EPS Rise 28% From Prior Quarter and Nearly Quadruple Prior Year
COLUMBUS, Ohio--(BUSINESS WIRE)--March 20, 2008--Worthington
Industries, Inc. (NYSE: WOR) today reported results for the three- and
nine-month periods ended February 29, 2008.
(U.S. dollars in millions, except per share data)
3Q2008 2Q2008 3Q2007 9M2008 9M2007
------ ------ ------ -------- --------
Net sales $725.7 $713.7 $677.3 $2,198.3 $2,185.2
Operating income 18.1 11.5 2.2 49.5 87.5
Equity income 15.7 14.9 13.5 45.6 46.5
Net earnings 18.3 14.7 5.5 53.2 75.7
Earnings per share $ 0.23 $ 0.18 $ 0.06 $ 0.65 $ 0.87
EBITDA(a) $ 48.7 $ 39.7 $ 30.0 $ 137.9 $ 178.0
(a)Earnings before interest, taxes, depreciation and amortization. See
reconciliation on consolidated statement of earnings.
For the third quarter of fiscal 2008, net sales were $725.7
million, an increase of 7% from $677.3 million last year. Third
quarter net earnings were $18.3 million and earnings per diluted share
were $0.23, compared to $5.5 million, or $0.06 per diluted share, for
the same period last year. Net earnings for the third quarter included
$2.6 million in pre-tax restructuring charges, $1.4 million of which
was non-cash, primarily related to previously announced plant closures
in the Metal Framing segment. These charges had a negative impact of
$0.02 on reported earnings per share.
For the nine-month period, net sales of $2,198.3 million, were 1%
higher than $2,185.2 million for the same period last year. Net
earnings were $53.2 million, or $0.65 per diluted share, compared to
$75.7 million, or $0.87 per diluted share, for the same period last
year. Year-to-date results were negatively impacted by $9.9 million in
pre-tax restructuring charges, or $0.08 per share, related to early
retirement, severance and plant closures.
"Our performance this quarter showed significant improvement,"
said Chairman and CEO, John McConnell. "Pressure Cylinders and our
WAVE joint venture, which posted a record third quarter, continued
producing excellent results. Metal Framing made great strides as
efforts to reduce cost and improve customer service are beginning to
net results." McConnell added, "The entire team has pulled together to
help this segment successfully implement its turnaround plan. Steel
Processing has also done an excellent job of increasing volumes and
market share to help offset the weakness in the automotive sector."
"Our employees are doing a very good job of eliminating or
changing the way we work, resulting in permanent reductions in cost
and improved efficiencies. We have removed $12 million in costs so far
this year. Once the plant closings in Metal Framing are completed and
other identified cost reductions are fully implemented, we expect our
total cost savings to reach a $39 million annual run rate in 2010."
Third Quarter Highlights
- The Steel Processing segment increased volumes by 9%, compared
to the prior year, as a result of new business.
- The Metal Framing segment returned to operating profitability
for the month of February, excluding the impact of
restructuring charges and a pension charge.
- Quarterly net sales in the Pressure Cylinders segment were a
third quarter record of $138.3 million. Operating income was
down from last year's third quarter record but remained well
above historical levels.
- Equity income from nine unconsolidated joint ventures totaled
$15.7 million led by record third quarter earnings at
Worthington Armstrong Venture (WAVE) and the addition of the
new Serviacero Worthington joint venture in Mexico.
- Cash dividends received from unconsolidated joint ventures
totaled $13.0 million for the quarter.
- Cash provided by operating activities was $11.4 million for
the third quarter of fiscal 2008 and $108.2 million for the
year to date. Capital expenditures, excluding acquisitions,
were $10.6 million and $37.2 million for the same periods.
- During the third quarter, $13.9 million was paid to
shareholders in a regular quarterly dividend. At quarter end,
the dividend yielded a 3.9% annualized return.
- During the third quarter, the company repurchased 2.3 million
common shares, reducing total outstanding shares to 79.3
million at quarter end.
Quarterly Segment Results
In the Steel Processing segment, quarterly net sales rose 8%, or
$26.1 million, to $350.4 million from $324.3 million in the comparable
quarter of fiscal 2007. Volumes rose 9%, partially offset by lower
average pricing (down 1%), as the segment benefited from a concerted
sales effort focused on generating new business. Segment results were
negatively impacted by an unplanned furnace outage at Severstal, the
primary supplier to, and minority partner in, the company's Spartan
Steel Coating joint venture, which is consolidated in this segment.
