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Worthington Reports Second Quarter Fiscal 2013 Results

Jan 03, 2013 (Marketwire via COMTEX) --Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $622.6 million and net earnings of $31.8 million, or $0.45 per share, for its fiscal 2013 second quarter ended November 30, 2012. In the second quarter of the prior year, the Company reported net sales of $565.7 million and net earnings of $12.0 million, or $0.17 per share. The prior year period included $9.7 million or $0.10 per share of charges related to the voluntary recall of propylene cylinders, which is now essentially complete. The current quarter included an additional $1.0 million of expense related to the recall.

Financial highlights for the current and comparative periods are as follows:

(U.S. dollars in millions, except per share data)

 
  2Q 2013   1Q 2013   2Q 2012   6M2013   6M2012
Net sales $622.6   $666.0   $565.7   $1,288.7   $1,168.0
Operating income 28.8   33.4   2.8   62.2   24.0
Equity income 25.2   22.6   21.9   47.9   46.6
Net earnings 31.8   34.0   12.0   65.8   37.6
Earnings per share $0.45   $0.49   $0.17   $0.94   $0.53
                   

"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.

Balance Sheet

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.

Recent Developments

  • On September 17, 2012, the Company acquired the outstanding common shares of Westerman, Inc., a leading manufacturer of tanks and pressure vessels for the oil and gas and nuclear markets as well as hoists for marine applications. The business is now a part of the Pressure Cylinders segment. 

  • A quarterly dividend of $0.13 per common share was declared by the Company's Board of Directors on September 27, 2012, payable on December 28, 2012 to shareholders of record as of December 14, 2012.

  • On December 10, 2012, the Company's Board of Directors declared an additional cash dividend totaling $0.26 per common share. The dividend was paid on December 28, 2012 to shareholders of record as of December 21, 2012. This dividend represents an acceleration of the dividend payments for the third and fourth quarters of fiscal 2013.

  • On October 31, 2012, the Company completed the sale of its air brake tank business in the Czech Republic. A $1.6 million impairment charge related to this transaction was recorded in the previous quarter.

Outlook

"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."

Conference Call

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.

Corporate Profile

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.

   
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF EARNINGS  
(In thousands, except per share amounts)  
   
                       
  Three Months Ended     Six Months Ended  
  November 30,     November 30,  
  2012     2011     2012     2011  
Net sales $ 622,622     $ 565,652     $ 1,288,657     $ 1,168,039  
Cost of goods sold   527,766       509,046       1,100,150       1,039,971  
  Gross margin   94,856       56,606       188,507       128,068  
Selling, general and administrative expense   65,101       52,901       124,523       98,262  
Impairment of long-lived assets   (50 )     -       1,520       -  
Restructuring and other expense   1,262       2,048       1,665       3,751  
Joint venture transactions   (279 )     (1,192 )     (1,441 )     2,023  
  Operating income   28,822       2,849       62,240       24,032  
Other income (expense):                              
  Miscellaneous income   303       279       468       680  
  Interest expense   (6,334 )     (4,756 )     (11,593 )     (9,444 )
  Equity in net income of unconsolidated affiliates   25,221       21,912       47,864       46,609  
  Earnings before income taxes   48,012       20,284       98,979       61,877  
Income tax expense   15,390       6,083       31,492       19,336  
Net earnings   32,622       14,201       67,487       42,541  
Net earnings attributable to noncontrolling interest   796       2,216       1,699       4,904  
Net earnings attributable to controlling interest $ 31,826     $ 11,985     $ 65,788     $ 37,637  
                               
Basic                              
Average common shares outstanding   68,934       69,350       68,604       70,440  
Earnings per share attributable to controlling interest $ 0.46     $ 0.17     $ 0.96     $ 0.53  
                               
Diluted                              
Average common shares outstanding   70,411       69,356       69,834       70,925  
Earnings per share attributable to controlling interest $ 0.45     $ 0.17     $ 0.94     $ 0.53  
                               
                               
Common shares outstanding at end of period   69,060       68,937       69,060       68,937  
                               
