
and until Agents have received instructions and Agents will
have no liability to any Person or Lender by reason of so
refraining. Agents will not be required to take any action
which exposes Agents to personal liability or is contrary to
this Agreement or applicable law.
11.2 AGENTS' RELIANCE, ETC. Neither Agents, any Affiliate of
Agents, nor any of their respective directors, officers,
agents, employees, attorneys or consultants will be liable for
any action taken or omitted to be taken by it or them under or
in connection with this Agreement, any of the Obligations or
any Loan Document, except for its or their own gross
negligence or willful misconduct. Without limitation of the
generality of the foregoing, Agents: (a) may consult with
legal counsel (including counsel for Borrower), independent
public accountants and other experts selected by Agents and
will not be liable for any action taken or omitted to be taken
in good faith by it in accordance with the advice of such
counsel, accountants or experts; (b) make no warranty or
representation to any Lender and will not be responsible to
any Lender for any statements, warranties or representations
made in or in connection with this Agreement, the Notes or any
Loan Document; (c) will not have any duty to ascertain or to
inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement, the
Obligations or any Loan Document on the part of Borrower or as
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to the existence or possible existence of any Default or Event
of Default or to inspect the property (including the books and
records) of Borrower; (d) will not be responsible to any
Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this
Agreement, the Obligations or any Loan Document or any other
instrument or document furnished pursuant thereto; and (e)
will incur no liability under or in respect of this Agreement,
the Obligations or any Loan Document by acting upon any
notice, consent, certificate or other instrument or writing
(which may be by telephone, telegram, cable, telecopy or
telex) believed by it to be genuine and signed or sent by the
proper party or parties. Agents will not be liable for any
apportionment or distribution of payments made by it
reasonably and in good faith pursuant to this Agreement, and
if any such apportionment or distribution is subsequently
determined to have been made in error the sole recourse of any
Person to whom payment was due, but not made, will be to
recover from the recipients of such payments any payment in
excess of the amount to which they are determined to have been
entitled.
11.3 AGENTS AND THEIR AFFILIATES. With respect to its Revolving
Commitments, the Advances made by it and the Notes issued to
it, Agents will have the same rights and powers under the Loan
Documents as any other Lender and may exercise the same as
though they were not Agents; and the term "Lender" or
"Lenders" will, unless otherwise expressly indicated, include
Agents in their individual capacity. Agents and their
Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind
of business with Borrower, Borrower's Affiliates and any
Person who may do business with or own securities of Borrower
or Borrower's Affiliates, all as if they were not Agents and
without any duty to account therefor to Lenders.
11.4 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agents or any other
Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision
to enter into this Agreement. Each Lender also acknowledges
that it will, independently and without reliance upon Agents
or any other Lender and based on such documents and
information as it will deem appropriate at the time, continue
to make its own credit decisions in taking or not taking
action under or otherwise relating to this Agreement and the
Obligations; and Agents will not have any duty or
responsibility at any time to provide any Lender with any
credit or other information with respect thereto.
11.5 INDEMNIFICATION. Lenders agree to indemnify Agents (to the
extent not reimbursed by Borrower), ratably according to the
sum of their respective Revolving Commitments plus Secondary
Revolving Credit Commitments existing on the date hereof, from
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against Agents in any way
relating to or arising out of this Agreement, the Notes, the
Obligations or any of the Loan Documents or any action taken
or omitted by Agents under this Agreement, the Notes, the
Obligations or any of the Loan
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Documents, provided that no Lender will be liable for any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agents' gross negligence or
willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse Agents promptly upon demand for its
ratable share of any out-of-pocket expenses incurred by Agents
in connection with the preparation, review, execution,
delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings
or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, the Notes, the
Obligations or any of the Loan Documents, or any of them, to
the extent that Agents are not reimbursed for such expenses by
Borrower. The provisions of this Section will survive the
termination of this Agreement.
11.6 SUCCESSOR AGENTS. Either Agent may resign at any time as Agent
under this Agreement, the Notes or the Loan Documents by
giving written notice thereof to Lenders and Borrower, which
resignation will be effective only upon the appointment of a
successor Agent. Upon any such resignation, the Majority
Lenders will, on behalf of Lenders, appoint a successor Agent,
which will be a commercial bank organized under the laws of
the United States of America or of any State thereof and
having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent will
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the
retiring Agent will be discharged from its duties and
obligations under this Agreement; provided, however, that the
successor Agent will not be considered as a Lender for
purposes of this Agreement unless it is otherwise a Lender.
After any retiring Agent's resignation, the provisions of this
Section will inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this
Agreement. If the other Lenders request either Agent to
resign, then, prior to such resignation, the other Lenders
will cause such Agent to be paid all amounts owed to such
Agent hereunder, including, without limitation, such Agent's
Ratable Portion of all outstanding Advances and other
Obligations.
11.7 RELATIONS AMONG LENDERS. Each Lender agrees that it will not
take or institute any actions or proceedings, against Borrower
under this Agreement or any of the Loan Documents, without the
prior written consent of the Majority Lenders.
11.8 BENEFIT. The provisions of this Section are solely for the
benefit of Agents and Lenders, and may at any time or times be
changed by Lenders as they may elect without necessity of
notice to or consent or approval by Borrower or other Person
(other than Lenders pursuant to Section 12.4, below); and
neither Borrower or other Person will have any right to rely
on or enforce any of the provisions hereof. In performing its
actions and duties under this Agreement Agents act solely as
Agent of Lenders and do not assume or have any obligation
toward or agency relationship with or for Borrower.
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12. GENERAL.
12.1 WAIVER. No delay or omission on the part of any Lender or
Agents to exercise any right or power arising from any Event
of Default will impair any such right or power or be
considered a waiver of any such right or power or a waiver of
any such Event of Default or any acquiescence therein nor will
the action or nonaction of any Lender or Agents in case of
such Event of Default impair any right or power arising as a
result thereof or affect any subsequent default or any other
default of the same or a different nature. No disbursement of
Advances hereunder will constitute a waiver of any of the
conditions to Lenders' or Agents' obligation to make further
disbursements; nor, in the event that Borrower is unable to
satisfy any such condition, will any such disbursement have
the effect of precluding Lenders from thereafter declaring
such inability to be a Default or an Event of Default. No
modification or waiver of any provision of this Agreement or
any of the Loan Documents, nor consent to any departure by
Borrower therefrom, will be established by conduct, custom or
course of dealing; and no modification, waiver or consent will
in any event be effective unless the same is in writing and
specifically refers to this Agreement, and then such waiver or
consent will be effective only in the specific instance and
for the purpose for which given. No notice to or demand on
Borrower in any case will entitle Borrower to any other or
further notice or demand in the same, similar or other
circumstance. Unless otherwise agreed in writing by all
Lenders pursuant to Section 12.4 hereof, the liability of
Borrower will not be affected by any surrender, exchange,
acceptance, or release by Agents or any Lender of any party or
other person or any other guarantee or any security held by it
for any of the Obligations or by Agents' or any Lender's
failure to take any steps to perfect or maintain its lien or
security interest in or to preserve any of its rights to, any
guarantee, security or other collateral for any of the
Obligations, by any delay or omission in exercising any right,
remedy or power with respect to any of the Obligations or any
guarantee or collateral therefor, or by any irregularity,
unenforceability or invalidity of any of the Obligations or
any security or guarantee therefor. Subject to Section 12.4
hereof, Lenders at any time and from time to time, and without
impairing, releasing, discharging or modifying the liabilities
of Borrower hereunder, may (a) without the consent of or
notice to Borrower, change the manner, amount, place or terms
of payment or performance of or interest rates on, or change
or extend the time of payment of, or other terms relating to,
any of the Obligations, (b) renew, substitute, modify, amend
or alter, or grant consents or waivers relating to, any of the
Obligations without the consent of or notice to Borrower, (c)
renew, substitute, modify, amend or alter, or grant consents
or waivers relating to, any guarantee or any security for any
guarantee, (d) apply any and all payments received by a Lender
by whomever paid or however realized, to any of the
Obligations in such order, manner and amount as such Lender
may determine in its sole discretion, (e) deal with any Person
in respect of the Obligations in such manner as such Lender
deems appropriate in its sole discretion and/or (f) substitute
any security or guarantee. Irrespective of the taking or
refraining from the taking of any such action, the obligations
of Borrower will remain in full force and effect. Lenders and
Agents in their sole discretion may determine the
reasonableness of the period which may elapse prior to the
making of demand for
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any payment upon Borrower and need not pursue any remedy or
remedies against Borrower or any other Person before having
recourse against Borrower hereunder.
12.2 NOTICES. All notices, demands, requests, consents, approvals
and other communications required or permitted hereunder will
be in writing and will be conclusively deemed to have been
received by a party hereto and to be effective if delivered
personally to such party, or sent by telex, telecopy (followed
by written confirmation) or other telegraphic means, or by
overnight courier service, or by certified or registered mail,
return receipt requested, postage prepaid, addressed to such
party at the address set forth below or to such other address
as any party may give to the other in writing for such
purpose:
To Administrative Agent: The Bank of Nova Scotia
600 Peach Street, N.E., Suite 2700
Atlanta, Georgia 30308
Attention: Amanda Norsworthy
Telecopier No.: (404) 888-8998
Telephone No.: (404) 877-1551
To Documentation Agent: PNC Bank, National Association
Energy, Metals and Mining
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-2707
Attention: David W. Mengel
Telecopier No.: (412) 762-6484
Telephone No.: (412) 762-2524
To Borrower: Worthington Industries, Inc.
1205 Dearborn Drive
Columbus, Ohio 43085
Attention: Treasurer
Telecopier No.: (614) 438-7508
Telephone No.: (614) 438-3187
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With copy with Worthington Industries, Inc.
respect to notices 1205 Dearborn Drive
under Section 7 only: Columbus, Ohio 43085
Attention: General Counsel
Telecopier No.: (614) 840-3706
Telephone No.: (614) 438-3001
To Revolving At their addresses set forth on the
Credit Lenders: Amended and Restated Schedule 1,
attached hereto
To Secondary At their addresses set forth on
Revolving Credit Lenders: Schedule 2, attached hereto
To Designated Lenders: At their addresses set forth in the
applicable Designation Agreement
All such communications, if personally delivered, will be
conclusively deemed to have been received by a party hereto
and to be effective when so delivered, or if sent by telex,
telecopy or telegraphic means, on the day on which
transmitted, or if sent by overnight courier service, on the
day after deposit thereof with such service, or if sent by
certified or registered mail, on the third business day after
the day on which deposited in the mail, except that notices
and communications to Administrative Agent pursuant to Section
2 above, will not be effective until received by
Administrative Agent.
12.3 SUCCESSORS AND ASSIGNS.
12.3.1 This Agreement will be binding upon and inure to the
benefit of Borrower and Lenders and their respective
successors and assigns, provided, however, that
Borrower may not assign this Agreement in whole or in
part without the prior written consent of all of the
Lenders.
12.3.2 Each Lender may, with the prior written consent of
Agents and Borrower, which consent will not be
unreasonably withheld, assign to one or more banks or
other entities all or a portion of its rights and
obligations under this Agreement (including, without
limitation, all or a portion of its Revolving
Commitments, the Secondary Revolving Credit
Commitments, the Advances owing to it and the Note or
Notes held by it); provided, however, that except as
provided in Section 12.3.7, (i) each Revolving Credit
Lender may assign to an Affiliate of such Revolving
Credit Lender that is a bank without any such
consent, and each Secondary Revolving Credit Lender
may assign to an Affiliate of such Secondary
Revolving Credit Lender that is a bank without any
such consent, and each Designated Lender may assign
its Competitive Bid Loan to its Designating Lender or
to another Designated Lender designated by such
Designating Lender and such assignment by a
Designated Lender will not be subject to the
requirements of clauses (ii)
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through (iv) of this Section 12.3.2 provided that the
Designated Lender and Designating Lender notify the
Administrative Agent promptly of such assignment,
(ii) each such assignment will be of a uniform, and
not a varying, percentage of all rights and
obligations under and in respect of all of the Credit
Facilities, (iii) except in the case of an assignment
of all of a Revolving Credit Lender's or a Secondary
Revolving Credit Lender's rights and obligations
under this Agreement, (A) the amount of the Revolving
Commitment of the assigning Revolving Credit Lender
being assigned pursuant to each such assignment
(determined as of the date of the Assignment and
Acceptance with respect to such assignment) will in
no event be less than $5,000,000 and will be an
integral multiple of $1,000,000 and (B) after giving
effect to each such assignment, the amount of the
Revolving Commitment of the assigning Revolving
Credit Lender will in no event be less than
$10,000,000 unless it is reduced to zero; (C) the
amount of the Secondary Revolving Credit Commitment
of the assigning Secondary Revolving Credit Lender
being assigned pursuant to each such assignment
(determined as of the date of the Assignment and
Acceptance with respect to such assignment) will in
no event be less than $5,000,000 and will be an
integral multiple of $1,000,000 and (D) after giving
effect to each such assignment, the amount of the
Secondary Revolving Credit Commitment of the
assigning Secondary Revolving Credit Lender will in
no event be less than $10,000,000 unless it is
reduced to zero, and (iv) the parties to each such
assignment will execute and deliver to Administrative
Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with
any Note or Notes subject to such assignment and, for
the sole account of Administrative Agent, a
processing and recordation fee of $2,500. Upon such
execution, delivery, acceptance and recording, from
and after the effective date specified in such
Assignment and Acceptance, (x) the assignee
thereunder will be a party hereto and, to the extent
that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a
Revolving Credit Lender hereunder or a Secondary
Revolving Credit Lender, depending on the nature of
the commitment being assigned, and (y) Lender
assignor thereunder will, to the extent that rights
and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its
obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the
remaining portion of an assigning Revolving Credit
Lender's or Secondary Revolving Credit Lender's, as
applicable, rights and obligations under this
Agreement, such Revolving Credit Lender or Secondary
Revolving Credit Lender, as the case may be, will
cease to be a party hereto).
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12.3.3 Administrative Agent will maintain at its address
referred to above for notices a copy of each
Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names
and addresses of Lenders and the respective Revolving
Commitments of, and principal amount of the Advances
owing to, each Lender from time to time (the
"Register"). The entries in the Register will be
conclusive and binding for all purposes, absent
manifest error, and Borrower, Administrative Agent
and Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for
all purposes of this Agreement. The Register will be
available for inspection by Borrower or any Lender at
any reasonable time and from time to time upon
reasonable prior notice.
12.3.4 Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee,
together with any Note or Notes subject to such
assignment, Administrative Agent will, if such
Assignment and Acceptance has been completed and is
in substantially the form of delivered to Lenders in
connection with the Closing, (i) accept such
Assignment and Acceptance, (ii) record the
information contained therein in the Register and
(iii) give prompt notice thereof to Borrower. Within
five Business Days after its receipt of such notice,
Borrower, at its own expense, will execute and
deliver to Administrative Agent in exchange for the
surrendered Note or Notes a new Note or Notes to the
order of such assignee in an amount equal to the
applicable Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning
Lender has retained a Commitment hereunder, a new
Note or Notes to the order of the assigning Lender in
an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes will be in an
aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes,
will be dated the effective date of such Assignment
and Acceptance.
12.3.5 Each Lender may sell participation to one or more
banks or other entities in all or a portion of its
rights and obligations under this Agreement
(including, without limitation, all or a portion of
its Revolving Commitments, Secondary Revolving Credit
Commitments, and the Advances owing to it and the
Note or Notes held by it); provided, however, that
(i) such Lender's obligations under this Agreement
(including, without limitation, its Revolving
Commitments and Secondary Revolving Credit
Commitments to Borrower hereunder) will remain
unchanged, (ii) such Lender will remain solely
responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender
will remain the holder of any such Notes for all
purposes of this Agreement, (iv) Borrower, Agents and
the other Lenders will continue to deal solely and
directly with such Lender in connection with such
Lender's rights and obligations under this Agreement
and (v) no
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participant under any such participation will have
any right to approve any amendment or waiver of any
provision of any Loan Document, or any consent to any
departure by any party therefrom except the following
if so provided in the participation agreement: (i)
changes to the amount of, or rate of interest on, any
Note held by any Lender and (ii) postpone any date
fixed for any payment of principal of, or interest
on, any of the Notes. Notwithstanding the foregoing,
Borrower agrees that each such participant will, to
the extent provided in its participation, be entitled
to the rights and benefits under Section 2.12 and,
subject to Section 7, all rights of setoff under this
Agreement with respect to its participating interest,
in each case, as if such participant were a Lender.
12.3.6 Any Lender may, in connection with any assignment or
participation or proposed assignment or participation
pursuant to this Section, disclose to the assignee or
participant or proposed assignee or participant, any
information relating to Borrower furnished to such
Lender by or on behalf of Borrower.
12.3.7 Any Revolving Credit Lender (each a "Designating
Lender") may at any time designate one or more
Designated Lenders to fund Competitive Bid Loans
which the Designating Lender is required to fund
subject to the terms of this Section 12.3.7 and the
provisions on Section 12.3.2 shall not apply to such
designation. No Revolving Credit Lender shall be
entitled to make more than two such designations. The
parties to each such designation shall execute and
deliver to the Agent, for its acceptance, a
Designation Agreement. Upon such receipt of an
appropriately completed Designation Agreement
executed by a Designating Lender and a designee
representing that it is a Designated Lender, the
Documentation Agent will accept such Designation
Agreement and give prompt notice thereof to the
Borrower, whereupon, from and after the effective
date specified in the Designation Agreement, the
Designated Lender shall become a party to this
Agreement with a right to make Competitive Bid Loans
on behalf of its Designating Lender pursuant to
Section 2.2 after the Borrower has accepted a
Competitive Bid (or a portion thereof) of the
Designating Lender. Each Designating Lender shall
serve as the agent (in its capacity as a Designating
Lender) of the Designated Lender and shall on behalf
of the Designated Lender give and receive all
communications and notices and take all actions
hereunder, including without limitation votes,
approvals, waivers, consents and amendments under or
relating to this Agreement or the other Loan
Documents. Any such notice, communication, vote,
approval, waiver, consent or amendment shall be
signed by the Designating Lender as agent (in its
capacity as a Designating Lender) for the Designated
Lender and shall not be signed by the Designated
Lender. The Borrower, the Agents and
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the Lenders may rely thereon without any requirement
that the Designated Lender sign or acknowledge the
same.
12.4 MODIFICATIONS. No modification, amendment or waiver of any
provision of this Agreement or any of the Loan Documents nor
consent to any departure therefrom by Borrower will in any
event be effective unless the same is in writing signed by the
Majority Lenders and specifically refers to this Agreement,
and then such waiver or consent will be effective only in the
specific instance and for the purpose for which given,
provided, however, that no amendment, waiver or consent will,
unless in writing and signed by all Lenders, (i) except as
provided in Section 2.15, change the percentage amount of the
Revolving Commitments; (ii) change the percentage amount of
the Secondary Revolving Credit Commitments; (iii) change the
aggregate unpaid principal amount of the Notes or the number
of Lenders which will be required for Lenders or any of them
to take any action hereunder; (iv) waive any Event of Default
under Section 7.1 hereof; (v) amend Sections 7, 10, 12.3.1 or
this Section 12.4; (vi) increase any Commitment of any Lender;
(vii) change the rate of interest on any Note held by any
Lender; (viii) postpone any date fixed for any payment of
principal of, or interest on, any of the Notes; or (ix)
release Borrower; and provided further, however, that no
amendment, waiver or consent will, unless in writing and
signed by Agents in addition to all Lenders or the Majority
Lenders, as the case may be, affect the rights or duties of
Agents under this Agreement, the Obligations or any Loan
Document. No notice to or demand on Borrower in any case will
entitle Borrower to any other or further notice or demand in
the same, similar or other circumstance. Notwithstanding
anything to the contrary contained herein, Agents may in their
sole discretion subject to approval of Borrower and without
the consent of the Majority Lenders reduce or increase the
fees or expenses that Borrower is required to pay to Agents
for their own account.
12.5 ILLEGALITY. If fulfillment of any provision hereof or any
transaction related hereto or of any provision of any of the
Loan Documents, at the time performance of such provision is
due, involves transcending the limit of validity prescribed by
law, then ipso facto, the obligation to be fulfilled will be
reduced to the limit of such validity; and if any clause or
provisions herein contained other than the provisions hereof
pertaining to repayment of the Obligations operates or would
prospectively operate to invalidate this Agreement in whole or
in part, then such clause or provision only will be void, as
though not herein contained, and the remainder of this
Agreement will remain operative and in full force and effect;
and if such provision pertains to repayment of the
Obligations, then, at the option of Lenders, all of the
Obligations will become immediately due and payable.
12.6 GENDER, ETC. Whenever used herein, the singular number will
include the plural, the plural the singular and the use of the
masculine, feminine or neuter gender will include all genders.
12.7 HEADINGS. The headings in this Agreement are for convenience
only and will not limit or otherwise affect any of the terms
hereof.
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12.8 LIABILITY OF LENDERS. Borrower hereby agrees that neither
Agents nor Lenders will be chargeable for any negligence,
mistake, act or omission of any accountant, examiner, agent or
attorney selected with reasonable care and in the exercise of
good faith by Lenders in making examinations, investigations
or collections under the Loan Documents, unless Agents or
Lenders actually know that such mistake, negligence, act or
omission is incorrect at the time committed.
12.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed will be
deemed to be an original and all of which taken together will
constitute one and the same agreement.
12.10 REMEDIES CUMULATIVE. No single or partial exercise of any
right or remedy by Lenders will preclude any other or further
exercise thereof or the exercise of any other right or remedy.
All remedies hereunder and in any instrument or document
evidencing, securing, guaranteeing or relating to any Loan or
now or hereafter existing at law or in equity or by statute
are cumulative and none of them will be exclusive of the
others or any other remedy. All such rights and remedies may
be exercised separately, successively, concurrently,
independently or cumulatively from time to time and as often
and in such order as Lenders may deem appropriate.
