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Worthington Reports Record First Quarter Results


Earnings Per Share More Than Triples

COLUMBUS, Ohio--(BUSINESS WIRE)--Sept. 23, 2008--Worthington Industries, Inc. (NYSE: WOR) today reported results for the three months ended August 31, 2008.

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

                                                  1Q2009 4Q2008 1Q2008
                                                  ------ ------ ------

Net sales                                         $913.2 $868.9 $759.0
Operating income                                    79.7   56.5   20.0
Equity income                                       25.0   21.9   15.0
Net earnings                                        68.6   53.9   20.2
Earnings per share                                 $0.86  $0.68  $0.24

EBITDA(a)                                         $120.6  $92.6  $49.6

(a) Earnings before interest, taxes, depreciation and amortization. See reconciliation on consolidated statement of earnings.

    First Quarter 2009 Highlights
  • Quarterly net sales and net earnings were the highest in company history, despite volume declines.
  • Quarterly net sales and operating income in the Steel Processing segment were a record $459.9 million and $44.4 million, respectively.
  • The Metal Framing segment reported a second consecutive quarter of significant operating income totaling $21.0 million.
  • Quarterly net sales and operating income in the Pressure Cylinders segment represented a first quarter record of $148.4 million and $18.7 million, respectively.
  • Equity income from eight unconsolidated joint ventures totaled $25.0 million led by record quarterly earnings at Worthington Armstrong Venture (WAVE) and the addition of the new Serviacero Worthington joint venture in Mexico.
  • Cash dividends received from joint ventures totaled $14.5 million for the quarter.
  • Cash provided by operating activities was $22.3 million for the first quarter of fiscal 2009. Capital expenditures were $14.8 million for the same period.
  • Dividends paid to shareholders totaled $13.5 million for the quarter. Based on the quarter-end stock price, the dividend yielded a 3.9% annualized return.
  • The ratio of total debt to capitalization was 32.5% at quarter end, compared to 30.1% at the last fiscal year end.
  • The June 2, 2008, acquisition of Sharon Stairs, a manufacturer of steel egress stair systems contributed $5.5 million in sales to the Construction Services segment in Other.

Consolidated Results

For the first quarter, net sales were $913.2 million, compared to $759.0 million for the first quarter of fiscal 2008, an increase of 20%. First quarter net earnings of $68.6 million, or $0.86 per diluted share, rose 240% from first quarter 2008 net earnings of $20.2 million, or $0.24 per diluted share.

Operating income for the first quarter included $8.8 million in pre-tax restructuring charges, primarily related to previously announced plant closures in the Metal Framing segment and professional fees in Other. These charges had a negative impact of $0.08 on reported earnings per share. Results for the prior year period included $4.4 million in restructuring charges which had a negative impact of $0.03 on earnings per share.

"We are pleased with our excellent first quarter which resulted in the best quarterly sales and earnings in the company's history," said John McConnell, Chairman and CEO. "While we benefited from a rising price environment, we have also been very focused on reducing costs, maximizing asset utilization and driving improvements in our operations. Unfortunately, the record quarterly sales and net earnings are not sustainable given current market conditions, particularly in the Steel Processing and Metal Framing business segments." McConnell added, "That's why we remain aggressive in our efforts with the Transformation Plan to create more opportunities for margin enhancement, restructuring, if necessary, developing new customers, and improving the supply chain. We also applaud the continued strong results in our Pressure Cylinders segment, and congratulate them on their efforts, along with the significant contributions this quarter from our joint ventures, WAVE and Serviacero Worthington."

Quarterly Segment Results

In the Steel Processing segment, quarterly net sales rose 29%, or $104.1 million, to $459.9 million from $355.9 million in the comparable quarter of fiscal 2008. The increase in net sales was the result of higher average pricing (up 40%) partially offset by lower volumes (down 7%) relative to the prior year. Operating income increased because of a much wider spread between average selling prices and material costs compared to the first quarter of fiscal 2008. In the Metal Framing segment, net sales increased 18%, or $34.9 million, to $232.9 million from $198.1 million in the comparable quarter of fiscal 2008. Average selling prices rose 35%, more than offsetting an overall volume decrease of 13%. The wider spread between selling prices and material costs resulted in much improved profitability for the quarter.

