<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) October 13, 2000
----------------------
WORTHINGTON INDUSTRIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Ohio 1-8399 31-1189815
------------------------ --------------------- ---------------------------------
(State of Incorporation) (Commission File No.) (IRS Employer Identification No.)
</TABLE>
1205 Dearborn Drive, Columbus, Ohio 43085
---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 438-3210
------------------------------
Not Applicable
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
WORTHINGTON INDUSTRIES, INC.
INDEX
Page
----
ITEM 5 - OTHER EVENTS.........................................................2
CERTAIN INFORMATION ON THE ACQUISITION FROM METALTECH, NEXTECH AND
GALVTECH..........................................................2
COMBINED FINANCIAL STATEMENTS OF METALTECH, NEXTECH AND GALVTECH............3
UNAUDITED PRO FORMA FINANCIAL INFORMATION..................................18
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS...................................24
EXHIBIT INDEX..............................................................24
SIGNATURES...................................................................25
i
<PAGE> 3
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains forward-looking statements and
assumptions concerning our financial condition, results of operations and
business as a result of the proposed acquisition of the net assets of MetalTech,
NexTech and GalvTech (collectively, the "Techs"). These forward-looking
statements are included under the heading "Unaudited Pro Forma Financial
Information." These statements and assumptions include, among others, those
relating to financial condition and operating results of the combined company
following the proposed acquisition, financing and other costs related to the
acquisition, cost savings expected to result from the proposed acquisition,
growth, projected capacity levels of the combined companies and anticipated
capital expenditures.
Although we believe our plans, intentions and expectations reflected in
or suggested by these forward-looking statements and assumptions are reasonable,
we can give no assurance that our plans, intentions or expectations will be
achieved. Important factors that could cause actual results to differ materially
from the forward-looking statements and assumptions we make in this Current
Report include, among others, the following factors:
o lower than expected operating results following the proposed
acquisition;
o unexpected costs or difficulties related to the integration of
our business and that of the Techs;
o lower than expected or delayed cost savings from the proposed
acquisition;
o competitive factors and pricing pressures;
o changes in pricing or availability of raw materials,
particularly steel;
o capacity restraints and efficiencies;
o changes in product demand, changes in product mix and market
acceptance of products;
o the need to improve processes and business practices to keep
pace with the economic, competitive and technological
environment;
o changes in general economic conditions and the business
environment in the United States or in the market areas in
which we conduct business;
o legislation or regulatory changes that adversely affect our
business; and
o other risks described from time to time in our filings with
the Securities and Exchange Commission.
1
<PAGE> 4
ITEM 5. OTHER EVENTS.
This Current Report on Form 8-K is being filed to summarize the
material provisions of the agreement to acquire the Techs' net assets (the
"Techs Acquisition") and to provide historical financial statements of the Techs
and pro forma financial information regarding the Techs Acquisition. The
information is being provided under this Item following the execution of a
definitive asset purchase agreement for the Techs Acquisition on October 13,
2000. This and other updated information will be provided under Items 2 and 7 of
a Form 8-K required to be filed after the closing of the Techs Acquisition.
Please refer to Note P - Subsequent Event (Unaudited) of the Notes to
Consolidated Financial Statements incorporated by reference into Item 8 -
Financial Statements of our Annual Report on Form 10-K for the fiscal year ended
May 31, 2000, where we discussed the signing of the letter of intent to acquire
the Techs' net assets.
CERTAIN INFORMATION ON THE ACQUISITION FROM
METALTECH, NEXTECH AND GALVTECH
On October 13, 2000, Worthington Techs, L.P., a wholly-owned subsidiary
of Worthington Industries, Inc., entered into an Asset Purchase Agreement (the
"Techs Agreement"), to acquire substantially all of the net assets of the Techs
for $260 million in cash, subject to adjustment for changes in working capital.
The purchase price may increase by up to $60 million over the three-year period
beginning January 1, 2001, depending on capacity utilization and the spread
between the market price for galvanized steel and the cost of raw material. A
letter of intent regarding the Techs Acquisition had previously been signed on
July 28, 2000 and the closing is expected to occur on or before November 30,
2000. The Techs Acquisition will be funded by debt.
The Techs are Pennsylvania limited partnerships which collectively
produce and distribute approximately one million tons of hot-dipped galvanized
steel annually. The purchased assets include owned and leased real property,
machinery and equipment, inventory, work in process, accounts receivable,
contracts and intellectual property used by the Techs in the operation of their
hot-dipped galvanized steel production facilities in Pittsburgh, West Homestead
and Turtle Creek, Pennsylvania and the associated goodwill.
Each of the Techs has a different ownership structure, but the five
original investors control all three. They are G. Watts Humphrey, Jr., Edwin H.
Gott, Jr., Wilson J. Farmerie, Thomas Grudovich and Robert W. Riordan.
Additionally, LTVGT, Inc., a wholly-owned subsidiary of The LTV Corporation, has
a 40 percent limited partnership interest in GalvTech.
The Techs Agreement includes customary representations and warranties
for transactions of this type. The obligation of Worthington Techs, L.P. to
consummate the Techs Acquisition is conditioned upon, among other things:
o the receipt of specified third party consents and approvals;
o the execution of specified ancillary agreements, including
consulting and non-competition agreements with the five
original investors in the Techs and confidentiality agreements
with the four managing partners of the Techs;
o no material adverse change in the Techs' business since
December 31, 1999; and
o the completion of satisfactory debt financing.
Further information concerning the Techs is included in the historical
financial statements and pro forma financial information included elsewhere in
this report.
2
<PAGE> 5
COMBINED FINANCIAL STATEMENTS OF METALTECH, NEXTECH AND GALVTECH
Included in this section are the audited combined financial statements
of MetalTech, NexTech and GalvTech as of and for the two years ended December
31, 1998 and 1999. Also included are the unaudited interim combined financial
statements as of June 30, 2000 and for the six months ended June 30, 1999 and
2000.