12.11 COSTS, EXPENSES AND LEGAL FEES. Borrower will be solely
responsible for all reasonable fees and expenses for
appraisals, surveys, title insurance, lien searches
environmental reports, recording fees, documentary taxes and
similar items. Borrower agrees to reimburse on demand Agents
and Lenders for all reasonable out-of-pocket costs and
expenses, including, without limitation, due diligence
expenses and reasonable fees and expenses of auditors,
attorneys (which attorneys may be Agent's employees) and
including, without limitation, the reasonable Attorneys Fees
and disbursements and other expenses, expended or incurred in
amending, supplementing, waiving or enforcing provisions of
this Agreement and the other Loan Documents; in enforcing this
Agreement and the other Loan Documents (with respect to the
enforcement of this Agreement and other Loan Documents,
Borrower agrees to reimburse on demand the Lenders for all
reasonable out-of-pocket costs and expenses incurred in
connection with such enforcement); in obtaining advice from
auditors, attorneys and other advisors regarding its rights
and responsibilities under this Agreement and the other Loan
Documents, or the perfection, protection or preservation of
rights and interests hereunder or thereunder; in collecting
any sum which is not paid when due under this Agreement and
the other Loan Documents; in negotiations with respect to any
Default or Event of Default or any restructuring or "working
out" the credit facilities; and/or in the protection,
perfection, preservation and enforcement of any and all rights
of Agents and Lender's in connection with this Agreement and
any of the other Loan Documents, including, without
limitation, the fees and costs incurred in any out-of-court
work-out, any litigation or in any bankruptcy or
reorganization proceeding or similar proceeding.
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12.12 INDEMNITY. Borrower will indemnify, defend and hold harmless
Agents and Lenders, their respective directors, officers,
counsel and employees, from and against all claims, demands,
liabilities, judgments, losses, damages, costs and expenses,
joint or several (including all accounting fees and Attorneys
Fees reasonably incurred), that any such indemnified party may
incur arising under or by reason of this Agreement, any of the
Credit Facilities or Loan Documents, or any act hereunder or
thereunder or with respect hereto or thereto except the
willful misconduct or negligence of such indemnified party.
Without limiting the generality of the foregoing, Borrower
agrees that if, after receipt by Agents or any Lender of any
payment of all or any part of the Obligations, demand is made
at any time upon Agents and/or any Lender for the repayment or
recovery of any amount or amounts received by it in payment or
on account of the Obligations and Agents and/or Lender repays
all or any part of such amount or amounts by reason of any
judgment, decree or order of any court or administrative body,
or by reason of any settlement or compromise of any such
demand, this Agreement will continue in full force and effect
and Borrower will be liable, and will indemnify, defend and
hold harmless Agents and Lenders for the amount or amounts so
repaid. The provisions of this Section will be and remain
effective notwithstanding any contrary action which may have
been taken by Borrower in reliance upon such payment, and any
such contrary action so taken will be without prejudice to
Agents and any Lender's rights under this Agreement and will
be deemed to have been conditioned upon such payment having
become final and irrevocable. The provisions of this Section
will survive the termination of this Agreement.
12.13 CONTINUING AGREEMENT. This Agreement is and is intended to be
a continuing Agreement and will remain in full force and
effect until the Obligations are finally and irrevocably paid
in full and the Credit Facilities are terminated.
12.14 COMPLETE AGREEMENT. This Agreement, together with the exhibits
and schedules hereto, the other Loan Documents and related
documents delivered on the Closing Date, on the Revised
Closing Date, and on the Second Revised Closing Date,
constitutes the entire agreement of the parties hereto
regarding the subject matter hereof and thereof and supersedes
any prior or written agreements or understandings regarding
such subject matter.
12.15 NO THIRD PARTY BENEFICIARIES. Nothing express or implied
herein is intended or will be construed to confer upon or give
any person, firm or corporation, other than the parties
hereto, any right to remedy hereunder or by reasons hereof.
12.16 TAX WITHHOLDING CLAUSE. Each Lender or assignee or participant
of Lender that is not incorporated under the laws of the
United States of America or a state thereof agrees that it
will deliver to each of the Borrower and the Documentation
Agent two (2) duly completed copies of the following: (i)
Internal Revenue Service Form W-9, 4224 or 1001, or other
applicable forms prescribed by the Internal Revenue Service,
certifying that such Lender, assignee or participant is
-61-
<PAGE> 69
entitled to receive payments under this Agreement and the
other Loan Documents without deduction or withholding of any
United Stated federal income taxes, or is subject to such tax
at a reduced rate under an applicable tax treaty, or (ii)
Internal Revenue Service Form W-8 or other applicable form of
certificate of such Lender, assignee or participant indicating
that no such exemption or reduced rate is allowable with
respect to such payments. Each Lender, assignee or participant
required to deliver to Borrower and the Documentation Agent a
form or certificate pursuant to the preceding sentence will
deliver such form or certificate as follows: (A) each Lender
which is a party hereto on the Closing Date will deliver such
form or certificate at least five (5) Business Days prior to
the first date on which any interest or fees are payable by
Borrower hereunder for the account of such Lender; (B) each
assignee or participant will deliver such form or certificate
at least five (5) Business Days before the effective date of
such assignment or participation (unless Documentation Agent
in its sole discretion will permit such form or certificate
less than five (5) Business Days before such date in which
case it will be due on the date specified by Documentation
Agent). Each Lender, assignee or participant that so delivers
a Form W-8, W-9, 4224 or 1001 further undertakes to deliver to
each of Borrower and the Documentation Agent two (2)
additional copies of such form (or a successor form) on or
before the date that such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the
most recent form so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be reasonably
requested by Borrower or Documentation Agent, either
certifying that such Lender, assignee or participant is
entitled to receive payments under this Agreement and the
other Loan Documents without deduction or withholding of any
United States federal income taxes or is subject to such tax
at a reduced rate under an applicable tax treaty or stating
that no such exemption or reduced rate is allowable.
Documentation Agent will be entitled to withhold United States
federal income taxes at the full withholding rate unless
Lender, assignee or participant establishes an exemption or
that it is subject to a reduced rate as established pursuant
to the above provisions.
12.17 NO PARTNERSHIP OR JOINT VENTURE. Nothing contained herein or
in any of the agreements or transactions contemplated hereby
is intended or will be constructed to create any relationship
other than as expressly stated herein or therein and will not
create any joint venture, partnership or other relationship.
12.18 GOVERNING LAW AND JURISDICTION; WAIVER OF JURY TRIAL. THIS
AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF OHIO WITHOUT REGARD TO ITS CONFLICT OF LAWS
PRINCIPLES, AND BORROWER HEREBY AGREES TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN HAMILTON COUNTY,
OHIO, AND CONSENT THAT ANY SERVICE OF PROCESS MAY BE MADE BY
CERTIFIED MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH
HEREIN FOR NOTICES AND SERVICE SO MADE WILL BE DEEMED TO BE
COMPLETED FIVE (5)
-62-
<PAGE> 70
BUSINESS DAYS AFTER THE SAME HAS BEEN DEPOSITED IN U.S. MAILS,
POSTAGE PREPAID; PROVIDED THAT NOTHING CONTAINED HEREIN WILL
PREVENT AGENTS FROM BRINGING ANY ACTION OR EXERCISING ANY
RIGHTS AGAINST ANY SECURITY OR AGAINST BORROWER INDIVIDUALLY
OR AGAINST ANY PROPERTY OF BORROWER, WITHIN ANY OTHER STATE OR
NATION. BORROWER WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER. BORROWER, AGENTS AND LENDERS EACH UNCONDITIONALLY
AND IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
AGREEMENTS.
Dated as of October 14, 1998.
WORTHINGTON INDUSTRIES, INC.,
as Borrower
By:/s/ John T. Baldwin
------------------------------------
Print Name: John T. Baldwin
----------------------------
Title: Treasurer
---------------------------------
THE BANK OF NOVA SCOTIA,
on its own behalf as Lender and as
Administrative Agent
By:/s/ F.C.H. Ashby
------------------------------------
Print Name: F.C.H. Ashby
----------------------------
Title: Senior Manager Loan Operations
---------------------------------
PNC BANK, NATIONAL ASSOCIATION,
on its own behalf as Lender and as
Documentation Agent,
By:/s/ David W. Mengel
------------------------------------
Print Name: David W. Mengel
----------------------------
Title: Senior Vice President
---------------------------------
-63-
<PAGE> 71
NATIONSBANK, N.A.,
as Lender
By:/s/ Philip S. Durand
------------------------------------
Print Name: Philip S. Durand
----------------------------
Title: Vice President
---------------------------------
WACHOVIA BANK, N.A.,
as Lender
By:/s/ Bradford L. Watkins
------------------------------------
Print Name: Bradford L. Watkins
----------------------------
Title: Vice President
---------------------------------
NBD BANK,
as Lender
By:/s/ Daniel J. Pienta
------------------------------------
Print Name: Daniel J. Pienta
----------------------------
Title: Vice President
---------------------------------
BANK ONE, N.A.,
as Lender
By:/s/ Douglas H. Klamfoth
------------------------------------
Print Name: Douglas H. Klamfoth
----------------------------
Title: Vice President
---------------------------------
NATIONAL CITY BANK,
as Lender
By:/s/ William J. Whitley
------------------------------------
Print Name: William J. Whitley
----------------------------
Title: Senior Vice President
---------------------------------
-64-
<PAGE> 1
EXHIBIT 4(h)
------------
THIRD SUPPLEMENTAL INDENTURE
----------------------------
<PAGE> 2
THIRD SUPPLEMENTAL INDENTURE, dated as of October 13, 1998, among WORTHINGTON
INDUSTRIES, INC., a corporation duly organized and existing under the laws of
the State of Delaware, having its principal office at 1205 Dearborn Drive,
Columbus, Ohio 43085 (the "Company"), WORTHINGTON INDUSTRIES, INC., a
corporation duly organized and existing under the laws of the State of Ohio,
having its principal office at 1205 Dearborn Drive, Columbus, Ohio 43085
("Worthington Ohio"), and PNC BANK, NATIONAL ASSOCIATION (formerly known as PNC
Bank, Ohio, National Association), a national banking association duly organized
and existing under the laws of the United States, as Trustee (the "Trustee").
R E C I T A L S
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an Indenture, dated as of May 15, 1996, a First Supplemental Indenture thereto
dated as of February 27, 1997 and a Second Supplemental Indenture thereto dated
as of December 12, 1997 (collectively, the "Indenture"), providing for the
issuance by the Company of an unlimited amount of its unsecured debentures,
notes, bonds or other evidences of indebtedness (the "Debt Securities"); and
WHEREAS, pursuant to an Agreement of Merger, dated as of August 20, 1998
(the "Merger Agreement"), between the Company and Worthington Ohio, the Company
is merging (the "Merger") with and into Worthington Ohio effective October 13,
1998 (the "Effective Date") with Worthington Ohio being the surviving
corporation in the Merger; and
WHEREAS, Section 10.01 of the Indenture provides that, in the event the
Company shall consolidate with or merge into any other corporation, the
Successor Company shall expressly assume, by an indenture supplemental to the
Indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all of the obligations of the Company under the Debt Securities
according to their tenor, and the Indenture; and
WHEREAS, Section 9.01 of the Indenture provides that the Company, when
authorized by a resolution of the Board of Directors, and the Trustee may enter
into a supplemental indenture without the consent of any Holders to evidence the
succession pursuant to Article X of the Indenture of another corporation to the
Company and the assumption by the Successor Company of the covenants, agreements
and obligations of the Company in the Indenture and in the Debt Securities; and
WHEREAS, immediately after giving effect to the Merger, no Default or
Event of Default would occur or be continuing; and
WHEREAS, all things necessary to authorize the assumption by Worthington
Ohio of the Company's obligations under the Indenture and to make this Third
-2-
<PAGE> 3
Supplemental Indenture, when executed by the parties hereto, a valid and binding
supplement to the Indenture have been done and performed;
NOW, THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby mutually covenant and agree as
follows:
SECTION 1. Assumption of Obligations. Worthington Ohio hereby expressly
assumes, from and after the Effective Date, all the obligations of the Company
under the Debt Securities according to their tenor, and the Indenture. The
Holder of each Debt Security outstanding as of the date hereof shall have the
right hereafter to receive on the Exchange Date for such Debt Security
securities of Worthington Ohio of like tenor, series, Stated Maturity and
principal amount and with a market value equal to the principal amount of such
Debt Security.
SECTION 2. Succession and Substitution. Worthington Ohio, from and after
the Effective Date, by virtue of the aforesaid assumption and the delivery of
this Third Supplemental Indenture, shall succeed to and be substituted for and
may exercise every right and power of the Company under the Indenture with the
same effect as if Worthington Ohio had been named as the Company in the
Indenture.
SECTION 3. Representations and Warranties. Worthington Ohio, as of the
date of execution of this Third Supplemental Indenture, represents and warrants
that: (i) it is a corporation organized and existing under the laws of the State
of Ohio; (ii) it has full corporate power and authority to execute and deliver
this Third Supplemental Indenture and to perform its obligations under this
Third Supplemental Indenture in accordance with its terms; and (iii) the
execution, delivery and performance of this Third Supplemental Indenture will
not violate, conflict with or constitute a breach of, or a default under, its
Amended Articles of Incorporation or any other material agreement or instrument
to which it is a party or which is binding on it or its assets, and will not
result in the creation of any Lien on any of its assets.
SECTION 4. Covenants. All covenants and agreements in this Third
Supplemental Indenture by Worthington Ohio shall bind its respective successors
and assigns, whether so expressed or not.
SECTION 5. Required Notices or Demands. Pursuant to Section 12.03 of the
Indenture, any notice or demand which by any provision of the Indenture is
required or permitted to be given or served by the Trustee or by the Holders to
or on the Company shall be addressed to Worthington Ohio at 1205 Dearborn Drive,
Columbus, Ohio 43085 or at any other address previously furnished in writing to
the Trustee by Worthington Ohio.
SECTION 6. Severability. In case any provision in this Third Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
-3-
<PAGE> 4
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 7. No Third Party Benefits. Nothing in this Third Supplemental
Indenture, expressed or implied, shall give to any Person, other than the
parties hereto and their successors under the Indenture, and the Holders of the
Debt Securities, any benefit or any legal or equitable right, remedy or claim
under the Indenture.
SECTION 8. Continuance of Indenture. This Third Supplemental Indenture
supplements the Indenture and shall be a part of and subject to all the terms
thereof. The Indenture, as supplemented by this Third Supplemental Indenture,
shall continue in full force and effect. This Third Supplemental Indenture shall
become effective at the Effective Date.
SECTION 9. The Trustee. The Trustee shall not be responsible in any
manner for or in respect of the validity or sufficiency of this Third
Supplemental Indenture, or for or in respect of the recitals contained herein,
all of which recitals are made by the Company and Worthington Ohio solely.
SECTION 10. Governing Law. This Third Supplemental Indenture shall be
construed in accordance with the laws of the State of New York (without
reference to principles of conflicts of law).
SECTION 11. Defined Terms. All capitalized terms used in this Third
Supplemental Indenture which are defined in the Indenture but not otherwise
defined herein shall have the same meanings assigned to them in the Indenture.
SECTION 12. Counterparts. This Third Supplemental Indenture may be
executed in any number of counterparts, each of which shall be an original, but
all such counterparts shall together constitute but one and the same instrument.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed as of the date first above written.
WORTHINGTON INDUSTRIES, INC.,
a Delaware corporation
By:/s/ John P. McConnell
----------------------------------
Name: John P. McConnell
---------------------------
Title: Chairman and CEO
--------------------------
Attest:
/s/ Dale T. Brinkman
- ----------------------------------
Name: Dale T. Brinkman
----------------------------
Title: Asst. Secretary
---------------------------
WORTHINGTON INDUSTRIES, INC.,
an Ohio corporation
By:/s/ John P. McConnell
----------------------------------
Name: John P. McConnell
---------------------------
Title: Chairman and CEO
--------------------------
Attest:
/s/ Dale T. Brinkman
- ----------------------------------
Name: Dale T. Brinkman
----------------------------
Title: Asst. Secretary
---------------------------
PNC BANK, NATIONAL ASSOCIATION
(formerly known as PNC Bank, Ohio,
National Association),as Trustee
By:/s/ Sheetal Shal
----------------------------------
Name: Sheetal Shal
---------------------------
Title: Bank Officer
--------------------------
Attest:
/s/ Jack Hannah
- ----------------------------------
Name: Jack C. Hannah
----------------------------
Title: Assistant Vice President Corporate Trust
----------------------------------------
-5-
<PAGE> 6
STATE OF OHIO )
) SS:
COUNTY OF FRANKLIN )
On the 14th day of October, 1998, before me personally came John P.
McConnell, to me known, who, being by me duly sworn, did depose and say that
she/he is the Chairman/CEO of WORTHINGTON INDUSTRIES, INC., a Delaware
corporation, one of the corporations described in and which executed the
foregoing instrument; and that she/he signed her/his name thereto by authority
of the Board of Directors of said corporation.
/s/ Barbara J. Watson
---------------------------------------
Notary Public
BARBARA J. WATSON
SEAL NOTARY PUBLIC, STATE OF OHIO
MY COMMISSION EXPIRES OCT. 6, 2002
STATE OF OHIO )
) SS:
COUNTY OF FRANKLIN )
On the 14th day of October, 1998, before me personally came John P.
McConnell, to me known, who, being by me duly sworn, did depose and say that
she/he is the Chairman/CEO of WORTHINGTON INDUSTRIES, INC., an Ohio corporation,
one of the corporations described in and which executed the foregoing
instrument; and that she/he signed her/his name thereto by authority of the
Board of Directors of said corporation.
/s/ Barbara J. Watson
---------------------------------------
Notary Public
BARBARA J. WATSON
SEAL NOTARY PUBLIC, STATE OF OHIO
MY COMMISSION EXPIRES OCT. 6, 2002
-6-
<PAGE> 7
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
On the ___ day of October, 1998, before me personally came Sheetal Shah
_________________, to me known, who, being by me duly sworn, did depose and say
that she/he is the ___________ of PNC BANK, NATIONAL ASSOCIATION (formerly known
as PNC Bank, Ohio, National Association), a national banking association, one of
the entities described in and which executed the foregoing instrument; and that
she/he signed her/his name thereto by authority of the Board of Directors of
said national banking association.
/s/ Cheryl N. Wilson
---------------------------------------
Notary Public
CHERYL N. WILSON
SEAL Notary Public, State of Ohio
My Commission Expires Oct. 17, 1999
-7-
<PAGE> 1
EXHIBIT 4(i)
------------
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
<PAGE> 2
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of October 14, 1998 (as
amended, supplemented or otherwise modified from time to time, this
"Agreement"), made by Worthington Industries, Inc., a Delaware corporation
("Worthington Delaware"), and Worthington Industries, Inc., an Ohio corporation
("Worthington Ohio"), in favor of The Bank of Nova Scotia and PNC Bank, Ohio,
National Association, in their capacities as agents (the "Agents") for the
lenders (the "Lenders") from time to time parties to the Amended and Restated
Loan Agreement dated as of May 30, 1997 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Loan Agreement";
capitalized terms used herein which are defined in the Loan Agreement are used
herein as so defined), among Worthington Delaware, the Lenders and the Agents.
WITNESSETH:
WHEREAS, pursuant to an Agreement of Merger, dated as of August 20,
1998 (the "Merger Agreement"), between Worthington Delaware and Worthington
Ohio, Worthington Delaware is merging (the "Merger") with and into Worthington
Ohio effective October 14, 1998 (the "Effective Date") with Worthington Ohio
being the surviving corporation in the Merger; and
WHEREAS, Worthington Ohio is a wholly-owned subsidiary of Worthington
Delaware and a Consolidated Subsidiary of Worthington Delaware for purposes of
the Loan Agreement; and
WHEREAS, Section 6.6 of the Loan Agreement provides that Worthington
Delaware may merge into a Consolidated Subsidiary if the surviving corporation:
(a) is organized and existing under the laws of a state of the United States;
(b) has the majority of its property and assets within the continental limits of
the United States of America; and (c) assumes in writing all of the obligations
and liabilities of Worthington Delaware, as Borrower, under the Loan Documents;
and
WHEREAS, immediately after giving effect to the Merger, no condition or
event would exist which constitutes a Default or an Event of Default; and
WHEREAS, Worthington Delaware and Worthington Ohio have agreed to
execute and deliver this Agreement to the Agents for the benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
-2-
<PAGE> 3
SECTION 1. Assignment and Assumption. Upon the effectiveness of the
Merger in accordance with the terms of the Merger Agreement, (i) Worthington
Delaware hereby assigns, conveys and transfers to Worthington Ohio, and
Worthington Ohio hereby accepts the assignment, conveyance and transfer to it
of, all rights, obligations and liabilities of Worthington Delaware under and in
connection with the Loan Agreement, the other Loan Documents to which
Worthington Delaware is a party and all other documents, certificates,
instruments and other agreements executed and delivered by Worthington Delaware
in connection therewith and (ii) Worthington Ohio hereby agrees, as successor by
merger to Worthington Delaware, to be bound by all terms, conditions, covenants,
indemnities and other provisions of the Loan Agreement, such other Loan
Documents and such other documents, certificates, instruments and other
agreements as and to the same extent as Worthington Delaware is bound thereby
immediately prior to the effectiveness of the Merger and to perform all
covenants and agreements of Worthington Delaware thereunder for the benefit of
the Agents and the Lenders.
SECTION 2. Representations and Warranties. Worthington Delaware and
Worthington Ohio each hereby represent and warrant to the Agents and the Lenders
that:
(a) Each of Worthington Delaware and Worthington Ohio has the corporate
power and authority to execute, deliver and perform this Agreement and Merger
Agreement and to consummate the Merger in accordance with the terms of the
Merger Agreement and has taken all corporate action necessary to be taken by it
to authorize such actions.
(b) This Agreement and the Merger Agreement each constitute a legal,
valid and binding obligation of Worthington Delaware and Worthington Ohio,
enforceable against Worthington Delaware and Worthington Ohio in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting the rights of creditors generally and except as such enforceability
may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Prior to the effectiveness of the Merger, Worthington Ohio (i)
engaged in no activities or business other than the negotiation, execution and
delivery of this Agreement and the Merger Agreement and the performance of its
obligations under the Merger Agreement and (ii) did not have any Subsidiaries.
SECTION 3. Miscellaneous. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO.
