NOTES TO FINANCIAL STATEMENTS
Worthington Industries, Inc.
Retirement Savings Plan for Collectively Bargained Employees
The
following description of the Worthington Industries, Inc. Retirement Savings Plan for Collectively Bargained Employees (the Plan) provides only general information. Participants should refer to the Plan document for a complete
description of the Plans provisions.
General:
The Plan is a defined contribution plan covering all union employees at the Boston, Canton, Chilton and, starting in December 2015 and
through December 2, 2016, Theodore facilities of Worthington Industries, Inc. (Worthington or the Company) who meet the hour and age requirements. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). The Trustee of the Plan is Fidelity Management Trust Company (the Trustee). Worthington is the Plan Sponsor.
The Plan is one of two plans within the Worthington Deferred Profit Sharing Plan Master Trust (the Master Trust). The other plan is the Worthington Industries, Inc. Deferred Profit Sharing
Plan. Effective December 31, 2015, the Plan was amended to remove the Dietrich Industries, Inc. Salaried Employees Profit Sharing Plan (the Dietrich Plan) from the Master Trust, as the Dietrich Plan was terminated and all
assets were disbursed as of this date.
Eligibility:
Union employees who are at least eighteen years of age and have been employed for ninety days are eligible to participate in the Plan.
Contributions:
Employee Contribution - Cash or Deferred Option 401(k) - Participants may defer up to 90% of their compensation to the Plan. Contributions are subject to annual addition and other limitations imposed by
the Internal Revenue Code (IRC) as defined in the Plan document.
Employer Matching Contributions - The
participants at the Chilton facility receive matching contributions equal to 25% of their Section 401(k) contributions up to 8% of their compensation. The participants at the Theodore facility receive matching contributions equal to 50% of
their section 401(k) contributions up to 4% of their compensation.
Annual Company Contributions - The participants at the
Chilton facility receive the following annual contributions:
For workers employed at September 17, 2004:
1% of pay each year for ages up to and including age 44.
2% of pay each year for ages 45 through 54.
4% of pay each year for ages 55
through 59.
8% of pay each year for ages 60 and over.
-8-
For workers hired after September 17, 2004:
Employees receive an annual contribution of 1% of pay regardless of age.
Participant Accounts - Each participants account is credited with the participants elective contributions, employer matching
contributions (as applicable), annual Company contributions (as applicable), and earnings and losses thereon.
Rollover
contributions from other plans are also accepted, provided certain specified conditions are met.
Investment Options:
Participants direct their contributions among a choice of the Plans investment options. All contributions are
allocated to the designated investment options according to each participants election, although, to the extent that a participant receiving a contribution made no allocation election, the participants contribution is invested in the
applicable Fidelity Freedom Fund, as determined by the age of the participant.
Contributions to the Worthington Industries,
Inc. Common Stock fund are limited to not more than 25% of the total contributions made by or for a participant to the Plan. A participant will be prohibited from making investment exchanges to the Worthington Industries, Inc. Common Stock fund if
the participants investment in the fund equals or exceeds 25% of such persons total accounts.
Vesting:
All participants are 100% vested in elective deferrals and rollover contributions made to the Plan. In addition, if an
active participant dies prior to attaining his normal retirement age, or becomes totally and permanently disabled prior to a break-in-service, their vesting percentage shall be 100%.
Effective January 1, 2009, employer matching and annual company contributions are vested 100% upon 3 or more years of service for all
participants.
Forfeitures:
Non-vested account balances are forfeited either upon full distribution of vested balances or completion of five consecutive one-year breaks in service, as defined by the Plan document. Forfeitures are
either used to reduce Company contributions to the Plan or to pay reasonable expenses of the Plan, as determined by the Plan Sponsor.
The Company used forfeitures totaling $7,000 and $84,715 to offset Company contributions in 2016 and 2015, respectively. At December 31, 2016 and 2015, forfeited non-vested accounts were $3,004 and
$7,902, respectively.
Notes Receivable from Participants:
Loans are permitted under certain circumstances and are subject to limitations. Participants may borrow from their fund accounts up to a
maximum equal to the lesser of $50,000 or 50% of their account balance. Loans are to be repaid over a period not to exceed 5 years, except when used for the purchase of a primary residence.
-9-
The loans are secured by the balance in the participants account and bear interest at
rates established by the Trustee. Principal and interest are paid ratably through payroll deductions. Loans are valued at unpaid principal plus accrued unpaid interest.
Other Plan Provisions:
Normal retirement age is 65 at the Boston,
Chilton and Theodore facilities, and 62 at the Canton facility. Early retirement age is 62 for the participants at the Boston, Chilton and Theodore facilities.
Payment of Benefits:
Upon termination of service by reason of
retirement, death or total and permanent disability, a participant may receive a lump-sum amount equal to the value of his or her account. Chilton participants may receive a lump-sum or periodic installments.
Hardship Withdrawals:
Hardship withdrawals are permitted in accordance with Internal Revenue Service (IRS) guidelines.