Operating income increased in spite of the business interruption
because of higher volumes and a wider spread between average selling
prices and material costs compared to the depressed spreads of a year
ago.
In the Metal Framing segment, net sales increased 5%, or $8.9
million, to $182.8 million from $173.9 million in the comparable
quarter of fiscal 2007, due to higher volumes (up 5%). While average
selling prices were comparable to the year ago period, they increased
from what had been a declining trend since then and were up 4% from
the second quarter. Selling prices are steadily rising in conjunction
with rapidly rising steel raw material costs. Price increases were
implemented in both January and February and additional monthly
increases have been announced through May. The operating loss narrowed
as the spread between selling prices and material costs improved
significantly compared to the depressed levels of a year ago. Much of
the improvement was a result of lower material costs associated with a
more favorable mix of inventory. Reported results were hurt by $2.5
million in pre-tax restructuring charges related to announced plant
closures (see press release dated September 25, 2007, for more detail)
and a $1.5 million pre-tax pension charge related to the resolution of
a legal matter. The remaining plant closures are expected to be
substantially complete by fiscal year end. Measurable cost savings
related to these closures, estimated at $9 million annually, are not
expected until fiscal 2009.
In the Pressure Cylinders segment, net sales increased 3%, or $4.6
million, to $138.3 million from $133.7 million in the comparable
quarter of fiscal 2007. Stronger foreign currencies relative to the
U.S. dollar positively impacted reported U.S. dollar sales of the
non-U.S. operations by $6.7 million compared to last year. Improved
volumes in both the European and North American markets were offset by
lower average pricing resulting from changes to the product mix as
well as to pricing in the European market. Capacity increases by
European producers and increased imports into Europe from the U.S. and
China drove a significant pricing decline in the European high
pressure product line. While operating income fell from the year ago
quarter, the results were well above previous historical levels due to
continued strength in both the European and North American operations.
Worthington's joint ventures added significantly to third quarter
results as equity income from the nine unconsolidated affiliates rose
16% totaling $15.7 million, compared to $13.5 million in the year ago
quarter. WAVE continued to contribute the vast majority of equity
earnings. Its earnings were a third quarter record, up 22% from the
record set last year. Compared to the year ago quarter, equity income
increased due primarily to WAVE and to Worthington's new Mexican joint
venture, Serviacero Worthington.
Cost Reduction Initiative Update
Progress continued on the company's cost reduction program,
announced in September 2007, which included dozens of initiatives
related to overhead expense reductions and plant closures.
(1) Overhead expense reductions: Initiatives have been identified
that are expected to yield $30 million in annualized expense savings,
and half have been implemented. Realized savings to date are $12
million.
(2) Plant closures: Five metal framing facilities were identified
for closure or downsizing in September 2007. These closures are
expected to result in $9 million in annual savings once fully
implemented. In February 2008, the first facility was closed in
Wildwood, Florida. The remaining facilities are slated for closure
over the next several months and related savings will begin shortly
thereafter. Restructuring charges taken to date total $7 million of
the expected $15 million.
Realized cost savings for the entire cost reduction program are
expected to increase for the balance of fiscal 2008 and throughout
fiscal 2009 and reach the full $39 million annual savings run rate in
fiscal 2010.
Other
Share Repurchases
During the quarter, 2,271,300 shares were repurchased. A portion
of the shares (1,370,800) completed a 10 million share authorization
announced on June 13, 2005. The remaining portion of shares (900,500)
were purchased under a 10 million share authorization announced on
September 26, 2007. Purchases may occur from time to time, on the open
market or in private transactions with consideration given to the
market price of the stock, the nature of other investment
opportunities, cash flows from operations and general economic
conditions.
Dividend Declared
On February 19, 2008, the board of directors declared a quarterly
cash dividend of $0.17 per share payable March 29, 2008, to
shareholders of record on March 15, 2008.