(b) This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
WORTHINGTON INDUSTRIES, INC., a
Delaware corporation
By:/s/ John T. Baldwin
--------------------------------
Print Name: John T. Baldwin
------------------------
Title: Treasurer
-----------------------------
WORTHINGTON INDUSTRIES, INC.,
an Ohio corporation
By:/s/ John T. Baldwin
--------------------------------
Print Name: John T. Baldwin
------------------------
Title: Treasurer
-----------------------------
ACCEPTED AND AGREED:
THE BANK OF NOVA SCOTIA,
on its own behalf as Lender and as Administrative Agent
By:/s/ F.C.H. Ashby
-----------------------------------
Print Name: F.C.H. Ashby
---------------------------
Title: Senior Manager Loan Operations
--------------------------------
PNC BANK, NATIONAL
ASSOCIATION,
on its own behalf as Lender and as Documentation Agent,
By:/s/ David W. Mengel
-----------------------------------
Print Name: David W. Mengel
---------------------------
Title: Senior Vice President
--------------------------------
-4-
<PAGE> 5
NATIONSBANK, N.A.,
as Lender
By:/s/ Philip S. Durand
-----------------------------------
Print Name: Philip S. Durand
---------------------------
Title: Vice President
--------------------------------
WACHOVIA BANK, N.A.,
as Lender
By:/s/ Bradford L. Watkins
-----------------------------------
Print Name: Bradford L. Watkins
---------------------------
Title: Vice President
--------------------------------
NBD BANK,
as Lender
By:/s/ Daniel J. Pienta
-----------------------------------
Print Name: Daniel J. Pienta
---------------------------
Title: Vice President
--------------------------------
BANK ONE, N.A.,
as Lender
By:/s/ Douglas H. Klamfoth
-----------------------------------
Print Name: Douglas H. Klamfoth
---------------------------
Title: Vice President
--------------------------------
NATIONAL CITY BANK,
as Lender
By:/s/ William J. Whitley
-----------------------------------
Print Name: William J. Whitley
---------------------------
Title: Senior Vice President
--------------------------------
-5-
<PAGE> 1
EXHIBIT 4(j)
Agreement to furnish instruments defining rights of holders of long-term debt
<PAGE> 2
August 27, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Worthington Industries, Inc. - Form 10-K for the fiscal year
ended May 31, 1999
Gentlemen:
Worthington Industries, Inc., an Ohio corporation, is today
executing and filing a Form 10-K, Annual Report for the fiscal year ended May
31, 1999.
Pursuant to the instructions relating to the Exhibits in Item 601
of Regulation S-K, Worthington Industries, Inc. hereby agrees to furnish to the
Commission, upon request, copies of instruments and agreements defining the
rights of holders of its long-term debt and of the long-term debt of its
consolidated subsidiaries. Such long-term debt does not exceed 10% of the total
assets of Worthington Industries, Inc. and its subsidiaries on a consolidated
basis.
Very truly yours,
WORTHINGTON INDUSTRIES, INC.
/s/John S. Christie
John S. Christie
President & Chief Operating Officer
Enclosures
<PAGE> 1
EXHIBIT 10(b)
------------------------------------------------------
WORTHINGTON INDUSTRIES, INC.
1990 STOCK OPTION PLAN, AS AMENDED
------------------------------------------------------
<PAGE> 2
----------------------------------------------------------------
WORTHINGTON INDUSTRIES, INC.
1990 STOCK OPTION PLAN, AS AMENDED
----------------------------------------------------------------
1. PURPOSE.
The purpose of this 1990 Worthington Industries, Inc. Stock Option Plan
(herein referred to as the "Plan") is to promote and advance the interests of
Worthington Industries, Inc. (the "Company") and its shareholders by enabling
the Company and its Subsidiaries to attract, retain and reward employees and to
strengthen the mutuality of interest between employees and the Company's
shareholders. The Plan is designed to accomplish this purpose by offering Stock
Options to selected employees thereby providing a proprietary interest in
pursuing the long-term growth, profitability and financial success of the
Company.
2. DEFINITIONS.
For purposes of the Plan, the following terms shall have the meanings
set forth below:
a. "Award" or "Awards" means an award or grant made to a
Participant under Section 6 of this Plan.
b. "Board" means the Board of Directors of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended, in
effect from time to time or any successor thereto, together
with rules, regulations and interpretations promulgated
thereunder.
d. "Committee" means the Committee of the Board constituted as
provided in Section 3 of this Plan.
e. "Common Shares" means the Common Shares, $.01 par value, of
the Company or any security of the Company issued in
substitution, exchange or in lieu thereof.
f. "Company" means Worthington Industries, Inc., a Delaware
corporation, or any successor corporation.
g. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, in effect from time to time, or any successor
statute.
<PAGE> 3
h. "Fair Market Value" means on any given date, the closing price
of the Common Shares as reported on the NASDAQ National Market
System for the previous day on which Common Shares were traded
or, if Common Shares were not traded on such date, on the next
preceding day on which Common Shares were traded; provided,
however, that the Committee may prescribe, by rule of general
application, such other measure of fair market value per share
as the Committee may in its discretion, determine but, in the
case of rights that relate to Incentive Stock Options such
determination must be permissible under Section 422A of the
Code so as not to disqualify such option as an Incentive Stock
Option under Section 422A.
i. "Incentive Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of this Plan that is
intended to be and is specifically designated as an "incentive
stock option" within the meaning of Section 422A of the Code.
j. "Non-Qualified Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of this Plan that is
not an Incentive Stock Option.
k. "Participant" means an employee of the Company or any
Subsidiary who is granted an Award under this Plan.
l. "Plan" means this Worthington Industries, Inc. 1990 Stock
Option Plan, as set forth herein and as it may hereafter be
amended and from time to time in effect.
m. "Stock Option" means an Award to purchase Common Shares
granted pursuant to the provisions of Section 6 of this Plan.
n. "Subsidiary" means any corporation or entity in which the
Company directly or indirectly controls fifty percent (50%) or
more of the total voting power of all classes of its stock
having voting power.
3. ADMINISTRATION.
a. The Plan shall be administered by the Committee to be appointed from
time to time by the Board and comprised of not less than three of the members of
the Board who may qualify to administer the Plan as contemplated by Rule 16b-3
of the Exchange Act or any successor. Members of the Committee shall serve at
the pleasure of the Board, and the Board may from time to time remove members
from, or add members to, the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business. Action
approved in writing by all of the members of the Committee then serving shall be
effective as if the action had been taken by unanimous vote at a meeting duly
called and held.
b. The Committee is authorized to construe and interpret the Plan and
to promulgate, amend and rescind rules and regulations relating to the
implementation of the Plan and to make all other determinations necessary or
advisable for the administration of the Plan. Any determination, decision or
action of the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be final, conclusive and
binding upon all persons participating in the Plan and any person validly
claiming under or through persons participating in the Plan. The Committee's
powers include but are not limited to such modifications, procedures and
subplans as are necessary to comply with provisions of the laws of foreign
countries in which the Company and its Subsidiaries may operate to assure the
viability of the benefits of Awards made to Participants employed in such
<PAGE> 4
countries and to meet the intent of the Plan. The Company shall effect the
granting of Awards under the Plan in accordance with the determinations made by
the Committee, by execution of instruments in writing in such form as approved
by the Committee.
c. The Committee may designate persons other than members of the
Committee to carry out its responsibilities (including without limitation, the
granting of Awards) under such conditions and limitations as it may prescribe,
except that the Committee may not delegate its authority with regard to,
selection for participation of, and the granting of Awards to, persons subject
to Section 16(a) and 16(b) of the Exchange Act.
4. DURATION OF, AND COMMON SHARES SUBJECT TO, PLAN.
a. TERM. The Plan shall remain in effect until terminated by the Board,
provided, however, that no Incentive Stock Option may be granted more than ten
(10) years after the effective date of this Plan determined in accordance with
Section 14(i) of this Plan.
b. COMMON SHARES SUBJECT TO PLAN. The maximum number of Common Shares
in respect for which Awards may be granted under the Plan, subject to adjustment
as provided in Section 11 of the Plan, is 2,000,000 Common Shares.
Notwithstanding the foregoing, in no event shall more than one million
(1,000,000) Common Shares be cumulatively available for Awards of Incentive
Stock Options under the Plan. No Participant may be granted awards under the
Plan in any one calendar year with respect to more than 100,000 Common Shares.
For the purpose of computing the total number of Common Shares
available for Awards under the Plan, there shall be counted against the
foregoing limitations the number of Common Shares subject to issuance upon
exercise or settlement of Awards as of the dates on which such Awards are
granted. The Common Shares which were previously subject to Awards shall again
be available to Awards under the Plan if any such Awards are forfeited,
terminated, expire unexercised, settled in cash or exchanged for other Awards
(to the extent of such forfeiture or expiration of such Awards), or if the
Common Shares subject thereto can otherwise no longer be issued. Further, any
Common Shares which are used as full or partial payment to the Company by a
Participant of the purchase price of Common Shares upon exercise of a Stock
Option shall again be available for Awards under the Plan.
Common Shares which may be issued under the Plan may be either
authorized and unissued shares or issued shares which have been reacquired by
the Company. No fractional shares shall be issued under the Plan.
5. ELIGIBILITY.
Persons eligible for Awards under the Plan shall consist of all
employees of the Company or any Subsidiary.
6. STOCK OPTION.
Stock Options granted under the Plan may be in the form of Incentive
Stock Options or Non-Qualified Stock Options, and such Stock Options shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the express provisions of the Plan,
as the Committee shall deem desirable:
<PAGE> 5
a. GRANT. Stock Options may be granted under the Plan on such terms and
conditions not inconsistent with the provisions of the Plan and in such form as
the Committee may from time to time approve.
b. STOCK OPTION PRICE. The option exercise price per Common Share
purchasable under a Stock Option shall be determined by the Committee at the
time of grant, but in no event shall the exercise price of an Incentive Stock
Option be less than one-hundred percent (100%) of the Fair Market Value of the
Common Shares on the date of the grant of such Stock Option; provided, however,
that the option price shall not be less than one-hundred ten percent (110%) of
the Fair Market Value on such date if the Incentive Stock Option is granted to
any person who, at the time the option is granted, owns more than ten percent
(10%) of the outstanding voting shares of the Company or any Subsidiary. For
purposes of determining stock ownership, an employee shall be deemed to own all
Common Shares which are attributable to him under Section 425(d) of the Code,
including, but not limited to, Common Shares owned by his brothers, sisters,
ancestors and lineal descendants. If no exercise price is otherwise set by the
Committee, the exercise price shall be one-hundred percent (100%) of the Fair
Market Value of the Common Shares on the date of grant.
c. OPTION TERMS. The term of each Stock Option shall be fixed by the
Committee, except that the term of any Incentive Stock Option shall not exceed
ten (10) years after the date such Incentive Stock Option is granted; provided,
however, that no Incentive Stock Option shall be exercisable after the
expiration of five (5) years from such date if such Incentive Stock Option is
granted to an employee who, at the time the Incentive Stock Option is granted,
owns more than ten percent (10%) of the outstanding voting stock of the Company
or any Subsidiary. For purposes of determining stock ownership, the attribution
rules set forth in subsection b of this Section 6 above shall be applicable. If
no term is otherwise set by the Committee, the option term shall be ten (10)
years.
7. EXERCISE OF OPTIONS.
a. BY AN EMPLOYEE DURING CONTINUOUS EMPLOYMENT. An employee may not
exercise any Stock Option granted under the Plan prior to twelve (12) months
from the date of grant. Unless otherwise determined by the Committee, the
employee may exercise such Stock Option as follows:
(1) At any time after such twelve (12) months as to twenty percent
(20%) of the shares originally subject to the Stock Option;
(2) At any time after twenty-four (24) months from the date the Stock
Option is granted as to forty percent (40%) of the shares originally subject to
the Stock Option;
(3) At any time after thirty-six (36) months from the date the Stock
Option is granted as to sixty percent (60%) of the shares originally subject to
the Stock Option;
(4) At any time after forty-eight (48) months from the date the Stock
Option is granted as to eighty percent (80%) of the shares originally subject to
the Stock Option; and
(5) At any time after sixty (60) months from the date the Stock Option
is granted as to one-hundred percent (100%) of the shares originally subject to
the Stock Option.
Any Stock Option becoming exercisable shall remain exercisable until
the date of expiration of the option term.
<PAGE> 6
Subject to the provisions of subsections b and c of this Section 7, a
Participant may not exercise any part of a Stock Option granted under this Plan
unless, at the time of such exercise, he has been in the continuous employment
of the Company or any Subsidiary since the date such Stock Option was granted.
The Committee may decide in each case whether leaves of absence for government
or military service, illness, temporary disability or other reasons shall be
deemed not to interrupt continuous employment for purposes of this paragraph.
b. BY A FORMER EMPLOYEE. No person may exercise a Stock Option granted
under the Plan after he ceases to be an employee of the Company or any
Subsidiary, except that (1) if a person ceases to be an employee as a result of
retirement, any Incentive Stock Option granted to him may be exercised within
three (3) months after the date on which he ceases to be an employee (but in no
event later than the date of expiration of the Stock Option term) and any
Non-Qualified Stock Option granted to him may be exercised within twelve (12)
months after the date on which he ceases to be an employee (but in no event
later than the date of expiration of the Stock Option term) and (2) if a person
ceases to be an employee by reason of a disability within the meaning of Section
22(e)(3) of the Code, any Incentive Stock Option or Non-Qualified Stock Option
granted to him may be exercised within twelve (12) months after the date on
which he ceases to be an employee (but in no event later than the date of
expiration of the Stock Option term). Any Stock Option exercised pursuant to
this paragraph may be exercised by a former employee for the number of shares
for which it could have been exercised at the time he ceased to be an employee
or for such greater number of shares, subject to the Stock Option, as the
Committee may authorize.
c. IN CASE OF DEATH. If an employee or former employee who was granted
a Stock Option dies, and at the time of death he was entitled to exercise any
Stock Option granted under this Plan, such Stock Option may be exercised within
twelve (12) months after the death of the employee or former employee (but no
later than the date of expiration of the Stock Option term) by his estate or by
a person who acquired the right to exercise such Stock Option by bequest or
inheritance. Such Stock Option may be exercised only as to the number of shares
for which it could have been exercised at the time the employee or former
employee died or for such greater number of shares, subject to the Stock Option,
as the Committee may authorize.
d. TERMINATION OF OPTIONS. An option granted under this Plan shall be
terminated on the date of expiration of the Stock Option term or on such earlier
date that it can no longer be exercised in whole or in part, for shares
originally subject to the Stock Option in accordance with this Section 7. The
Committee may, on a case-by-case basis or simultaneously with respect to all
Stock Options, accelerate the schedule of the time or times when a Stock Option
granted under this Plan may be exercised or extend the time or times when a
Stock Option granted under this Plan may be exercised, provided, that any such
extension shall be permissible under Section 422A of the Code so as not to
disqualify such option as an Incentive Stock Option under Section 422A.
8. METHOD OF EXERCISE.
A Stock Option may be exercised, in whole or in part, by giving written
notice of exercise to the Company specifying the number of Common Shares to be
purchased. Such notice shall be accompanied by payment in full of the purchase
price in cash or, if acceptable to the Committee in its sole discretion, in
Common Shares already owned by the Participant or by surrendering outstanding
Awards or any combination thereof (in each case valuing Common Shares at Fair
Market Value on the date of exercise). The Committee shall determine acceptable
methods for tendering Common Shares or other Awards and may impose
<PAGE> 7
such conditions on the use of Common Shares or other Awards to exercise Stock
Options as it deems appropriate.
The Company and its Subsidiaries shall have the right to require the
person exercising an option to pay, or may withhold from such person's wages or
from other amounts payable to such person, an amount necessary to meet any
federal, state or local tax withholding requirements which may arise as a result
of the exercise of an option. In addition, the Committee may permit such person
to pay his or her withholding in Common Shares already owned or by surrendering
outstanding Awards (in each case valuing Common Shares at Fair Market Value on
the date of exercise).
9. SPECIAL RULE FOR INCENTIVE STOCK OPTIONS.
With respect to an Incentive Stock Option granted under the Plan, the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of the number of shares with respect to which such Incentive
Stock Option is exercisable for the first time by a Participant during any
calendar year shall not exceed One Hundred Thousand Dollars ($100,000) or such
other limit as may be required by the Code.
10. NON-TRANSFERABILITY OF AWARDS.
No Award under the Plan, and no rights or interests therein, shall be
assignable or transferable by a Participant except by will or the laws of
descent and distribution. During the lifetime of a Participant, Stock Options
are exercisable only by, and payments in settlement of Awards will be payable
only to, the Participant or his or her legal representative.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
a. The existence of this Plan and the Awards granted hereunder shall
not affect or restrict in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference shares ahead of or affecting
the Company's capital stock or the rights thereof, the dissolution or
liquidation of the Company or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
b. In the event of any change in capitalization affecting the Common
Shares of the Company, such as a stock dividend, stock split, recapitalization,
merger, consolidation, split-up, combination or exchange of shares or other form
of reorganization, or any other change affecting the Common Shares or the price
thereof, such proportionate adjustments, if any, as the Board in its discretion
may deem appropriate to reflect such change shall be made with respect to the
aggregate number of Common Shares for which Awards in respect thereof may be
granted under the Plan, the maximum number of Common Shares which may be sold or
awarded to any Participant, the number of Common Shares covered by each
outstanding Award, and the price per share in respect of outstanding Awards.
c. The Committee may also make such adjustments in the number of shares
covered by, and the price or other value of any outstanding Awards in the event
of a spin-off or other distribution (other than normal cash dividends) of
Company assets to shareholders. In the event that another corporation or
business entity is being acquired by the Company, and the Company agrees to
assume outstanding employee stock options and/or the obliga-
<PAGE> 8
tion to make future grants of options or rights to employees of the acquired
entity, the aggregate number of Common Shares available for Awards under Section
6 of the Plan may be increased accordingly.
12. CHANGE IN CONTROL.
a. In the event of a Change in Control (as defined below) of the
Company, all Stock Options then outstanding shall become fully exercisable as of
the date of the Change in Control, whether or not then exercisable (subject to
the limitation that any Award which has been outstanding less than six (6)
months on the date of the Change in Control shall not be afforded such
treatment); provided, however, that this provision shall not apply to any Change
in Control when expressly provided otherwise by a three-fourths vote of the
Whole Board, but only if a majority of the members of the Board then in office
and acting upon such matters shall be Continuing Directors.
b. A "Change in Control" of the Company shall have occurred when any
Acquiring Person (other than (i) the Company or any Subsidiary, (ii) any
employee benefit plan of the Company or any Subsidiary or any trustee of or
fiduciary with respect to any such plan when acting in such capacity, or (iii)
any person who, on the Effective Date of the Plan, is an Affiliate of this
Company and owning in excess of ten percent (10%) of the outstanding Common
Shares of the Company and the respective successors, executors, legal
representatives, heirs and legal assigns of such person), alone or together with
its Affiliates and Associates, has acquired or obtained the right to acquire the
beneficial ownership of twenty-five percent (25%) or more of the Common Shares
then outstanding (except pursuant to an offer for all outstanding Common Shares
of the Company at a price and upon such terms and conditions as a majority of
the Continuing Directors determine to be in the best interests of the Company
and its shareholders (other than the Acquiring Person or any Affiliate or
Associate thereof on whose behalf the offer is being made)), and the Continuing
Directors no longer constitute a majority of the Board.
c. "Acquiring Person" means any person (any individual, firm,
corporation or other entity) who or which, together with all Affiliates and
Associates, has acquired or obtained the right to acquire the beneficial
ownership of twenty-five percent (25%) or more of the Common Shares then
outstanding.
d. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
e. "Continuing Director" means any person who was a member of the Board
on the Effective Date of the Plan or thereafter elected by the stockholders or
appointed by the Board prior to the date as of which the Acquiring Person became
a Substantial Stockholder (as such term is defined in Article Six of the
Company's Certificate of Incorporation) or, a person designated (before his
initial election or employment as a director) as a Continuing Director by
three-fourths of the Whole Board, but only if a majority of the Whole Board
shall then consist of Continuing Directors.
f. "Whole Board" means the total number of directors which the Company
would have if there were no vacancies.
<PAGE> 9
13. AMENDMENT AND TERMINATION OF PLAN.
Without further approval of the shareholders, the Board may at any time
terminate the Plan, or may amend it from time to time in such respects as the
Board may deem advisable, except that the Board may not, without approval of the
shareholders, make any amendment which would (a) increase the aggregate number
of Common Shares which may be issued under the Plan (except for adjustments
pursuant to Section 11 of the Plan), (b) materially modify the requirements as
to eligibility for participation in the Plan, or (c) materially increase the
benefits accruing to Participants under the Plan. The above notwithstanding, the
Board may amend the Plan to take into account changes in applicable securities,
federal income tax and other applicable laws. Further, should the provisions of
Rule 16b-3, or any successor rule, under the Exchange Act be amended, the Board
may amend the Plan in accordance with any modifications to this Rule.
14. MISCELLANEOUS.
a. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the
granting of any Award shall confer upon any employee of the Company or any
Subsidiary any right to continued employment with the Company or any Subsidiary,
as the case may be, nor shall it interfere in any way with the right of the
Company or any Subsidiary to terminate the employment of any of its employees at
any time, with or without cause.
b. PAYMENTS TO TRUST. The Committee is authorized to cause to be
established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.
c. ENGAGING IN COMPETITION WITH COMPANY. In the event a Participant
terminates his or her employment with the Company or any Subsidiary for any
reason whatsoever, and within eighteen (18) months after the date thereof
accepts employment with any competitor of, or otherwise engages in competition
with, the Company, the Committee, in its sole discretion, may require such
Participant to return to the Company the economic value of any Award which is
realized or obtained (measured at the date of exercise) by such Participant at
any time during the period beginning on that date which is six months prior to
the date of such Participant's termination of employment with the Company or any
Subsidiary.
d. OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's regular, recurring compensation
for purposes of the termination indemnity or severance pay law of any state or
country
<PAGE> 10
and shall not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan or similar arrangement provided
by the Company or any Subsidiary unless expressly so provided by such other plan
or arrangements, or except where the Committee expressly determines that an
Award or portion of an Award should be included to accurately reflect
competitive compensation practices or to recognize that an Award has been made
in lieu of a portion of competitive annual cash compensation. Awards under the
Plan may be made in combination with or in tandem with, or as alternatives to,
grants, awards or payments under any other Company or Subsidiary plans. The Plan
notwithstanding, the Company or any Subsidiary may adopt such other compensation
programs and additional compensation arrangements as it deems necessary to
attract, retain and reward employees for their service with the Company or any
Subsidiary.
e. SECURITIES LAW RESTRICTIONS. No Common Shares shall be issued under
the Plan unless counsel for the Company shall be satisfied that such issuance
will be in compliance with applicable Federal and state securities laws.