Independent Auditors' Report........................................4
Combined Balance Sheets
as of December 31, 1998 and 1999 and June 30, 2000..............5
Combined Statements of Operations
for the Years Ended December 31, 1998 and 1999 and
the Six Months Ended June 30, 1999 and 2000.....................6
Combined Statements of Partnership Deficit
for the Years Ended December 31, 1998 and 1999 and
the Six Months Ended June 30, 2000..............................7
Combined Statements of Cash Flows
for the Years Ended December 31, 1998 and 1999 and
the Six Months Ended June 30, 1999 and 2000.....................8
Notes to Combined Financial Statements..............................9
3
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
Partners
MetalTech, NexTech and GalvTech
Pittsburgh, Pennsylvania
We have audited the accompanying combined balance sheets of MetalTech, NexTech
and Galvtech (Pennsylvania limited partnerships) as of December 31, 1998 and
1999 and the related combined statements of operations, partnership deficit and
cash flows for the years then ended. These combined financial statements are the
responsibility of the partnerships' management. Our responsibility is to express
an opinion on these combined 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 audits 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of MetalTech,
NexTech and GalvTech as of December 31, 1998 and 1999 and the results of their
combined operations and their combined cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Hill, Barth & King LLC
----------------------------
Certified Public Accountants
Wexford, Pennsylvania
February 17, 2000 (except
with respect to Note M, as
to which the date is
October 13, 2000).
4
<PAGE> 7
COMBINED BALANCE SHEETS
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- JUNE 30,
1998 1999 2000
------------ ------------ ------------
ASSETS - NOTES E AND F (UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash $ 4,512,975 $ 1,374,466 $ -0-
Receivables:
Trade accounts 38,008,311 39,879,605 51,155,000
Other 171,415 198,323 77,000
------------ ------------ ------------
38,179,726 40,077,928 51,232,000
Less allowance for doubtful accounts (459,322) (676,602) (848,000)
------------ ------------ ------------
Net Receivables 37,720,404 39,401,326 50,384,000
Inventories - Note C 14,862,602 17,972,602 25,344,000
Prepaid expenses 406,954 439,093 534,000
------------ ------------ ------------
Total Current Assets 57,502,935 59,187,487 76,262,000
Property, Plant and Equipment - Note D 30,576,664 28,442,151 26,905,000
Other Assets 1,208,215 1,213,278 1,186,000
------------ ------------ ------------
$ 89,287,814 $ 88,842,916 $104,353,000
============ ============ ============
LIABILITIES AND PARTNERSHIP DEFICIT
Current Liabilities:
Bank overdraft $ 2,092,157 $ 8,501,074 $ 12,680,000
Revolving credit notes - Note E 13,000,000 17,500,000 31,700,000
Accounts payable 39,090,492 37,443,540 43,983,000
Accrued liabilities 6,403,053 5,733,458 7,579,000
Current portion of long-term debt - Note F 9,149,067 9,149,067 9,150,000
------------ ------------ ------------
Total Current Liabilities 69,734,769 78,327,139 105,092,000
------------ ------------ ------------
Long-Term Debt Less Principal Due
Within One Year - Note F 56,214,533 47,065,466 42,490,000
Partnership Deficit - Note G
General partners (23,257,692) (23,347,695) (25,152,000)
Limited partners (13,403,796) (13,201,994) (18,077,000)
------------ ------------ ------------
Total Partnership Deficit (36,661,488) (36,549,689) (43,229,000)
------------ ------------ ------------
$ 89,287,814 $ 88,842,916 $104,353,000
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements
5
<PAGE> 8
COMBINED STATEMENTS OF OPERATIONS
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------ ------------------------------
1998 1999 1999 2000
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Operating Income
Net sales $484,035,639 $448,490,080 $221,012,000 $223,677,000
Less cost of sales 415,462,603 385,505,212 189,343,000 200,869,000
------------ ------------ ------------ ------------
Gross Profit 68,573,036 62,984,868 31,669,000 22,808,000
------------ ------------ ------------ ------------
Operating Expenses
Selling, general and administrative 23,548,012 21,540,954 11,089,000 9,833,000
Depreciation 5,052,669 5,170,287 2,545,000 2,744,000
------------ ------------ ------------ ------------
Total Operating Expenses 28,600,681 26,711,241 13,634,000 12,577,000
------------ ------------ ------------ ------------
Income From Operations 39,972,355 36,273,627 18,035,000 10,231,000
------------ ------------ ------------ ------------
Other Income (Expense)
Interest expense (5,804,259) (5,386,242) (2,595,000) (3,293,000)
Interest income 100,252 9,320 35,000 37,000
Other (1,575) (24,783) 99,000 242,000
------------ ------------ ------------ ------------
(5,705,582) (5,401,705) (2,461,000) (3,014,000)
------------ ------------ ------------ ------------
Net Income $ 34,266,773 $ 30,871,922 $ 15,574,000 $ 7,217,000
============ ============ ============ ============
</TABLE>
See accompanying notes to combined financial statements
6
<PAGE> 9
COMBINED STATEMENTS OF PARTNERSHIP DEFICIT
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
YEARS ENDED DECEMBER 31, 1998 AND 1999
AND THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Deficit January 1, 1998 $(23,453,727) $(13,930,623) $(37,384,350)
Net income 9,293,190 24,973,583 34,266,773
Cash distributions to partners (9,097,155) (24,446,756) (33,543,911)
------------ ------------ ------------
Deficit December 31, 1998 (23,257,692) (13,403,796) (36,661,488)
Net income 8,260,954 22,610,968 30,871,922
Cash distributions to partners (8,350,957) (22,409,166) (30,760,123)
------------ ------------ ------------
Deficit December 31, 1999 (23,347,695) (13,201,994) (36,549,689)
Net income (unaudited) 1,824,000 5,393,000 7,217,000
Cash distributions to partners (unaudited) (3,628,305) (10,268,006) (13,896,311)
------------ ------------ ------------
Deficit June 30, 2000 (unaudited) $(25,152,000) $(18,077,000) $(43,229,000)
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements
7
<PAGE> 10
COMBINED STATEMENTS OF CASH FLOWS
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX-MONTHS ENDED JUNE 30,
------------------------------ ------------------------------
1998 1999 1999 2000
------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 34,266,773 $ 30,871,922 $ 15,574,000 $ 7,217,000
