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EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
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[WORTHINGTON INDUSTRIES LOGO]
2000 ANNUAL REPORT TO
SHAREHOLDERS
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WORTHINGTON INDUSTRIES, INC.
2000 ANNUAL REPORT
CONTENTS
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PAGE
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A Message to Our Shareholders............................... 1
The Company................................................. 1
Stock Trading, Price and Dividend Information............... 3
Six 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, 2000 and 1999...... 12
Consolidated Statements of Earnings -- Years ended May 31,
2000, 1999 and 1998.................................... 13
Consolidated Statements of Shareholders' Equity -- Years
ended May 31, 2000, 1999 and 1998...................... 14
Consolidated Statements of Cash Flows -- Years ended May
31, 2000, 1999 and 1998................................ 17
Notes to Consolidated Financial Statements.................. 18
Report of Management........................................ 31
Report of Independent Auditors.............................. 32
Company Locations........................................... 33
Officers & Directors........................................ 34
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A MESSAGE TO OUR SHAREHOLDERS
This 2000 Annual Report to Shareholders contains the Worthington
Industries, Inc. audited consolidated 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. 2000 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 for the fiscal year ended May 31, 2000 ("fiscal 2000").
We invite our shareholders also to consider our 2000 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.
The Company's 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 the fiscal year ended May 31, 1999
("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 and prior.
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 2000, fiscal 1999 and the fiscal year ended May
31, 1998 ("fiscal 1998"), the percentage of sales from continuing operations
generated by the Processed Steel Products segment was 65.6%, 63.2% 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, cutting-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
2000, fiscal 1999 and fiscal 1998, the percentage of sales from continuing
operations generated by Dietrich was 17.9%, 19.1% and 20.7%, respectively.
Dietrich's products include steel studs, floor and wall system components, roof
trusses and other metal accessory products. Dietrich has over 2,000 customers,
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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 2000, fiscal 1999 and
fiscal 1998, the percentage of sales from continuing operations generated by
Worthington Cylinders was 16.2%, 17.3% and 13.8%, 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; certain assets of 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, refrigerant gas cylinders, and portable high-pressure cylinders.
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. Refrigerant gas cylinders primarily are used by
major refrigerant gas producers to contain refrigerant gases for use in charging
residential, commercial, automotive and other air conditioning and refrigeration
systems. High-pressure cylinders are sold primarily to gas fillers and suppliers
as containers for acetylene, medical, industrial, halon, electronic and cutting
and welding gases. Worthington Cylinders also produces recycle and recovery
tanks for refrigerant gases and non-refillable cylinders for 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.
Consolidated
- 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 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.
Unconsolidated
- 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. TWB
operates facilities in Monroe, Michigan and Saltillo, Mexico.
- 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 ("WSP"), a 50%-owned joint venture with
USX Corporation in Jackson, Michigan, operates primarily as a toll
processor for USX Corporation.
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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.
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 Shares trade on the New York Stock Exchange ("NYSE")
under the symbol "WOR" and are listed in most newspapers as "WorthgtnInd". Prior
to April 19, 2000, the Company's Common Shares were traded on the Nasdaq
National Market ("Nasdaq") under the symbol "WTHG". As of June 30, 2000, the
Company had approximately 11,134 shareholders of record. The following table
sets forth (i) the range of low, high and closing bid prices for the Company's
Common Shares (as quoted on Nasdaq) for each quarter of fiscal 1999 and the
first three quarters of fiscal 2000, (ii) the low, high and closing sale prices
for the Company's Common Shares (as traded on NYSE) for the quarter ended May
31, 2000, and (iii) the cash dividends per share paid on the Company's Common
Shares, for each quarter of fiscal 1999 and fiscal 2000.
<TABLE>
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MARKET PRICE
FISCAL 1999 --------------------------- CASH
QUARTER ENDED LOW HIGH CLOSING DIVIDENDS
------------- ------ ------ ------- ---------
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August 31, 1998............................... $12.44 $17.88 $13.00 $0.14
November 30, 1998............................. $10.38 $14.25 $12.19 $0.14
February 28, 1999............................. $11.31 $14.63 $12.69 $0.14
May 31, 1999.................................. $11.06 $15.13 $12.81 $0.15
</TABLE>
<TABLE>
<CAPTION>
FISCAL 2000
QUARTER ENDED
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August 31, 1999............................... $12.31 $16.44 $15.00 $0.15
November 30, 1999............................. $14.38 $17.63 $16.00 $0.15
February 29, 2000............................. $12.88 $17.00 $13.25 $0.15
May 31, 2000.................................. $11.38 $13.63 $12.13 $0.16
</TABLE>
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WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
SIX YEAR SELECTED FINANCIAL DATA
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<CAPTION>
FISCAL YEAR ENDED MAY 31,
---------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
IN THOUSANDS, EXCEPT PER SHARE ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Net Sales................................. $1,962,606 $1,763,072 $1,624,449 $1,428,346 $1,126,492 $1,125,495
Cost of Goods Sold........................ 1,629,455 1,468,886 1,371,841 1,221,078 948,505 942,672
---------- ---------- ---------- ---------- ---------- ----------
Gross Margin.............................. 333,151 294,186 252,608 207,268 177,987 182,823
Selling, General & Administrative
Expense................................. 163,662 147,990 117,101 96,252 78,852 67,657
---------- ---------- ---------- ---------- ---------- ----------
Operating Income.......................... 169,489 146,196 135,507 111,016 99,135 115,166
Miscellaneous Income...................... 2,653 5,210 1,396 906 1,013 648
Loss on Investment in Rouge............... (8,553) -- -- -- -- --
Interest Expense.......................... (39,779) (43,126) (25,577) (18,427) (8,687) (6,673)
Equity in Net Income of Unconsolidated
Affiliates -- Joint Ventures............ 26,832 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............................ 150,642 132,751 130,642 107,454 120,171 146,536
Income Taxes.............................. 56,491 49,118 48,338 40,844 46,130 55,190
---------- ---------- ---------- ---------- ---------- ----------
Earnings From Continuing Operations....... 94,151 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.............................. 94,151 54,912 118,412 93,318 100,973 123,129
Earnings Per Share (Diluted) --
Continuing Operations................... 1.06 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............................ 1.06 0.59 1.22 0.96 1.04 1.27
Continuing Operations (Excluding
Rouge*)............................... 1.12 0.90 0.85 0.69 0.62 0.73
Depreciation and Amortization from
Continuing Operations................... 70,997 64,087 41,602 34,150 26,931 23,741
Earnings Before Interest, Taxes,
Depreciation and Amortization from
Continuing Operations................... 261,418 239,964 197,821 160,031 155,789 176,950
Capital Expenditures from Continuing
Operations.............................. 71,541 98,404 297,516 160,846 97,346 45,416
Cash Dividends Declared................... 53,391 52,343 51,271 45,965 40,872 37,212
Per Share............................... $ 0.61 $ 0.57 $ 0.53 $ 0.49 $ 0.45 $ 0.41
Average Shares Outstanding (Diluted)...... 88,598 93,106 96,949 96,841 96,822 96,789
FINANCIAL POSITION
Current Assets............................ $ 624,229 $ 624,255 $ 642,995 $ 594,128 $ 505,104 $ 474,853
Current Liabilities....................... 433,270 427,725 410,031 246,794 167,585 191,672
---------- ---------- ---------- ---------- ---------- ----------
Working Capital........................... 190,959 196,530 232,964 347,334 337,519 283,181
Net Fixed Assets.......................... 862,512 871,347 933,158 691,027 544,052 358,579
Total Assets.............................. 1,673,873 1,686,951 1,842,342 1,561,186 1,282,424 964,299
Total Debt**.............................. 525,072 493,313 501,950 417,883 317,997 108,916
Shareholders' Equity...................... 673,354 689,649 780,273 715,518 667,318 608,142
Per Share............................... 7.85 7.67 8.07 7.40 6.91 6.30
Total Committed Capital**................. $1,198,426 $1,182,962 $1,282,223 $1,133,401 $ 985,315 $ 717,058
Shares Outstanding........................ 85,755 89,949 96,657 96,711 96,505 96,515
</TABLE>
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All financial data, except cash dividends declared, include the results of The
Gerstenslager Company which was acquired in February 1997 through a pooling of
interests.