Certificates for Common Shares delivered under the Plan may be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common Shares are then
listed, and any applicable Federal or state securities law. The Committee may
cause a legend or legends to be put on any such certificate to make appropriate
reference to such restrictions.
f. AWARD AGREEMENT. Each Participant receiving an Award under the Plan
shall enter into an agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the Award and such related
matters as the Committee shall, in its sole discretion, determine.
g. COST OF PLAN. The costs and expenses of administering the Plan shall
be borne by the Company.
h. GOVERNING LAW. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
i. EFFECTIVE DATE. The Plan shall be effective if, and when, approved
by the Company's shareholders at the 1990 annual meeting of shareholders or any
adjournment thereof.
<PAGE> 1
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
<PAGE> 2
[WORTHINGTON INDUSTRIES LOGO]
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1999 ANNUAL REPORT TO
SHAREHOLDERS
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<PAGE> 3
WORTHINGTON INDUSTRIES, INC.
1999 ANNUAL REPORT
CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
A Message to Our Shareholders............................... 1
The Company................................................. 1
Stock Trading, Price and Dividend Information............... 3
Five Year Selected Financial Data........................... 4
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 5
Consolidated Financial Statements
Consolidated Balance Sheets -- May 31, 1999 and 1998...... 14
Consolidated Statements of Earnings -- Years ended May 31,
1999, 1998 and 1997.................................... 15
Consolidated Statements of Shareholders' Equity -- Years
ended May 31, 1999, 1998 and 1997...................... 16
Consolidated Statements of Cash Flows -- Years ended May
31, 1999, 1998 and 1997................................ 19
Notes to Consolidated Financial Statements.................. 20
Report of Management........................................ 34
Report of Independent Auditors.............................. 35
Company Locations........................................... 36
Officers & Directors........................................ 37
</TABLE>
i
<PAGE> 4
A MESSAGE TO OUR SHAREHOLDERS
This 1999 Annual Report to Shareholders contains the Worthington
Industries, Inc. audited financial statements and all of the information that
the regulations of the Securities and Exchange Commission (the "SEC") require be
presented in an Annual Report to Shareholders. For legal purposes, this is the
Worthington Industries, Inc. 1999 Annual Report to Shareholders. This Annual
Report is not part of the Proxy Statement and is not deemed to be soliciting
material or to be filed with the SEC except to the extent that it is expressly
incorporated by reference in a document filed with the SEC.
We invite our shareholders to consider our 1999 Summary Annual Report,
which presents information concerning the business and financial results of the
Company in a format and level of detail that we believe most of our shareholders
will find useful and informative. Shareholders who would like to receive more
detailed information may request a copy of our Annual Report on Form 10-K.
THE WORTHINGTON INDUSTRIES, INC. ANNUAL REPORT ON FORM 10-K, AS FILED WITH
THE SEC, WILL BE PROVIDED TO ANY SHAREHOLDER, WITHOUT CHARGE, UPON WRITTEN
REQUEST TO THE WORTHINGTON INDUSTRIES, INC. INVESTOR RELATIONS DEPARTMENT, 1205
DEARBORN DRIVE, COLUMBUS, OHIO 43085.
THE COMPANY
Worthington Industries, Inc., together with its subsidiaries, is referred
to herein as the "Company". The Company's corporate headquarters are located at
1205 Dearborn Drive, Columbus, Ohio 43085.
For the fiscal year ended May 31, 1999 ("fiscal 1999"), the Company's
continuing operations are reported principally in three business segments:
Processed Steel Products, Metal Framing and Pressure Cylinders. The Processed
Steel Products segment includes The Worthington Steel Company and The
Gerstenslager Company. The Metal Framing segment is made up of Dietrich
Industries, Inc. and the Pressure Cylinders segment consists of Worthington
Cylinder Corporation. In addition, the Company holds an equity position in seven
joint ventures as described below. During fiscal 1999, in keeping with its
strategy to focus on steel processing and metals-related businesses, the Company
divested its Worthington Custom Plastics, Inc., Worthington Precision Metals,
Inc. and Buckeye Steel Castings Company operations. The divested operations,
which previously made up the Company's Custom Products and Cast Products
segments, have been reported as discontinued operations for fiscal 1999.
PROCESSED STEEL PRODUCTS
The Processed Steel Products segment consists of two business units, The
Worthington Steel Company ("Worthington Steel") and The Gerstenslager Company
("Gerstenslager"). For fiscal 1999, and the fiscal years ended May 31, 1998
("fiscal 1998") and May 31, 1997 ("fiscal 1997"), the percentage of sales from
continuing operations generated by the Processed Steel Products segment was
63.2%, 64.6% and 64.6%, respectively.
Both Worthington Steel and Gerstenslager are intermediate processors of
flat-rolled steel. This segment's processing capabilities include pickling,
slitting, rolling, annealing, edging, tension leveling, cut-to-length,
configured blanking, stamping, painting, nickel and zinc/nickel coating and hot
dipped galvanizing. Worthington Steel has over 1,000 customers principally in
the automotive, automotive supply, appliance, electrical, communications,
construction, office furniture, office equipment, agricultural, machinery and
leisure time industries. Gerstenslager supplies automotive aftermarket body
panels within the United States primarily to domestic and transplant automotive
and heavy duty truck manufacturers.
METAL FRAMING
The Metal Framing segment consists of one business unit, Dietrich
Industries, Inc. ("Dietrich"), which produces metal framing products for the
commercial and residential construction markets in the United States. For fiscal
1999, fiscal 1998 and fiscal 1997, the percentage of sales from continuing
operations generated by Dietrich was 19.1%, 20.7% and 20.9%, respectively.
Dietrich's products include steel studs, floor joists and other
1
<PAGE> 5
metal accessory products. Dietrich has over 2000 customers, primarily consisting
of building products distributors, commercial and residential contractors and
gypsum producers.
PRESSURE CYLINDERS
The Pressure Cylinders segment consists of one business unit, Worthington
Cylinder Corporation ("Worthington Cylinders"). For fiscal 1999, fiscal 1998 and
fiscal 1997, the percentage of sales from continuing operations generated by
Worthington Cylinders was 17.3%, 13.8% and 13.9%, respectively.
During fiscal 1999, the Company expanded its Pressure Cylinders segment by
acquiring the cylinder operations of Jos. Heiser vormals J. Winter's Sohn, GmbH,
based in Kienberg, Austria, in June 1998 and Metalurgica Progresso de Vale de
Cambra, Lda., based in Vale de Cambra, Portugal, in May 1999 and a majority
interest in Gastec spol. s.r.o., based in Hustopece, Czech Republic, in February
1999.
Worthington Cylinders produces portable low pressure liquid propane
cylinders and refrigerant gas cylinders, and portable high pressure cylinders.
Refrigerant gas 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 and
distributors of barbecue grills and propane, mass merchandisers, and
manufacturers and users of material handling, heating, cooking and camping
equipment. High pressure cylinders are sold primarily to gas fillers and
suppliers as containers for acetylene, medical, industrial, halon and electronic
gases. Worthington Cylinders also produces recycle and recovery tanks for
refrigerant gases, and helium balloon kits. Worthington Cylinders has over 3,000
customers.
JOINT VENTURES
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, the Company
participates in three consolidated and four unconsolidated joint ventures.
Worthington Armstrong Venture ("WAVE"), a 50% owned joint venture with
Armstrong World Industries, is one of the three leading global manufacturers of
suspended ceiling systems for concealed and lay-in panel ceilings. WAVE operates
facilities in Pennsylvania, Maryland, Michigan, Nevada, England, France, Spain
and China.
TWB Company, L.L.C., a 33% owned joint venture with Thyssen Krupp, Rouge
Steel, LTV Steel and Bethlehem Steel, produces laser welded blanks for use in
the auto industry for products such as inner door frames.
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.
Spartan Steel Coating, L.L.C. ("Spartan Steel"), a 52% owned consolidated
joint venture with Rouge Steel, operates a cold rolled hot dipped galvanizing
facility near Monroe, Michigan.
Worthington Specialty Processing ("WSP"), a 50% owned joint venture with
USX Corporation in Jackson, Michigan, operates primarily as a toll processor for
USX Corporation.
Worthington S.A., a 52% owned consolidated joint venture with three
Brazilian propane producers, operates a cylinder manufacturing facility in Itu,
Brazil.
Worthington Gastec a.s., a 51% owned consolidated joint venture with a
local Czech Republic entrepreneur, operates a pressure cylinder manufacturing
facility in Hustopece, Czech Republic.
DISCONTINUED OPERATIONS
Custom Plastics. The Company completed the divestiture of the Worthington
Custom Plastics businesses in the fourth quarter of fiscal 1999. While operated
by the Company, Worthington Custom Plastics manufactured and supplied injection
molded plastic parts to automobile manufacturers and their suppliers, and to
manufacturers of appliances, lawn and garden products, recreational products,
business equipment, audio equipment, furniture, and other items.
2
<PAGE> 6
Precision Metals. The Company completed the divestiture of the Worthington
Precision Metals operations in the second quarter of fiscal 1999. While operated
by the Company, Worthington Precision Metals produced extremely close tolerance
metal components for use by automobile manufacturers and their suppliers in
power steering, transmission, anti-lock brake and other automotive mechanical
systems.
Steel Castings. The Company completed the divestiture of the Buckeye Steel
Castings operations in the third quarter of fiscal 1999. While operated by the
Company, Buckeye Steel Castings designed, produced and machined a broad line of
railcar and industrial steel castings. Buckeye was also a leading designer and
producer of undercarriages for mass transit cars.
STOCK TRADING, PRICE AND DIVIDEND INFORMATION
The Company's Common Stock trades on the Nasdaq National Market ("Nasdaq")
under the symbol "WTHG" and is listed in most newspapers as "WorthgtnInd". As of
July 31, 1999, the Company had approximately 11,408 shareholders of record. The
following table sets forth, for the periods indicated, the range of high and low
sales prices for the Company's Common Stock as reported on Nasdaq:
<TABLE>
<CAPTION>
NASDAQ PRICING
RANGE
FISCAL 1998 ---------------- CASH
QUARTER ENDED LOW HIGH DIVIDENDS
- ------------- ------ ------ ---------
<S> <C> <C> <C>
August 31, 1997....................................... $17.50 $20.25 $.13
November 30, 1997..................................... $17.38 $20.88 $.13
February 28, 1998..................................... $15.13 $18.38 $.13
May 31, 1998.......................................... $16.94 $19.56 $.14
FISCAL 1999
QUARTER ENDED
- -------------
August 31, 1998....................................... $12.44 $17.88 $.14
November 30, 1998..................................... $10.38 $14.25 $.14
February 28, 1999..................................... $11.31 $14.63 $.14
May 31, 1999.......................................... $11.06 $15.13 $.15
</TABLE>
3
<PAGE> 7
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED MAY 31 1999 1998 1997 1996 1995
----------------- ---------- ---------- ---------- ---------- ----------
IN THOUSANDS, EXCEPT PER SHARE
<S> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Net Sales...................................... $1,763,072 $1,624,449 $1,428,346 $1,126,492 $1,125,495
Cost of Goods Sold............................. 1,468,886 1,371,841 1,221,078 948,505 942,672
---------- ---------- ---------- ---------- ----------
Gross Margin................................... 294,186 252,608 207,268 177,987 182,823
Selling, General & Administrative Expense...... 147,990 117,101 96,252 78,852 67,657
---------- ---------- ---------- ---------- ----------
Operating Income............................... 146,196 135,507 111,016 99,135 115,166
Miscellaneous Income........................... 5,210 1,396 906 1,013 648
Interest Expense............................... (43,126) (25,577) (18,427) (8,687) (6,673)
Equity in Net Income of Unconsolidated
Affiliates -- Joint Ventures................. 24,471 19,316 13,959 6,981 5,284
Equity in Net Income of Unconsolidated
Affiliate -- Rouge........................... -- -- -- 21,729 32,111
---------- ---------- ---------- ---------- ----------
Earnings From Continuing Operations Before
Income Taxes................................. 132,751 130,642 107,454 120,171 146,536
Income Taxes................................... 49,118 48,338 40,844 46,130 55,190
---------- ---------- ---------- ---------- ----------
Earnings From Continuing Operations............ 83,633 82,304 66,610 74,041 91,346
Discontinued Operations, Net of Taxes.......... (20,885) 17,337 26,708 26,932 31,783
Extraordinary Item, Net of Taxes............... -- 18,771 -- -- --
Cumulative Effect of Accounting Change, Net of
Taxes........................................ (7,836) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net Earnings................................... 54,912 118,412 93,318 100,973 123,129
Earnings Per Share (Diluted) --
Continuing Operations........................ 0.90 0.85 0.69 0.76 0.94
Discontinued Operations, Net of Taxes........ (0.23) 0.18 0.27 0.28 0.33
Extraordinary Item, Net of Taxes............. -- 0.19 -- -- --
Cumulative Effect of Accounting Change, Net
of Taxes................................... (0.08) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net Earnings................................. 0.59 1.22 0.96 1.04 1.27
Continuing Operations (Without Rouge
Equity).................................... 0.90 0.85 0.69 0.62 0.73
Depreciation and Amortization from Continuing
Operations................................... 64,087 41,602 34,150 26,931 23,741
Earnings Before Interest, Taxes, Depreciation
and Amortization from Continuing
Operations................................... 239,964 197,821 160,031 155,789 176,950
Capital Expenditures from Continuing
Operations................................... 98,404 297,516 160,846 97,346 45,416
Cash Dividends Declared........................ 52,343 51,271 45,965 40,872 37,212
Per Share.................................... $ 0.57 $ 0.53 $ 0.49 $ 0.45 $ 0.41
Average Shares Outstanding (Diluted)........... 93,106 96,949 96,841 96,822 96,789
FINANCIAL POSITION (AT MAY 31)
Current Assets................................. $ 624,255 $ 642,995 $ 594,128 $ 505,104 $ 474,853
Current Liabilities............................ 427,725 410,031 246,794 167,585 191,672
---------- ---------- ---------- ---------- ----------
Working Capital................................ 196,530 232,964 347,334 337,519 283,181
Net Fixed Assets............................... 871,347 933,158 691,027 544,052 358,579
Total Assets................................... 1,686,951 1,842,342 1,561,186 1,282,424 964,299
Total Debt*.................................... 493,313 501,950 417,883 317,997 108,916
Shareholders' Equity........................... 689,649 780,273 715,518 667,318 608,142
Per Share.................................... 7.67 8.07 7.40 6.91 6.30
Total Committed Capital*....................... $1,182,962 $1,282,223 $1,133,401 $ 985,315 $ 717,058
Shares Outstanding............................. 89,949 96,657 96,711 96,505 96,515
</TABLE>
- ---------------
All financial data, except cash dividends declared, includes the results of The
Gerstenslager Company which was acquired in February 1997 through a pooling of
interests.
* Excludes Debt Exchangable for Common Stock of $52,497, $75,745 and $88,494 at
May 31, 1999, 1998 and 1997, respectively.
4
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained in this 1999 Annual Report to Shareholders,
including, without limitation, the Management's Discussion and Analysis that
follows, constitute "forward looking statements" that are based on management's
beliefs, estimates, assumptions and currently available information. Such
forward looking statements include, without limitation, statements relating to
future operating results, growth, stock appreciation, plant start-ups,
capabilities, the impact of year 2000 and other non-historical information.
Because they are based on beliefs, estimates and assumptions, forward looking
statements are inherently subject to risks and uncertainties that could cause
actual results to differ materially from those projected. Any number of factors
could affect actual results, including, without limitation, product demand and
changes in product mix, changes in pricing or availability of raw material,
particularly steel, conditions in major product markets, delays in construction
or equipment supply, year 2000 issues, general economic conditions and other
risks described from time to time in filings with the Securities and Exchange
Commission.
OVERVIEW
Worthington Industries, Inc. (the "Company") is a diversified steel
processor that focuses on steel processing and metals related businesses. It
operates 39 facilities worldwide, principally in three reportable business
segments: Processed Steel Products, Metal Framing and Pressure Cylinders. The
Company also holds equity positions in seven joint ventures, which operate 14
facilities worldwide.
During the fourth quarter of the fiscal year ended May 31, 1998 ("fiscal
1998"), the Company made a strategic decision to focus on its core strengths,
steel processing and metals related businesses. As a result of this decision,
the Company divested its Worthington Custom Plastics, Inc., Worthington
Precision Metals, Inc. and Buckeye Steel Castings Company operations, which had
previously comprised the Custom Products and Cast Products segments. The
divested operations are reflected in the Company's financial statements as
discontinued operations. The divestitures were completed at various times
throughout the fiscal year ended May 31, 1999 ("fiscal 1999") for aggregate
proceeds of $224.0 million, which included $194.0 million in cash and
approximately $30.0 million in other consideration. The cash proceeds were used
to finance capital projects, fund acquisitions, repurchase common stock and
decrease debt. The divestitures resulted in an aggregate $24.6 million after-tax
loss.
Effective for fiscal 1999, the Company adopted the Financial Accounting
Standards Board's Statement No. 131, Disclosures About Segments of an Enterprise
and Related Information, issued June 1997, which establishes certain standards
for reporting information about operating segments in annual financial
statements. Accordingly, the Company has restated the former Processed Steel
Products segment as three reportable segments: Processed Steel Products, Metal
Framing and Pressure Cylinders.
RESULTS
In fiscal 1999, annual sales increased 9% to $1.8 billion from $1.6 billion
in fiscal 1998. Earnings from continuing operations increased 2% to $83.6
million in fiscal 1999 from $82.3 million in fiscal 1998, and earnings per share
from continuing operations increased 6% to $0.90 in fiscal 1999 from $0.85 in
fiscal 1998. Earnings from discontinued operations before the loss on the
divestitures decreased to $3.7 million in fiscal 1999 from $17.3 million in
fiscal 1998.
In fiscal 1999, the Company adopted the American Institute of Certified
Public Accountants' Statement of Position 98-5, Reporting on the Costs of
Start-Up Activities, which requires that costs related to commencing operations
at new plants and facilities be expensed as incurred. An after-tax charge of
$7.8 million or $0.08 per share was recorded for the accounting policy change,
to expense the costs that had been capitalized prior to fiscal 1999. The impact
of the change on earnings from continuing operations for fiscal 1999 as reported
was immaterial.
5
<PAGE> 9
In fiscal 1998, annual sales increased 14% to $1.6 billion from $1.4
billion in fiscal 1997. Earnings from continuing operations increased 24% to
$82.3 million in fiscal 1998 from $66.6 million in fiscal 1997, and earnings per
share from continuing operations increased 23% to $0.85 in fiscal 1998 from
$0.69 in fiscal 1997. Earnings from discontinued operations decreased to $17.3
million in fiscal 1998 from $26.7 million in fiscal 1997.
The Extraordinary Item in fiscal 1998 is the gain on the settlement of a
property insurance claim resulting from a fire at the Monroe, Ohio, facility in
August 1997. The settlement of $38.7 million represents replacement value of the
assets, which was significantly in excess of the book value of $8.9 million.
After adjusting for taxes, the gain was $18.8 million or $0.19 per share.
The following table sets forth, for the fiscal years indicated, selected
consolidated sales and earnings data and associated percentage growth rates:
<TABLE>
<CAPTION>
% GROWTH
RATES
------------
1999 1998 1997 1999 1998
DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA -------- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Sales................................... $1,763.1 $1,624.4 $1,428.3 9% 14%
Earnings:
Continuing Operations................. 83.6 82.3 66.6 2% 24%
Discontinued Operations:
Earnings from Operations........... 3.7 17.3 26.7
Loss on Divestitures............... (24.6)
Accounting Change..................... (7.8)
Extraordinary Item.................... 18.8
-------- -------- --------
$ 54.9 $ 118.4 $ 93.3
Earnings per Share (Diluted):
Continuing Operations................. $ 0.90 $ 0.85 $ 0.69 6% 23%
Discontinued Operations:
Earnings from Operations........... 0.03 0.18 0.27
Loss on Divestitures............... (0.26)
Accounting Change..................... (0.08)
Extraordinary Item.................... 0.19
-------- -------- --------
$ 0.59 $ 1.22 $ 0.96
</TABLE>
RESULTS FROM CONTINUING OPERATIONS
Annual sales increased 9% to $1.8 billion in fiscal 1999 from $1.6 billion
in fiscal 1998. Fiscal 1998 annual sales increased 14% from $1.4 billion in
fiscal 1997. In fiscal 1999, the increase was due to the start-up of two
Processed Steel Products facilities, the Worthington Steel, Decatur, Alabama
facility ("Decatur") and the Spartan Steel Coating Monroe, Michigan facility
("Spartan"). The acquisition of Jos. Heiser Vormals J. Winter's Sohn GmbH
("Worthington Heiser") in the Pressure Cylinders segment and a strong domestic
economy, which increased demand in the automotive manufacturing and building
construction markets. In fiscal 1998, the increase was due to the new
Worthington Steel, Delta, Ohio facility ("Delta"), gains in traditional markets
and the overall strength of the economy.
Gross margin as a percentage of net sales increased to 16.7% in fiscal
1999, from 15.6% in fiscal 1998 and 14.5% in fiscal 1997. The improvement in
margins was primarily due to favorable material costs. The fire at the
Worthington Steel, Monroe, Ohio facility ("Monroe") in August 1997 did not
materially impact margins during fiscal 1999 or fiscal 1998, because recoveries
from business interruption insurance offset lost operating income. In fiscal
1999 and fiscal 1998, $5.5 million and $8.5 million, respectively, of business
interruption insurance
6
<PAGE> 10
settlement proceeds were recorded in net sales. A summary of gross margin with
respective percentages of sales, for the fiscal years indicated, follows:
<TABLE>
<CAPTION>
1999 1998 1997
DOLLARS IN MILLIONS ------ ------ ------
<S> <C> <C> <C>
Gross Margin............................................. $294.2 $252.6 $207.3
% of Sales............................................... 16.7% 15.6% 14.5%
</TABLE>
Operating income increased 8% to $146.2 million in fiscal 1999 from $135.5
million in fiscal 1998. Fiscal 1998 operating income increased 22% from $111.0
million in fiscal 1997. In fiscal 1999, operating income increased due to the
Worthington Heiser acquisition and favorable material costs. The increase was
partially offset by the impact of the first quarter General Motors strike,
higher overhead costs associated with Decatur and Spartan and expenses related
to the Year 2000 issue described below.
Operating income as a percentage of net sales was 8.3% in both fiscal 1999
and fiscal 1998, and 7.8% in fiscal 1997. The gross margin improvement described
above was offset by higher selling, general and administrative costs ("SG&A"),
which increased 26% to $148.0 million in fiscal 1999 from $117.1 million in
fiscal 1998. SG&A as a percentage of sales was 8.4% in fiscal 1999, 7.2% in
fiscal 1998 and 6.7% in fiscal 1997. The SG&A increase in fiscal 1999 was the
result of the Year 2000 issue described below and the impact of overhead without
corresponding sales levels at Decatur and Spartan. The SG&A increase in fiscal
1998 was also due to the two new facilities as well as the start-up of Delta.