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 5,052,669 5,170,287 2,545,000 2,744,000
Amortization 99,175 99,757 50,000 38,000
Loss on asset retirements and sales -0- 9,625 -0- -0-
Provision for doubtful accounts 167,722 217,280 215,678 171,398
Increase in receivables (947,670) (1,898,202) (5,816,274) (11,154,072)
(Increase) decrease in inventories 526,447 (3,110,000) (4,410,398) (7,371,398)
Increase in prepaid expenses (1,032) (32,139) (483,046) (94,907)
(Increase) decrease in other assets (139,814) (93,335) 11,636 (10,722)
(Decrease) increase in accounts payable (1,016,068) (1,646,952) 9,805,508 6,539,460
(Decrease) increase in accrued liabilities (497,095) (669,595) 1,535,947 1,845,542
------------ ------------ ------------ -------------
Net Cash Provided By (Used In) Operating
Activities 37,511,107 28,918,648 19,028,051 (75,699)
------------ ------------ ------------ -------------
Cash Flows From Investing Activities
Purchase of property, plant and equipment (1,555,595) (3,054,709) (820,336) (1,206,849)
Proceeds from sale of asset -0- 9,310 -0- -0-
------------ ------------ ------------ -------------
Net Cash Used In Investing Activities (1,555,595) (3,045,399) (820,336) (1,206,849)
------------ ------------ ------------ -------------
Cash Flows From Financing Activities
Increase in bank overdraft 695,199 6,408,917 1,474,843 4,178,926
Increase in revolving credit note 100,000 4,500,000 3,100,000 14,200,000
Payments on long-term debt (9,149,066) (9,149,067) (4,575,533) (4,574,533)
Cash paid for loan costs -0- (11,485) -0- -0-
Cash distributions to partners (33,543,911) (30,760,123) (21,627,000) (13,896,311)
------------ ------------ ------------ -------------
Net Cash Used In Financing Activities (41,897,778) (29,011,758) (21,627,690) (91,918)
------------ ------------ ------------ -------------
Net Decrease In Cash (5,942,266) (3,138,509) (3,419,975) (1,374,466)
Cash at beginning of period 10,455,241 4,512,975 4,512,975 1,374,466
------------ ------------ ------------ -------------
Cash at end of period $ 4,512,975 $ 1,374,466 $ 1,093,000 $ -0-
============ ============ ============ ==============
Cash Was Paid For
Interest $ 5,776,008 $ 5,366,942 $ 2,595,000 $ 3,293,000
============ ============ ============ ==============
</TABLE>
See accompanying notes to combined financial statements
8
<PAGE> 11
NOTES TO COMBINED FINANCIAL STATEMENTS
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE A - NATURE OF OPERATIONS
The partnerships own and operate hot-dip steel coil zinc galvanizing
lines, sell finished coated coils primarily into the construction markets, and
grant credit to their customers, located primarily in the midwestern and eastern
United States. The partnerships perform ongoing credit evaluations of their
customers' financial condition and, generally, require no collateral from their
customers.
The combined financial statements include the accounts of MetalTech,
NexTech and GalvTech, which are all related through common ownership. All
material inter-company accounts and transactions have been eliminated in
combination.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Information:
The interim financial information as of and for the six-month periods
ended June 30, 1999 and 2000 included herein is unaudited; however, such
information reflects all adjustments consisting only of normal recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods. The interim financial statements should be read in
conjunction with the financial statements and the notes included in the
financial statements. The results of operations for the interim period presented
are not necessarily indicative of the results to be expected for the full year.
Inventories:
Inventories are stated at lower of cost or market on the first-in,
first-out method.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation is
computed on the straight-line method over the estimated useful lives of the
assets, which range from five to thirty-five years. Leasehold improvements are
being amortized on a straight-line basis over twenty years.
Other Assets:
Other assets include operating spare parts and loan origination fees.
Amortization of loan origination fees is computed on the straight-line method
over the term of the related loans.
Income Taxes:
Income of the partnerships is taxed directly to their partners.
Accordingly, no provision for income taxes has been made in the accompanying
combined financial statements.
Interest Rate Swap Agreements:
The differential to be paid or received is accrued as interest rates
change and is recognized over the life of the agreements.
9
<PAGE> 12
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Hedging Transactions:
The partnerships use futures, calls and puts for price hedging in their
zinc raw material inventory purchasing programs. The Company does not enter into
financial instruments for trading or speculative purposes. Gains and losses on
price hedging transactions related to inventory are charged or credited to cost
of sales when the contracts are closed which substantially corresponds with the
timing of the inventory charge to cost of sales. In connection with the
partnerships' hedging activities, the partnerships participate in a combined
$3,000,000 margin line of credit with brokers. At December 31, 1999, the
partnerships' future hedging activities had contracts maturing through June 2000
covering approximately 1,050 metric tons of zinc with a combined contract value
of approximately $1,038,000. They also had call options maturing through March
2000 covering approximately 975 metric tons of zinc with a contract value of
approximately $44,700 and June 2000 covering approximately 750 metric tons of
zinc with a contract value of approximately $39,000. They also sold put options
at a value of $21,750 maturing through June 2000 covering 750 metric tons of
zinc. Had the partnerships settled all of their future, put and call positions
at December 31, 1999, they would have recognized a gain of approximately
$420,000.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments:
The carrying amount for cash, accounts receivable, revolving credit
notes and accounts payable approximates fair value due to the short-term
maturity of these instruments. The fair value of the partnerships' long-term
debt approximates the carrying value due to the variable interest rate feature
of the instruments.