* Excludes the impact of the "Loss on Investment in Rouge" for the fiscal year
ended May 31, 2000 and the "Equity in Net Income of Unconsolidated Affiliate
- Rouge" for the fiscal years ended May 31, 1996 and 1995.
** Excludes Debt Exchangeable for Common Stock of $52,497, $75,745 and $88,494
at May 31, 1999, 1998 and 1997, respectively.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements contained in this 2000 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, projected capacity levels, pricing trends,
anticipated capital expenditures, plant start-ups and capabilities and other
non-historical information. Because they are based on beliefs, estimates and
assumptions, forward-looking statements are inherently subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Any number of factors could affect actual results, including, without
limitation, product demand, changes in product mix and market acceptance of
products; changes in pricing or availability of raw materials, particularly
steel; capacity restraints and efficiencies; conditions in major product
markets; delays in construction or equipment supply; ability to integrate recent
acquisitions; inherent risks of international development, including foreign
currency risks; the ability to improve processes and business practices to keep
pace with the economic, competitive and technological environment; general
economic conditions, business environment and the impact of governmental
regulations, both in the United States and abroad; and other risks described
from time to time in filings with the 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 40 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 15
facilities worldwide.
In March 2000, the Company recorded an $8.6 million pre-tax loss ($0.06 per
share, net of tax) relating to the Company's investment in the common stock of
Rouge Industries, Inc. ("Rouge"). This previously unrealized loss had been
reported as a reduction in shareholders' equity. On March 1, 1997, the Company
issued debt exchangeable for common stock ("DECS"), payable in Rouge stock. The
loss on the Rouge investment was realized when the Company used the Rouge stock
to satisfy the DECS at maturity on March 1, 2000.
During fiscal 1999, the Company divested its non-core businesses:
Worthington Custom Plastics, Inc., Worthington Precision Metals, Inc. and
Buckeye Steel Castings Company, 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
provided aggregate proceeds of $224.0 million, which included $194.0 million in
cash and approximately $30.0 million in preferred stock and notes receivable
issued by the acquirers. The cash proceeds were used to finance capital
projects, fund acquisitions, repurchase common shares and reduce debt. The
divestitures resulted in an aggregate $24.6 million after-tax loss.
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.
During fiscal 1999, the Company completed three European acquisitions
within the Pressure Cylinders segment. In June 1998, the Company acquired the
stock of Jos. Heiser vormals J. Winter's Sohn, GmbH ("Worthington Heiser").
Based in Kienberg, Austria, Worthington Heiser produces high-pressure cylinders.
The Company acquired a 51% majority 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 Company, given the full
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product offering and geographic coverage throughout Europe. See Note K to the
Consolidated Financial Statements.
The extraordinary item in fiscal 1998 is the gain on the settlement of a
property insurance claim resulting from a fire at the Processed Steel Products'
Monroe, Ohio ("Monroe") 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. See Note M to the Consolidated Financial
Statements.
RESULTS FROM OPERATIONS
The following table sets forth, for the fiscal years indicated,
consolidated sales and operating income by segment and other financial
information:
<TABLE>
<CAPTION>
2000 1999 1998
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% OF % % OF % % OF
ACTUAL SALES CHANGE ACTUAL SALES CHANGE ACTUAL SALES
IN MILLIONS, EXCEPT PER SHARE -------- ----- ------ -------- ----- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales:
Processed Steel Products.............. $1,287.9 65.6% 16% $1,114.9 63.2% 6% $1,049.5 64.6%
Metal Framing......................... 350.6 17.9% 4% 337.2 19.1% 0% 337.0 20.7%
Pressure Cylinders.................... 318.8 16.2% 4% 305.8 17.3% 37% 223.5 13.8%
Other................................. 5.3 0.3% 5.2 0.4% 14.4 0.9%
-------- -------- --------
Total Net Sales................... 1,962.6 100.0% 11% 1,763.1 100.0% 9% 1,624.4 100.0%
Cost of Goods Sold........................ 1,629.4 83.0% 11% 1,468.9 83.3% 7% 1,371.8 84.4%
-------- -------- --------
Gross Margin........................ 333.2 17.0% 13% 294.2 16.7% 16% 252.6 15.6%
Selling, General & Administrative......... 163.7 8.4% 11% 148.0 8.4% 26% 117.1 7.3%
Operating Income:
Processed Steel Products.............. 96.8 7.5% 17% 82.6 7.4% -6% 87.7 8.4%
Metal Framing......................... 43.2 12.3% 70% 25.4 7.5% 27% 20.0 5.9%
Pressure Cylinders.................... 34.2 10.7% -7% 36.7 12.0% 28% 28.6 12.8%
Other................................. (4.7) 1.5 (0.8)
-------- -------- --------
Total Operating Income............ 169.5 8.6% 16% 146.2 8.3% 8% 135.5 8.3%
Other Income (Expense):
Misc. Income.......................... 2.7 5.1 1.4
Loss on Investment in Rouge........... (8.6) -- --
Interest Expense...................... (39.8) -2.0% -8% (43.1) -2.4% 69% (25.6) -1.6%
Equity in Net Income of Unconsolidated
Affiliates.......................... 26.8 1.4% 9% 24.5 1.4% 27% 19.3 1.2%
-------- -------- --------
Earnings Before Taxes............... 150.6 7.7% 13% 132.7 7.5% 2% 130.6 8.0%
Income Taxes.............................. 56.4 2.9% 15% 49.1 2.8% 2% 48.3 2.9%
-------- -------- --------
Earnings From Continuing Operations....... 94.2 4.8% 13% 83.6 4.7% 2% 82.3 5.1%
Discontinued Operations, Net of Taxes..... -- (20.9) 17.3
Extraordinary Item, Net of Taxes.......... -- -- 18.8
Cumulative Effect of Accounting Change,
Net of Taxes............................ -- (7.8) --
-------- -------- --------
Net Earnings.............................. $ 94.2 4.8% 71% $ 54.9 3.1% -54% $ 118.4 7.3%
======== ======== ========
Average Common Shares
Outstanding -- Diluted.................. 88.6 93.1 96.9
Earnings Per Share -- Diluted:
Earnings From Continuing
Operations........................ $ 1.06 $ 0.90 $ 0.85
Discontinued Operations, Net of
Taxes............................. -- (0.23) 0.18
Extraordinary Item, Net of Taxes.... -- -- 0.19
Cumulative Effect of Accounting
Change, Net of Taxes.............. -- (0.08) --
-------- -------- --------
Net Earnings........................ $ 1.06 $ 0.59 $ 1.22
======== ======== ========
</TABLE>
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FISCAL 2000 COMPARED TO FISCAL 1999
Net sales increased 11% to $2.0 billion from $1.8 billion in fiscal 1999.
The increase was primarily due to the start-up of two Processed Steel Products
facilities: the Decatur, Alabama facility ("Decatur") and the Spartan Steel
Coating facility ("Spartan") in Monroe, Michigan. A strong construction market
and increased demand for steel portable cylinders provided for the increased
sales in the Metal Framing and Pressure Cylinders segments, respectively. These
volume increases were partially offset by lower selling prices in the Processed
Steel Products and Pressure Cylinders segments. The following provides further
information on sales by segment:
- Processed Steel Products. Net sales increased 16% to $1.3 billion from
$1.1 billion in fiscal 1999. This increase was mainly volume driven as
the start-up facilities in Decatur and at Spartan continued to ramp up
their operations throughout fiscal 2000. However, the effect of the
volume increases was partially offset by lower selling prices during
fiscal 2000.