In the Pressure Cylinders segment, net sales increased 9%, or $11.8 million, to $148.4 million from $136.6 million in the comparable quarter of fiscal 2008. The increase in net sales was primarily the result of higher volumes (up 5%), especially in the 16 ounce camping gas product line sold in North America. With selling prices keeping pace with rising material costs, the higher volumes translated to an increase in operating income from the prior year.

Worthington's joint ventures added significantly to first quarter results, as equity income from the eight unconsolidated affiliates rose 67%, totaling a record $25.0 million for the quarter, compared to $15.0 million in the year ago quarter. Equity income increased due primarily to WAVE and to Worthington's new Mexican joint venture Serviacero Worthington. WAVE continued to contribute the vast majority of equity earnings, which reached a new record in the quarter.

Transformation Plan

Initial cost reduction efforts, announced in the first quarter of fiscal 2008, have grown into a broader program called the Transformation Plan. The Transformation Plan includes a focus on cost reduction, margin expansion and organizational capability improvements as well as an effort to drive excellence in three core competencies: sales, operations and supply chain management. The program is comprehensive in scope and features aggressive diagnostic and planning initiatives in the Steel Processing and Metal Framing business segments. The goal of the Transformation Plan is to increase the company's sustainable earnings potential over the next three years.

The initial cost reduction effort identified opportunities for $39 million in annual savings in overhead expense reduction, early retirement and plant closures, exclusive of the expenses related to achieving these savings. To date, $21.8 million of the $39.0 million in annual savings have been realized, of which $3.3 million was realized in the first quarter of fiscal 2009.

Restructuring charges associated with the Transformation Plan totaled $8.8 million in the first quarter of fiscal 2009. Additional charges are expected during the life of the plan including charges for professional fees, facility closures and relocation.

Other Dividend Declared

On August 19, 2008, the board of directors declared a quarterly cash dividend of $0.17 per share payable September 29, 2008, to shareholders of record on September 15, 2008.


On June 2, 2008, Worthington announced that its Worthington Integrated Building Systems subsidiary had acquired the assets of Sharon Stairs, a designer and manufacturer of steel egress stair systems for the commercial construction market. Sharon Stairs has experienced significant growth in recent years and ended 2007 with $32 million in sales. The acquisition offers additional growth opportunities, higher margin products and synergies with Worthington's mid-rise product offerings.

On September 23, 2008, U.S. Steel and Worthington Industries announced a plan to expand their existing Worthington Specialty Processing joint venture. Under the terms of the agreement, U.S. Steel will contribute ProCoil Company LLC, its steel processing subsidiary in Canton, Michigan, and Worthington will contribute its steel processing subsidiary in Taylor, Michigan. The expanded joint venture is expected to achieve synergies that will allow the three merged entities to better serve the automotive and flat-rolled market. Worthington Industries will own 51% and U.S. Steel will own 49% of the new joint venture. Worthington will continue as managing partner.

Conference Call

Worthington will review first quarter results during its quarterly conference call tomorrow, September 24, 2008, at 8:30 a.m.. Eastern Daylight Time. Details regarding the conference call can be found on the company web site at

Corporate Profile

Worthington Industries is a leading diversified metal processing company with annual sales of approximately $3 billion. The Columbus, Ohio, based company is North America's premier value-added steel processor and a leader in manufactured metal products such as metal framing, pressure cylinders, automotive past model service stampings, metal ceiling grid systems and laser welded blanks. Worthington employs approximately 8,000 people and operates 68 manufacturing facilities in 11 countries.

Founded in 1955, the company operates under a long-standing corporate philosophy rooted in the golden rule, with earning money for its shareholders as the first corporate goal. This philosophy, an unwavering commitment to the customer, and one of the strongest employee/employer partnerships in American industry serve as the company's foundation.