Conference Call
Worthington will review third quarter results during its quarterly
conference call today, March 20, 2008, at 1:30 p.m. Eastern Daylight
Time. Details on the conference call can be found on the company web
site at www.WorthingtonIndustries.com
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 more than 8,000 people and operates 69 facilities in 10
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
performance, sales, operating results and earnings per share;
projected capacity and working capital needs; pricing trends for raw
materials and finished goods; 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 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 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 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.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share)
Three Months Ended Nine Months Ended
------------------------- -------------------------
February 29, February 28, February 29, February 28,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Net sales $725,667 $677,250 $2,198,286 $2,185,232
Cost of goods sold 649,940 620,931 1,973,764 1,923,464
------------ ------------ ------------ ------------
Gross margin 75,727 56,319 224,522 261,768
Selling, general
and administrative
expense 55,054 54,159 165,054 174,316
Restructuring
charges 2,619 - 9,929 -
------------ ------------ ------------ ------------
Operating income 18,054 2,160 49,539 87,452
Other income
(expense):
Miscellaneous
expense (818) (847) (4,157) (1,916)
Interest expense (5,702) (6,636) (15,710) (17,003)
Equity in net
income of
unconsolidated
affiliates 15,665 13,463 45,577 46,544
------------ ------------ ------------ ------------
Earnings before
income taxes 27,199 8,140 75,249 115,077
Income tax expense 8,897 2,630 22,039 39,395
------------ ------------ ------------ ------------
Net earnings $ 18,302 $ 5,510 $ 53,210 $ 75,682
============ ============ ============ ============
Average common
shares outstanding
- basic 80,184 84,733 81,879 86,918
------------ ------------ ------------ ------------
Earnings per share
- basic $ 0.23 $ 0.07 $ 0.65 $ 0.87
============ ============ ============ ============
Average common
shares outstanding
- diluted 80,214 85,309 82,480 87,473
------------ ------------ ------------ ------------
Earnings per share
- diluted $ 0.23 $ 0.06 $ 0.65 $ 0.87
============ ============ ============ ============
Common shares
outstanding at end
of period 79,304 84,430 79,304 84,430
Cash dividends
declared per share $ 0.17 $ 0.17 $ 0.51 $ 0.51
-------------------
Reconciliation of
net earnings to
EBITDA
Net earnings $ 18,302 $ 5,510 $ 53,210 $ 75,682
Interest expense 5,702 6,636 15,710 17,003
Income taxes 8,897 2,630 22,039 39,395
Depreciation &
amortization 15,768 15,251 46,990 45,872
------------ ------------ ------------ ------------
EBITDA $ 48,669 $ 30,027 $ 137,949 $ 177,952
============ ============ ============ ============
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
February 29, May 31,
2008 2007
------------ ----------
Assets
Current assets:
Cash and cash equivalents $ 54,432 $ 38,277
Short-term investments - 25,562
Receivables, less allowances of $4,606 and
$3,641 at February 29, 2008 and May 31,
2007 408,322 400,916
Inventories:
Raw materials 275,856 261,849
Work in process 96,248 97,633
Finished products 118,598 88,382
------------ ----------
Total inventories 490,702 447,864
Assets held for sale 5,603 4,600
Deferred income taxes 18,161 13,067
Prepaid expenses and other current assets 39,976 39,097
------------ ----------
Total current assets 1,017,196 969,383
Investments in unconsolidated affiliates 110,701 57,540
Goodwill 182,952 179,441
Other assets 31,639 43,553
Property, plant & equipment, net 552,444 564,265
------------ ----------
Total assets $1,894,932 $1,814,182
============ ==========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 314,874 $ 263,665
Notes payable 163,300 31,650
Accrued compensation, contributions to
employee benefit plans and related taxes 39,297 46,237
Dividends payable 13,484 14,440
Other accrued items 58,745 45,519
Income taxes payable 19,482 18,983
------------ ----------
Total current liabilities 609,182 420,494
Other liabilities 69,112 57,383
Long-term debt 245,000 245,000
Deferred income taxes 89,072 105,983
------------ ----------
Total liabilities 1,012,366 828,860
Minority interest 42,610 49,321
Shareholders' equity 839,956 936,001
------------ ----------
Total liabilities and shareholders' equity $1,894,932 $1,814,182
============ ==========
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Nine Months Ended
------------------------- -------------------------
February 29, February 28, February 29, February 28,
2008 2007 2008 2007
------------ ------------ ------------ ------------
Operating
activities