- Metal Framing. Net sales increased 4% to $350.6 million from $337.2
million in fiscal 1999. The building products market remained strong
throughout fiscal 2000. That combined with the volume and price increases
in the stainless products were the main reasons for the increase in
sales. Lower current year selling prices for building products and the
sale of the garage door product line in the second quarter of fiscal 1999
partially offset this increase.
- Pressure Cylinders. Net sales increased 4% to $318.8 million from $305.8
million in fiscal 1999. Increased demand for steel portables, system
tanks and high-pressure steel cylinders, partially offset by lower
selling prices, was the main reason for the increase in sales. Sales in
the European operations were flat compared to fiscal 1999 due to
competitive pricing pressures in that market.
Gross margin as a percent of net sales increased to 17.0% in fiscal 2000
from 16.7% in fiscal 1999. The improvement in the gross margin was primarily due
to favorable raw material costs particularly in the Metal Framing and Pressure
Cylinders segments. This favorability occurred earlier in the year as prices for
raw materials continued to increase across all segments throughout the year.
Higher manufacturing expenses partially offset some of this favorable price
impact. Selling, general and administrative costs ("SG&A") remained at 8.4% of
sales for both fiscal 2000 and fiscal 1999 and were higher than normal due to
Year 2000 expenses in both years.
Operating income increased 16% to $169.5 million from $146.2 million in
fiscal 1999. This increase was due mainly to the previously mentioned increases
in sales volume and favorable raw material pricing partially offset by lower
selling prices and increased manufacturing expenses in the European cylinder
operations. Operating income as a percentage of net sales was 8.6% in fiscal
2000 compared to 8.3% in fiscal 1999. The following provides further information
on operating income by segment:
- Processed Steel Products. Operating income increased 17% to $96.8 million
in fiscal 2000 from $82.6 million in fiscal 1999. This was primarily due
to higher sales volumes in the start-up operations. Favorability due to
lower raw material costs occurred earlier in the year but was offset by
raw material price increases in the third and fourth quarters of fiscal
2000. Direct labor, manufacturing expenses and SG&A as a percent of sales
remained consistent with the prior year resulting in an operating margin
for the year of 7.5%.
- Metal Framing. Operating income for Metal Framing increased 70% to $43.2
million in fiscal 2000 from $25.4 million in fiscal 1999. Higher sales
volumes in the building products line driven by the favorable
construction market more than offset the impact of lower selling prices.
Favorable raw material prices and operating efficiencies also
contributed, increasing the operating margin to 12.3%.
- Pressure Cylinders. Operating income decreased 7% to $34.2 million in
fiscal 2000 from $36.7 million in fiscal 1999. Lower selling prices kept
sales in the European market flat compared to last year. In addition,
higher labor, manufacturing and SG&A expenses in those operations lowered
operating income. Higher sales volumes in the steel portables product
line were partially offset by fewer sales of the refrigerant cylinders.
All of these factors combined produced an operating margin of 10.7%.
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<PAGE> 11
Interest expense decreased 8% to $39.8 million in fiscal 2000 from $43.1
million in fiscal 1999. Capitalized interest in fiscal 2000 was $0.8 million
compared to $4.0 million in fiscal 1999 as the major construction projects
(Decatur and rebuilding Monroe) were completed in the first part of fiscal 1999.
The decrease in interest expense is due to lower weighted average debt levels
and the extinguishment of the DECS notes in the current year. At May 31, 2000,
approximately 70% of the Company's $525.1 million of total debt was at fixed
rates of interest.
Equity in net income of unconsolidated affiliates increased 9% to $26.8
million in fiscal 2000 from $24.5 million in fiscal 1999. The Company's
Worthington Armstrong Venture ("WAVE"), TWB Company, LLC and Acerex S.A. de C.V.
joint ventures posted increases in sales and earnings for fiscal 2000. Profits
for Worthington Specialty Processing declined slightly in the current year due
to lower sales.
The effective tax rate for the Company was 37.5% in fiscal 2000 up from 37%
in fiscal 1999 due to increased business in higher-taxed foreign and domestic
locations, the result of divestiture and acquisition activity concluded in
fiscal 1999.
FISCAL 1999 COMPARED TO FISCAL 1998
Continuing Operations
Net sales increased 9% to $1.8 billion from $1.6 billion in fiscal 1998.
The increase was due to the start-up of the Decatur and Spartan facilities, the
acquisition of Worthington Heiser and a strong domestic economy, which increased
demand in the automotive, manufacturing and building construction markets. The
following provides further information on net sales by segment:
- Processed Steel Products. Net sales increased 6% to $1.1 billion from
$1.0 billion in fiscal 1998. 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, commenced operations in the fourth
quarter of fiscal 1998.
- Metal Framing. Net sales of $337.2 million in fiscal 1999 were
essentially even with fiscal 1998. Building products sales volume
increased due to increased demand in the building construction markets.
The increase was 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.
- Pressure Cylinders. Net sales increased 37% to $305.8 million from $223.5
million in fiscal 1998. 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.
Gross margin as a percent of net sales increased to 16.7% in fiscal 1999
from 15.6% in fiscal 1998. The improvement in margins was primarily due to
favorable material costs. The fire at the Monroe facility 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, business interruption insurance settlement proceeds of
$5.5 million and $8.5 million, respectively, were recorded in net sales.
The gross margin improvement was offset by higher SG&A costs, 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 and 7.3% in fiscal
1998. The SG&A increase in fiscal 1999 was the result of the Year 2000
remediation expenses and the increased overhead at Decatur and Spartan.
Operating income increased 8% to $146.2 million from $135.5 million in
fiscal 1998. This increase was due to the Worthington Heiser acquisition and
favorable raw material costs. The increase was partially offset by the impact of
the first quarter General Motors strike, higher overhead costs associated with
the Decatur and Spartan start-ups and expenses related to Year 2000 remediation
expenses. Operating income as a percentage of net sales
8
<PAGE> 12
was 8.3% in fiscal 1999 and fiscal 1998. The following provides further
information on operating income by segment:
- Processed Steel Products. Operating income decreased 6% to $82.6 million
in fiscal 1999 from $87.7 million in fiscal 1998. This was primarily due
to higher manufacturing overhead from the start-ups without corresponding
sales increases, the General Motors strike, and the Company's Year 2000
remediation expenses, partially offset by favorable raw material costs,
resulting in an operating margin for the year of 7.4%.
- Metal Framing. Operating income for Metal Framing increased 27% to $25.4
million from $20.0 million in fiscal 1998 due to lower raw material costs
and operational efficiencies, partially offset by the Company's Year 2000
remediation expenses.
- Pressure Cylinders. Operating income increased 28% to $36.7 million from
$28.6 million in fiscal 1998. Worthington Heiser contributed to the
fiscal 1999 increase in operating income, but the operating margin as a
percentage of sales decreased in fiscal 1999 to 12.0% from 12.8% in
fiscal 1998, primarily due to the Year 2000 remediation expenses.
Interest expense increased to $43.1 million in fiscal 1999 from $25.6
million in fiscal 1998. Capitalized interest associated with the construction of
new facilities totaled $4.0 million in fiscal 1999, down from $11.3 million in
fiscal 1998. The interest expense 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 shares. The increase in debt levels was partially offset by
the proceeds received from the divestitures of non-core businesses 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.
Equity in net income of unconsolidated affiliates increased 27% to $24.5
million from $19.3 million in fiscal 1998. The Company's WAVE, TWB and Acerex
joint ventures posted increases in sales and earnings for fiscal 1999.
Worthington Specialty Processing experienced a profitable year, despite a slight
decline in sales.
The effective tax rate for the Company was 37% in fiscal 1999 and in fiscal
1998.
Discontinued Operations
Fiscal 1999 net sales from discontinued operations decreased 25% to $371.6
million from $493.8 in fiscal 1998. The decline in net sales was primarily due
to a 26% decline in Custom Products' net 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 in fiscal 1998. 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.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 2000, the Company generated $138.9 million in cash from operating
activities, up 34% from $103.7 million during fiscal 1999. The higher cash flow
in fiscal 2000 is mainly due to better operating results combined with a
non-recurring $25 million dividend from WAVE and lower net working capital
requirements for continuing operations.