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 future or expected growth, growth opportunities, performance, sales, operating results and earnings per share; projected capacity and working capital needs; pricing trends for raw materials and finished goods, and the impact of pricing charges; anticipated capital expenditures and asset sales; projected timing, results, costs, charges and expenditures related to acquisitions or to facility startups, dispositions, shutdowns and consolidations; new products, services and markets; expectations for company and customer inventories, jobs and orders; expectations for the economy and markets; expected benefits from turnaround plans, plant closings, cost reduction efforts and other new initiatives; expectations for improvements in efficiencies or the supply chain; expectations for improving margins and increasing 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, product demand and pricing; changes in product mix, product substitution and market acceptance of the company's products; fluctuations in 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 consolidation and other changes within the steel, automotive, construction and related industries; failure to maintain appropriate levels of inventories; the ability to realize targeted expense reductions such as head count reductions, facility closures and other expense reductions; the ability to realize other cost savings and operational efficiencies and improvements on a timely basis; the overall success of, and the ability to integrate, newly-acquired businesses and achieve synergies therefrom; capacity levels and efficiencies within facilities and within the industry as a whole; financial difficulties (including bankruptcy filings) of customers, suppliers, joint venture partners and others with whom the company does business; the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the effect of disruption in 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 inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability, and foreign currency exposure; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; adverse claims experience with respect to workers compensation, product recalls or 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; and other risks described from time to time in the company's filings with the United States Securities and Exchange Commission.

                     WORTHINGTON INDUSTRIES, INC.
                   (In thousands, except per share)

                                                   Three Months Ended
                                                       August 31,
                                                     2008      2007
                                                   --------- ---------
Net sales                                          $913,222  $758,955
Cost of goods sold                                  761,320   680,170
                                                   --------- ---------
    Gross margin                                    151,902    78,785
Selling, general and administrative expense          63,402    54,345
Restructuring charges                                 8,752     4,436
                                                   --------- ---------
    Operating income                                 79,748    20,004
Other income (expense):
    Miscellaneous expense                              (492)     (908)
    Interest expense                                 (5,569)   (4,638)
    Equity in net income of unconsolidated
     affiliates                                      25,010    14,985
                                                   --------- ---------
    Earnings before income taxes                     98,697    29,443
Income tax expense                                   30,073     9,275
                                                   --------- ---------
Net earnings                                        $68,624   $20,168
                                                   ========= =========

Average common shares outstanding - basic            79,017    84,063
                                                   --------- ---------
Earnings per share - basic                            $0.87     $0.24
                                                   ========= =========

Average common shares outstanding - diluted          79,498    85,001
                                                   --------- ---------
Earnings per share - diluted                          $0.86     $0.24
                                                   ========= =========

Common shares outstanding at end of period           78,785    81,034

Cash dividends declared per share                     $0.17     $0.17


Reconciliation of net earnings to EBITDA
Net earnings                                        $68,624   $20,168
Interest expense                                      5,569     4,638
Income taxes                                         30,073     9,275
Depreciation & amortization                          16,368    15,486
                                                   --------- ---------
EBITDA                                             $120,634   $49,567
                                                   ========= =========
                     WORTHINGTON INDUSTRIES, INC.
                            (In thousands)

                                                 August 31,  May 31,
                                                   2008        2008
                                                ----------- ----------
Current assets:
  Cash and cash equivalents                         $74,775    $73,772
  Receivables, less allowances of $6,300 and
   $4,849 at August 31, 2008 and May 31, 2008       378,645    384,354
    Raw materials                                   377,421    350,256
    Work in process                                 137,879    123,106
    Finished products                               154,681    119,599
                                                ----------- ----------
      Total inventories                             669,981    592,961
  Assets held for sale                                1,092      1,132
  Deferred income taxes                              18,330     17,966
  Prepaid expenses and other current assets          36,154     34,785
                                                ----------- ----------
    Total current assets                          1,178,977  1,104,970

Investments in unconsolidated affiliates            130,040    119,808
Goodwill                                            201,333    183,523
Other assets                                         41,560     29,786
Property, plant & equipment, net                    549,747    549,944
                                                ----------- ----------
Total assets                                     $2,101,657 $1,988,031
                                                =========== ==========

Liabilities and shareholders' equity
Current liabilities:
  Accounts payable                                 $360,515   $356,129
  Notes payable                                     199,568    135,450
  Accrued compensation, contributions to
   employee benefit plans and related taxes          55,742     59,619
  Dividends payable                                  13,400     13,487
  Other accrued items                                74,278     68,545
  Income taxes payable                               42,104     31,665
                                                ----------- ----------
    Total current liabilities                       745,607    664,895

Other liabilities                                    48,941     49,785
Long-term debt                                      245,400    245,000
Deferred income taxes                                99,719    100,811
                                                ----------- ----------
    Total liabilities                             1,139,667  1,060,491