All corporate overhead costs have been reflected in the results from continuing
operations. A summary of Operating Income and SG&A with respective percentages
of sales, for the fiscal year indicated, follows:
<TABLE>
<CAPTION>
1999 1998 1997
DOLLARS IN MILLIONS ------ ------ ------
<S> <C> <C> <C>
Operating Income......................................... $146.2 $135.5 $111.0
% of Sales............................................... 8.3% 8.3% 7.8%
SG&A..................................................... $148.0 $117.1 $ 96.3
% of Sales............................................... 8.4% 7.2% 6.7%
</TABLE>
Interest expense increased to $43.1 million in fiscal 1999 from $25.6
million in fiscal 1998 and $18.4 million in fiscal 1997. Capitalized interest
associated with the construction of new facilities totaled $4.0 million in
fiscal 1999, $11.3 million in fiscal 1998 and $6.6 million in fiscal 1997. The
interest cost increase in fiscal 1999 was due to increased debt levels to
finance the completion of Decatur, the re-build of Monroe, the acquisition of
three European Pressure Cylinder operations and the repurchase of the Company's
common stock. The increase in debt levels was partially offset by the proceeds
received from the divestitures over the course of fiscal 1999 and lower interest
rates. Weighted average interest rates on short-term unsecured notes payable
decreased to 5.14% in fiscal 1999 from 5.80% in fiscal 1998. At May 31, 1999,
approximately 75% of the Company's $493.3 million of total debt (excluding debt
exchangeable for common stock (the "DECS")) was at fixed rates of interest. The
fiscal 1998 interest cost increased to $36.9 million from $25.0 million as a
result of financing the Company's capital investment program that began in
fiscal 1997, which included a significant portion of the construction of Decatur
and the completion of Spartan. A summary of total interest cost, for the fiscal
years indicated, follows:
<TABLE>
<CAPTION>
1999 1998 1997
DOLLARS IN MILLIONS ----- ----- -----
<S> <C> <C> <C>
Interest Expense............................................ $43.1 $25.6 $18.4
Capitalized Interest........................................ 4.0 11.3 6.6
----- ----- -----
Total Interest Cost............................... $47.1 $36.9 $25.0
</TABLE>
Equity in net income of unconsolidated affiliates increased 27% to $24.5
million in fiscal 1999 from $19.3 million in fiscal 1998. Fiscal 1998 equity in
net income of unconsolidated affiliates increased 38% from $14.0 million in
fiscal 1997. The Company's Worthington Armstrong Venture ("WAVE") and TWB
Company joint ventures posted increases in sales and earnings for fiscal 1999.
The Acerex joint venture in Monterrey, Mexico and Worthington Specialty
Processing experienced profitable years, despite slight declines in sales. In
7
<PAGE> 11
fiscal 1998, WAVE posted solid increases in sales and earnings and all other
joint ventures contributed positively to earnings.
The effective tax rate for continuing operations was 37% in fiscal 1999,
37% in fiscal 1998, and 38% in fiscal 1997. The effective tax rate decreased in
fiscal 1998 because of a decrease in state income taxes.
PROCESSED STEEL PRODUCTS
Processed Steel Products sales increased 6% to $1,114.9 million in fiscal
1999 from $1,049.5 million in fiscal 1998. Fiscal 1998 sales increased 14% from
$922.2 million in fiscal 1997. In fiscal 1999, the new Decatur and Spartan
start-up facilities were responsible for the increase in sales, offset by an
unfavorable steel pricing environment and the first quarter General Motors
strike. Decatur produced its first commercially saleable cold-rolled coils in
August 1998. Spartan, the Company's hot-dipped galvanizing joint venture with
Rouge Industries Inc. ("Rouge"), commenced operations in the fourth quarter of
fiscal 1998. Operating income decreased 6% to $82.6 million in fiscal 1999 from
$87.7 million in fiscal 1998 primarily due to the higher manufacturing overhead
from the start-ups, the General Motors strike, and the Company's Year 2000
costs, partially offset by favorable material costs, resulting in an operating
margin for the year of 7.4%. In fiscal 1998, sales and operating income
increased due to the contributions of Delta, which completed its first full year
of operation. In addition, higher volume and operating efficiencies at the
Gerstenslager Company ("Gerstenslager") facility in Wooster, Ohio contributed to
increased sales and operating income. The fiscal 1998 operating margin on sales
of 8.4% declined from 8.6% in fiscal 1997 due to the start-up of Delta.
As noted above, on August 14, 1997, the Company experienced a fire at
Monroe. The fire destroyed the pickling area of the facility and caused
extensive damage to other parts of the plant, including blanking and slitting.
The Company shifted a significant amount of business from Monroe to other
locations, with the remainder sent to third party processors. Blanking
operations resumed in September 1997, slitting in March 1998 and pickling in
September 1998. The Company increased pickling and storage capacity at this
facility as compared to pre-fire capabilities. The Company reached final
settlement with its insurance provider as described in Note M of Notes to
Consolidated Financial Statements.
The following table sets forth, for the fiscal years indicated, Processed
Steel Products segment sales and operating income data and associated percentage
growth rates:
<TABLE>
<CAPTION>
% GROWTH
RATES
------------
1999 1998 1997 1999 1998
DOLLARS IN MILLIONS -------- -------- ------ ---- ----
<S> <C> <C> <C> <C> <C>
Sales................................... $1,114.9 $1,049.5 $922.2 6% 14%
Operating Income........................ $ 82.6 $ 87.7 $ 79.3 -6% 11%
% of Sales.............................. 7.4% 8.4% 8.6%
</TABLE>
METAL FRAMING
Metal Framing sales of $337.2 million in fiscal 1999 were essentially even
with fiscal 1998 and increased from $297.9 million in fiscal 1997. In fiscal
1999, building products sales volume increased due to higher demand in the
building construction markets. The increase was partially offset by a decrease
in the garage door product line sales due to its divestiture during the second
quarter of fiscal 1999, and a decrease in sales from the stainless product line
due to a labor dispute at the Company's Aurora, Ohio facility during the first
three quarters of fiscal 1999. Operating income increased 28% to $25.4 million
in fiscal 1999 from $20.0 million in fiscal 1998. Fiscal 1998 operating income
increased 79% from $11.2 million in fiscal 1997. Operating margin on sales
increased to 7.5% in fiscal 1999 from 5.9% in fiscal 1998 due to lower material
costs and cost improvements which were partially offset by the Company's Year
2000 costs. In fiscal 1998, both sales and operating income increased,
reflecting greater volume and better margins due to cost improvements.
8
<PAGE> 12
The following table sets forth, for the fiscal years indicated, Metal
Framing segment sales and operating income data and associated percentage growth
rates:
<TABLE>
<CAPTION>
% GROWTH
RATES
------------
1999 1998 1997 1999 1998
DOLLARS IN MILLIONS ------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Sales...................................... $337.2 $337.0 $297.9 0% 18%
Operating Income........................... $ 25.4 $ 20.0 $ 11.2 27% 79%
% of Sales................................. 7.5% 5.9% 3.8%
</TABLE>
PRESSURE CYLINDERS
Pressure Cylinders sales increased 37% to $305.8 million in fiscal 1999
from $223.5 million in fiscal 1998. Fiscal 1998 sales increased 13% from $197.9
million in fiscal 1997. In fiscal 1999, the increase resulted primarily from the
Worthington Heiser acquisition and completing the introduction (which commenced
in fiscal 1998) of a higher-priced valve with a new overfill protection device.
Operating income increased 28% to $36.7 million in fiscal 1999 from $28.6
million in fiscal 1998. Fiscal 1998 operating income increased 19% from $24.0
million in fiscal 1997. Worthington Heiser contributed to the fiscal 1999
increase in operating income, but operating margin as a percentage of sales
decreased in fiscal 1999 to 12.0% from 12.8% in fiscal 1998, primarily due to
Year 2000 costs. In fiscal 1998, sales and operating income increased due to
increased volume in most product lines and higher selling prices due to the
introduction of the higher-priced valve discussed above.
The Company continued to pursue growth with three European business
acquisitions. Worthington Heiser was acquired in June 1998. Based in Kienberg,
Austria, Worthington Heiser produces high pressure cylinders. The Company
acquired a controlling interest in Gastec spol. s.r.o., based in Hustopece,
Czech Republic, in February 1999 and purchased the cylinder manufacturing assets
of Metalurgica Progresso de Vale de Cambra, Lda., based in Vale de Cambra,
Portugal, in May 1999. Both of these operations manufacture various low pressure
cylinders. These acquisitions offer significant growth opportunities for the
segment, given the full product offering and geographic coverage throughout
Europe.
The following table sets forth, for the fiscal years indicated, Pressure
Cylinders segment sales and operating income data and associated percentage
growth rates:
<TABLE>
<CAPTION>
% GROWTH
RATES
------------
1999 1998 1997 1999 1998
DOLLARS IN MILLIONS ------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Sales...................................... $305.8 $223.5 $197.9 37% 13%
Operating Income........................... $ 36.7 $ 28.6 $ 24.0 28% 19%
% of Sales................................. 12.0% 12.8% 12.1%
</TABLE>
RESULTS FROM DISCONTINUED OPERATIONS
Fiscal 1999 sales from discontinued operations decreased 25% to $371.6
million from $493.8 in fiscal 1998. The decline in sales was primarily due to a
26% decline in Custom Products sales as a result of the impact of the first
quarter strike at General Motors and the divestitures in October 1998 of
Precision Metals, in April 1999 of the non-automotive Worthington Custom
Plastics businesses, and in May 1999 of the automotive Worthington Custom
Plastics businesses. Cast Products sales were 21% less than fiscal 1998 due to
the divestiture of Buckeye Steel Castings Company in February 1999. Overall
results from discontinued operations amounted to a $20.9 million loss compared
to earnings of $17.3 million last year. Excluding the after-tax loss of $24.6
million recorded for the sales of discontinued businesses, net income from the
discontinued operations decreased 79% to $3.7 million from $17.3 million in
fiscal 1998.
Fiscal 1998 sales from discontinued operations of $493.8 million were up
$10.4 million over fiscal 1997, primarily due to a 17% increase in sales at Cast
Products, partially offset by a 2% sales decrease at Custom Products. The Cast
Products increase was due to rail car volume improvement, while Custom Products
experienced lower sales due to the phase out of a few key contracts. Fiscal 1998
net income decreased 35% to $17.3 million from $26.7 million in fiscal 1997
primarily due to Custom Products' lower sales.
9
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $7.6 million at May 31, 1999,
an increase of $3.9 million over May 31, 1998. In fiscal 1999, the Company
generated $103.7 million in cash from operating activities, down from $200.9
million during fiscal 1998. The lower cash flow in fiscal 1999 is due to lower
operating results from discontinued operations and increased net working capital
requirements for continuing operations. The increase in continuing operations
net working capital, primarily accounts receivable, was due to higher fourth
quarter sales in Processed Steel Products from the new Decatur, Alabama and
Spartan Steel Coating facilities.
The $103.7 million of net cash from operating activities and the cash
proceeds from sale of assets of $199.0 million provided the resources needed to
dividend $52.4 million to shareholders, fund investing activities, repurchase
$94.4 million of the Company's common stock, and reduce debt. Investing
activities included capital projects of $107.8 million ($100.3 million, net of
Rouge Industries' capital investment in Spartan) and $34.1 million for the
Pressure Cylinders acquisitions. The most significant capital projects were
Decatur and the rebuild of Monroe, both in the Processed Steel Products segment.
Consolidated net working capital decreased $36.5 million to $196.5 million
on May 31, 1999 from $233.0 million on May 31, 1998. Consolidated current assets
decreased $18.7 million to $624.3 million on May 31, 1999 from $643.0 million on
May 31, 1998. Consolidated current liabilities increased $17.7 million to $427.7
million on May 31, 1999 from $410.0 million on May 31, 1998. Accordingly, the
current ratio at May 31, 1999 was 1.5 to 1 as compared to 1.6 to 1 at May 31,
1998. Accounts receivable, inventories, prepaid expenses and other current
assets and accounts payable sold with the discontinued operations were partially
replaced with working capital required to support new operations and
acquisitions. Contributing to the net increase in current liabilities was the
reclassification of the DECS liability maturing in March 2000, offset by an
increase in current assets as the investment in Rouge was reclassified as a
current asset since it will be used to retire the DECS. Short term debt (current
notes payable) decreased $14.3 million to $122.3 million during fiscal 1999.
The Company uses short-term uncommitted lines of credit extended by various
commercial banks to finance its business operations. Maturities on these
borrowings typically range from one to ninety days. To ensure liquidity, the
Company maintains a revolving credit facility with a group of commercial banks.
During October 1998, the Company increased the amount of the revolving credit
facility to $300 million from $190 million. The $110 million increase in
commitments extended by the existing bank group expires in September 1999,
unless extended. The $190 million of previously existing commitments expire in
May 2003. At May 31, 1999, there were no outstanding borrowings under the
revolving credit facility.
In March 1997, the DECS, payable in Rouge stock, was issued by the Company.
In management's opinion, it is appropriate to examine the Company's debt without
the DECS, since the Company may satisfy the DECS with currently owned Rouge
stock. The DECS liability as of May 31, 1999 was $52.5 million, as compared to
$75.7 million at May 31, 1998, the result of a decrease in the value of the
Rouge common stock.
At May 31, 1999, the Company's total debt (excluding the DECS) was $493.3
million compared to $502.0 million at the end of fiscal 1998. Total debt to
committed capital (excluding the DECS) increased to 41.7% versus 39.1% at the
prior fiscal year end.
During the first quarter of fiscal 1999, the Company repurchased 4.2
million shares of the Company's common shares. In August 1998, the Board of
Directors of the Company increased the Company's authority to repurchase an
additional 10 million common shares on the open market or in private
transactions. The Company repurchased 2.6 million shares during the fourth
quarter. For fiscal 1999, approximately 6.8 million common shares ($94.4
million) were repurchased. At May 31, 1999, approximately 7.4 million shares
remained available for repurchase under the August 1998 authorization. The
timing and amount of any future repurchases will be at the Company's discretion
and will depend upon market conditions and the Company's operating performance
and liquidity. Any repurchase will also be subject to the covenants contained in
the Company's credit facilities as well as its other debt instruments.
The Company's immediate borrowing capacity, in addition to cash generated
from operations, should be more than sufficient to fund expected normal
operating costs, dividends, and capital expenditures for existing
10
<PAGE> 14
businesses. While there are no specific needs at this time, the Company
regularly considers long-term debt issuance an alternative depending on
financial market conditions.
ENVIRONMENTAL
The Company believes environmental issues will not have a material effect
on capital expenditures, consolidated financial position, future results or
operations.
IMPACT OF YEAR 2000
Year 2000 issues occur in computerized systems when only two digits are
used to identify the year in a date instead of four (i.e., the years 1900 and
2000 are both represented as "00") and the two-digit years are used for
calculating or decision-making in the operation of those systems. As the year
2000 approaches, the use of two-digit years in computer hardware or software, or
any other equipment reliant on embedded computer chip technology, could result
in computer system or equipment failures, potentially leading to business and
manufacturing disruptions. In the discussion below, information technology
("IT") generally refers to hardware and software that processes information used
to manage the business. Non-information technology ("non-IT") generally refers
to hardware and software used to control specific manufacturing processes on the
plant floor, such as programmable controllers, or to serve basic administrative
needs, such as telephone systems, copiers, or facsimile machines.
STATE OF READINESS
Several initiatives related to Year 2000 issues have been continuing in the
Company's businesses. The Company formed a Year 2000 project team comprised of
business and technical representatives from across the Company and external
consultants to assess and resolve remaining Year 2000 issues, including the Year
2000 readiness of its equipment manufacturers and significant suppliers. In
addition, this team is assessing the possible impact of significant customers
who may not be Year 2000 ready. The project team is using a two-phase approach
at all continuing operations to accomplish its objectives. The phases are:
Inventory and Assessment -- A physical inventory of all IT and non-IT
hardware and software is taken by a trained inventory team, including such
information as manufacturers and model numbers. Each item on the physical
inventory is reviewed for both known problems for particular vendors and
models and for potential problems based on internal and external expertise.
Those inventory items identified as having or possibly posing a Year 2000
issue are further grouped for remediation planning.
Remediation and Testing -- The groups of inventory items are
prioritized in the following classifications based on the expected impact
to operations if they are not remediated by Year 2000: 1) those that will
immediately and materially impact operations; 2) those that will materially
impact operations within a relatively short time frame; 3) those that could
eventually have a material impact on operations; and 4) those not expected
to have a material impact on operations. In priority order, items with
known Year 2000 issues are repaired, replaced, or retired as expected to
resolve the issue. Items with possible Year 2000 issues that are not
retired are tested in priority order for possible issues and repaired or
replaced as further expected to resolve the issue. After remediation, items
are tested in an actual or simulated production environment, verified as
remediated, and re-deployed into production. Contingency planning is a
formal part of this process.
Both phases are audited for process quality by an independent group staffed
with both internal and external subject matter experts.
11
<PAGE> 15
The Inventory and Assessment phase has been completed at all continuing
operations. The Remediation and Testing phase is in progress. The following
table summarizes the status on July 31, 1999, of the Year 2000 remediation
efforts on identified items that may materially impact operations:
-- ESTIMATED CURRENT COMPLETION PERCENT AND MONTH OF EXPECTED COMPLETION --
<TABLE>
<CAPTION>
INVENTORY AND ASSESSMENT REMEDIATION AND TESTING
---------------------------- ----------------------------
EXPECTED EXPECTED
AREA % COMPLETE COMPLETION % COMPLETE COMPLETION
---- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
IT Hardware and Software:
Financial 100% Complete 95% September 1999
Non-Financial 100% Complete 70% September 1999
Non-IT Hardware and Software 100% Complete 65% September 1999
Significant Suppliers* 70% September 1999 * *
Products N/A N/A N/A N/A
</TABLE>
* The Company has initiated communications with significant suppliers to confirm
their plans to become year 2000 ready and assess the potential impact of
non-ready significant suppliers on the Company's operations. The Company
estimates contingency planning for potential disruptions caused by non-ready
significant suppliers that could materially impact operations will be
completed by September 1999.
COSTS
As of May 31, 1999, approximately $10.1 has been expensed related to Year
2000 issues in continuing operations. Of this amount approximately $9.4 million
and $3.8 million have been expensed in the fiscal year and fiscal quarter ended
May 31, 1999, respectively. An additional $0.7 million in capital expenditures
has been incurred on these projects as of May 31, 1999. The Company currently
projects additional expenses in its efforts to resolve Year 2000 issues of $11
million. An additional $5 million in capital expenditures is currently projected
by the Company to result from these efforts. Year 2000 expenditures are expected
to be funded through operating cash flow.
Responsibility for the costs of discontinued operations becoming Year 2000
ready has been transferred by contract to the acquiring companies of those
businesses.
The Company has elected to delay certain IT projects and re-direct the
internal resources to Year 2000 projects to minimize Year 2000 related costs.
The Company expects no material adverse consequences due to the re-direction of
these resources.
RISKS AND CONTINGENCY PLANNING
The Company is using all commercially reasonable efforts and expects to
complete critical year 2000 projects by September 1999. However, there can be no
assurance that all systems on which the Company relies will be Year 2000 ready.
Worst case scenarios include the possible shutting down of an entire
operation for an extended period of time. Historically, the business losses from
such events have been mitigated through the use of other company-owned
facilities with similar manufacturing capabilities. However, this is not
possible for all products the Company manufactures. In the event of the shut
down of an operation, orders may be serviced from inventories or alternate
manufacturing sites for short periods of time. An extended shut down may result
in the out-sourcing of some manufacturing to third parties or an actual loss of
business.
The formal remediation process includes the identification of year 2000
issues that could have a material impact on operations, as well as contingency
planning for such issues. This process is expected to minimize risks to the
Company. Additional contingency planning for worst case scenarios is in progress
and expected to be complete by September 1999.
12
<PAGE> 16
While possible, the Company does not currently believe the advent of the
Year 2000 will have an additional material impact on the results of operations
or the financial position of the Company.
THE YEAR 2000 STATEMENTS CONTAINED HEREIN ARE YEAR 2000 READINESS
DISCLOSURES (AS DEFINED UNDER THE YEAR 2000 INFORMATION AND READINESS ACT) AND
SHALL BE TREATED AS SUCH FOR ALL PURPOSES PERMISSIBLE UNDER SUCH ACT. THESE
STATEMENTS ARE BASED ON MANAGEMENT'S ANALYSIS OF ALL INFORMATION OBTAINED TO
DATE AND USE WHAT MANAGEMENT BELIEVES TO BE REASONABLE ASSUMPTIONS IN ESTIMATING
COSTS, PROJECT TIMING, AND THE OCCURRENCE OF FUTURE EVENTS. THERE CAN BE NO
ASSURANCE THAT ACTUAL COSTS WILL NOT EXCEED ANY STATED ESTIMATES, THAT ALL
POSSIBLE YEAR 2000 ISSUES WILL BE RESOLVED BY THE STATED TIMES, OR THAT THERE
WILL BE NO ADVERSE IMPACT ON THE COMPANY DUE TO SYSTEM FAILURES CAUSED BY EITHER
INTERNAL OR EXTERNAL YEAR 2000 ISSUES.
EURO-CURRENCY
The European Union's new common currency was introduced on January 1, 1999.
The Company expects no material impact to its results from operations or
financial condition due to the Company's limited overseas operations.
INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented in the Consolidated Financial Statements.