The Company's significant investing and financing activities during fiscal
2000 included investing $71.5 million in capital expenditures, spending $63.0
million for the repurchase of the Company's common shares and disbursing $53.2
million in dividends to shareholders. These transactions were funded by the cash
flow from the Company's operations and short-term borrowings.
9
<PAGE> 13
Capital investments during fiscal 2000 included amounts for expanding the
Processed Steel Products segment's annealing capacity at the Decatur facility
and adding the ability to apply a dry film lubricant at the Monroe facility. The
expenditures also provided for continuing implementation of the Pressure
Cylinders segment's new business information system, and for the further
development of the Metal Framing segment's new structural design software as
well as the acquisition of a new corporate facility for the Company.
Consolidated net working capital decreased $5.5 million to $191.0 million
at May 31, 2000 from $196.5 million at May 31, 1999. Accounts receivable
increased over the prior year end due mainly to increased sales in the Processed
Steel Products segment. Inventories increased due to growth in the Processed
Steel Products segment. These increases were mainly financed by short-term notes
which increased $37.9 million over the prior year end. The increase in income
taxes resulted from the tax liability related to the settlement of the DECS
becoming a current payable.
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. In addition, the Company
maintains a $300 million unsecured revolving credit facility. This facility is
divided into two tranches: a $110 million 364-day commitment expiring in
September 2000 and a $190 million commitment expiring in May 2003. The revolving
credit facility was not used during fiscal 2000.
As previously mentioned, the Company's DECS obligation matured on March 1,
2000. The Company satisfied this obligation by exchanging its shares of Rouge
common stock for the DECS notes. This eliminated the Rouge investment and the
related DECS liability from the Company's consolidated balance sheet. In
addition, the previously unrealized loss on the Rouge investment, which had been
recorded in shareholders' equity, became realized and was recognized in the
statement of earnings in the fourth quarter of fiscal 2000.
At May 31, 2000, the Company's total debt was $525.1 million compared to
$493.3 million at the end of fiscal 1999 (excluding the DECS). Total debt to
committed capital (excluding the DECS) increased to 43.8% from 41.7% at the
prior fiscal year end.
The Company repurchased 4.6 million common shares and 6.8 million common
shares during fiscal 2000 and fiscal 1999, respectively. As of May 31, 2000,
approximately 2.9 million common shares remained available for repurchase under
plans authorized by the Company's Board of Directors. 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 from time to time engages in discussions with respect to
selected acquisitions and expects to continue to assess these and other
acquisition opportunities as they arise. Accordingly, on August 15, 2000, the
Company announced that it had signed a letter of intent to acquire the assets of
MetalTech, NexTech and GalvTech for $300 million in cash. Under the terms of the
letter of intent, the purchase price may increase by up to $40 million over a
three-year period depending upon certain market conditions. The transaction is
subject to various approvals and is contingent upon obtaining financing
satisfactory to the Company. To finance this acquisition, the Company currently
plans to issue long-term debt.
The Company may also require additional financing if it decides to make
additional acquisitions. There can be no assurance, however, that any such
opportunities will arise, any such acquisitions will be consummated or that any
needed additional financing will be available when required on terms
satisfactory to the Company. Absent any acquisitions, the Company anticipates
that cash flows from operations, working capital and unused short-term borrowing
capacity should be more than sufficient to fund expected normal operating costs,
dividends, and capital expenditures for existing businesses.
10
<PAGE> 14
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes.
The Company uses interest rate swap agreements to limit its exposure to
changing interest rates related to its variable-rate debt arrangements. The
aggregate amount of debt hedged by interest swap agreements was $7.3 million at
May 31, 2000. The impact of a 100 basis point change in interest rates on the
value of the swap agreements would be immaterial to the financial position of
the Company.
The Company enters into forward contracts only to hedge specific foreign
currency or commodity transactions. Gains or losses from these contracts offset
gains or losses of the assets, liabilities or transactions being hedged.
Therefore, the impact of fluctuations in currency or commodity prices is
immaterial to the financial position of the Company.
RECENTLY ISSUED ACCOUNTING STANDARDS
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.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 on Revenue Recognition, which the Company must adopt
by the beginning of the fourth quarter of fiscal 2001. The Bulletin specifies
the criteria that must be met to recognize revenue and provides guidance on
disclosures. Management does not anticipate that the adoption of the new
Bulletin will have a significant effect on earnings or the financial position of
the Company.
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
In prior years, the Company disclosed the nature and progress of its plans
to become Year 2000 ready. Prior to December 31, 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the Year 2000 date change.
Total cumulative costs (including capitalized costs of $3.1 million) of $21.2
million were incurred by the Company during this process ($10.4 million, $10.2
million and $0.6 million in fiscal 2000, fiscal 1999 and fiscal 1998,
respectively). The Company is not aware of any material problems resulting from
Year 2000 issues, either with its internal systems, or the products or services
of third parties. The Company will continue to monitor its mission critical
computer applications and those of its suppliers and vendors throughout the Year
2000 to ensure that any latent Year 2000 matters that may arise are addressed
properly.
INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented in the Consolidated Financial Statements.
11
<PAGE> 15
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31
------------------------
2000 1999
DOLLARS IN THOUSANDS ---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 538 $ 7,641
Accounts receivable, less allowances of $3,879 and $4,209
at May 31, 2000 and 1999................................ 301,175 281,706
Inventories
Raw materials........................................... 144,903 163,277
Work in process......................................... 81,632 39,786
Finished products....................................... 64,669 53,947
---------- ----------
291,204 257,010
Investment in Rouge....................................... -- 52,497
Prepaid expenses and other current assets................. 31,312 25,401
---------- ----------
Total Current Assets............................... 624,229 624,255
Investment in Unconsolidated Affiliates..................... 50,197 63,943
Intangible Assets........................................... 80,213 83,402
Other Assets................................................ 56,722 44,004
Property, Plant and Equipment:
Land...................................................... 27,654 31,184
Buildings................................................. 244,015 245,958
Machinery and equipment................................... 861,772 823,343
Construction in progress.................................. 47,181 31,276
---------- ----------
1,180,622 1,131,761
Less accumulated depreciation............................. 318,110 260,414
---------- ----------
862,512 871,347
---------- ----------
Total Assets....................................... $1,673,873 $1,686,951
========== ==========
LIABILITIES
CURRENT LIABILITIES:
Accounts payable.......................................... $ 157,998 $ 161,264
Notes payable............................................. 160,194 122,277
Accrued compensation, contributions to employee benefit
plans and related taxes................................. 36,888 37,187
Dividends payable......................................... 13,721 13,492
Other accrued items....................................... 30,082 35,482
Income taxes.............................................. 31,699 292
Current maturities of long-term debt...................... 2,688 5,234
Debt exchangeable for common stock........................ -- 52,497
---------- ----------
Total Current Liabilities.......................... 433,270 427,725
Other Liabilities........................................... 25,531 31,512
Long-Term Debt.............................................. 362,190 365,802
Deferred Income Taxes....................................... 125,942 124,444
Contingent Liabilities -- Note G............................ -- --
Minority Interest........................................... 53,586 47,819
EQUITY
SHAREHOLDERS' EQUITY:
Preferred shares, without par value,
authorized -- 1,000,000 shares, issued and outstanding
-- none................................................. -- --
Common shares, without par value,
authorized -- 150,000,000 shares, issued and
outstanding -- 2000 -- 85,754,525
shares -- 1999 -- 89,949,277 shares..................... -- --
Additional paid-in capital................................ 109,776 111,474
Cumulative other comprehensive loss, net of taxes of
$3,046 and $5,996 at May 31, 2000 and 1999.............. (5,806) (8,484)
Retained earnings......................................... 569,384 586,659
---------- ----------
673,354 689,649
---------- ----------
Total Liabilities and Shareholders' Equity......... $1,673,873 $1,686,951
========== ==========
</TABLE>
See notes to consolidated financial statements.