The fair value of the partnerships' interest rate swap agreements is the
estimated amount the partnerships would have to pay or receive to terminate the
agreements as provided by the financial institution who is the counterparty to
the agreements. At December 31, 1999, the fair value of the partnerships'
interest rate swap agreements was approximately $17,000.
NOTE C - INVENTORIES
Following is a summary of major classes of inventories:
<TABLE>
<CAPTION>
December 31,
-------------------------- June 30,
1998 1999 2000
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Finished goods $ 8,155,548 $11,467,954 $ 9,281,000
Raw materials 6,707,054 6,504,648 16,063,000
----------- ----------- -----------
Total Inventories $14,862,602 $17,972,602 $25,344,000
=========== =========== ===========
</TABLE>
Finished goods inventories include material, labor and manufacturing
overhead.
10
<PAGE> 13
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Following is a summary of property, plant and equipment:
<TABLE>
<CAPTION>
December 31,
-------------------------- June 30,
1998 1999 2000
------------ ----------- ------------
(Unaudited)
<S> <C> <C> <C>
Land and land improvements $ 888,519 $ 888,519 $ 889,000
Leasehold improvements 775,492 864,092 868,000
Building and improvements 2,659,205 2,759,838 2,823,000
Machinery and equipment 52,578,114 53,332,280 56,191,822
Furniture, fixtures and office equipment 1,316,642 1,458,784 1,593,000
Construction in progress -0- 1,854,460 -0-
----------- ----------- -----------
58,217,972 61,157,973 62,364,822
Less accumulated depreciation 27,641,308 32,715,822 35,459,822
----------- ----------- -----------
Net Property, Plant And Equipment $30,576,664 $28,442,151 $26,905,000
=========== =========== ===========
</TABLE>
NOTE E - REVOLVING CREDIT NOTES
NexTech has a line of credit under a Credit Agreement (the NexTech
Credit Agreement) with a bank to provide for an $8,000,000 revolving line of
credit with a $1,000,000 sublimit for the issuance of standby letters of credit.
The NexTech Credit Agreement terminates on September 30, 2003, and may be
extended for additional one-year periods if requested by the partnership and
approved by the bank. There were no amounts outstanding under the line of credit
as of December 31, 1998 and 1999.
MetalTech has a line of credit under a Credit Agreement (the MetalTech
Credit Agreement) with a bank to provide for a $9,000,000 (decreased from
$12,000,000 during 1999) revolving line of credit with a $1,000,000 sublimit for
the issuance of standby letters of credit. The MetalTech Credit Agreement
terminates on September 30, 2003, and may be extended for additional one-year
periods if requested by the partnership and approved by the bank. There was
$5,800,000 at 7.75% and $5,700,000 at 8.50% outstanding under the line of credit
as of December 31, 1998 and 1999.
GalvTech has a line of credit under a Credit Agreement (the GalvTech
Credit Agreement) with a bank to provide for a $16,000,000 (increased from
$13,000,000 during 1999) revolving line of credit with a $1,000,000 sublimit for
issuance of standby letters of credit. The GalvTech Credit Agreement terminates
on September 30, 2003, and may be extended for additional one-year periods if
requested by the partnership and approved by the bank. As of December 31, 1998,
$7,200,000 was outstanding under the partnership's line of credit. Of the
$11,800,000 outstanding at December 31, 1999, $5,000,000 bore interest at 6.93%,
$4,000,000 bore interest at 6.87%, and $2,800,000 bore interest at 8.5%.
11
<PAGE> 14
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE E - REVOLVING CREDIT NOTES (CONTINUED)
Any principal amounts outstanding under the lines bear interest, at the
partnerships' option, either at the bank's base rate plus a base rate margin or
the Euro-Rate plus a Euro-Rate margin. The base rate margin may range from 0% to
.5% and the Euro-Rate margin may range from .375% to 2.0% depending upon the
ratio of total indebtedness to earnings before interest, taxes, depreciation and
amortization (EBITDA). The partnerships must also pay quarterly a commitment fee
on the daily unused amount of the lines. The fees may range from .15% to .5%
based upon the ratio of total indebtedness to EBITDA.
Borrowings under the lines may not exceed 80% of qualified accounts
receivable and 60% of qualified inventory, both as defined in the Credit
Agreements. However, advances made with respect to inventory cannot exceed an
amount equal to 50% of the borrowing base. Borrowings under the lines are
collateralized by substantially all the partnerships' assets. The line of credit
agreements are with the same bank as the partnerships' term loans discussed in
Note F and are an integral part of the Credit Agreements. Accordingly, they are
subject to substantially identical restrictions as the term loans.