13
<PAGE> 17
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31
------------------------
1999 1998
DOLLARS IN THOUSANDS ---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 7,641 $ 3,788
Accounts receivable, less allowances of $4,209 and $4,130
at May 31, 1999 and 1998................................ 281,706 310,155
Inventories
Raw materials........................................... 163,277 172,920
Work in process and finished products................... 93,733 115,991
---------- ----------
257,010 288,911
Investment in Rouge....................................... 52,497 --
Income taxes receivable................................... -- 5,429
Prepaid expenses and other current assets................. 25,401 34,712
---------- ----------
Total Current Assets............................... 624,255 642,995
Investment in Unconsolidated Affiliates..................... 63,943 61,694
Intangible Assets........................................... 83,402 95,725
Other Assets................................................ 44,004 33,025
Investment in Rouge......................................... -- 75,745
Property, Plant and Equipment:
Land...................................................... 31,184 32,508
Buildings................................................. 245,958 243,514
Machinery and equipment................................... 823,343 767,165
Construction in progress.................................. 31,276 272,481
---------- ----------
1,131,761 1,315,668
Less accumulated depreciation............................. 260,414 382,510
---------- ----------
871,347 933,158
---------- ----------
Total Assets....................................... $1,686,951 $1,842,342
========== ==========
LIABILITIES
CURRENT LIABILITIES:
Accounts payable.......................................... $ 161,264 $ 176,752
Notes payable............................................. 122,277 136,600
Accrued compensation, contributions to employee benefit
plans and related taxes................................. 37,187 43,867
Dividends payable......................................... 13,492 13,532
Other accrued items....................................... 35,482 37,800
Income taxes.............................................. 292 --
Current maturities of long-term debt...................... 5,234 1,480
Debt exchangeable for common stock........................ 52,497 --
---------- ----------
Total Current Liabilities.......................... 427,725 410,031
Other Liabilities........................................... 31,512 24,788
Long-Term Debt:
Conventional long-term debt............................... 365,802 363,870
Debt exchangeable for common stock........................ -- 75,745
---------- ----------
365,802 439,615
Deferred Income Taxes....................................... 124,444 145,230
Contingent Liabilities -- Note G............................ -- --
Minority Interest........................................... 47,819 42,405
EQUITY
SHAREHOLDERS' EQUITY:
Preferred shares, $1.00 par value, authorized -- 1,000,000
shares, issued and outstanding -- none.................. -- --
Common shares, authorized -- 150,000,000 shares, issued
and outstanding -- 1999 -- 89,949,277 shares -- 1998
96,656,759 shares....................................... -- 968
Additional paid-in capital................................ 111,474 116,696
Cumulative other comprehensive loss, net of taxes of
$5,996 and $2,996 at May 31, 1999 and 1998.............. (8,484) (8,375)
Retained earnings......................................... 586,659 670,984
---------- ----------
689,649 780,273
---------- ----------
Total Liabilities and Shareholders' Equity......... $1,686,951 $1,842,342
========== ==========
</TABLE>
See notes to consolidated financial statements.
14
<PAGE> 18
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
--------------------------------------
1999 1998 1997
IN THOUSANDS, EXCEPT PER SHARE ---------- ---------- ----------
<S> <C> <C> <C>
Net sales.............................................. $1,763,072 $1,624,449 $1,428,346
Cost of goods sold..................................... 1,468,886 1,371,841 1,221,078
---------- ---------- ----------
Gross Margin................................. 294,186 252,608 207,268
Selling, general and administrative expense............ 147,990 117,101 96,252
---------- ---------- ----------
Operating Income............................. 146,196 135,507 111,016
Other income (expense):
Miscellaneous income................................. 5,210 1,396 906
Interest expense..................................... (43,126) (25,577) (18,427)
Equity in net income of unconsolidated
affiliates -- Joint Ventures...................... 24,471 19,316 13,959
---------- ---------- ----------
Earnings Before Income Taxes................. 132,751 130,642 107,454
Income taxes........................................... 49,118 48,338 40,844
---------- ---------- ----------
Earnings From Continuing Operations.......... 83,633 82,304 66,610
Discontinued Operations, net of taxes.................. (20,885) 17,337 26,708
Extraordinary Item, net of taxes....................... -- 18,771 --
Cumulative Effect of Accounting Change, net of taxes... (7,836) -- --
---------- ---------- ----------
Net Earnings................................. $ 54,912 $ 118,412 $ 93,318
========== ========== ==========
Average Common Shares Outstanding (Basic).............. 93,016 96,751 96,557
Earnings Per Share (Basic):
Continuing Operations........................ $ 0.90 $ 0.85 $ 0.69
Discontinued Operations, net of taxes........ (0.23) 0.18 0.28
Extraordinary Item, net of taxes............. -- 0.19 --
Cumulative Effect of Accounting Change, net
of taxes................................... (0.08) -- --
---------- ---------- ----------
Net Earnings................................. $ 0.59 $ 1.22 $ 0.97
========== ========== ==========
Average Common Shares Outstanding (Diluted)............ 93,106 96,949 96,841
Earnings Per Share (Diluted):
Continuing Operations........................ $ 0.90 $ 0.85 $ 0.69
Discontinued Operations, net of taxes........ (0.23) 0.18 0.27
Extraordinary Item, net of taxes............. -- 0.19 --
Cumulative Effect of Accounting Change, net
of taxes................................... (0.08) -- --
---------- ---------- ----------
Net Earnings................................. $ 0.59 $ 1.22 $ 0.96
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 19
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED MAY 31, 1999
<TABLE>
<CAPTION>
COMPREHENSIVE COMMON ADDITIONAL RETAINED
DOLLARS IN THOUSANDS TOTAL INCOME STOCK PAID-IN-CAPITAL EARNINGS
-------------------- -------- ------------- ------ --------------- --------
<S> <C> <C> <C> <C> <C>
Beginning balance at June 1, 1998.... $780,273 $968 $116,696 $670,984
Comprehensive income:
Net income......................... 54,912 54,912 54,912
Other comprehensive income, net of
tax:
Foreign currency translation..... (109) (109)
-------
Other comprehensive income....... (109)
-------
Comprehensive income................. $54,803
=======
Common stock issued -- options
(139,985 shares issued under
plan).............................. 1,492 1,492
Common stock issued -- dividend
reinvestment....................... (130) (130)
Reorganization to Ohio............... -- (926) 926
Purchase & retirement of common stock
(6,847,467 shares repurchased)..... (94,432) (42) (7,497) (86,893)
Other................................ (15) (13) (2)
Cash dividends declared ($.57 per
share)............................. (52,342) (52,342)
-------- ---- -------- --------
Ending balance at May 31, 1999....... $689,649 $ -- $111,474 $586,659
======== ==== ======== ========
<CAPTION>
CUMULATIVE OTHER COMPREHENSIVE LOSS,
NET OF TAX
--------------------------------------
UNREALIZED FOREIGN
GAIN (LOSS) ON CURRENCY
DOLLARS IN THOUSANDS TOTAL INVESTMENT TRANSLATION
-------------------- ------- -------------- -----------
<S> <C> <C> <C>
Beginning balance at June 1, 1998.... $(8,375) $(5,563) $(2,812)
Comprehensive income:
Net income.........................
Other comprehensive income, net of
tax:
Foreign currency translation..... (109) (109)
------- ------- -------
Other comprehensive income....... (109) -- (109)
------- ------- -------
Comprehensive income.................
Common stock issued -- options
(139,985 shares issued under
plan)..............................
Common stock issued -- dividend
reinvestment.......................
Reorganization to Ohio...............
Purchase & retirement of common stock
(6,847,467 shares repurchased).....
Other................................
Cash dividends declared ($.57 per
share).............................
------- ------- -------
Ending balance at May 31, 1999....... $(8,484) $(5,563) $(2,921)
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 20
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
COMPREHENSIVE COMMON ADDITIONAL RETAINED
DOLLARS IN THOUSANDS TOTAL INCOME STOCK PAID-IN-CAPITAL EARNINGS
-------------------- -------- ------------- ------ --------------- --------
<S> <C> <C> <C> <C> <C>
Beginning balance at June 1, 1997.... $715,518 $968 $114,052 $607,922
Comprehensive income:
Net income......................... 118,412 118,412 -- 118,412
Other comprehensive income, net of
tax:
Foreign currency translation..... (951) (951)
--------
Other comprehensive income....... (951)
--------
Comprehensive income................. $117,461
========
Common stock issued -- options
(142,902 shares issued under
plan).............................. 1,751 1 1,750
Common stock issued -- dividend
reinvestment (56,222 shares issued
under plan)........................ 1,156 1 1,155
Purchase & retirement of common stock
(253,600 shares repurchased)....... (4,342) (2) (261) (4,079)
Cash dividends declared ($ .53 per
share)............................. (51,271) (51,271)
-------- ---- -------- --------
Ending balance at May 31, 1998....... $780,273 $968 $116,696 $670,984
======== ==== ======== ========
<CAPTION>
CUMULATIVE OTHER COMPREHENSIVE LOSS,
NET OF TAX
--------------------------------------
UNREALIZED FOREIGN
GAIN (LOSS) ON CURRENCY
DOLLARS IN THOUSANDS TOTAL INVESTMENT TRANSLATION
-------------------- ------- -------------- -----------
<S> <C> <C> <C>
Beginning balance at June 1, 1997.... $(7,424) $(5,563) $(1,861)
Comprehensive income:
Net income.........................
Other comprehensive income, net of
tax:
Foreign currency translation..... (951) (951)
------- ------- -------
Other comprehensive income....... (951) -- (951)
------- ------- -------
Comprehensive income.................
Common stock issued -- options
(142,902 shares issued under
plan)..............................
Common stock issued -- dividend
reinvestment (56,222 shares issued
under plan)........................
Purchase & retirement of common stock
(253,600 shares repurchased).......
Cash dividends declared ($ .53 per
share).............................
------- ------- -------
Ending balance at May 31, 1998....... $(8,375) $(5,563) $(2,812)
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 21
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
COMPREHENSIVE COMMON ADDITIONAL RETAINED
DOLLARS IN THOUSANDS TOTAL INCOME STOCK PAID-IN-CAPITAL EARNINGS
-------------------- -------- ------------- ------ --------------- --------
<S> <C> <C> <C> <C> <C>
Beginning balance at June 1, 1996.... $667,318 $965 $106,079 $561,711
Comprehensive income:
Net income......................... 93,318 93,318 93,318
Other comprehensive income, net of
tax:
Unrealized gain (loss) on
investment..................... (5,563) (5,563)
Minimum pension liability........ 189 189
Foreign currency translation..... (613) (613)
-------
Other comprehensive income....... (5,987)
-------
Comprehensive income................. $87,331
=======
Common stock issued -- options
(173,026 shares issued under
plan).............................. 2,116 2 2,114
Common stock issued -- dividend
reinvestment (95,438 shares issued
under plan)........................ 1,896 1 1,895
Purchase & retirement of common stock
(62,500 shares repurchased)........ (1,211) (69) (1,142)
Transactions of Unconsolidated
Affiliates......................... 4,033 4,033
Cash dividends declared ($.49 per
share)............................. (45,965) (45,965)
-------- ---- -------- --------
Ending balance at May 31, 1997....... $715,518 $968 $114,052 $607,922
======== ==== ======== ========
<CAPTION>
CUMULATIVE OTHER COMPREHENSIVE LOSS, NET OF
TAX
--------------------------------------------------
UNREALIZED MINIMUM FOREIGN
GAIN (LOSS) ON PENSION CURRENCY
DOLLARS IN THOUSANDS TOTAL INVESTMENT LIABILITY TRANSLATION
-------------------- ------- -------------- --------- -----------
<S> <C> <C> <C> <C>
Beginning balance at June 1, 1996.... $(1,437) $ -- $(189) $(1,248)
Comprehensive income:
Net income.........................
Other comprehensive income, net of
tax:
Unrealized gain (loss) on
investment..................... (5,563) (5,563)
Minimum pension liability........ 189 189
Foreign currency translation..... (613) (613)
------- ------- ----- -------
Other comprehensive income....... (5,987) (5,563) 189 (613)
------- ------- ----- -------
Comprehensive income.................
Common stock issued -- options
(173,026 shares issued under
plan)..............................
Common stock issued -- dividend
reinvestment (95,438 shares issued
under plan)........................
Purchase & retirement of common stock
(62,500 shares repurchased)........
Transactions of Unconsolidated
Affiliates.........................
Cash dividends declared ($.49 per
share).............................
------- ------- ----- -------
Ending balance at May 31, 1997....... $(7,424) $(5,563) $ -- $(1,861)
======= ======= ===== =======
</TABLE>
See notes to consolidated financial statements.
18
<PAGE> 22
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
---------------------------------
1999 1998 1997
DOLLARS IN THOUSANDS -------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings............................................. $ 54,912 $ 118,412 $ 93,318
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization......................... 78,490 61,459 51,388
Provision for deferred income taxes................... (18,087) 22,104 3,326
Equity in undistributed net income of unconsolidated
affiliates.......................................... (10,848) (5,729) (9,625)
Minority interest in net loss of consolidated
subsidiary.......................................... (2,664) (553) (27)
Net loss on sale of assets............................ 29,237 -- --
Cumulative effect of accounting change................ 12,292 -- --
Extraordinary gain.................................... -- (29,795) --
Changes in assets and liabilities:
Accounts receivable................................. (27,078) (43,319) (8,005)
Inventories......................................... (4,980) 7,977 (70,322)
Prepaid expenses and other current assets........... (2,965) (10,920) 8,331
Other assets........................................ (366) (1,319) (2,801)
Accounts payable and accrued expenses............... (665) 76,637 11,658
Other liabilities................................... (3,554) 5,949 1,122
-------- --------- --------
Net Cash Provided By Operating Activities........ 103,724 200,903 78,363
INVESTING ACTIVITIES:
Investment in property, plant and equipment, net......... (107,759) (309,412) (172,905)
Acquisitions, net of cash acquired....................... (34,054) -- (69,942)
Investments in unconsolidated affiliates................. -- -- (5,420)
Proceeds from sale of assets............................. 198,995 -- --
Proceeds from property insurance......................... -- 38,683 --
-------- --------- --------
Net Cash Provided (Used) By Investing
Activities..................................... 57,182 (270,729) (248,267)
FINANCING ACTIVITIES:
Proceeds from (payments on) short-term borrowings........ (14,491) 86,600 50,000
Proceeds from long-term debt............................. 390 152,868 165,715
Principal payments on long-term debt..................... (4,983) (155,401) (23,589)
Proceeds from issuance of common shares.................. 1,349 2,955 4,011
Proceeds from minority interest.......................... 7,497 34,081 8,904
Repurchase of common shares.............................. (94,432) (4,390) (1,211)
Dividends paid........................................... (52,383) (50,311) (44,294)
-------- --------- --------
Net Cash Provided (Used) By Financing
Activities..................................... (157,053) 66,402 159,536
-------- --------- --------
Increase (decrease) in cash and cash equivalents......... 3,853 (3,424) (10,368)
Cash and cash equivalents at beginning of year........... 3,788 7,212 17,580
-------- --------- --------
Cash and Cash Equivalents at End of Year......... $ 7,641 $ 3,788 $ 7,212
======== ========= ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 23
WORTHINGTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of Worthington Industries, Inc. and subsidiaries (the "Company"). Spartan Steel
Coating. L.L.C. (owned 52%), Worthington S.A. (owned 52%), and Worthington
Gastec a.s. (owned 51%) are fully consolidated with the equity owned by the
respective partners shown as minority interest on the balance sheet and their
portion of net income or loss included in miscellaneous income or expense.
Investments in unconsolidated affiliates are accounted for using the equity
method. Significant intercompany accounts and transactions are eliminated.
Certain reclassifications were made to prior years' amounts to conform with the
1999 presentation.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Investment in Rouge: The investment in common stock of Rouge Industries,
Inc. ("Rouge") is adjusted to market value as an "available-for-sale" security
with a net of tax adjustment to shareholder's equity.
Cash and Cash Equivalents: The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
Inventories: Inventories are valued at the lower of cost or market. Cost is
determined using the specific identification method for steel coils and the
first-in, first-out method for all other inventories.
Deferred Start-up Costs: In April 1998, the American Institute of Certified
Public Accountants' issued Statement of Position 98-5 ("SOP 98-5"), Reporting on
the Costs of Start-Up Activities, which requires that costs related to start-up
activities be expensed as incurred. Prior to 1999, the Company capitalized the
cost of starting up new plants and facilities. The Company adopted the
provisions of the SOP in its financial statements for the year ended May 31,
1999. The effect of the adoption of SOP 98-5 was to record a charge for the
cumulative effect of an accounting change of $7,836,000, net of taxes of
$4,456,000, to expense costs that had been capitalized prior to 1999. The impact
of the change on earnings from continuing operations for fiscal 1999 was
immaterial.
Intangible Assets: Intangible Assets include goodwill which is being
amortized on the straight-line method over periods ranging from 30 to 40 years.
Unamortized goodwill was $83,402,000 at May 31, 1999 and $95,665,000 at May 31,
1998. Amortization expense was $2,996,000 in 1999, $3,066,000 in 1998 and
$2,409,000 in 1997.
Property and Depreciation: Property, plant and equipment are carried at
cost and depreciated using the straight-line and units-of production methods
over the estimated useful lives of the assets. Accelerated depreciation methods
are used for income tax purposes.
Capitalized Interest: Interest is capitalized in connection with
construction of qualified assets. Under this policy, the Company capitalized
interest of $3,972,000 in 1999, $11,306,000 in 1998 and $6,559,000 in 1997.
Revenue Recognition: The Company recognizes revenue at the time of
shipment.
Environmental Costs: Environmental costs are capitalized if the costs
extend the life of the property, increase its capacity, and/or mitigate or
prevent contamination from future operations. Costs related to environmental
contamination treatment and clean-up are charged to expense.
Recently Issued FASB Statements: In June 1998, the Financial Accounting
Standards Board issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, which is required to be adopted by the Company for
fiscal 2002. The statement broadens the definition of derivatives, requires
derivatives to be carried at fair value, and requires hedges to be accounted for
based on the type of hedge. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of the new Statement will have
a significant effect on earnings or the financial position of the Company.
20
<PAGE> 24
Derivatives and Financial Instruments: The carrying amounts of cash and
cash equivalents, other assets, and long-term debt are reported in the balance
sheets at their approximate fair value.
The Company does not engage in currency or commodity speculation and
generally enters into forward contracts only to hedge specific foreign currency
or commodity transactions. The amount of these contracts outstanding and the
adjustments marked to market at any time are immaterial. Gains or losses from
these contracts offset gains or losses of the assets, liabilities or
transactions being hedged.
Statements of Cash Flows: Supplemental cash flow information for the years
ended May 31 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
IN THOUSANDS ------- ------- -------
<S> <C> <C> <C>
Interest paid......................................... $45,251 $32,414 $26,587
Income taxes paid..................................... $52,459 $48,470 $58,912
</TABLE>
Risks and Uncertainties: The Company, including unconsolidated affiliates,
operates 53 production facilities in 20 states and 11 countries (see "Company
Locations" and "The Company" sections elsewhere for market descriptions and
location listing). The Company's largest markets are the automotive and
automotive supply markets. Foreign operations and exports represent less than
10% of the Company's production and sales. Approximately 20% of the Company's
labor force is covered by collective bargaining agreements. All significant
labor contracts expire over one year from May 31, 1999. See Note H for
significant business transacted with a major customer. The concentration of
credit risks from financial instruments related to the markets served by the
Company is not expected to have a material adverse effect on the Company's
consolidated financial position, cash flow or future results of operations.
NOTE B -- SHAREHOLDERS' EQUITY
The Board of Directors is empowered to determine the issue prices, dividend
rates, amounts payable upon liquidation, voting rights and other terms of the
preferred shares when issued.
On October 13, 1998, Worthington Industries, Inc., a Delaware corporation
(Worthington Delaware) was merged with and into the Company, an Ohio corporation
and a wholly-owned subsidiary of Worthington Delaware. Each share of common
stock, par value $.01 per share, of Worthington Delaware was converted into one
common share, without par value, of the Company.
NOTE C -- DEBT
Debt at May 31 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
IN THOUSANDS -------- --------
<S> <C> <C>
Short-term unsecured notes payable.......................... $122,277 $136,600
Revolver -- unsecured....................................... -- --
7.125% unsecured senior notes due May 15, 2006.............. 200,000 200,000
6.7% unsecured senior notes due December 1, 2009............ 150,000 150,000
Other....................................................... 21,036 15,350
-------- --------
Total conventional debt................................ 493,313 501,950
Debt exchangeable for common stock.......................... 52,497 75,745
-------- --------
Total debt............................................. 545,810 577,695
Less current maturities and short-term notes payable........ 180,008 138,080
-------- --------
Total long-term debt................................... $365,802 $439,615
======== ========
</TABLE>
The short-term unsecured notes payable represent borrowings under
uncommitted bank lines of credit. The weighted average interest rate for fiscal
1999 was 5.14%. In fiscal 1998, short-term notes payable had a weighted average
interest rate of 5.80%. In addition, the Company maintains a $300,000,000
unsecured revolving credit facility, which was not utilized in fiscal 1999. The
credit facility is divided into two tranches; a $110,000,000
21
<PAGE> 25
364-day facility maturing September 30, 1999 and a $190,000,000 tranch maturing
May 30, 2003. The Company pays a commitment fee on the unused credit amount.
Interest rates are determined at the time of borrowing, based upon alternatives
specified in the credit agreement. To remain in compliance with the credit
agreement, the Company must maintain a ratio of debt to total capitalization as
defined of less than 50%. At May 31, 1999, this ratio was 42.9%.
The Company's "Other" debt primarily includes industrial development
revenue bonds with variable interest rates up to 5.91% and debt from foreign
operations.
During March 1997, the Company issued approximately $93 million of
three-year notes exchangeable into Class A Common Stock of Rouge (the "DECS").
The DECS have an interest rate of 7.25% and are due March 1, 2000. At maturity,
holders of the DECS will receive, in exchange for the principal amount of the
notes, shares of common stock of Rouge ("Rouge shares") held by the Company (or
at the Company's option, cash in lieu of the shares). It is the Company's
intention to settle the DECS using Rouge shares. The number of Rouge shares (or
the amount of cash to be paid) will be based upon the price of Rouge Class A
Common Stock shortly before the maturity of the DECS. If the value of Rouge
shares increases to a certain point the DECS liability would increase, partially
offsetting the market value increase in the stock. If it decreases, because the
stock is considered an "available for sale" security, a net of tax adjustment to
shareholder's equity will be made for the net change both in stock value and the
carrying amount of the DECS liability.
Principal payments due on long-term debt, including lease purchase
obligations, in the next five fiscal years are as follows: 2000 -- $57,730,867
(primarily DECS); 2001 -- $2,913,546; 2002 -- $2,714,050; 2003 -- $1,892,741;
2004 -- $1,748,372 and thereafter -- $356,533,041.
The Company enters into interest rate swap agreements to manage interest
costs and exposure to changing interest rates. At May 31, 1999, agreements were
in place that effectively converted $7,965,000 of floating rate Notes due 2011
to a 5.91% fixed rate. During September 1998, the agreements that were in place
to effectively convert $100,000,000 of the 7.125% Notes due 2006 from fixed rate
debt to floating were terminated. The termination resulted in a gain of
$5,203,000, which is being amortized over the life of the note.