12
<PAGE> 16
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
--------------------------------------
2000 1999 1998
IN THOUSANDS, EXCEPT PER SHARE ---------- ---------- ----------
<S> <C> <C> <C>
Net sales............................................. $1,962,606 $1,763,072 $1,624,449
Cost of goods sold.................................... 1,629,455 1,468,886 1,371,841
---------- ---------- ----------
Gross Margin................................... 333,151 294,186 252,608
Selling, general and administrative expense........... 163,662 147,990 117,101
---------- ---------- ----------
Operating Income............................... 169,489 146,196 135,507
Other income (expense):
Miscellaneous income................................ 2,653 5,210 1,396
Loss on investment in Rouge......................... (8,553) -- --
Interest expense.................................... (39,779) (43,126) (25,577)
Equity in net income of unconsolidated affiliates --
joint ventures................................... 26,832 24,471 19,316
---------- ---------- ----------
Earnings Before Income Taxes................... 150,642 132,751 130,642
Income taxes.......................................... 56,491 49,118 48,338
---------- ---------- ----------
Earnings From Continuing Operations............ 94,151 83,633 82,304
Discontinued operations, net of taxes................. -- (20,885) 17,337
Extraordinary item, net of taxes...................... -- -- 18,771
Cumulative effect of accounting change, net of
taxes............................................... -- (7,836) --
---------- ---------- ----------
Net Earnings................................... $ 94,151 $ 54,912 $ 118,412
========== ========== ==========
Average common shares outstanding (Basic)............. 88,411 93,016 96,751
Earnings Per Share (Basic):
Continuing operations.......................... $ 1.06 $ 0.90 $ 0.85
Discontinued operations, net of taxes.......... -- (0.23) 0.18
Extraordinary item, net of taxes............... -- -- 0.19
Cumulative effect of accounting change, net of
taxes....................................... -- (0.08) --
---------- ---------- ----------
Net Earnings................................... $ 1.06 $ 0.59 $ 1.22
========== ========== ==========
Average Common Shares Outstanding (Diluted)........... 88,598 93,106 96,949
Earnings Per Share (Diluted):
Continuing operations.......................... $ 1.06 $ 0.90 $ 0.85
Discontinued operations, net of taxes.......... -- (0.23) 0.18
Extraordinary item, net of taxes............... -- -- 0.19
Cumulative effect of accounting change, net of
taxes....................................... -- (0.08) --
---------- ---------- ----------
Net Earnings................................... $ 1.06 $ 0.59 $ 1.22
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
13
<PAGE> 17
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED MAY 31, 2000
<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,
1999........................... $689,649 $ -- $111,474 $586,659
Comprehensive income:
Net income..................... 94,151 94,151 94,151
Other comprehensive income, net
of tax:
Unrealized gain (loss) on
investment................. 5,616 5,616
Foreign currency
translation................ (2,938) (2,938)
-------
Other comprehensive income... 2,678
-------
Comprehensive income............. $96,829
=======
Common shares issued -- options
(358,203 shares issued under
plan).......................... 4,018 4,018
Purchase & retirement of common
shares (4,552,952 shares
repurchased)................... (63,740) (5,720) (58,020)
Other............................ (11) 4 (15)
Cash dividends declared ($.61 per
share)......................... (53,391) (53,391)
-------- ------ -------- --------
Ending balance at May 31, 2000... $673,354 $ -- $109,776 $569,384
======== ====== ======== ========
<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,
1999........................... $(8,484) $(5,563) $(2,921)
Comprehensive income:
Net income.....................
Other comprehensive income, net
of tax:
Unrealized gain (loss) on
investment................. 5,616 5,616
Foreign currency
translation................ (2,938) -- (2,938)
------- ------- -------
Other comprehensive income... 2,678 5,616 (2,938)
------- ------- -------
Comprehensive income.............
Common shares issued -- options
(358,203 shares issued under
plan)..........................
Purchase & retirement of common
shares (4,552,952 shares
repurchased)...................
Other............................
Cash dividends declared ($.61 per
share).........................
------- ------- -------
Ending balance at May 31, 2000... $(5,806) $ 53 $(5,859)
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
14
<PAGE> 18
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............. $54,803
=======
Common shares issued -- options
(139,985 shares issued under
plan).......................... 1,492 1,492
Common shares issued -- dividend
reinvestment................... (130) (130)
Reorganization to Ohio........... -- (926) 926
Purchase & retirement of common
shares (6,847,467 shares
repurchased)................... (94,432) (42) (7,497) (86,893)
Other............................ (15) 13 (2)
Cash dividends declared ($.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) $(2,812)
Comprehensive income:
Net income.....................
Other comprehensive income, net
of tax:
Foreign currency
translation................ (109) (109)
------- ------- -------
Other comprehensive income... (109) -- (109)
------- ------- -------
Comprehensive income.............
Common shares issued -- options
(139,985 shares issued under
plan)..........................
Common shares issued -- dividend
reinvestment...................
Reorganization to Ohio...........
Purchase & retirement of common
shares (6,847,467 shares
repurchased)...................
Other............................
Cash dividends declared ($.57 per
share).........................
------- ------- -------
Ending balance at May 31, 1999... $(8,484) $(5,563) $(2,921)
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 19
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............. $117,461
========
Common shares issued -- options
(142,902 shares issued under
plan).......................... 1,751 1 1,750
Common shares issued -- dividend
reinvestment (56,222 shares
issued under plan)............. 1,156 1 1,155
Purchase & retirement of common
shares (253,600 shares
repurchased)................... (4,342) (2) (261) (4,079)
Cash dividends declared ($.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) $(1,861)
Comprehensive income:
Net income.....................
Other comprehensive income, net
of tax:
Foreign currency
translation................ (951) (951)
------- ------- -------
Other comprehensive income... (951) -- (951)
------- ------- -------
Comprehensive income.............
Common shares issued -- options
(142,902 shares issued under
plan)..........................
Common shares issued -- dividend
reinvestment (56,222 shares
issued under plan).............
Purchase & retirement of common
shares (253,600 shares
repurchased)...................
Cash dividends declared ($.53 per
share).........................
------- ------- -------
Ending balance at May 31, 1998... $(8,375) $(5,563) $(2,812)
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
16
<PAGE> 20
WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
--------------------------------
2000 1999 1998
DOLLARS IN THOUSANDS ------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings........................................... $94,151 $ 54,912 $118,412
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization....................... 70,997 78,490 61,459
Provision for deferred income taxes................. (16,345) (18,087) 22,104
Loss on investment in Rouge......................... 8,553 -- --
Equity in undistributed net income of unconsolidated
affiliates........................................ 13,262 (10,848) (5,729)
Minority interest in net income (loss) of
consolidated subsidiary........................... 2,699 (2,664) (553)
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............................... (17,413) (27,078) (43,319)
Inventories....................................... (29,106) (4,980) 7,977
Prepaid expenses and other current assets......... 1,264 (2,965) (10,920)
Other assets...................................... (15,957) (366) (1,319)
Accounts payable and accrued expenses............. 30,631 (665) 76,637
Other liabilities................................. (3,826) (3,554) 5,949
------- --------- --------
Net Cash Provided By Operating Activities...... 138,910 103,724 200,903
INVESTING ACTIVITIES:
Investment in property, plant and equipment, net....... (71,541) (107,759) (309,412)
Acquisitions, net of cash acquired..................... (1,108) (34,054) --
Proceeds from sale of assets........................... 2,672 198,995 --
Proceeds from property insurance....................... -- -- 38,683
------- --------- --------
Net Cash Provided (Used) By Investing
Activities................................... (69,977) 57,182 (270,729)
FINANCING ACTIVITIES:
Proceeds from (payments on) short-term borrowings...... 37,917 (14,491) 86,600
Proceeds from long-term debt........................... -- 390 152,868
Principal payments on long-term debt................... (5,597) (4,983) (155,401)
Proceeds from issuance of common shares................ 4,018 1,349 2,955
Proceeds from minority interest........................ 3,790 7,497 34,081
Repurchase of common shares............................ (63,003) (94,432) (4,390)
Dividends paid......................................... (53,161) (52,383) (50,311)
------- --------- --------
Net Cash Provided (Used) By Financing
Activities................................... (76,036) (157,053) 66,402
------- --------- --------
Increase (decrease) in cash and cash equivalents....... (7,103) 3,853 (3,424)
Cash and cash equivalents at beginning of year......... 7,641 3,788 7,212
------- --------- --------
Cash and Cash Equivalents at End of Year....... $ 538 $ 7,641 $ 3,788
======= ========= ========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE> 21
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 year amounts to conform to the 2000
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: On March 1, 2000, the Company retired the notes
exchangeable into Class A Common Stock of Rouge (the "DECS"). The holders of the
DECS received, in exchange for the principal amount of the notes, an aggregate
of 5,999,600 shares of Class A Common Stock of Rouge Industries, Inc. ("Rouge
shares") representing the total number of Rouge shares owned by the Company at
that time. Prior to the exchange, the Company's investment in Rouge Industries,
Inc. ("Rouge") was classified as an "available-for-sale" security with
adjustments to market value being recorded, net of tax, to shareholders' equity.