Cash dividends declared per share $ 0.13     $ 0.12     $ 0.26     $ 0.24  
                               
                               
                               
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    November 30,   May 31,
    2012   2012
Assets            
Current assets:            
  Cash and cash equivalents   $ 32,889   $ 41,028
  Receivables, less allowances of $4,139 and $3,329 at November 30, 2012 and May 31, 2012, respectively     334,912     400,869
  Inventories:            
    Raw materials     180,690     211,543
    Work in process     89,766     115,510
    Finished products     87,768     74,887
      Total inventories     358,224     401,940
  Income taxes receivable     6,869     892
  Assets held for sale     3,697     7,202
  Deferred income taxes     19,963     20,906
  Prepaid expenses and other current assets     38,560     41,402
    Total current assets     795,114     914,239
             
Investments in unconsolidated affiliates     252,347     240,882
Goodwill     179,837     156,681
Other intangible assets, net of accumulated amortization of $20,546 and $16,103 at November 30, 2012 and May 31, 2012, respectively     114,807     100,333
Other assets     18,649     22,585
Property, plant and equipment, net     460,081     443,077
Total assets   $ 1,820,835   $ 1,877,797
             
Liabilities and equity            
Current liabilities:            
  Accounts payable   $ 218,971   $ 252,334
  Short-term borrowings     43,978     274,923
  Accrued compensation, contributions to employee benefit plans and related taxes     52,903     71,271
  Dividends payable     9,541     8,478
  Other accrued items     34,446     38,231
  Income taxes payable     1,802     11,697
  Current maturities of long-term debt     1,183     1,329
    Total current liabilities     362,824     658,263
             
Other liabilities     72,994     72,371
Distributions in excess of investment in unconsolidated affiliate     64,966     69,165
Long-term debt     406,811     257,462
Deferred income taxes     90,764     73,099
  Total liabilities     998,359     1,130,360
             
Shareholders' equity - controlling interest     776,146     697,174
Noncontrolling interest     46,330     50,263
  Total equity     822,476     747,437
Total liabilities and equity   $ 1,820,835   $ 1,877,797
             
             
                       
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
               
  Three Months Ended     Six Months Ended  
  November 30,     November 30,  
  2012     2011     2012     2011  
Operating activities                              
Net earnings $ 32,622     $ 14,201     $ 67,487     $ 42,541  
Adjustments to reconcile net earnings to net cash provided by operating activities:                              
  Depreciation and amortization   16,101       13,119       31,088       25,973  
  Impairment of long-lived assets   (50 )     -       1,520       -  
  Provision for deferred income taxes   (1,320 )     500       3,359       8,178  
  Bad debt expense (income)   492       (140 )     499       (111 )
  Equity in net income of unconsolidated affiliates, net of distributions   (7,057 )     2,782       (14,415 )     (2,287 )
  Net gain on sale of assets   (2,379 )     (1,653 )     (69 )     (2,068 )
  Stock-based compensation   3,740       2,578       6,933       5,779  
Changes in assets and liabilities:                              
  Receivables   30,634       28,717       68,750       56,092  
  Inventories   40,882       48,860       57,901       54,775  
  Prepaid expenses and other current assets   1,747       2,940       1,602       3,550  
  Other assets   90       1,567       2,937       2,840  
  Accounts payable and accrued expenses   (30,618 )     (50,281 )     (70,191 )     (147,129 )
  Other liabilities   3,497       1,165       1,978       1,382  
Net cash provided by operating activities   88,381       64,355       159,379       49,515  
                               
Investing activities                              
  Investment in property, plant and equipment, net   (7,911 )     (3,559 )     (24,616 )     (10,031 )
  Acquisitions, net of cash acquired   (62,110 )     (38,782 )     (62,110 )     (79,782 )
  Distributions from unconsolidated affiliates   -       -       -       (785 )
  Proceeds from sale of assets   9,090       6,306       15,675       11,347  
Net cash used by investing activities   (60,931 )     (36,035 )     (71,051 )     (79,251 )
                               