Net earnings $18,302 $5,510 $53,210 $75,682
Adjustments to
reconcile net
earnings to net
cash provided by
operating
activities:
Depreciation and
amortization 15,768 15,251 46,990 45,872
Restructuring
charges, non-
cash 1,378 - 4,108 -
Provision for
deferred income
taxes (10,169) (1,000) (3,693) (826)
Equity in net
income of
unconsolidated
affiliates, net
of distributions (2,665) 40,958 (3,177) 40,421
Minority interest
in net income of
consolidated
subsidiaries 1,212 980 5,199 3,561
Net loss on sale
of assets (115) 1,569 2,827 (457)
Stock-based
compensation 1,203 904 2,965 2,553
Excess tax
benefits -
stock-based
compensation (44) - (2,292) (200)
Changes in assets
and liabilities:
Accounts
receivable (38,576) 3,923 (13,012) 36,716
Inventories (42,852) 48,164 (42,215) (15,774)
Prepaid expenses
and other
current assets 3,165 (724) 3,037 (3,970)
Other assets 221 (668) (131) 3,320
Accounts payable
and accrued
expenses 66,591 26,953 56,846 (139,622)
Other liabilities (1,988) (642) (2,482) 1,123
------------ ------------ ------------ ------------
Net cash provided
by operating
activities 11,431 141,178 108,180 48,399
------------ ------------ ------------ ------------
Investing
activities
Investment in
property, plant
and equipment,
net (10,612) (10,627) (37,233) (44,134)
Acquisitions, net
of cash acquired 16 - (2,225) (31,727)
Investment in
unconsolidated
affiliate (526) - (47,569) (1,000)
Proceeds from
sale of assets 510 135 802 18,091
Sales of short-
term investments - - 25,562 2,173
------------ ------------ ------------ ------------
Net cash used by
investing
activities (10,612) (10,492) (60,663) (56,597)
------------ ------------ ------------ ------------
Financing
activities
Proceeds from
(payments on)
short-term
borrowings 70,100 (83,936) 131,650 111,880
Principal
payments on
long-term debt - (5) - (7)
Proceeds from
issuance of
common shares 98 693 13,146 2,558
Excess tax
benefits -
stock-based
compensation 44 - 2,292 200
Payments to
minority
interest (3,840) (2,400) (10,560) (2,400)
Repurchase of
common shares (38,475) (14,109) (125,785) (76,617)
Dividends paid (13,868) (14,488) (42,105) (44,664)
------------ ------------ ------------ ------------
Net cash provided
(used) by
financing
activities 14,059 (114,245) (31,362) (9,050)
------------ ------------ ------------ ------------
Increase (decrease)
in cash and cash
equivalents 14,878 16,441 16,155 (17,248)
Cash and cash
equivalents at
beginning of
period 39,554 22,527 38,277 56,216
------------ ------------ ------------ ------------
Cash and cash
equivalents at end
of period $54,432 $38,968 $54,432 $38,968
============ ============ ============ ============
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 Nine Months Ended
------------------- -----------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2008 2007 2008 2007
--------- --------- ----------- -----------
Volume:
Steel Processing (tons) 809 744 2,459 2,431
Metal Framing (tons) 157 150 494 473
Pressure Cylinders
(units) 11,460 9,970 33,675 31,291
Net sales:
Steel Processing $350,402 $324,312 $1,050,486 $1,100,179
Metal Framing 182,789 173,918 563,275 575,773
Pressure Cylinders 138,287 133,714 408,099 375,525
Other 54,189 45,306 176,426 133,755
--------- --------- ----------- -----------
Total net sales $725,667 $677,250 $2,198,286 $2,185,232
========= ========= =========== ===========
Material cost:
Steel Processing $266,818 $251,946 $ 799,155 $ 837,708
Metal Framing 130,017 138,459 413,736 407,167
Pressure Cylinders 66,278 60,536 191,337 171,030
Operating income (loss):
Steel Processing $ 10,030 $ 2,079 $ 30,276 $ 40,650
Metal Framing (7,562) (21,538) (31,610) (8,619)
Pressure Cylinders 13,889 21,760 49,285 58,596
Other 1,697 (141) 1,588 (3,175)
--------- --------- ----------- -----------
Total operating income $ 18,054 $ 2,160 $ 49,539 $ 87,452
========= ========= =========== ===========
The following provides detail of the restructuring charges included in
the operating income by segment presented above.
Three Months Ended Nine Months Ended
------------------- -----------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2008 2007 2008 2007
--------- --------- ----------- -----------
Pre-tax restructuring
charges by segment:
Steel Processing $ - $ - $ 1,096 $ -
Metal Framing 2,466 - 6,905 -
Pressure Cylinders 103 - 103 -
Other 50 - 1,825 -
--------- --------- ----------- -----------
Total restructuring
charges $ 2,619 $ - $ 9,929 $ -
========= ========= =========== ===========
CONTACT: Worthington Industries, Inc.
Media Contact:
Cathy M. Lyttle, 614-438-3077
VP, Corporate Communications
E-mail: cmlyttle@WorthingtonIndustries.com
or
Investor Contact:
Allison M. Sanders, 614-840-3133
Director, Investor Relations
E-mail: asanders@WorthingtonIndustries.com
or
www.WorthingtonIndustries.com
SOURCE: Worthington Industries, Inc.