See Note C.
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 SOP 98-5 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 primarily include goodwill, which is
being amortized on the straight-line method primarily over 40 years. Intangible
assets were $80,213,000 at May 31, 2000 and $83,402,000 at May 31, 1999 (net of
accumulated amortization of $7,841,000 and $6,111,000, respectively).
Amortization expense was $4,150,000 in fiscal 2000, $2,996,000 in fiscal 1999
and $3,066,000 in fiscal 1998. The Company's policy is to periodically review
its intangible assets based upon the evaluation of such factors as the
occurrence of a significant adverse event or change in the environment in which
the business operates or if the expected future net cash flows (undiscounted and
without interest) would become less than the carrying amount of the assets. An
impairment loss would be recorded in the period such determination is made based
on the fair value of the related businesses.
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 $750,000 in fiscal 2000, $3,972,000 in fiscal 1999 and $11,306,000
in fiscal 1998.
Revenue Recognition: The Company recognizes revenue at the time of
shipment.
18
<PAGE> 22
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 Accounting Standards: 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.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 on Revenue Recognition, which the Company must adopt
by the beginning of the fourth quarter of fiscal 2001. The Bulletin specifies
the criteria that must be met to recognize revenue and provides guidance on
disclosures. Management does not anticipate that the adoption of the new
Bulletin will have a significant effect on earnings or the financial position of
the Company.
Derivatives and Financial Instruments: The carrying amounts of cash and
cash equivalents, receivables, other assets and payables approximate fair
values. The fair value of long-term debt based upon quoted market prices is
$335,420,000 and $363,487,000 at May 31, 2000 and 1999, respectively.
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>
2000 1999 1998
IN THOUSANDS ------- ------- -------
<S> <C> <C> <C>
Interest paid......................................... $41,634 $45,251 $32,414
Income taxes paid, net of refunds..................... $22,821 $52,459 $48,470
</TABLE>
Risks and Uncertainties: The Company, including unconsolidated affiliates,
operates 55 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 19% of the Company's
labor force is covered by collective bargaining agreements. All significant
labor contracts expire over one year from May 31, 2000. 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.
19
<PAGE> 23
NOTE C -- DEBT
Debt at May 31 is summarized as follows:
<TABLE>
<CAPTION>
2000 1999
IN THOUSANDS -------- --------
<S> <C> <C>
Short-term unsecured notes payable.......................... $160,194 $122,277
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....................................................... 14,878 21,036
-------- --------
Total conventional debt................................ 525,072 493,313
Debt exchangeable for common stock.......................... -- 52,497
-------- --------
Total debt............................................. 525,072 545,810
Less current maturities and short-term notes payable........ 162,882 180,008
-------- --------
Total long-term debt................................... $362,190 $365,802
======== ========
</TABLE>
The short-term unsecured notes payable represent borrowings under
uncommitted bank lines of credit. The weighted average interest rate for fiscal
2000 was 5.82%. In fiscal 1999, short-term notes payable had a weighted average
interest rate of 5.14%. In addition, the Company maintains a $300,000,000
unsecured revolving credit facility, which was not utilized in fiscal 2000. The
credit facility is divided into two tranches: a $110,000,000 364-day facility
maturing September 28, 2000 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
60%. At May 31, 2000, this ratio was 44.3%.
The Company's "Other" debt primarily includes industrial development
revenue bonds with variable swapped interest rates up to 5.91% and debt from
foreign operations.
During March 1997, the Company issued approximately $93 million of
three-year DECS notes. The DECS had an interest rate of 7.25% and matured on
March 1, 2000. On March 1, 2000, the Company retired the DECS notes in exchange
for the Rouge shares held by the Company. The number of Rouge shares exchanged
was based upon the average closing price per share of Rouge shares for the
20-day trading period immediately prior to March 1, 2000. While it was
outstanding, the DECS liability fluctuated in proportion to the market value of
the Rouge shares. Because it was the Company's intention to settle the DECS
using the Rouge shares, considered an "available for sale" security, a net of
tax adjustment to shareholder's equity was made for the net change both in stock
value and the carrying amount of the DECS liability. The previously unrealized
loss on the investment in Rouge was realized when the Company used the Rouge
shares to satisfy the DECS on March 1, 2000, resulting in an $8,553,000 pre-tax
loss. See Note A, Investment in Rouge.
Principal payments due on long-term debt, including lease purchase
obligations, in the next five fiscal years are as follows: 2001 -- $2,688,309;
2002 -- $2,433,377; 2003 -- $1,868,732; 2004 -- $1,631,730; 2005 -- $1,174,540;
and thereafter -- $355,081,507.
The Company has entered into interest rate swap agreements to manage
interest costs and exposure to changing interest rates. At May 31, 2000,
agreements were in place that effectively converted $7,305,000 of floating rate
notes due 2011 to a 5.91% fixed rate. During September 1998, 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 totaling $10,535,000 at May 31, 2000,
with varying maturities, which primarily relate to debt of unconsolidated joint
ventures. The Company believes the guarantees will not significantly affect its
consolidated financial position or future results of operations.
20
<PAGE> 24
NOTE D -- INCOME TAXES
Income taxes for the years ended May 31 were as follows:
<TABLE>
<CAPTION>
2000 1999 1998
IN THOUSANDS ------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $66,070 $33,665 $35,340
State and local..................................... 4,078 3,808 4,160
Foreign............................................. 2,688 3,938 --
Deferred:
Federal............................................. (16,514) 7,891 8,259
State............................................... 169 (184) 579
------- ------- -------
56,491 49,118 48,338
Discontinued Operations............................... -- (4,481) 10,182
------- ------- -------
$56,491 $44,637 $58,520
======= ======= =======
</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.
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>
2000 1999
IN THOUSANDS -------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts........................... $ 2,094 $ 1,384
Inventory................................................. 1,913 803
Accrued expenses.......................................... 5,172 7,470
Income taxes.............................................. 4,122 4,385
Other..................................................... 413 260
-------- --------
13,714 14,302
Deferred tax liabilities:
Property, plant and equipment............................. 115,529 75,538
Undistributed earnings of unconsolidated affiliates....... 11,830 48,906
Other..................................................... (1,417) --
-------- --------
125,942 124,444
-------- --------
Net deferred tax liability................................ $112,228 $110,142
======== ========
</TABLE>
The reasons for the difference between the effective income tax rate and
the statutory federal income tax rate were as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate...................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal tax benefit.... 1.8 1.9 2.2
Foreign and other........................................... .7 .1 (.2)
---- ---- ----
37.5% 37.0% 37.0%
==== ==== ====
</TABLE>
21
<PAGE> 25
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 were
disposed.