NOTE F - LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
------------------------- June 30,
1998 1999 2000
------------------------- -----------
(Unaudited)
<S> <C> <C> <C>
NexTech
Term Loan A, due in 23 quarterly
principal installments of $1,041,500
beginning December 31, 1997 with a
final payment due September 30, 2003 $19,792,500 $15,626,500 $13,543,500
Term Loan B, due in 27 quarterly
principal installments of $50,000
beginning December 31, 1997 with a
final payment due September 30, 2004 16,750,000 16,550,000 16,450,000
GalvTech
Term loan, principal balance due in
24 equal quarterly installments of
$729,167 commencing December 31, 1997 13,854,167 10,937,500 9,479,167
----------- ----------- -----------
Balance Forward $50,396,667 $43,114,000 $39,472,667
</TABLE>
12
<PAGE> 15
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE F - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
December 31,
-------------------------- June 30,
1998 1999 2000
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Balance Forward $50,396,667 $43,114,000 $39,472,667
MetalTech
Term Loan A, due in 23 quarterly
principal installments of $416,600
beginning December 31, 1997 with a
final payment due September 30, 2003 7,916,933 6,250,533 5,417,333
Term Loan B, due in 27 quarterly
principal installments of $50,000
beginning December 31, 1997 with a
final payment due September 30, 2004 7,050,000 6,850,000 6,750,000
----------- ----------- -----------
65,363,600 56,214,533 51,640,000
Less principal due within one year 9,149,067 9,149,067 9,150,000
----------- ----------- ----------
Total Long-Term Debt Less Principal Due Within One Year $56,214,533 $47,065,466 $42,490,000
=========== =========== ===========
</TABLE>
Principal amounts outstanding under the term loans bear interest, at the
partnerships' option, either at the bank's base rate plus a base rate margin or
the Euro-Rate plus a Euro-Rate margin. The base rate margin for Term Loans A and
B may range from 0% to .5% and from 0% to 1.0%, respectively, and the Euro-Rate
margin may range from .5% to 2.0% and from 1.0% to 2.5%, respectively, depending
upon the ratio of total indebtedness to EBITDA.
At December 31, 1999, NexTech had an amount outstanding of $15,626,500
under Term Loan A with interest at 7.74% and an amount outstanding of
$16,550,000 under Term Loan B with interest at 8.24%. At December 31, 1999,
GalvTech had an amount outstanding of $10,937,500 at an interest rate of 6.94%.
At December 31, 1999, MetalTech had an amount outstanding of $6,250,533 under
Term Loan A with interest at 7.19% and an amount outstanding of $6,850,000 under
Term Loan B with interest at 7.69%.
Although the term loans are payable in quarterly installments, the
Credit Agreements require mandatory prepayments due to asset sales, as defined.
Interest payable on both the revolving credit and term loans is payable
quarterly in arrears for any base rate loans and on the last day of each
Euro-Rate interest period or on the 90th day of such Euro-Rate interest period
if the Euro-Rate interest period is six months.
The term loans are secured by substantially all of the partnerships'
assets.
13
<PAGE> 16
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE F - LONG-TERM DEBT (CONTINUED)
The Credit Agreements contain restrictive covenants with which the
partnerships are required to comply. The most restrictive of these covenants
include the following:
1) Maintenance of a minimum ratio of earnings before interest,
taxes, depreciation and amortization, less capital expenditures,
to debt service, as defined.
2) Maintenance of a minimum ratio of total indebtedness, as
defined, to earnings before interest, taxes, depreciation and
amortization.
3) Limitations on new debt.
4) Limitations on distributions to partners.
Principal due on long-term debt, exclusive of mandatory prepayments
which may be required, for each of the five years following December 31, 1999 is
as follows:
2000 $ 9,149,067
2001 9,149,067
2002 9,149,067
2003 6,967,332
2004 21,800,000
-----------
TOTAL $56,214,533
===========
As required under the NexTech Credit Agreement, NexTech has entered into
interest rate swap agreements to limit the effect of increases in the interest
rates on any floating rate debt. The differential is accrued as interest rates
change and is recorded in interest expense. During 1997, the partnership entered
into two swap agreements, expiring on October 30, 2000, with an aggregate
notional amount of $21,000,000 which amortizes until the original maturity date.
The counterparty to the swap agreements has the right to extend the swap on the
original maturity date by two years until October 30, 2002. The effect of these
agreements is to limit the interest rate exposure, exclusive of the base rate
margin or the Euro-Rate margin percent, to 6.19% on $8,333,333 of Term Loan A
and to 6.2% on $8,300,000 of Term Loan B. As a result of the swap agreements,
interest expense was increased by approximately $117,400 and $194,949 in 1998
and 1999, respectively.
As required under the MetalTech Credit Agreement, MetalTech has entered
into interest rate swap agreements to limit the effect of increases in the
interest rates on any floating rate debt. The differential is accrued as
interest rates change and is recorded in interest expense. During 1997, the
partnership entered into two swap agreements, expiring on October 30, 2000, with
an aggregate notional amount of $8,650,000 which amortizes until the original
maturity date. The counterparty to the swap agreements has the right to extend
the swap on the original maturity date by two years until October 30, 2002. The
effect of these agreements is to limit the interest rate exposure, exclusive of
the base rate margin or the Euro-Rate margin percent, to 6.21% on $3,333,333 of
Term Loan A and to 6.21% on $3,450,000 of Term Loan B. As a result of the swap
agreements, interest expense was increased by approximately $48,300 and $66,592
in 1998 and 1999, respectively.
14
<PAGE> 17
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE G - LIMITED PARTNERSHIP AGREEMENTS
NexTech was formed on July 25, 1989 under the Pennsylvania Uniform
Limited Partnership Act. The Limited Partnership Agreement provides, among other
things:
a. The term of the partnership expires December 31, 2039; however,
dissolution will occur as the result of the sale or other
disposition of all or substantially all of the partnership
properties. In addition, dissolution will occur with the written
consent or affirmative vote of all of the limited partners, or
upon the occurrence of certain defined events involving the
general partner.
b. With few exceptions, net profits and losses are to be allocated
18.61% to the general partner and 81.39% to the limited partners
and among the limited partners in accordance with their
percentage interests.
c. Distributable cash, if any, is to be distributed to the partners
at the sole discretion of the general partner, but at least
annually, and is to be allocated in accordance with the
allocations of net profits and losses.