Financing activities                              
  Net proceeds from (repayments of) short-term borrowings   (14,508 )     16,881       (238,196 )     93,131  
  Proceeds from long-term debt   -       -       150,000       -  
  Principal payments on long-term debt   (363 )     -       (805 )     -  
  Proceeds from issuance of common shares   4,773       315       15,628       8,523  
  Dividends paid to noncontrolling interest, net of contributions   (5,990 )     (3,456 )     (5,990 )     (6,576 )
  Repurchase of common shares   -       (16,715 )     -       (52,120 )
  Dividends paid   (8,954 )     (8,414 )     (17,104 )     (15,583 )
Net cash provided (used) in financing activities   (25,042 )     (11,389 )     (96,467 )     27,375  
                               
Increase (decrease) in cash and cash equivalents   2,408       16,931       (8,139 )     (2,361 )
Cash and cash equivalents at beginning of period   30,481       36,875       41,028       56,167  
Cash and cash equivalents at end of period $ 32,889     $ 53,806     $ 32,889     $ 53,806  
                               
                               
                               
WORTHINGTON INDUSTRIES, INC.  
SUPPLEMENTAL DATA  
(In thousands)  
                       
This supplemental information is provided to assist in the analysis of the results of operations.  
   
  Three Months Ended     Six Months Ended  
  November 30,     November 30,  
  2012     2011     2012     2011  
Volume:                              
  Steel Processing (tons)   626       681       1,321       1,385  
  Pressure Cylinders (units)   19,496       14,585       40,965       29,178  
                               
Net sales:                              
  Steel Processing $ 339,313     $ 373,462     $ 719,285     $ 781,636  
  Pressure Cylinders   207,494       176,717       401,730       345,546  
  Engineered Cabs   57,804       -       122,299       -  
  Other   18,011       15,473       45,343       40,857  
      Total net sales $ 622,622     $ 565,652     $ 1,288,657     $ 1,168,039  
                               
Material cost:                              
  Steel Processing $ 241,161     $ 281,784     $ 520,895       588,434  
  Pressure Cylinders   97,559       90,461       189,643       177,013  
  Engineered Cabs   29,940       -       62,051       -  
                               
Selling, general and administrative expense:                              
  Steel Processing $ 26,889     $ 25,888     $ 52,873     $ 51,368  
  Pressure Cylinders   26,040       21,909       48,198       35,736  
  Engineered Cabs   7,558       -       14,534       -  
  Other   4,614       5,104       8,918       11,158  
      Total selling, general and administrative expense $ 65,101     $ 52,901     $ 124,523     $ 98,262  
                               
Operating income (loss):                              
  Steel Processing $ 13,314     $ 7,387     $ 29,333     $ 23,664  
  Pressure Cylinders   17,079       531       32,105       12,446  
  Engineered Cabs   565       -       5,259       -  
  Other   (2,136 )     (5,069 )     (4,457 )     (12,078 )
      Total operating income $ 28,822     $ 2,849     $ 62,240     $ 24,032  
                               
The following provides detail of impairment of long-lived assets, restructuring and other expense, and joint venture transactions included in operating income by segment presented above.  
                       
  Three Months Ended     Six Months Ended  
  November 30,     November 30,  
  2012     2011     2012     2011  
Impairment of long-lived assets and restructuring and other expense:                              
  Steel Processing $ -     $ -     $ -     $ -  
  Pressure Cylinders   (50 )     -       1,526       -  
  Engineered Cabs   -       -       -       -  
  Other   1,262       2,048       1,659       3,751  
      Total impairment of long-lived assets and restructuring and other expense $ 1,212     $ 2,048     $ 3,185     $ 3,751  
                               
  Three Months Ended     Six Months Ended  
  November 30,     November 30,  
  2012     2011     2012     2011  
Joint venture transactions:                              
  Steel Processing $ -     $ -     $ -     $ -  
  Pressure Cylinders   -       -       -       -  
  Engineered Cabs   -       -       -       -  
  Other   (279 )     (1,192 )     (1,441 )     2,023  
      Total joint venture transactions $ (279 )   $ (1,192 )   $ (1,441 )   $ 2,023  
                               
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
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