A summary of the components of net periodic pension cost for the defined
benefit plans in fiscal 2000, fiscal 1999 and fiscal 1998, and the contributions
charged to pension expense for the defined contribution plans follows:
<TABLE>
<CAPTION>
2000 1999 1998
IN THOUSANDS ------- ------ -------
<S> <C> <C> <C>
Defined benefit plans:
Service cost (benefits earned during the period)...... $ 827 $1,214 $ 917
Interest cost on projected benefit obligation......... 1,051 1,236 964
Actual return on plan assets.......................... (1,109) (2,050) (2,997)
Net amortization and deferral......................... 177 1,587 2,409
------- ------ -------
Net pension cost on defined benefit plans............. 946 1,987 1,293
Defined contribution plans.............................. 6,418 6,247 5,720
------- ------ -------
Total pension expense - Continuing
Operations.................................. 7,364 8,234 7,013
Discontinued Operations................................. -- (1,048) 1,339
------- ------ -------
Total pension expense......................... $ 7,364 $7,186 $ 8,352
======= ====== =======
</TABLE>
Pension expense was calculated assuming a weighted average discount rate of
between 7.00% and 8.00% with a weighted average expected long-term rate of
return of between 7.75% and 9.00%. 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
CONTINUING OPERATIONS
----------------------
2000 1999
IN THOUSANDS --------- ---------
<S> <C> <C>
Change in Benefit Obligation
Benefit Obligation - Beginning of year.................... $14,520 $12,141
Service Cost.............................................. 827 926
Interest Cost............................................. 1,069 1,017
Amendments................................................ -- 1,488
Actuarial Gain............................................ (706) (53)
Benefits Paid............................................. (819) (999)
------- -------
Benefit Obligation - End of year.......................... $14,891 $14,520
======= =======
Change in Plan Assets
Fair Value of Plan Assets - Beginning of year............. $13,932 $11,709
Actual Return on Plan Assets.............................. 796 1,817
Employer Contributions.................................... 781 1,412
Benefits Paid............................................. (742) (1,006)
------- -------
Fair Value of Plan Assets - End of year................... $14,767 $13,932
------- -------
</TABLE>
22
<PAGE> 26
<TABLE>
<CAPTION>
PENSION BENEFITS
CONTINUING OPERATIONS
----------------------
2000 1999
IN THOUSANDS --------- ---------
<S> <C> <C>
Funded Status............................................... $ (124) $ (588)
Unrecognized Net Actuarial Loss............................. (3,928) (3,290)
Unrecognized Prior Service Cost............................. 2,967 3,419
------- -------
Prepaid (Accrued) Benefit Cost.............................. $(1,085) $ (459)
======= =======
Plans With Benefit Obligations in Excess of Fair Value of
Plan Assets Projected Benefit Obligation.................. $14,073 $ 6,348
Fair Value of Plan Assets................................... 13,563 5,094
------- -------
Funded Status............................................... $ (510) $(1,254)
======= =======
</TABLE>
NOTE F -- STOCK OPTIONS
Under its employee stock option plans, the Company may grant employees
incentive stock options to purchase common 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
vest and become exercisable at the rate of 20% per year beginning one year from
date of grant and expire ten years thereafter.
The following table summarizes the option plans' activity for the years ended
May 31:
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ------------------ ------------------
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.......... 3,907 $15.04 2,440 $17.39 2,370 $16.85
Granted................................... 1,006 12.75 2,153 13.00 465 18.71
Exercised................................. (358) 9.25 (140) 9.31 (143) 8.80
Forfeited................................. (219) 17.29 (546) 18.90 (252) 19.47
----- ----- -----
Outstanding -- end of year................ 4,336 14.90 3,907 15.04 2,440 17.39
===== ===== =====
Exercisable at end of year................ 1,474 17.68 1,227 16.52 1,273 17.39
Weighted-average fair value of options
granted during the year................. $ 2.84 $ 2.19 $ 3.91
Assumptions used:
Dividend yield............................ 4.25% 4.25% 3.00%
Expected volatility....................... 23.00% 23.00% 23.00%
Risk-free interest rate................... 5.96% 4.79% 5.06%
Expected lives (years).................... 5 5 5
</TABLE>
Options outstanding at May 31, 2000 are summarized as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------------ -----------------------
WEIGHTED WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
NUMBER EXERCISE PRICE CONTRACTUAL LIFE NUMBER EXERCISE PRICE
IN THOUSANDS, EXCEPT PER SHARE ------ -------------- ---------------- ------ --------------
<S> <C> <C> <C> <C> <C>
Exercise prices between
$12.00 and $15.00.............. 3,047 $12.92 8.9 429 $12.99
$18.56 and $21.38.............. 1,289 19.57 5.2 1,045 19.61
</TABLE>
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
23
<PAGE> 27
the fair value at the grant date for awards in 2000, 1999 and 1998 consistent
with the provisions of Statement No. 123, the Company's net earnings and
earnings per share would have been as presented in the following table (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- --------
<S> <C> <C> <C>
Net earnings
As reported................................ $94,151 $54,912 $118,412
Pro forma.................................. 92,708 53,830 117,759
Earnings per share (basic)
As reported................................ $ 1.06 $ 0.59 $ 1.22
Pro forma.................................. 1.05 0.58 1.22
Earnings per share (diluted)
As reported................................ $ 1.06 $ 0.59 $ 1.22
Pro forma.................................. 1.05 0.58 1.21
</TABLE>
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 require the Company to deliver certain
quantities of acid for processing annually through the year 2019. In addition,
the Company is required to pay for freight and utilities used in processing its
acid. The aggregate amount of required payments at May 31, 2000 is as follows
(in thousands):
<TABLE>
<S> <C>
2001............................................. $ 4,395
2002............................................. 4,395
2003............................................. 4,395
2004............................................. 4,395
2005............................................. 4,395
Thereafter....................................... 61,535
-------
Total............................................ $83,510
=======
</TABLE>
The Company may not terminate the unconditional purchase obligations
without assuming or otherwise repaying certain debt of the supplier, based on
the fair market value of the facility. At May 31, 2000, $35.9 million of such
debt was outstanding.
NOTE H -- INDUSTRY SEGMENT DATA
The Company's continuing operations include 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.
24
<PAGE> 28
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,
cutting-to-length, configured blanking, stamping, painting, nickel and
zinc/nickel coating and hot-dipped galvanizing. This segment sells to customers
principally in the automotive, automotive supply, 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 construction markets in the United States. 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, electronic,
cutting and welding gases. This segment also produces recycle and recovery tanks
for refrigerant gases, helium tanks and cylinders to hold other gases.
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.