MetalTech was formed on January 12, 1984 under the Pennsylvania Uniform
Limited Partnership Act. The Limited Partnership Agreement provides, among other
things:
a. The term of the partnership expires December 31, 2034; however,
dissolution will occur as the result of the sale or other
disposition of all or substantially all of the partnership
properties. In addition, dissolution will occur with the written
consent or affirmative vote of all of the limited partners, or
upon the occurrence of certain defined events involving the
general partner.
b. With few exceptions, net profits and losses are to be allocated
24.75% to the general partner and 75.25% to the limited partners
and among the limited partners in accordance with their capital
contributions.
c. Distributable cash, if any, is to be distributed to the partners
at the sole discretion of the general partner, but at least
annually, and is to be allocated in accordance with the
allocations of net profits and losses.
GalvTech was formed on June 12, 1995 under the Pennsylvania Uniform
Limited Partnership Act. The Limited Partnership Agreement provides, among other
things:
a. The term of the partnership expires December 31, 2040; however,
dissolution will occur as the result of the sale or other
disposition of all or substantially all of the assets of the
partnership. In addition, dissolution will occur upon bankruptcy
of the partnership, or upon the occurrence of certain defined
events involving the general partner.
b. With few exceptions, net profits are to be allocated 30.77% to
the general partner, 40% to the Class A Limited Partner, and
29.23% to the other limited partners. With the exception of
certain special allocations, losses are to be allocated to the
partners in proportion to their capital account balances.
c. Distributable cash, if any, is to be distributed to the partners
at the sole discretion of the general partner, and is to be
allocated in accordance with the allocations of net profits.
15
<PAGE> 18
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE H - LEASES WHERE PARTNERSHIPS ARE LESSEE
NexTech occupies its real property under an operating lease extending to
March 31, 2000, and GalvTech occupies its real property under an operating lease
extending to August 31, 2016. The partnerships also lease certain operating and
office equipment under operating lease agreements. The real property leases
contain options to renew for an additional five-year period at the end of the
initial lease term, and also contain purchase options. The partnerships are also
required to pay real estate taxes during the lease period. Management expects
that in the normal course of business all of the above leases will be renewed or
replaced by other leases. Rental expense for all operating leases charged to
operations totaled approximately $1,040,200 for 1998 and $1,125,000 for 1999.
Following is a summary of approximate future minimum rental payments under
operating leases that have initial or remaining noncancellable terms in excess
of one year as of December 31, 1999:
Year Ending
December 31, 2000 $ 739,000
December 31, 2001 550,000
December 31, 2002 511,000
December 31, 2003 500,000
December 31, 2004 500,000
Thereafter 5,831,000
----------
Total $8,631,000
==========
NOTE I - COMMITMENTS AND CONTINGENCIES
GalvTech and MetalTech have entered into a ten-year Steel Supply
Agreement with a supplier (which is also a 40% limited partner in GalvTech)
whereby they have agreed to purchase specified minimum quantities of steel over
a ten-year period, generally at the then current market prices.
GalvTech has guaranteed notes payable by its landlord, who developed the
facilities in which the partnership's manufacturing facilities are located. The
outstanding principal amount of the notes payable is $923,403 as of December 31,
1999.
NOTE J - EMPLOYEE BENEFIT PLANS
Each of the partnerships has a defined contribution 401(k) profit
sharing plan covering regular employees who are credited with 1,000 hours of
service during the applicable 12 consecutive month period. NexTech contributions
are 10% of income, as defined, up to a specified base level and 12% on amounts
in excess of the base. GalvTech contributions are 10% of income, as defined.
MetalTech contributions are at various percentages ranging from 10% to 15% of
income, as defined, depending on the level of profitability. Combined expense
recognized in connection with the plans was $5,314,035 in 1998 and $4,410,599 in
1999.
16
<PAGE> 19
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
METALTECH, NEXTECH AND GALVTECH
(PENNSYLVANIA LIMITED PARTNERSHIPS)
DECEMBER 31, 1998 AND 1999
NOTE K - CONCENTRATION OF CREDIT RISK
The partnerships maintain most of their cash balances in one financial
institution located in Pittsburgh, Pennsylvania. These balances are insured by
the Federal Deposit Insurance Corporation up to $100,000. At December 31, 1999,
uninsured amounts held at this financial institution totaled approximately
$2,401,000.
NOTE L - NEW ACCOUNTING PRONOUNCEMENT
The partnerships have not yet adopted the provisions of Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133), for which the effective date is all fiscal
quarters for all fiscal years beginning after June 15, 2000. SFAS 133 will
require the partnerships to record all derivatives as assets or liabilities at
fair value. Changes in derivative fair value will either be reported in
earnings, offset against changes in the fair value of the related hedged assets,
liabilities and firm commitments or, for forecasted transactions, recorded as a
component of other comprehensive income in partnership deficit until the hedged
transactions occur and are recognized in earnings. Management has not yet
quantified the impact which implementation of SFAS 133 may have upon the
combined financial statements.
NOTE M - SUBSEQUENT EVENT
On October 13, 2000, Worthington Techs, L.P., a subsidiary of
Worthington Industries, Inc., signed an agreement to acquire substantially all
of the net assets of MetalTech, NexTech and GalvTech (collectively the "Techs")
for $260 million in cash. The acquisition is expected to close on or before
November 30, 2000. Under the terms of the agreement, the purchase price may
increase by up to $60 million over a three-year period beginning January 1,
2001, depending on capacity utilization and the spread between the market price
for galvanized steel and the cost of raw material. The cash purchase price also
is subject to adjustment based upon certain changes in working capital. The
transaction is contingent upon obtaining financing satisfactory to Worthington
Industries, Inc. and other typical closing conditions.