The Company guaranteed obligations of unconsolidated entities totaling
$25,017,000 at May 31, 1999, which relate to debt with varying maturities. The
Company believes the guarantees will not significantly affect its consolidated
financial position or future results of operations.
NOTE D -- INCOME TAXES
Income taxes for the years ended May 31 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
IN THOUSANDS ------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $33,665 $35,340 $33,852
State and local..................................... 3,808 4,160 4,618
Foreign............................................. 3,938 -- --
Deferred:
Federal............................................. 7,891 8,259 2,719
State............................................... (184) 579 (345)
------- ------- -------
49,118 48,338 40,844
Discontinued Operations............................. (4,481) 10,182 16,370
------- ------- -------
$44,637 $58,520 $57,214
======= ======= =======
</TABLE>
Under Statement of Financial Accounting Standards Board No. 109, Accounting
for Income Taxes, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities,
and are measured using enacted tax rates and laws that will be in effect when
the differences are expected to reverse.
22
<PAGE> 26
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax purposes. The components of the Company's
deferred tax assets and liabilities as of May 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
IN THOUSANDS -------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts........................... $ 1,384 $ 569
Inventory................................................. 803 (1,440)
Accrued expenses.......................................... 7,470 4,806
Income taxes.............................................. 4,385 3,949
Other..................................................... 260 651
-------- --------
14,302 8,535
Deferred tax liabilities:
Property, plant and equipment............................. 75,538 104,573
Undistributed earnings of unconsolidated affiliates....... 48,906 40,657
-------- --------
124,444 145,230
-------- --------
Net deferred tax liability................................ $110,142 $136,695
======== ========
</TABLE>
The reasons for the difference between the effective income tax rate and
the statutory federal income tax rate were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate...................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal tax benefit.... 1.9 2.2 2.6
Foreign and other........................................... .1 (.2) .4
---- ---- ----
37.0% 37.0% 38.0%
==== ==== ====
</TABLE>
NOTE E -- EMPLOYEE BENEFIT PLANS
Certain employees of the Company participate in a current cash profit
sharing plan and a deferred profit sharing plan. Company contributions to and
costs for these plans are determined as a percentage of the Company's pre-tax
income before profit sharing.
Certain operations have non-contributory defined benefit pension plans
covering a majority of their employees qualified by age and service. Company
contributions to these plans comply with ERISA's minimum funding requirements.
At May 31, 1999 all pension plans of discontinued operations have been
disposed.
A summary of the components of net periodic pension cost for the defined
benefit plans in 1999, 1998 and 1997, and the contributions charged to pension
expense for the defined contribution plans follows:
<TABLE>
<CAPTION>
1999 1998 1997
IN THOUSANDS ------ ------- ------
<S> <C> <C> <C>
Defined benefit plans:
Service cost (benefits earned during the period)....... $1,214 $ 917 $ 656
Interest cost on projected benefit obligation.......... 1,236 964 711
Actual return on plan assets........................... (2,050) (2,997) (622)
Net amortization and deferral.......................... 1,587 2,409 97
------ ------- ------
Net pension cost on defined benefit plans.............. 1,987 1,293 842
Defined contribution plans............................... 6,247 5,720 5,206
------ ------- ------
Total pension expense -- Continuing Operations...... 8,234 7,013 6,048
Discontinued Operations.................................. (1,048) 1,339 907
------ ------- ------
Total pension expense............................... $7,186 $ 8,352 $6,955
====== ======= ======
</TABLE>
23
<PAGE> 27
Pension expense was calculated assuming a weighted average discount rate of
between 7.0% and 8.0% with a weighted average expected long-term rate of return
of 8.0%. Plan assets consist principally of listed equity securities and fixed
income instruments. The following table sets forth the funded status and amounts
recognized in the Company's consolidated balance sheet for defined benefit
pension plans at May 31:
<TABLE>
<CAPTION>
PENSION BENEFITS PENSION BENEFITS
CONTINUING DISCONTINUED
OPERATIONS OPERATIONS
-------------------- ----------------
1999 1998 1998
IN THOUSANDS ------- ------- ----------------
<S> <C> <C> <C>
Change in Benefit Obligation
Benefit Obligation -- Beginning of year............. $12,141 $10,469 $45,945
Service Cost........................................ 926 917 1,501
Interest Cost....................................... 1,017 964 3,374
Amendments.......................................... 1,488 978 --
Actuarial Gain...................................... (53) (177) (2,779)
Benefits Paid....................................... (999) (1,010) (1,971)
------- ------- -------
Benefit Obligation -- End of year................... $14,520 $12,141 $46,070
======= ======= =======
Change in Plan Assets
Fair Value of Plan Assets -- Beginning of year...... $11,709 $ 8,206 $55,861
Actual Return on Plan Assets........................ 1,817 2,997 15,913
Plan Participants' contributions.................... 1,412 1,516 177
Benefits Paid....................................... (1,006) (1,010) (1,971)
------- ------- -------
Fair Value of Plan Assets -- End of year............ $13,932 $11,709 $69,980
------- ------- -------
Funded Status......................................... $ (588) $ (432) $23,910
Unrecognized net actuarial loss....................... (3,290) (3,136) (28,998)
Unrecognized prior service cost....................... 3,419 2,614 8,511
------- ------- -------
Prepaid (accrued) benefit cost........................ $ (459) $ (954) $ 3,423
======= ======= =======
Plans With Benefit Obligations in Excess of Fair Value
of Plan Assets
Projected benefit obligation.......................... $ 6,348 $ 5,797 $ --
Fair value of plan assets............................. 5,094 4,351 --
------- ------- -------
Funded Status......................................... $(1,254) $(1,446) $ --
======= ======= =======
</TABLE>
NOTE F -- STOCK OPTIONS
Under its employee stock option plans, the Company may grant employees
incentive stock options to purchase shares at not less than 100% of market value
at date of grant or non-qualified stock options at a price determined by the
Compensation and Stock Option Committee. Generally, options are exercisable at
the rate of 20% per year beginning one year from date of grant and expire ten
years thereafter.
24
<PAGE> 28
The following table summarizes the option plans' activity for the years
ended May 31:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
IN THOUSANDS, EXCEPT PER SHARE ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- beginning of
year............................ 2,440 $17.39 2,370 $16.85 2,174 $15.57
Granted........................... 2,153 13.00 465 18.71 434 20.44
Exercised......................... (140) 9.31 (143) 8.80 (173) 8.92
Forfeited......................... (546) 18.90 (252) 19.47 (65) 18.92
------ ----- -----
Outstanding -- end of year........ 3,907 15.04 2,440 17.39 2,370 16.85
====== ===== =====
Exercisable at end of year........ 1,227 16.52 1,273 17.39 1,081 13.14
Weighted-average fair value of
options granted during the
year............................ $ 2.19 $ 3.91 $ 4.96
Assumptions used:
Dividend yield.................... 4.25% 3.00% 2.53%
Expected volatility............... 23.00% 23.00% 23.00%
Risk-free interest rate........... 4.79% 5.06% 5.12%
Expected lives (years)............ 5 5 5
</TABLE>
Options outstanding at May 31, 1999 had exercise prices ranging from $9.22
to $21.375 based upon 100% of market volume at date of grants and expiration
dates ranging from February 2000 to November 2008.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.
Accordingly, no compensation cost has been recognized for the stock option
plans. Had compensation cost for the Company's stock option plans been
determined based on the fair value at the grant date for awards in 1999, 1998
and 1997 consistent with the provisions of Statement No. 123, the Company's net
earnings and earnings per share would not have been materially affected.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the above weighted-average
assumptions used for grants. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in the Company's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
NOTE G -- CONTINGENT LIABILITIES AND COMMITMENTS
The Company is a defendant in certain legal actions. In the opinion of
management, the outcome of these actions, which is not clearly determinable at
the present time, would not significantly affect the Company's consolidated
financial position or future results of operations. The Company believes that
environmental issues will not have a material effect on capital expenditures,
consolidated financial position or future results of operations.
To secure access to facilities used to regenerate acid used in certain
steel processing locations, the Company has entered into unconditional purchase
obligations with a third party which requires the Company to deliver certain
quantities of acid for processing annually through the year 2019. In addition,
the Company is required to
25
<PAGE> 29
pay for freight and utilities used in processing its acid. The aggregate amount
of required payments at May 31, 1999 is as follows (in thousands):
<TABLE>
<S> <C>
2000................................. $ 4,095
2001................................. 4,395
2002................................. 4,395
2003................................. 4,395
2004................................. 4,395
Thereafter........................... 65,930
-------
Total................................ $87,605
=======
</TABLE>
The Company may not terminate the unconditional purchase obligation without
assuming or otherwise repaying certain debt of the supplier, based on the fair
market value of the facility. At May 31, 1999, $36.6 million of such debt was
outstanding.
NOTE H -- INDUSTRY SEGMENT DATA
During June 1997, the FASB issued Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information, effective for fiscal 1999.
Statement 131 established standards for reporting information about operating
segments in annual financial statements and requires selected information about
operating segments in interim financial reports issued to shareholders. It also
established standards for related disclosures about products and services, and
geographic areas. The Company previously reported using one segment under the
prior standards. The information for 1998 and 1997 has been restated to conform
to the 1999 presentation.
The Company's continuing operations have been aggregated into three
reportable segments (Processed Steel Products, Metal Framing, and Pressure
Cylinders.) Factors used to identify these segments include the products and
services provided by each segment as well as the management reporting structure
used by the Company. A discussion of each segment is outlined below.
Processed Steel Products: This segment consists of two business units, The
Worthington Steel Company and The Gerstenslager Company. Both are intermediate
processors of flat-rolled steel. Processing capabilities in this segment include
pickling, slitting, rolling, annealing, edging, tension leveling, cut-to-length,
configured blanking, stamping, painting, nickel plating, and hot dipped
galvanizing. This segment sells to customers principally in the automotive,
automotive supply, heavy duty truck, appliance, electrical, communications,
construction, office furniture, office equipment, agricultural, machinery and
leisure time industries.
Metal Framing: This segment consists of one business unit, Dietrich
Industries, Inc., which produces metal framing products for the commercial and
residential building industries. Dietrich's customers include building products
distributors, commercial and residential contractors, and gypsum producers.
Pressure Cylinders: This segment consists of one business unit, Worthington
Cylinder Corporation, which produces portable low pressure liquid propane
cylinders and refrigerant gas cylinders, and portable high pressure cylinders.
Refrigerant gas 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 and
distributors of barbecue grills and propane, mass merchandisers, and
manufacturers and users of material handling, heating, cooking and camping
equipment. High pressure cylinders are sold primarily to gas fillers and
suppliers as containers for acetylene, medical, industrial, halon and electronic
gases. This segment also produces recycle and recovery tanks for refrigerant
gases, and helium balloon kits.
The accounting policies of the operating segments are described in Note
A -- Summary of Significant Accounting Policies. The Company evaluates segment
performance based on operating income. Inter-segment sales are not material.
26
<PAGE> 30
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" category includes
corporate related items, results of immaterial operations, and income and
expense not allocated to the reportable segments. See Note N for results of the
discontinued operations' segments.
<TABLE>
<CAPTION>
1999 1998 1997
IN MILLIONS -------- -------- --------
<S> <C> <C> <C>
NET SALES
Processed Steel Products............................. $1,114.9 $1,049.5 $ 922.2
Metal Framing........................................ 337.2 337.0 297.9
Pressure Cylinders................................... 305.8 223.5 197.9
Other................................................ 5.2 14.4 10.3
-------- -------- --------
Continuing Operations................................ $1,763.1 $1,624.4 $1,428.3
======== ======== ========
OPERATING INCOME
Processed Steel Products............................. $ 82.6 $ 87.7 $ 79.3
Metal Framing........................................ 25.4 20.0 11.2
Pressure Cylinders................................... 36.7 28.6 24.0
Other................................................ 1.5 (0.8) (3.5)
-------- -------- --------
Continuing Operations................................ $ 146.2 $ 135.5 $ 111.0
======== ======== ========
DEPRECIATION AND AMORTIZATION
Processed Steel Products............................. $ 43.2 $ 25.8 $ 19.5
Metal Framing........................................ 8.6 8.1 7.3
Pressure Cylinders................................... 9.4 5.2 4.9
Other................................................ 2.9 2.5 2.4
-------- -------- --------
Continuing Operations................................ $ 64.1 $ 41.6 $ 34.1
======== ======== ========
TOTAL ASSETS
Processed Steel Products............................. $1,000.0 $ 947.2 $ 674.6
Metal Framing........................................ 250.7 258.0 241.0
Pressure Cylinders................................... 223.9 153.4 132.7
Other................................................ 212.4 198.0 216.1
-------- -------- --------
Continuing Operations................................ $1,687.0 $1,556.5 $1,264.4
======== ======== ========
CAPITAL EXPENDITURES
Processed Steel Products............................. $ 79.0 $ 283.8 $ 142.7
Metal Framing........................................ 7.8 5.8 6.9
Pressure Cylinders................................... 8.0 4.1 7.9
Other................................................ 3.6 3.9 3.3
-------- -------- --------
Continuing Operations................................ $ 98.4 $ 297.6 $ 160.8
======== ======== ========
</TABLE>
Sales for continuing operations, in the Processed Steel Products segment,
include $112 million in 1999, $124 million in 1998, and $95 million in 1997 to a
major automobile manufacturer purchasing through decentralized divisions and
subsidiaries in different geographical areas. Sales for discontinued operations,
comprised of the Custom Products and Cast Products segments, for the same
customer were $107 million in 1999, $153 million in 1998, and $172 million in
1997.
Company locations contained within the Annual Report are an integral part
of these financial statements.
NOTE I -- RELATED PARTY TRANSACTIONS
The Company purchases from and sells to affiliated companies, certain raw
materials and services at prevailing market prices. Sales to affiliated
companies for fiscal 1999, 1998 and 1997 totaled $33 million, $33 million and
$25 million, respectively. Accounts receivable related to these transactions
were $5 million and $14 million at May 31, 1999 and 1998, respectively.
Purchases for each of the fiscal years 1999, 1998 and 1997,
27
<PAGE> 31
totaled $1 million. Accounts payable to related parties were $11 million and $4
million at May 31, 1999 and 1998, respectively.
NOTE J -- INVESTMENT IN UNCONSOLIDATED AFFILIATES
The Company's investments in affiliated companies which are not
"majority-owned" and controlled are accounted for using the equity method.
Investments carried at equity and the percentage interest owned consist of
Worthington Specialty Processing (50%), Worthington Armstrong Venture (50%), TWB
Company (33%), and Acerex, S.A. de C.V. (50%).
During April 1997, TWB Company sold new shares for $19.5 million to three
different owners giving them a total ownership interest of 33%. As a result, the
Company's share of ownership was reduced from 50% to 33%. An increase in
additional paid-in capital of $3,798,000 (net of deferred taxes of $2,328,000)
was recorded from the transaction. The proceeds were used by TWB to repay
advances to the Company.
Financial information for affiliated companies accounted for by the equity
method is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
IN THOUSANDS -------- -------- --------
<S> <C> <C> <C>
Current assets..................................... $107,461 $ 90,535 $ 85,234
Noncurrent assets.................................. 130,822 135,688 117,250
Current liabilities................................ 41,697 34,979 31,236
Noncurrent liabilities............................. 57,350 67,869 57,996
Net sales.......................................... 324,306 282,616 214,914
Gross margin....................................... 87,365 73,510 54,088
Net income......................................... $ 51,448 $ 38,251 $ 25,116
</TABLE>
The Company's share of undistributed earnings of unconsolidated affiliates
included in consolidated retained earnings was $20,525,000 at May 31, 1999.
NOTE K -- ACQUISITIONS
The Company acquired a 51% majority interest in Gastec spol. s.r.o.
("Worthington Gastec") in February 1999 and purchased the cylinder manufacturing
assets of Metalurgica Progresso de Vale de Cambra, Lda. ("Worthington Portugal")
in May of 1999. Worthington Gastec, based in Hustopece, Czech Republic, and
Worthington Portugal, based in Vale de Cambra, Portugal, produce small and
medium size low pressure gas cylinders used in heating and industrial
applications. The Worthington Gastec and Worthington Portugal acquisitions were
business combinations accounted for as purchases. The results of operations for
these acquisitions are included in the financial statements of the Company since
the date of acquisition. Goodwill in the amount of $1,146,000 relating to
Worthington Gastec and $3,158,000 relating to Worthington Portugal resulting
from these purchases is being amortized using the straight-line method over 40
years.
During June 1998, the Company acquired the stock of Jos. Heiser vormals J.
Winter's Sohn, GmbH ("Worthington Heiser") for approximately $27 million (net of
cash acquired) plus $7.3 million of debt assumed in a business combination
accounted for as a purchase. Based in Kienberg, Austria, Worthington Heiser
produces high pressure industrial gas cylinders. The results of operations for
Worthington Heiser are included in the financial statements of the Company since
the date of acquisition. Goodwill in the amount of $12.9 million resulting from
the purchase is being amortized using the straight-line method over 40 years.
On February 21, 1997, the Company acquired The Gerstenslager Company
("Gerstenslager") in a business combination accounted for as a pooling of
interests. Gerstenslager, located in Wooster, Ohio, is a producer of processed
steel products, primarily aftermarket automotive body panels. Gerstenslager was
primarily owned by a subsidiary of JMAC, Inc., an investment company, owned by
John P. McConnell, Chairman and CEO of the Company and a partnership involving
John P. McConnell, John H. McConnell, Chairman Emeritus, and a trust for the
benefit of their families. All of the stock of Gerstenslager was exchanged for
5,675,000 Common Shares of the Company, which had a value of $113 million based
on an average share price prior to the closing date. The
28
<PAGE> 32
Board of Directors of the Company received an opinion from an independent
investment banking firm attesting to the fairness of this consideration.
On December 3, 1996, the Company acquired the net assets of Plastics
Manufacturing, Inc. ("PMI"), located in North Carolina, for $61.6 million in a
business combination accounted for as a purchase. PMI was sold as part of the
divestitures that took place in fiscal 1999. The results of operations for PMI
are included in the financial statements of the Company as discontinued
operations from the date of acquisition through the date of disposal.
During June 1996, the Company acquired the stock of SCM Technologies
("SCM") for $8.4 million. SCM designs, engineers and manufactures high pressure
industrial, medical, halon and electronic gas cylinders and is located near
Windsor, Ontario. The transaction was accounted for as a purchase. The results
of operations for SCM are included in the financial statements of the Company
since the date of acquisition. Goodwill in the amount of $3.8 million resulting
from the purchase is being amortized using the straight-line method over 40
years.
Proforma results including the acquired companies since the beginning of
the earliest period presented would not be materially different than actual
results.
NOTE L -- EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share from continuing operations:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
-----------------------------------------
1999 1998 1997
DOLLARS IN THOUSANDS, EXCEPT PER SHARE ----------- ----------- -----------
<S> <C> <C> <C>
Numerator (Basic & Diluted):
Earnings From Continuing Operations -- income
available to common shareholders............... $ 83,633 $ 82,304 $ 66,610
=========== =========== ===========
Denominator:
Denominator for basic earnings per
share -- weighted-average shares............... 93,015,707 96,751,260 96,557,453
Effect of dilutive securities -- employee stock
options........................................ 90,347 197,405 283,817
----------- ----------- -----------
Denominator for diluted earnings per
share -- adjusted weighted-average shares...... 93,106,054 96,948,665 96,841,270
=========== =========== ===========
Basic earnings from continuing operations per
share.......................................... $ 0.90 $ 0.85 $ 0.69
=========== =========== ===========
Diluted earnings from continuing operations per
share.......................................... $ 0.90 $ 0.85 $ 0.69
=========== =========== ===========
Antidilutive securities (a)....................... 2,876,429 1,617,237 746,787
=========== =========== ===========
</TABLE>
(a) Securities that could potentially dilute basic EPS are not included in
the computation of diluted EPS because to do so would have been antidilutive for
the period(s) presented.
NOTE M -- EXTRAORDINARY ITEM -- INVOLUNTARY CONVERSION OF ASSETS
On August 14, 1997, the Company experienced a fire at the Monroe, Ohio
facility. The fire destroyed the pickling area of the facility and caused
extensive damage to other parts of the plant, including blanking and slitting.
The Company shifted a significant amount of the business to other locations,
with the remainder sent to third party processors. Blanking operations resumed
in September 1997, slitting in March 1998 and pickling in September 1998. The
Company has increased both pickling and storage capacity at this facility beyond
its pre-fire capabilities.
The Company carries both property damage and business interruption
insurance and, as a result, the fire did not have a material adverse impact on
the Company's financial results.
29
<PAGE> 33
The Company settled the property portion of the insurance claim in fiscal
1998. The property settlement, $38,683,000, resulted in an extraordinary gain as
these proceeds were for replacement value, significantly in excess of the
remaining book value. The breakdown of the extraordinary item shown on the
consolidated statement of earnings is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Proceeds.............................................. $38,683
Less book value....................................... 8,888
-------
Gain on involuntary conversion........................ 29,795
Income tax provision.................................. 11,024
-------
$18,771
=======
</TABLE>
Total insurance proceeds received in the settlement of all claims were as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Property and equipment................................ $38,683
Inventory............................................. 2,500
Business interruption................................. 25,587
Other expenses........................................ 7,917
-------
$74,687
=======
</TABLE>
The proceeds related to damaged inventory approximated cost. The proceeds
related to business interruption were $13,934,000 ($5,474,000 in fiscal 1999 and
$8,460,000 in fiscal 1998) for lost operating income that is included in net
sales, and $11,653,000 ($4,913,000 in fiscal 1999 and $6,740,000 in fiscal 1998)
for costs incurred to mitigate the loss that is recorded as a reduction of the
related expense. The proceeds for other expenses represented reimbursement for
non-recurring expenses related to the fire and were recorded as an offset of
manufacturing costs.
During the fourth quarter of fiscal 1998, the Company received an advance
of $10,000,000 from its insurer toward business interruption claims subsequent
to February 28, 1998. This amount was included in Other Accrued Items at May 31,
1998. At that date, the Company had also accrued $4,632,000 as a receivable for
business interruption during the fourth quarter of fiscal 1998. Final settlement
was received in fiscal 1999.
NOTE N -- DISCONTINUED OPERATIONS
As a result of a fiscal 1998 strategic review, the Company adopted a plan
and subsequently sold its Custom and Cast Products segments consisting of
subsidiaries Worthington Custom Plastics, Worthington Precision Metals, and
Buckeye Steel Castings. Accordingly, the Company has reported the results of
these entities as discontinued operations.