2.
|
Summary of Significant Accounting Policies
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Basis of Accounting:
The Plans transactions are reported on
the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
Investment contracts held by a defined contribution plan are required to be reported at fair value.
Investment Valuation and Income Recognition:
The Master
Trusts investments in mutual funds and Worthington Industries, Inc. Common Stock are stated at fair value as of year-end. Fair values for mutual funds and Worthington Industries, Inc. Common Stock are determined by the respective quoted market
prices.
The Plan holds a stable value investment contract with the Trustee, which is structured as a common collective trust
(the CCT). The portfolio is an open-end commingled pool dedicated exclusively to the management of assets of defined contribution plans. The portfolio invests in underlying assets, typically fixed-income securities or bond funds and
enters into wrapper contracts issued by third parties. The Plan is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The wrapper contract issuer agrees to pay the
portfolio an amount sufficient to cover unit holder redemptions and certain other payments (such as portfolio expenses), provided all the terms of the wrapper contract have been met. Wrappers are normally purchased from issuers rated in the top
three long-term ratings categories (equaling A- or above).
-10-
The primary goal of the CCT in which the Master Trust is invested is to seek current income
while maintaining stability of invested principal. The CCT is invested and reinvested primarily in a diversified portfolio of fixed-income instruments which may include traditional and separate account guaranteed investment contracts (obligations of
creditworthy life insurance companies), corporate investment contracts, synthetic GICs (high-quality debt securities including mortgage-backed, commercial mortgage-backed, asset-backed and corporate securities held by the CCT within contracts that
are intended to minimize market volatility), variable rate GICs, repurchase agreements, US treasury and agency securities, and cash and cash equivalents, including certificates of deposit and money market instruments. The CCT may also invest in a
collective fund or group trust (including but not limited to one maintained by The Bank of New York Mellon or its affiliate) that invests in such fixed income instruments. No investment contract in which the CCT invests will have a duration of more
than six years from the date of issuance. The CCT will operate with a weighted average duration selected by The Bank of New York Mellon, in its capacity as Trustee of the fund from time to time, but such weighted average duration generally will
average between 1 and 3 years. Participants may purchase or redeem units of the CCT for cash or securities based on the unit value determined as of the valuation date. Unit value is generally determined each business day of the year. All
participants have a proportionate undivided interest in the net assets of the CCT.
Purchases and sales of securities are
recorded on a trade-date basis using fair market value. Dividends are recorded on the ex-dividend date. Interest is recorded on the accrual basis.
Use of Estimates:
The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
Administrative Fees:
The Company pays substantially all administrative fees of the Plan.
Plan
Termination:
Although it has not expressed any intent to do so, the Company has the right under the Plan to
discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.
Plan-to-Plan
Transfers:
Participants within the Plan are permitted to transfer their account to another plan provided by the
Company in the event they change employers within the affiliate group. This activity is presented on a net-basis on the statements of changes in net assets available for benefits.
Recently Issued Accounting Standards:
In May 2015, accounting guidance was issued to address diversity in practice related to how certain investments measured at net asset value (NAV) are reported within the financial statement
footnotes. The new guidance removes the requirement to categorize investments
-11-
measured under the current NAV practical expedient within the fair value hierarchy for all investments. The amendments also remove the requirement to make certain disclosures for all investments
that are eligible to be measured at fair value using the NAV practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance is
effective for fiscal years beginning after December 15, 2015 and is required to be applied retrospectively. Management concluded that the accounting guidance will have no impact on the Plans financial statements.
In February 2017, accounting guidance was issued that clarifies the presentation requirements under current U.S. GAAP for a plans
interest in a master trust and requires more detailed disclosures of this interest. The guidance is effective for fiscal years beginning after December 15, 2018 and is required to be applied retrospectively. Early adoption is permitted. The
Plan is currently evaluating the potential impact of this guidance on its ongoing financial reporting.
The Plan
received a determination letter from the IRS dated January 27, 2012, stating that the Plan is qualified under Section 401(a) of the IRC, and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the
IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Sponsor believes the Plan, as amended, is being operated in compliance with the applicable requirements of
the IRC and, therefore, believes that the Plan is qualified and the related trust is tax-exempt.
U.S. GAAP requires plan
management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken uncertain tax positions that more-likely-than-not would not be sustained upon examination by applicable taxing authorities. The Plan
administrator has analyzed tax positions taken by the Plan and has concluded that, as of December 31, 2016, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability or that would require
disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions.
The
Plans share of the investments held by the Master Trust was approximately 2% at both December 31, 2016 and 2015, respectively. Each participating retirement plan has a specific interest in the Master Trust. Net investment income for the
Plan is based upon its actual holdings of the net assets of the Master Trust.
