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|Worthington Reports Second Quarter Fiscal 2013 Results|
Jan 03, 2013 (Marketwire via COMTEX) --Worthington Industries, Inc. (
Financial highlights for the current and comparative periods are as follows:
(U.S. dollars in millions, except per share data)
"We had strong performances from most of our businesses in the second quarter, with volume increases in Pressure Cylinders, and a steady performance from Steel Processing, offset by softness in Engineered Cabs," said John McConnell, Chairman and CEO. "Our year-over-year performance improved despite declining steel prices, thanks to contributions from recent acquisitions. We are very pleased with the results of our latest acquisition, Westerman, whose products include tanks for use in on-site production in shale drilling activity."
Consolidated Quarterly Results
Net sales for the second quarter were $622.6 million, up 10% from the comparable quarter in the prior year, when net sales were $565.7 million. An increase in volume was partially offset by lower average selling prices, primarily in Steel Processing, which were affected by the declining market price of steel. Most of the volume increase resulted from the acquisition of Angus Industries, reported under the Engineered Cabs segment, and two acquisitions in Pressure Cylinders.
Gross margin for the current quarter was $94.9 million, compared to $56.6 million in the prior year quarter. The $38.3 million increase was the result of acquisitions, a more favorable product mix, lower inventory holding losses for Steel Processing, and the impact of the voluntary product recall in Pressure Cylinders. The gross margin for the current quarter included $1.0 million of product recall charges compared to $9.7 million in the comparable quarter in the prior year.
SG&A expense increased $12.2 million over the prior year quarter driven by the impact of acquisitions and higher profit sharing and bonus expense resulting from higher net earnings.
Operating income for the current quarter was $28.8 million, compared to $2.8 million in the prior year quarter. The $26.0 million increase was mostly due to the impact of the voluntary product recall in the prior year quarter, lower inventory holding losses in Steel Processing and acquisitions. The combined impact of impairments, restructuring charges and joint venture transactions was essentially flat from the prior year quarter. In the current quarter, $1.3 million of restructuring charges were incurred in connection with the wind-down of the commercial stairs business and a net gain of $0.3 million related to the joint venture transactions, which consisted primarily of gains on asset disposals.
Interest expense was $6.3 million in the quarter, compared to $4.8 million in the comparable period in the prior year primarily due to the impact of higher average debt levels.
Equity in net income from unconsolidated joint ventures was $25.2 million, an increase of $3.3 million from the comparable quarter in the prior year, on sales of $438.3 million. In the current quarter, WAVE contributed $14.8 million of earnings and TWB contributed $3.8 million. In addition, ClarkDietrich and ArtiFlex contributed $2.4 million and $1.7 million of earnings, respectively.
For the current quarter, income tax expense of $15.4 million increased from $6.1 million in the prior year quarter due to higher earnings. The current quarter income tax expense reflects an estimated annual effective tax rate of 32.7% compared to 32.9% for the prior year quarter.
At quarter end, total debt was $452.0 million, down $7.6 million from August 31, 2012, due to lower short-term borrowings. As of November 30, 2012, the Company had utilized $15.0 million of its $150.0 million trade accounts receivable securitization facility, and $23.1 million was drawn on the Company's $425.0 million revolving credit facility.
Quarterly Segment Results
Steel Processing's net sales of $339.3 million were down 9%, or $34.1 million, from the prior year quarter, as lower average selling prices and a decrease in volumes negatively impacted net sales by $29.2 million and $4.9 million, respectively. The decline in volumes was driven by the wind down of unprofitable customer accounts from the MISA Metals acquisition in fiscal 2012. The mix of direct versus toll tons processed was 55% to 45% this quarter, compared with a 51% to 49% mix in the comparable quarter of the prior year. Operating income increased by $5.9 million due primarily to lower inventory holding losses in the current quarter.
Pressure Cylinders' net sales of $207.5 million were up 17% from the comparable prior year quarter driven almost entirely by the impact of acquisitions. Pressure Cylinders' operating income was $17.1 million, up $16.5 million from the prior year quarter, which included a $9.7 million charge related to the voluntary product recall. Acquisitions, combined with an improvement in existing operations, drove the remainder of the increase.
Engineered Cabs, consisting of the operations of Angus Industries Inc. acquired on December 29, 2011, generated net sales of $57.8 million in the current quarter and reported operating income of $0.6 million. These results were impacted by lower volumes resulting from production delays at several top customers experiencing slower growth.
The entities included in "Other" are the Construction, Energy Innovations and Steel Packaging operating segments, as well as other non-allocated expenses. Operations in "Other" reported net sales of $18.0 million, which was $2.5 million higher than in the prior year quarter, mostly due to the Military Construction business. These operations reported a combined loss of $2.1 million for the quarter primarily driven by $1.3 million of restructuring charges incurred in connection with the wind-down of the commercial stairs business.