The Company completed the sale of the components of its Custom Products and
Cast Products segments for aggregate proceeds of approximately $139 million and
$85 million, respectively, in fiscal 1999.
30
<PAGE> 34
At May 31, 1999, all components of discontinued operations were disposed. A
summary of the assets and liabilities of the discontinued segments at May 31,
1998 follow:
<TABLE>
<CAPTION>
AT MAY 31, 1998
--------------------------------
CUSTOM CAST
PRODUCTS PRODUCTS TOTAL
IN THOUSANDS -------- -------- --------
<S> <C> <C> <C>
ASSETS
Current Assets..................................... $ 88,420 $33,109 $121,529
Noncurrent Assets.................................. 130,840 33,426 164,266
-------- ------- --------
Total Assets............................. 219,260 66,535 285,795
LIABILITIES
Current Liabilities................................ 26,680 14,342 41,022
Noncurrent Liabilities............................. 443 420 863
-------- ------- --------
Total Liabilities........................ 27,123 14,762 41,885
-------- ------- --------
Net Assets of Discontinued Operations.............. $192,137 $51,773 $243,910
======== ======= ========
</TABLE>
Summarized results of Discontinued Operations follow:
<TABLE>
<CAPTION>
CUSTOM CAST
PRODUCTS PRODUCTS TOTAL
IN THOUSANDS -------- -------- --------
<S> <C> <C> <C>
FOR THE YEAR ENDED MAY 31, 1999
Net Sales......................................... $275,996 $ 95,593 $371,589
Earnings (Loss) Before Income Taxes............... (6,515) 12,192 5,677
Income Taxes (Benefit)............................ (2,241) 4,207 1,966
-------- -------- --------
Net Earnings (Loss) from Operations............... (4,274) 7,985 3,711
Gain (Loss) on Sales.............................. (59,960) 28,917 (31,043)
Income Taxes (Benefit)............................ (21,281) 14,834 (6,447)
-------- -------- --------
Net Gain (Loss) on Sales.......................... (38,679) 14,083 (24,596)
-------- -------- --------
Net Income (Loss) from Discontinued Operations.... $(42,953) $ 22,068 $(20,885)
======== ======== ========
FOR THE YEAR ENDED MAY 31, 1998
Net Sales......................................... $372,822 $121,026 $493,848
Earnings Before Income Taxes...................... 21,508 6,011 27,519
Income Taxes...................................... 7,958 2,224 10,182
-------- -------- --------
Net Earnings...................................... $ 13,550 $ 3,787 $ 17,337
======== ======== ========
FOR THE YEAR ENDED MAY 31, 1997
Net Sales......................................... $380,048 $103,326 $483,374
Earnings Before Income Taxes...................... 31,272 11,806 43,078
Income Taxes...................................... 11,884 4,486 16,370
-------- -------- --------
Net Earnings...................................... $ 19,388 $ 7,320 $ 26,708
======== ======== ========
</TABLE>
31
<PAGE> 35
Other items of Discontinued Operations follow:
<TABLE>
<CAPTION>
CUSTOM CAST
PRODUCTS PRODUCTS TOTAL
IN THOUSANDS -------- -------- --------
<S> <C> <C> <C>
FOR THE YEAR ENDED MAY 31, 1999
Depreciation and Amortization Expense.............. $ 10,915 $ 3,488 $ 14,403
Capital Expenditures............................... 3,572 5,783 9,355
FOR THE YEAR ENDED MAY 31, 1998
Depreciation and Amortization Expense.............. 15,229 4,641 19,870
Capital Expenditures............................... 6,999 4,801 11,800
FOR THE YEAR ENDED MAY 31, 1997
Depreciation and Amortization Expense.............. 12,843 4,454 17,297
Capital Expenditures............................... $ 9,083 $ 2,976 $ 12,059
</TABLE>
NOTE O -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for the years ended May 31, 1999 and 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
AUGUST NOVEMBER FEBRUARY MAY
IN THOUSANDS, EXCEPT PER SHARE -------- -------- -------- --------
<S> <C> <C> <C> <C>
1999
Net sales....................................... $409,280 $436,428 $422,074 $495,290
Gross margin.................................... 61,678 69,170 72,337 91,001
Earnings from continuing operations............. 17,690 18,359 19,095 28,488
Earnings from discontinued operations, net of
tax........................................... (1,316) 3,948 (16,870) (6,647)
Cumulative effect of accounting change, net of
tax........................................... (7,836) -- -- --
-------- -------- -------- --------
Net earnings.................................... $ 8,538 $ 22,307 $ 2,225 $ 21,841
======== ======== ======== ========
Earnings per share (Diluted):
Continuing operations......................... $ 0.18 $ 0.20 $ 0.21 $ 0.31
Discontinued operations, net of tax........... (0.01) 0.04 (0.19) (0.07)
Cumulative effect of accounting change, net of
tax........................................ (0.08) -- -- --
-------- -------- -------- --------
Net earnings.................................. $ 0.09 $ 0.24 $ 0.02 $ 0.24
======== ======== ======== ========
1998
Net sales....................................... $387,561 $392,690 $397,529 $446,669
Gross margin.................................... 61,175 57,723 59,353 74,357
Earnings from continuing operations............. 20,971 17,046 18,821 25,466
Earnings from discontinued operations, net of
tax........................................... 1,783 4,854 3,527 7,173
Extraordinary item, net of tax.................. -- -- 18,771 --
-------- -------- -------- --------
Net earnings.................................... $ 22,754 $ 21,900 $ 41,119 $ 32,639
======== ======== ======== ========
Earnings per share (Diluted):
Continuing operations......................... $ 0.22 $ 0.18 $ 0.19 $ 0.26
Discontinued operations, net of tax........... 0.02 0.05 0.04 0.08
Extraordinary item, net of tax................ -- -- 0.19 --
-------- -------- -------- --------
Net earnings.................................. $ 0.24 $ 0.23 $ 0.42 $ 0.34
======== ======== ======== ========
</TABLE>
During the fourth quarter of fiscal 1999, the Company elected to adopt the
provisions of Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of
Start-Up Activities. SOP 98-5 states that the standard
32
<PAGE> 36
must be adopted as of the beginning of the fiscal year. Therefore the unaudited
quarterly results of operations for the three months ended August 31, 1998 have
been restated as follows:
<TABLE>
<CAPTION>
<S> <C>
Net earnings, as previously reported........................ $ 16,374
Cumulative effect of accounting change, net of tax.......... ( 7,836)
--------
Net earnings, as restated................................... $ 8,538
========
Earnings per share (Diluted):
Net earnings, as previously reported........................ $ 0.17
Cumulative effect of accounting change, net of tax.......... (0.08)
--------
Net earnings, as restated................................... $ 0.09
========
</TABLE>
The adoption of SOP 98-5 had no material effect on previously reported
results for the second and third quarters of fiscal 1999.
33
<PAGE> 37
REPORT OF MANAGEMENT
The management of Worthington Industries, Inc. is responsible for the
preparation of the accompanying consolidated financial statements in conformity
with generally accepted accounting principles appropriate in the circumstances.
Management is also responsible for the determination of estimates and judgments
used in the financial statements and the preparation of other financial
information included in this Annual Report to Shareholders. The financial
statements have been audited by Ernst & Young LLP, independent auditors.
The management of the Company has established and maintains an accounting
system and related internal controls that it believes are sufficient to provide
reasonable assurance that assets are safeguarded against unauthorized
acquisition, use or disposition, that transactions are executed and recorded in
accordance with management's authorization and that the financial records are
reliable for preparing financial statements. The concept of reasonable assurance
is based on the recognition that the cost of a system of internal control must
be related to the benefits derived and that the balancing of the factors
requires estimates and judgments. Management considers the recommendations of
the internal auditors and independent certified public accountants concerning
the Company's system of internal control and takes appropriate actions which are
cost effective in the circumstances.
The Board of Directors has an Audit Committee of Directors who are not
members of management. The Audit Committee meets periodically with the Company's
management, internal auditors and independent certified public accountants to
review matters relating to financial reporting, auditing and internal control.
To ensure auditor independence, both the internal auditors and independent
certified public accountants have full and free access to the Audit Committee.
/s/ JOHN P. MCCONNELL
------------------------------------------
John P. McConnell, Chairman & Chief
Executive Officer
/s/ JOHN T. BALDWIN
------------------------------------------
John T. Baldwin, Vice President & Chief
Financial Officer
34
<PAGE> 38
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Worthington Industries, Inc.
We have audited the accompanying consolidated balance sheets of Worthington
Industries, Inc. and subsidiaries as of May 31, 1999 and 1998, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended May 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Worthington
Industries, Inc. and subsidiaries at May 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended May 31, 1999 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
------------------------------------
Ernst & Young LLP
Columbus, Ohio
June 18, 1999
35
<PAGE> 39
COMPANY LOCATIONS
PROCESSED STEEL PRODUCTS
THE WORTHINGTON STEEL COMPANY
Columbus, Monroe & Delta, Ohio
Louisville, Kentucky
Rock Hill, South Carolina
Baltimore, Maryland
Jackson & Taylor, Michigan
Malvern, Pennsylvania
Porter, Indiana
Decatur, Alabama
THE GERSTENSLAGER COMPANY
Wooster, Ohio
METAL FRAMING
DIETRICH INDUSTRIES, INC.
Hammond & LaPorte, Indiana
Hicksville, Warren & Aurora, Ohio
Atlanta, Georgia
Baltimore, Maryland
Lunenburg, Massachusetts
Colton & Stockton, California
Phoenix, Arizona
Wildwood & Miami, Florida
East Brunswick, New Jersey
Hutchins, Texas
Fredericksburg, Virginia
Denver, Colorado
Lenexa, Kansas
PRESSURE CYLINDERS
WORTHINGTON CYLINDER CORPORATION
Columbus, Jefferson & Westerville, Ohio
Claremore, Oklahoma
Citronelle, Alabama
Kienberg, Austria
Tilbury, Ontario, Canada
Vale De Cambra, Portugal
Itu, Brazil
OTHER
WORTHINGTON MACHINE TECHNOLOGY
Columbus, Ohio
JOINT VENTURES
WORTHINGTON ARMSTRONG VENTURE (WAVE)
Suspended Ceilings
Malvern, Pennsylvania
Sparrows Point, Maryland
Valenciennes, France
North Las Vegas, Nevada
Shanghai, China
Madrid, Spain
Team Valley, England
Benton Harbor, Michigan
TWB COMPANY, L.L.C.
Laser Welded Blanks
Monroe, Michigan
ACEREX S.A. DE C.V.
Steel Processing
Monterrey, Mexico
SPARTAN STEEL COATING, L.L.C.
Processed Steel Products
Monroe, Michigan
WORTHINGTON SPECIALTY PROCESSING (WSP)
Steel Processing
Jackson, Michigan
WORTHINGTON S.A.
Pressure Cylinders
Itu, Brazil
WORTHINGTON GASTEC, A.S.
Pressure Cylinders
Hustopece, Czech Republic
36
<PAGE> 40
OFFICERS & DIRECTORS
CORPORATE OFFICERS
John H. McConnell*
Chairman Emeritus & Founder
Director, 1955
John P. McConnell*
Chairman & Chief Executive Officer
Director, 1975
John S. Christie
President & Chief Operating Officer,
1999
John T. Baldwin
Vice President & Chief Financial
Officer, 1997
Robert J. Borel
Vice President-Engineering, 1973
Dale T. Brinkman
Vice President-Administration,
General Counsel &
Assistant Secretary, 1982
Jonathan B. Dove
Chief Information Officer, 1998
Edward A. Ferkany
Executive Vice President, 1974
Cathy Mayne Lyttle
Vice President-Communications,
1999
Bruce Ruhl
Vice President-Purchasing, 1978
Michael R. Sayre
Corporate Controller, 1993
Mark H. Stier
Vice President-Human Resources,
1975
Gregory P. Youngblood
Treasurer, 1999
Donal H. Malenick*
Retired President
Director, 1959
William S. Dietrich
Chairman, Dietrich Industries
Director, 1996
SUBSIDIARY OFFICERS
Richard F. Berdik
President, 1996
Dietrich Industries, Inc.
Ralph V. Roberts
President, 1973
The Worthington Steel Company
Kenneth L. Vagnini
President, 1997
The Gerstenslager Company
Virgil L. Winland
President, 1971
Worthington Cylinder Corporation
* Member of Executive
Committee
+ Member of Audit
Committee
++ Member of
Compensation and
Stock Option
Committee
NOTE: Year listed indicates initial year of affiliation with
Worthington industries
OUTSIDE DIRECTORS
John B. Blystone ++
Chairman, President & CEO
SPX Corporation
Director, 1997
Charles R. Carson +
Retired Senior Vice President
General Electric Company
Director, 1986
John F. Havens ++*
Retired Chairman
Banc One Corporation
Director, 1988
Peter Karmanos, Jr. +
Chairman, CEO & Co-Founder
Compuware Corporation
Director, 1997
Pete A. Klisares*
Past President
Karrington Health, Inc.
Director, 1991
Robert B. McCurry ++
Retired Senior Advisor to President
Toyota Motor Sales, U.S.A. Inc.
Director, 1972
Charles D. Minor +
Counsel
Vorys, Sater, Seymour and Pease
Secretary and Director, 1962
Gerald B. Mitchell ++
Retired Chairman
Dana Corporation
Director, 1986
James Petropoulos +
Owner
James Petropoulos & Company
Director, 1976
Mary Fackler Schiavo +
Attorney
Director, 1998
37
<PAGE> 1
\
EXHIBIT 21
WORTHINGTON INDUSTRIES, INC.
AN OHIO CORPORATION
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY (1) INCORPORATION
- ------------------------------------------------------------------------------------------------------
<S> <C>
Worthington Industries Incorporated Ohio
Worthington Foreign Sales Corporation Barbados
Worthington Steel of Michigan, Inc. Michigan
d/b/a The Worthington Steel Company
SUBSIDIARIES OF WORTHINGTON STEEL OF MICHIGAN, INC.
- ---------------------------------------------------
Dietrich Industries, Inc. Pennsylvania
Dietrich Design Group, Inc. (2) Pennsylvania
The Gerstenslager Company Michigan
Gerstenslager Co. Ohio
The Worthington Steel Company Delaware
NRM Trucking Company (3) Delaware
The Worthington Steel Company North Carolina
The Worthington Steel Company of Alabama, Inc. Michigan
The Worthington Steel Company of Decatur, Inc. Michigan
The Worthington Steel Company Ohio
Worthington Cylinder Corporation Ohio
Worthington Acetylene Cylinders, Inc. (4) Alabama
(d/b/a North American Cylinders, Inc.)
Worthington Cylinders of Canada, Inc. (4) Ontario, Canada
Steel Cylinder Manufacturing, Inc. (5) Ontario, Canada
Worthington-Buckeye, Inc. (f/k/a Buckeye Steel Castings Company) Ohio
Buckeye Energy Company, Inc. (6) Ohio
Buckeye International Development, Inc. (6) Ohio
GSI Engineering, Inc. (6) Delaware
WI Products, Inc. (f/k/a Worthington Custom Plastics, Inc.)(6) Ohio
Worthington Precision Metals, Inc. (7) Tennessee
LIMITED LIABILITY COMPANY SUBSIDIARIES
- --------------------------------------
Worthington Steel Company of Decatur, L.L.C. (8) Alabama
Worthington Steel Company of Kentucky, L.L.C. (9) Kentucky
Worthington Steelpac Systems, LLC Delaware
JOINT VENTURES
- --------------
Worthington Specialty Processing, Inc. (10) Michigan
London Industries, Inc. (11) Ohio
Spartan Steel Coating, L.L.C. (12) Michigan
TWB Company, L.L.C. (13) Michigan
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Worthington Armstrong Venture (14) Delaware
Acerex, S.A. de C.V. (15) Mexico
Worthington S.A. (16) Brazil
FOREIGN SUBSIDIARIES
- --------------------
Industrias Worthington Do Brasil Ltda (17) Brazil
Worthington Industries Mexico, S.A. de C.V. (18) Mexico
Worthington Armstrong Venture Europe, S.A. (19) France
Worthington Heiser (20) Austria
Worthington Steel Company of Alabama, Inc. & Co. OEG (21) Austria
Worthington Cylinders, a.s. Czech Republic
Worthington Cylinders Embalagens Industrias de Gas, S.A. Portugal
* * * * *
</TABLE>
REFERENCES TO FOOTNOTES:
- -----------------------
1. All subsidiaries are 100% owned by the listed parent unless otherwise
noted. Some minor or non-functioning corporations are not listed.
2. Wholly-owned subsidiary of Dietrich Industries, Inc. (PA)
3. Wholly-owned subsidiary of The Worthington Steel Company (DE)
4. Wholly-owned subsidiary of Worthington Cylinder Corporation (OH)
5. Wholly-owned subsidiary of Worthington Cylinders of Canada, Inc.
(Ontario)
6. Wholly-owned subsidiary of Buckeye Steel Castings Company (OH)
7. Wholly-owned subsidiary of Worthington Custom Plastics, Inc. (OH)
8. Limited Liability Company owned 98% by The Worthington Steel Company of
Alabama, Inc.(MI) and 2% The Worthington Steel Company of Decatur, Inc.
9. Limited Liability Company owned 99% by The Worthington Steel Company
(OH) and 1% by Worthington Steel of Michigan, Inc. (MI)
10. 50% Joint Venture w/USX Corporation - owned by Worthington Steel of
Michigan, Inc.
11. 60% owned Joint Venture with Nissen, Sumitomo & Sumitomo Corp. of
America -owned by Worthington Custom Plastics, Inc.
12. Limited Liability Company between QS Steel Inc. (48%) and Worthington
Steel of Michigan, Inc. (MI) (52%)
13. Limited Liability Company between Thyssen Inc. (33.33%); Worthington
Steel of Michigan, Inc. (33.33%); Bethlehem Blank Welding, Inc. and LTV
Steel each owning 11.11%
14. 50% Joint Venture w/Armstrong Ventures, Inc. - Owned by The Worthington
Steel Company (DE)
15. 50% Joint Venture with Hylsa S.A. de C.V. Owned by Worthington
Industries Mexico, S.A. de C.V.
16. Joint Venture - owned 52% by Industrias Worthington do Brasil Ltda. and
48% by Metalplus
17. Limited Liability Company between Worthington Steel of Michigan, Inc.
(MI) and Worthington Cylinder Corporation (OH)
18. Limited Liability Company between The Worthington Steel Company (OH)
99% and Worthington Steel of Michigan, Inc. (MI) 1%
19. Subsidiary of Worthington Armstrong Venture (DE)
20 Subsidiary of Worthington Cylinder Corporation (OH)
21. Holding Company for Worthington Heiser (Austria), owned by The
Worthington Steel of Alabama, Inc. (MI) and Worthington Steel Company
of Decatur, Inc. (MI)
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Worthington Industries, Inc. of our report dated June 18, 1999, included in
the 1999 Annual Report to Shareholders of Worthington Industries, Inc.
Our audits also included the financial statement schedule of Worthington
Industries, Inc. listed in Item 14(a)(2) and 14(d). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-57981) pertaining to the Worthington Industries, Inc. Deferred
Profit Sharing Plan; (Form S-8 No. 2-80094) pertaining to the Worthington
Industries, Inc. Amended 1980 Stock Option Plan; (Form S-3 No. 33-46470 and Form
S-3 No. 33-48627) pertaining to the Worthington Industries, Inc. Dividend
Reinvestment and Stock Purchase Plan; (Form S-8 No. 33-38486) pertaining to the
Worthington Industries, Inc. 1990 Stock Option Plan (Form S-8 No. 333-18099)
pertaining to the Worthington Steel Company (Malvern) Union Retirement Savings
Plan; and (Form S-8 No. 333-42849) pertaining to the Worthington Industries,
Inc. 1997 Long-Term Incentive Plan of our report dated June 18, 1999, with
respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedule included in this Annual Report (Form 10-K) of
Worthington Industries, Inc.
/s/ Ernst & Young LLP
Columbus, Ohio
August 25, 1999
<PAGE> 1
EXHIBIT 24
POWERS OF ATTORNEY
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ John B. Blystone
-----------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ Charles R. Carson
-----------------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 1st
day of June, 1999.
/s/ John S. Christie
-----------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ William S. Dietrich, II
--------------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ John F. Havens
-----------------------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ Peter Karmanos, Jr.
-------------------------
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ Pete A. Klisares
-----------------------
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ Donal H. Malenick
-----------------------
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ John H. McConnell
-----------------------
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ John P. McConnell
-----------------------
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ Robert B. McCurry
-----------------------
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ Charles D. Minor
-----------------------
<PAGE> 14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ Gerald B. Mitchell
-----------------------
<PAGE> 15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ James Petropoulos
-----------------------
<PAGE> 16
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of Worthington Industries, Inc., a Delaware corporation, which is about
to file with the Securities and Exchange Commission, Washington, D.C., under the
provisions of the Securities Act of 1934, on Form 10-K constitutes and appoints
John P. McConnell, John T. Baldwin and Dale T. Brinkman, his true and lawful
attorneys-in-fact and agents, with full power to act without the other, for him
and in his name, place and stead, in any and all capacities, to sign such Annual
Report and any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them or their or his substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 20th
day of May, 1999.
/s/ Mary Fackler Schiavo
-----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<EXCHANGE-RATE> 1
<CASH> 7,641
<SECURITIES> 0
<RECEIVABLES> 281,706
<ALLOWANCES> 4,209
<INVENTORY> 257,010
<CURRENT-ASSETS> 624,255
<PP&E> 1,131,761
<DEPRECIATION> 260,414
<TOTAL-ASSETS> 1,686,951
<CURRENT-LIABILITIES> 427,725
<BONDS> 365,802
0
0
<COMMON> 0
<OTHER-SE> 689,649
<TOTAL-LIABILITY-AND-EQUITY> 1,686,951
<SALES> 1,763,072
<TOTAL-REVENUES> 1,763,072
<CGS> 1,468,886
<TOTAL-COSTS> 1,468,886
<OTHER-EXPENSES> 147,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,126
<INCOME-PRETAX> 132,751
<INCOME-TAX> 49,118
<INCOME-CONTINUING> 83,633
<DISCONTINUED> (20,885)
<EXTRAORDINARY> 0
<CHANGES> (7,836)
<NET-INCOME> 54,912
<EPS-BASIC> .59
<EPS-DILUTED> .59
</TABLE>