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>
2000 1999 1998
IN MILLIONS -------- -------- --------
<S> <C> <C> <C>
NET SALES
Processed Steel Products............................. $1,287.9 $1,114.9 $1,049.5
Metal Framing........................................ 350.6 337.2 337.0
Pressure Cylinders................................... 318.8 305.8 223.5
Other................................................ 5.3 5.2 14.4
-------- -------- --------
Continuing Operations................................ $1,962.6 $1,763.1 $1,624.4
======== ======== ========
OPERATING INCOME
Processed Steel Products............................. $ 96.8 $ 82.6 $ 87.7
Metal Framing........................................ 43.2 25.4 20.0
Pressure Cylinders................................... 34.2 36.7 28.6
Other................................................ (4.7) 1.5 (0.8)
-------- -------- --------
Continuing Operations................................ $ 169.5 $ 146.2 $ 135.5
======== ======== ========
DEPRECIATION AND AMORTIZATION
Processed Steel Products............................. $ 48.0 $ 43.2 $ 25.8
Metal Framing........................................ 9.4 8.6 8.1
Pressure Cylinders................................... 10.4 9.4 5.2
Other................................................ 3.2 2.9 2.5
-------- -------- --------
Continuing Operations................................ $ 71.0 $ 64.1 $ 41.6
======== ======== ========
</TABLE>
25
<PAGE> 29
<TABLE>
<CAPTION>
2000 1999 1998
IN MILLIONS -------- -------- --------
<S> <C> <C> <C>
TOTAL ASSETS
Processed Steel Products............................. $1,049.6 $1,000.0 $ 947.2
Metal Framing........................................ 256.5 250.7 258.0
Pressure Cylinders................................... 215.9 223.9 153.4
Other................................................ 151.9 212.4 198.0
-------- -------- --------
Continuing Operations................................ $1,673.9 $1,687.0 $1,556.5
======== ======== ========
CAPITAL EXPENDITURES
Processed Steel Products............................. $ 31.2 $ 79.0 $ 283.8
Metal Framing........................................ 11.0 7.8 5.8
Pressure Cylinders................................... 12.4 8.0 4.1
Other................................................ 16.9 3.6 3.9
-------- -------- --------
Continuing Operations................................ $ 71.5 $ 98.4 $ 297.6
======== ======== ========
</TABLE>
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 2000, 1999 and 1998 totaled $31 million, $33 million and
$33 million, respectively. Accounts receivable related to these transactions
were $1 million and $5 million at May 31, 2000 and 1999, respectively. Accounts
payable to related parties were $19 million and $11 million at May 31, 2000 and
1999, 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, LLC (33%) and Acerex, S.A. de C.V. (50%).
The Company received dividends from unconsolidated affiliates totaling
$40,094,000 and $13,623,000 in 2000 and 1999, respectively.
Financial information for affiliated companies accounted for by the equity
method is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
IN THOUSANDS -------- -------- --------
<S> <C> <C> <C>
Current assets..................................... $120,619 $107,461 $ 90,535
Noncurrent assets.................................. 129,699 130,822 135,688
Current liabilities................................ 55,220 41,697 34,979
Noncurrent liabilities............................. 85,568 57,350 67,869
Net sales.......................................... 377,630 324,306 282,616
Gross margin....................................... 99,095 87,365 73,510
Net income......................................... $ 55,921 $ 51,448 $ 38,251
</TABLE>
The Company's share of undistributed earnings of unconsolidated affiliates
included in consolidated retained earnings was $11,904,000 at May 31, 2000.
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,
26
<PAGE> 30
Lda. ("Worthington Portugal") in May 1999. Worthington Gastec, based in
Hustopece, Czech Republic, and Worthington Portugal, based in Vale de Cambra,
Portugal, produce small- and medium-sized 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 respective dates 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.
Pro forma 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 END MAY 31
-----------------------------------------
2000 1999 1998
DOLLARS IN THOUSANDS, EXCEPT PER SHARE ----------- ----------- -----------
<S> <C> <C> <C>
Numerator (Basic & Diluted):
Earnings From Continuing Operations -- income
available to common shareholders............... $ 94,151 $ 83,633 $ 82,304
=========== =========== ===========
Denominator:
Denominator for basic earnings per
share-weighted-average shares.................. 88,410,804 93,015,707 96,751,260
Effect of dilutive securities - employee stock
options........................................ 187,009 90,347 197,405
----------- ----------- -----------
Denominator for diluted earnings per share -
adjusted weighted-average shares............... 88,597,813 93,106,054 96,948,665
=========== =========== ===========
Basic earnings from continuing operations per
share.......................................... $ 1.06 $ 0.90 $ 0.85
=========== =========== ===========
Diluted earnings from continuing operations per
share.......................................... $ 1.06 $ 0.90 $ 0.85
=========== =========== ===========
Antidilutive securities (a)....................... 1,559,315 2,876,429 1,617,237
=========== =========== ===========
</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.
27
<PAGE> 31
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.
NOTE N -- DISCONTINUED OPERATIONS
As a result of a fiscal 1998 strategic review, the Company adopted a plan
and subsequently sold its Custom Products 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. The aggregate proceeds included $30
million in preferred stock and notes receivable issued by the acquirers, the
ultimate realization of which is dependent on the financial performance of the
acquirers. The Company periodically monitors its credit risk exposure for
evaluation of impairment indicators and potential write-down in value of its
investment in the preferred stock and notes receivable.
28
<PAGE> 32
At May 31, 1999, all components of discontinued operations were disposed.
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
======== ======== ========
</TABLE>
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
</TABLE>
29
<PAGE> 33
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, 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
AUGUST NOVEMBER FEBRUARY MAY
IN THOUSANDS, EXCEPT PER SHARE -------- -------- -------- --------
<S> <C> <C> <C> <C>
2000
Net sales...................................... $462,911 $473,331 $486,535 $539,829
Gross margin................................... 83,175 85,042 79,641 85,293
Net Earnings................................... 24,258 24,726 23,212 21,955
Earnings per share (Diluted)................... $ 0.27 $ 0.28 $ 0.26 $ 0.25
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
======== ======== ======== ========
</TABLE>
NOTE P -- SUBSEQUENT EVENT (UNAUDITED)
On August 15, 2000, the Company announced that it had signed a letter of
intent to acquire the assets of MetalTech, NexTech and GalvTech for $300 million
in cash. Under the terms of the letter of intent, the purchase price may
increase by up to $40 million over a three-year period depending upon certain
market conditions. The transaction is subject to various approvals and is
contingent upon obtaining financing satisfactory to the Company.
30
<PAGE> 34
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 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 and independent certified public accountants to review matters
relating to financial reporting, auditing and internal control. To ensure
auditor independence, the 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
31
<PAGE> 35
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, 2000 and 1999, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended May 31, 2000. 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 auditing standards generally
accepted in the United States. 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, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended May 31, 2000 in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
------------------------------------
Ernst & Young LLP
Columbus, Ohio
June 16, 2000
32
<PAGE> 36
COMPANY LOCATIONS
PROCESSED STEEL PRODUCTS
WORTHINGTON STEEL
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
WORTHINGTON BEAMALLOY CORPORATION
Dublin, Ohio
WORTHINGTON STEELPAC SYSTEMS
York, Pennsylvania
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
Saltillo, Mexico
ACEREX S.A. DE C.V.
Steel Processing
Monterrey, Mexico
SPARTAN STEEL COATING, L.L.C.
Steel Processing
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
33
<PAGE> 37
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,
Director, 1999
John T. Baldwin
Vice President & Chief Financial
Officer, 1997
Edward A. Ferkany
Executive Vice President, 1974
Dale T. Brinkman
Vice President-Administration,
General Counsel &
Assistant Secretary, 1982
Jonathan B. Dove
Chief Information Officer, 1998
Cathy Mayne Lyttle
Vice President-Communications, 1999
Bruce Ruhl
Vice President-Purchasing, 1978
Mark H. Stier
Vice President-Human Resources, 1975
Richard G. Welch
Controller, 1999
Gregory P. Youngblood
Treasurer, 1999
SUBSIDIARY OFFICERS
-------------------
Richard F. Berdik
President, 1996
Dietrich Industries, Inc.
Ralph V. Roberts
President, 1973
The Worthington Steel Company
Kenneth Vagnini
President, 1997
The Gerstenslager Company
Virgil L. Winland
President, 1971
Worthington Cylinder Corporation
* Member of Executive Committee
** Member of Nominating 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
William S. Dietrich
Chairman, Dietrich Industries, Inc.
Director, 1996
Michael J. Endres ++
Principal Owner
Stonehenge Holdings, Inc.
Director, 1999
John F. Havens*
Retired Chairman
Banc One Corporation
Director, 1988
Peter Karmanos, Jr. +
Chairman, CEO & Co-Founder
Compuware Corporation
Director, 1997
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, LLP
Secretary and Director, 1962
Gerald B. Mitchell ++*
Retired Chairman & CEO
Dana Corporation
Director, 1986
Mary Fackler Schiavo +**
Professor, The Ohio State University,
College of Engineering, and Attorney
Director, 1998
34