"We expect to see the normal seasonality in our traditional markets in the third quarter," McConnell said. "We do think that the delay by lawmakers in addressing the country's fiscal crisis has resulted in a pullback in some areas of the economy. While this may impact some of our cyclical businesses, we continue to anticipate good performance in our higher growth cylinder operations serving retail, alternative fuels and energy markets." McConnell added, "Our strategy to optimize our businesses continues across the Company as the Transformation takes hold in Pressure Cylinders and is moving into the Engineered Cabs facilities. We anticipate improvements in both of these businesses over the next several quarters. We will also continue to look for other opportunities to grow the Company organically and through new businesses."
Worthington will review second quarter results during its quarterly conference call on January 3, 2013, at 1:30 p.m., Eastern Standard Time. Details regarding the conference call can be found on the Company web site at www.WorthingtonIndustries.com.
Worthington Industries is a leading diversified metals manufacturing company with 2012 fiscal year sales of $2.5 billion. The Columbus, Ohio based company is North America's premier value-added steel processor and a leader in manufactured pressure cylinders, such as propane, oxygen and helium tanks, hand torches, refrigerant and industrial cylinders, camping cylinders, exploration, recovery and production products for global energy markets; scuba tanks, and compressed natural gas storage cylinders; custom-engineered open and enclosed cabs and operator stations for heavy mobile equipment; framing systems for mid-rise buildings; steel pallets and racks; and through joint ventures, suspension grid systems for concealed and lay-in panel ceilings, current and past model automotive service stampings, laser welded blanks, and light gauge steel framing for commercial and residential construction. Worthington employs more than 10,000 people and operates 82 facilities in 11 countries.
Founded in 1955, the Company operates under a long-standing corporate philosophy rooted in the golden rule. Earning money for its shareholders is the first corporate goal. This philosophy serves as an unwavering commitment to the customer, supplier, and shareholder, and it serves as the Company's foundation for one of the strongest employee-employer partnerships in American industry.
Safe Harbor Statement
The Company wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements by the Company relating to business plans or future or expected growth, performance, sales, volumes, cash flows, earnings, balance sheet strengths, debt, financial condition or other financial measures; projected profitability potential, capacity, and working capital needs; demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; pricing trends for raw materials and finished goods and the impact of pricing changes; anticipated capital expenditures and asset sales; anticipated improvements and efficiencies in costs, operations, sales, inventory management, sourcing and the supply chain and the results thereof; the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, newly-created joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to maintain margins and capture and maintain market share and to develop or take advantage of future opportunities, new products and new markets; expectations for Company and customer inventories, jobs and orders; expectations for the economy and markets or improvements therein; expected benefits from transformation plans, cost reduction efforts and other new initiatives; expectations for increasing volatility or improving and sustaining earnings, earnings potential, margins or shareholder value; effects of judicial rulings and other non-historical matters constitute "forward-looking statements" within the meaning of the Act. 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, the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the outcome of negotiations surrounding the United States "fiscal cliff", which, even if resolved, may be adverse due to its impact on tax increases, governmental spending, and customer confidence and spending; the effect of conditions in national and worldwide financial markets; product demand and pricing; changes in product mix, product substitution and market acceptance of the Company's products; fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities and other items required by operations; effects of facility closures and the consolidation of operations; the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction and other industries in which the Company participates; failure to maintain appropriate levels of inventories; financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom the Company does business; the ability to realize targeted expense reductions from headcount reductions facility closures and other cost reduction efforts; the ability to realize other cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from transformation initiatives, on a timely basis; the overall success of, and the ability to integrate newly-acquired businesses and joint ventures, maintain and develop their customers, and achieve synergies and other expected benefits and cost savings therefrom; capacity levels and efficiencies, within facilities, within major product markets and within the industry as a whole; the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, acts of war or terrorist activities or other causes; changes in customer demand, inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability, foreign currency exposure and the acceptance of our products in new markets; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; the outcome of adverse claims experience with respect to workers' compensation, product recalls or product liability, casualty events or other matters; deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies; level of imports and import prices in the Company's markets; the impact of judicial rulings and governmental regulations, both in the United states and abroad, including those adopted by the United State Securities and Exchange Commission and other governmental agencies as contemplated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the effect of changes to healthcare laws in the united States which may increase our healthcare and other costs and negatively impact our operations and financial results; and other risks described from time to time in the Company's filings with the United States Securities and Exchange Commission, including those described in "Part I - Item 1A. - Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended May 31, 2012.
CONTACTS: Cathy M. Lyttle VP, Corporate Communications and Investor Relations Phone: (614) 438-3077 E-mail: Email Contact Sonya L. Higginbotham Director, Corporate Communications Phone: (614) 438-7391 E-mail: Email Contact