Minority interest                                    38,851     42,163
Shareholders' equity                                923,139    885,377
                                                ----------- ----------
Total liabilities and shareholders' equity       $2,101,657 $1,988,031
                                                =========== ==========
                     WORTHINGTON INDUSTRIES, INC.
                            (In thousands)

                                                    Three Months Ended
                                                        August 31,
                                                      2008      2007
                                                    --------- --------
Operating activities
Net earnings                                         $68,624  $20,168
Adjustments to reconcile net earnings to net
 cash provided by operating activities:
  Depreciation and amortization                       16,368   15,486
  Provision for deferred income taxes                    744    1,747
  Equity in net income of unconsolidated
   affiliates, net of distributions                  (10,510)    (285)
  Minority interest in net income of consolidated
   subsidiaries                                          654    1,998
  Net (gain) loss on sale of assets                     (142)   2,392
  Stock-based compensation                             1,284      934
  Excess tax benefits - stock-based compensation        (355)    (560)
Changes in assets and liabilities:
  Accounts receivable                                 15,276   13,363
  Inventories                                        (69,650)   2,703
  Prepaid expenses and other current assets           (1,967)   1,718
  Other assets                                        (1,830)     207
  Accounts payable and accrued expenses                5,805   16,324
  Other liabilities                                   (1,958)  (1,362)
                                                    --------- --------
Net cash provided by operating activities             22,343   74,833
                                                    --------- --------

Investing activities
  Investment in property, plant and equipment, net   (14,784) (16,505)
  Acquisitions, net of cash acquired                 (40,225)       -
  Investment in unconsolidated affiliate                (288)       -
  Proceeds from sale of assets                         3,450       46
  Sales of short-term investments                          -   25,562
                                                    --------- --------
Net cash provided (used) by investing activities     (51,847)   9,103
                                                    --------- --------

Financing activities
  Net proceeds from short-term borrowings             56,203   55,350
  Principal payments on long-term debt                  (248)       -
  Proceeds from issuance of common shares              1,762    4,734
  Excess tax benefits - stock-based compensation         355      560
  Payments to minority interest                       (1,680)  (2,400)
  Repurchase of common shares                        (12,402) (87,310)
  Dividends paid                                     (13,483) (14,461)
                                                    --------- --------
Net cash provided (used) by financing activities      30,507  (43,527)
                                                    --------- --------

Increase in cash and cash equivalents                  1,003   40,409
Cash and cash equivalents at beginning of period      73,772   38,277
                                                    --------- --------
Cash and cash equivalents at end of period           $74,775  $78,686
                                                    ========= ========
                     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
                                                       August 31,
                                                     2008      2007
                                                   --------- ---------
 Steel Processing (tons)                                751       810
 Metal Framing (tons)                                   153       174
 Pressure Cylinders (units)                          12,147    11,539

Net sales:
 Steel Processing                                  $459,914  $355,854
 Metal Framing                                      232,932   198,071
 Pressure Cylinders                                 148,399   136,598
 Other                                               71,977    68,432
                                                   --------- ---------
                  Total net sales                  $913,222  $758,955
                                                   ========= =========

Material cost:
 Steel Processing                                  $330,926  $270,221
 Metal Framing                                      152,794   145,501
 Pressure Cylinders                                  69,960    64,278

Operating income (loss):
 Steel Processing                                   $44,397    $9,979
 Metal Framing                                       20,959    (8,003)
 Pressure Cylinders                                  18,654    17,965
 Other                                               (4,262)       63
                                                   --------- ---------
                  Total operating income            $79,748   $20,004
                                                   ========= =========

The following provides detail of the restructuring charges included
in the operating income by segment presented above.

                                                   Three Months Ended
                                                       August 31,
                                                     2008      2007
                                                   --------- ---------

Pre-tax restructuring charges by segment:
 Steel Processing                                       $12    $1,201
 Metal Framing                                        1,280       882
 Pressure Cylinders                                       7         -
 Other                                                7,453     2,353
                                                   --------- ---------
                  Total restructuring charges        $8,752    $4,436
                                                   ========= =========

CONTACT: Worthington Industries, Inc.
Media Contact:
Cathy M. Lyttle, 614-438-3077
VP, Corporate Communications
Investor Contact:
Allison M. Sanders, 614-840-3133
Director, Investor Relations

SOURCE: Worthington Industries, Inc.

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