17
<PAGE> 20
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On October 13, 2000, Worthington Techs, L.P., a wholly-owned subsidiary
of Worthington Industries, Inc. executed an asset purchase agreement to acquire
substantially all of the net assets of the Techs for $260 million in cash,
subject to adjustment for changes in working capital. The purchase price may
increase by up to $60 million over the three-year period beginning January 1,
2001, depending on capacity utilization and the spread between the market price
for galvanized steel and the cost of raw material. These contingent payments are
not included in the pro forma financial statements.
This section includes the following financial information on a pro
forma basis for Worthington Industries, Inc.:
Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of August 31, 2000................................19
Statement of Earnings for the Twelve Months Ended May 31, 2000.....21
Statement of Earnings for the Three Months Ended August 31, 2000...22
The unaudited pro forma condensed consolidated balance sheet at August
31, 2000 gives effect to the pending purchase by Worthington Techs, L.P. of the
net assets of the Techs as if the transaction occurred at August 31, 2000. The
unaudited pro forma condensed consolidated statements of earnings for the twelve
months ended May 31, 2000 and for the three months ended August 31, 2000 assume
the transaction occurred on June 1, 1999. Actual closing is expected to occur on
or before November 30, 2000. The pro forma condensed consolidated financial
statements and the related adjustments reflected therein will be updated upon
closing of the transaction.
The unaudited pro forma financial information is based on the
historical consolidated financial statements of Worthington Industries, Inc. and
the historical combined financial statements of the Techs and should be read in
conjunction with such financial statements and accompanying notes. The purchase
method of accounting was used to prepare the unaudited pro forma financial
statements using the purchase price established in the asset purchase agreement
and estimated fair values of the net assets to be acquired. The actual purchase
accounting adjustments to reflect the fair values of the net assets will be
based on management's evaluation, therefore the adjustments that have been used
in the unaudited pro forma condensed consolidated financial information are
subject to change pending the final allocation of the purchase price.
The pro forma financial information does not purport to be indicative
of the results of operations which would have actually been attained if the
acquisition had occurred on the dates indicated nor the results of operations
which will be reported in the future.
18
<PAGE> 21
WORTHINGTON INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31, 2000
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------- ------------------------------
Worthington
Industries,
Inc. The Techs Adjustments Consolidated
---------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 240 $ 564 $ 804
Accounts receivable, net 272,028 51,689 $ 8,000 (1) 331,717
Inventories 301,146 20,385 321,531
Prepaid expenses and other current assets 30,578 1,018 263 (6) 31,859
---------- -------- -------- ----------
Total Current Assets 603,992 73,656 8,263 685,911
Investment in Unconsolidated Affiliates 52,320 52,320
Intangible Assets 79,059 199,184 (2) 279,443
1,200 (3)
Other Assets 60,185 1,169 2,600 (4) 63,619
(335)(7)
Property, plant and equipment 1,196,871 62,512 (18,524)(6) 1,240,859
Less accumulated depreciation 333,856 36,136 (36,136)(6) 333,856
---------- -------- -------- ----------
Property, Plant and Equipment, net 863,015 26,376 17,612 907,003
---------- -------- -------- ----------
Total Assets $1,658,571 $101,201 $228,524 $1,988,296
========== ======== ======== ==========
Current Liabilities
Accounts payable $ 160,752 $ 53,628 $ 966 (1) $ 215,346
Notes payable 173,517 23,352 (23,352)(7) 173,517
Current maturities of long-term debt 2,546 9,150 (9,150)(7) 2,546
Other current liabilities 79,033 11,085 2,600 (4) 93,164
2,500 (5)
500 (6)
400 (3)
(2,954) (7)
---------- -------- -------- ----------
Total Current Liabilities 415,848 97,215 (28,490) 484,573
Long-Term Debt 361,721 42,490 (42,490)(7) 621,721
260,000 (4)
Other Liabilities 79,410 800 (3) 80,410
200 (6)
Deferred Income Taxes 129,619 129,619
Shareholders' Equity 671,973 (38,504) 38,504 (8) 671,973
---------- -------- -------- ----------
Total Liabilities and Shareholders' Equity $1,658,571 $101,201 $228,524 $1,988,296
========== ======== ======== ==========
</TABLE>
19
<PAGE> 22
WORTHINGTON INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
AUGUST 31, 2000
(In Thousands)
(Unaudited)
(1) Estimated working capital adjustments to purchase price.
(2) Estimated goodwill from the Techs Acquisition as follows:
<TABLE>
<CAPTION>
<S> <C>
Estimated purchase price $260,000
Estimated working capital adjustments (7,034)
Estimated transaction costs 2,500
--------
Net Purchase Price 255,466
Estimated fair market value of net assets purchased 56,282
--------
Estimated goodwill $199,184
========
</TABLE>
(3) Covenant-not-to-compete, consulting contract and related liabilities to
be paid and amortized over 3 years.
(4) Estimated funds borrowed and related financing fees incurred on the
debt to purchase the Techs' net assets. The financing fees will be
amortized over 10 years (the estimated period of the borrowing).
(5) Estimated transaction costs.
(6) Adjustments to record net tangible assets purchased at estimated fair
market value.
(7) Estimated Techs' assets not purchased and liabilities not assumed.
(8) Elimination of Techs' historical equity.