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|
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|
2016
|
|
|
2015
|
|
Investments of Master Trust at Fair Value:
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
$
|
444,032,314
|
|
|
$
|
403,621,839
|
|
Worthington Industries, Inc. Common Stock
|
|
|
50,540,784
|
|
|
|
47,119,744
|
|
Common Collective Trust
|
|
|
42,197,318
|
|
|
|
35,254,199
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
536,770,416
|
|
|
$
|
485,995,782
|
|
|
|
|
|
|
|
|
|
|
-12-
Investment Income for the Master Trust:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Interest and Dividend Income
|
|
$
|
15,549,896
|
|
|
$
|
18,437,935
|
|
Net Appreciation (Depreciation) in Fair Value of Investments as Determined by Quoted Market Price:
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
|
17,514,230
|
|
|
|
(14,301,475
|
)
|
Worthington Industries, Inc. Common Stock
|
|
|
25,962,328
|
|
|
|
387,558
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
59,026,454
|
|
|
$
|
4,524,018
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2016 and 2015 the Master Trust held 1,065,273 and 1,563,247 common shares of
Worthington, respectively. The Master Trust received cash dividends from Worthington of $974,205 and $1,126,321 for the years ended December 31, 2016 and 2015, respectively.
5.
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Party-in-Interest Transactions
|
Certain Plan investments are shares of mutual funds managed by the Trustee; therefore, transactions involving these funds qualify as party-in-interest transactions.
The Plan offers common shares of Worthington as an investment option. As a result, Worthington qualifies as a party-in-interest.
The Company provides certain administrative and accounting services at no cost to the Plan and may pay for the cost of
services incurred in the operation of the Plan.
6.
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Risks and Uncertainties
|
The Plan provides for various investment options. These investments are exposed to various risks, such as interest rate, market and credit
risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is possible that changes in the near or long term could materially affect
participants account balances and the amounts reported in the statements of net assets available for benefits and the statements of changes in net assets available for benefits.
Fair value is
the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. In determining fair value, the Plan utilizes certain assumptions that market
participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable
inputs. The Plan utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the examination of the inputs used in the valuation techniques, the Plan is required to provide the
following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and
disclosed in one of the following three categories:
|
Level 1:
|
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
|
-13-
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Level 2:
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Inputs to the valuation methodology include:
|
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets; and
Inputs other than quoted prices that are observable for the asset or liability.
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
Level 3:
|
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
A financial instruments categorization within the valuation hierarchy is based upon the lowest level of input that is significant to
the fair value measurement. See the description within Footnote 2, Summary of Significant Accounting Policies, as to the investment valuation methodology for each class of assets noted in the below table. There have been no changes in
the methodologies used at December 31, 2016 and 2015.
For the years ended December 31, 2016 and 2015, there were no
significant transfers between Levels 1 and 2 and no transfers in or out of Level 3.
The following table shows the assets of
the Plan measured at fair value on a recurring basis, as of December 31, 2016:
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|
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Fair Value Measurements at Reporting Date Using:
|
|
Description
|
|
Total
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
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Significant
Unobservable
Inputs
(Level 3)
|
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Plans Interest in Master Trust Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Mutual Funds
|
|
|
7,670,670
|
|
|
|
7,670,670
|
|
|
|
|
|
|
|
|
|
Common Collective Trust
|
|
|
711,686
|
|
|
|
|
|
|
|
711,686
|
|
|
|
|
|
Worthington Industries, Inc. Common Stock
|
|
|
298,524
|
|
|
|
298,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
|
|
$
|
8,680,880
|
|
|
$
|
7,969,194
|
|
|
$
|
711,686
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-14-
The following table shows the assets of the Plan measured at fair value on a recurring
basis, as of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using:
|
|
Description
|
|
Total
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
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Plans Interest in Master Trust Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Mutual Funds
|
|
|
7,355,100
|
|
|
|
7,355,100
|
|
|
|
|
|
|
|
|
|
Common Collective Trust
|
|
|
782,582
|
|
|
|
|
|
|
|
782,582
|
|
|
|
|
|
Worthington Industries, Inc. Common Stock
|
|
|
185,398
|
|
|
|
185,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
|
|
$
|
8,323,080
|
|
|
$
|
7,540,498
|
|
|
$
|
782,582
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Management evaluates events occurring subsequent to the date of the financial statements in determining the accounting for and disclosure
of transactions and events that affect the financial statements. Subsequent events have been evaluated through the filing date of this Form 11-K.
-15-
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
Form 5500, Schedule H, Part IV, Line 4i
Worthington Industries, Inc.
Retirement Savings Plan for Collectively Bargained
Employees
EIN 34-0245610, Plan Number 003
December 31, 2016
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(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
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(e)
|
|
|
|
Identity of Issue,
Borrower, Lessor,
or Similar Party
|
|
Description of Investment Including
Maturity Date, Rate of Interest,
Collateral, Par, or Maturity Value
|
|
Cost
|
|
|
Current
Value
|
|
*
|
|
Worthington Deferred Profit Sharing Plan Master Trust
|
|
Master Trust
|
|
|
N/A
|
|
|
$
|
8,680,880
|
|
|
|
|
|
|
*
|
|
Loans from Participants
|
|
Interest Rates Ranging From 3.25% to 4.50%
|
|
|
N/A
|
|
|
|
227,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,908,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Party-in-Interest to the Plan
|
-16-