20
<PAGE> 23
WORTHINGTON INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
TWELVE MONTHS ENDED MAY 31, 2000
(In Thousands, Except Per Share)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------ --------------------------------
Worthington Adjustments
Industries, Inc. The Techs (10) Consolidated
----------------- --------- -------- ------------
<S> <C> <C> <C> <C>
Net sales $1,962,606 $448,589 $(5,314)(1) $2,405,881
Cost of goods sold 1,629,455 398,368 (5,314)(1) 2,019,704
280 (1)
(3,085)(2)
---------- -------- -------- ----------
Gross Margin 333,151 50,221 2,805 386,177
Selling, general and administrative expenses 163,662 20,896 (5,868)(3) 184,158
400 (4)
5,068 (5)
---------- -------- -------- ----------
Operating Income 169,489 29,325 3,205 202,019
Other income (expense):
Miscellaneous income 2,653 161 2,814
Loss on investment in Rouge (8,553) (8,553)
Interest expense (39,779) (5,664) 5,664 (6) (64,739)
(24,700)(7)
(260)(8)
Equity in net income of unconsolidated
affiliates 26,832 26,832
---------- -------- -------- ----------
Earnings Before Income Taxes 150,642 23,822 (16,091) 158,373
Income Taxes 56,491 2,899 (9) 59,390
---------- -------- -------- ----------
Net Earnings $ 94,151 $ 23,822 $(18,990) $ 98,983
========== ======== ======== ==========
Average Common Shares Outstanding:
Basic 88,411 88,411
Diluted 88,598 88,598
Earnings Per Share:
Basic $1.06 $1.12
Diluted $1.06 $1.12
</TABLE>
21
<PAGE> 24
WORTHINGTON INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
THREE MONTHS ENDED AUGUST 31, 2000
(In Thousands, Except Per Share)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------ --------------------------------
Worthington Adjustments
Industries, Inc. The Techs (10) Consolidated
----------------- --------- -------- ------------
<S> <C> <C> <C> <C>
Net sales $484,224 $120,242 $(1,329)(1) $603,137
Cost of goods sold 420,346 108,241 (1,329)(1) 526,682
(576)(2)
-------- -------- ------- --------
Gross Margin 63,878 12,001 576 76,455
Selling, general and administrative expenses 41,991 3,989 (1,098)(3) 46,249
100 (4)
1,267 (5)
-------- -------- ------- --------
Operating Income 21,887 8,012 307 30,206
Other income (expense):
Miscellaneous income 83 57 140
Interest expense (9,357) (2,092) 2,092 (6) (15,597)
(6,175)(7)
(65)(8)
Equity in net income of unconsolidated
affiliates 7,036 7,036
-------- -------- ------- --------
Earnings Before Income Taxes 19,649 5,977 (3,841) 21,785
Income Taxes 7,172 780 (9) 7,952
-------- -------- ------- --------
Net Earnings $ 12,477 $ 5,977 $(4,621) $ 13,833
======== ======== ======= ========
Average Common Shares Outstanding:
Basic 85,755 85,755
Diluted 85,755 85,755
Earnings Per Share:
Basic $.15 $.16
Diluted $.15 $.16
</TABLE>
22
<PAGE> 25
WORTHINGTON INDUSTRIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (CONTINUED)
TWELVE MONTHS ENDED MAY 31, 2000 AND THREE MONTHS ENDED AUGUST 31, 2000
(In Thousands)
(Unaudited)
(1) Estimated elimination of sales by the Techs to Worthington Industries,
Inc. subsidiaries previously recorded as sales to external customers
and the estimated profit on those sales in inventory.
(2) Estimated adjustment from eliminating the Techs' fixed asset
depreciation recorded on historical cost and recording depreciation of
the estimated fair value over the estimated remaining useful lives
which are as follows:
Years
-----
Buildings, Leasehold and Land Improvements 35
Machinery and Equipment 20
Furniture & Fixtures and Office Equipment 10
Computers and Software 3-5
(3) Estimated payments of salaries, bonuses, and management fees paid to
the five original investors of the Techs that will not continue after
the closing date of the transaction. This pro forma adjustment is made
because of changed circumstances that will exist following the
consummation of the purchase of the Techs' net assets.
(4) Estimated amortization over 3 years of the covenant-not-to-compete and
consulting contracts, which total $1,200.
(5) Estimated amortization of the goodwill using a useful life of 40 years.
(6) Estimated adjustment to reverse interest expense recorded by the Techs
for debt not assumed in the purchase transaction.
(7) Estimated interest expense on additional debt incurred to purchase the
Techs' net assets using an estimated interest rate of 9.5%.
(8) Estimated amortization of deferred financing costs incurred on the
additional debt using an estimated life of 10 years (the estimated
period of the borrowing).
(9) Estimated additional tax expense on the pro forma consolidated earnings
before income taxes using an effective tax rate of 37.5% for the twelve
months ended May 31, 2000 and 36.5% for the three months ended August
31, 2000. Income of the Techs is taxed directly to their partners.
Accordingly, no provision for income taxes has been made in the
historical financial statements of the Techs. After the acquisition,
the Techs income will be taxable to Worthington Industries, Inc. and
reflected as additional tax provision in the consolidated financial
statements.
(10) The purchase agreement includes contingent payments ("earnouts") of $60
million that could be earned over a three-year period beginning January
1, 2001. These amounts, if paid, will be recorded as additional
purchase price and amortized over the remaining useful life of the
goodwill booked at the purchase date. Additional amortization expense
for these earnouts could decrease net income by approximately
$1,000 per year.
23
<PAGE> 26
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements
No financial statements are required to be included in this
Item 7. We have voluntarily included as part of the Item 5 disclosure
certain historical financial statements of the Techs and certain pro
forma financial information of Worthington Industries, Inc.
Exhibits
The following exhibits are being filed with this Form 8-K:
Page
----
Exhibit 23 - Consent of Independent Auditors.............26
Exhibit 99 - Press Release...............................27
24
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WORTHINGTON INDUSTRIES, INC.
Date: October 19, 2000 By: /s/ John T. Baldwin
---------------------
John T. Baldwin
Vice President & Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)
25
