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Worthington Reports Fourth Quarter and Fiscal Year Results


COLUMBUS, Ohio, Jun 29, 2010 (BUSINESS WIRE) --

Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $626.4 million, and net earnings of $33.1 million, or $0.42 per share, for the fiscal 2010 fourth quarter ended May 31, 2010. In last year's fourth quarter, the Company reported a net loss of $13.7 million, or $0.17 per share. The prior year fourth quarter included a $6.3 million pre-tax inventory write-down and $6.0 million of pre-tax restructuring charges, for a combined negative impact of $0.15 per share.

For the fiscal year ended May 31, 2010, the Company posted net earnings of $45.2 million, or $0.57 per share, driven by the strong fourth quarter. Sales were down 26% from the prior year to $1,943.0 million, primarily due to the reduction in sales volumes in the Metal Framing segment and a 24% decrease in the average market price of steel. Fiscal 2010 earnings were reduced by goodwill impairment, restructuring and certain legal charges totaling $31.0 million or $0.39 per share. The prior year net loss of $108.2 million was impacted by inventory write-downs, goodwill impairment, restructuring charges, and a gain on the sale of the Aegis joint venture, reducing net earnings by $175.7 million or $2.23 per share.

The results for the three- and twelve-month periods ended May 31, 2010 were as follows:

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

4Q 2010

3Q 2010 4Q 2009 12M 2010 12M 2009
Net sales $626.4 $451.1 $471.6 $1,943.0 $2,631.3
Operating income (loss) 42.6 (35.3) (19.2) 22.0 (175.3)
Equity income 18.8 14.6 8.7 64.6 48.6
Net earnings (loss) 33.1 (17.7) (13.7) 45.2 (108.2)
Earnings (loss) per share $0.42 $(0.22) $(0.17) $0.57 $(1.37)

"I am very pleased with our strong fourth quarter results," said John P. McConnell, Chairman and CEO. "The recession has made the past two years very difficult, but I believe we are a better company today because of the way we have responded. I am proud of all Worthington employees for their hard work and commitment in putting us on a much improved track. While our sales were down compared to last year, we improved our bottom line. We are growing the profit potential of existing businesses, investing in higher value-added businesses, and working to reduce our earnings volatility.

"Steel Processing continues to show marked improvement in its operations, despite lower but improving volumes. Pressure Cylinders had a very strong quarter in North America across many of its product lines with some modest improvements showing up in results from the European operations. Metal Worthington Industries Framing has worked diligently to remain cash neutral while market conditions continue to deteriorate. While we expect additional operating improvements to match existing market conditions in our traditional markets for Metal Framing, we have separately launched efforts to identify opportunities in new markets abroad."

Quarterly Results -Consolidated

Net sales for the fourth quarter ended May 31, 2010, were $626.4 million, a 33% increase from the comparable quarter last year, primarily due to increased volumes in our Steel Processing and Pressure Cylinders segments.

Gross margin for the current quarter was $105.8 million, or 17% of net sales. This represents a $68.5 million increase over the prior year quarter's gross margin of $37.3 million, or 8% of net sales. An improved spread, primarily in Steel Processing, between the average selling price and the cost of steel, improved the margin by $56.7 million. While volumes were up in both Steel Processing and Pressure Cylinders, the favorable impact was partially offset by volume declines in Metal Framing and the other construction related segments.

SG&A expenses were $12.1 million higher than the prior year quarter due to higher profit sharing and bonus expenses from improved earnings, but declined from 10.7% to 10.0% of net sales.

Operating income for the quarter was $42.6 million, driven by the increase in volume and improved spreads. This compares to the prior year quarter loss of $19.2 million, which included $6.0 million of pre-tax restructuring charges, and a $6.3 million pre-tax inventory write-down.

Interest expense was $3.1 million in the quarter, down from $4.3 million in the prior year due to lower average borrowings and interest rates.

Equity in net income from unconsolidated joint ventures was $18.8 million, an increase of $10.0 million from the comparable year-ago quarter, on sales of $203.7 million. Worthington Armstrong Venture (WAVE) contributed $15.1 million of earnings, a 42% increase from last year's fourth quarter, and dividends of $13.0 million. Four other joint ventures, TWB Company, Worthington Specialty Processing, Serviacero Worthington and Samuel Steel Pickling were all profitable and showed a combined improvement of $5.7 million over the prior year quarter.

For the quarter, income tax expense was $22.8 million compared to the income tax benefit of $2.9 million a year ago. The current quarter reflects an estimated effective income tax rate of 40.8%, excluding earnings from the non-controlling interest. The effective income tax rate for the year is 37.1%. The rates include a $3.0 million valuation allowance that was recorded in the fourth quarter related to certain deferred tax assets of Metal Framing.

Balance Sheet

At quarter end, total debt was $250.2 million, up $29.8 million from the previous quarter. In April of the current quarter, the Company completed the public offering of $150.0 million in senior notes due 2020 at a coupon rate of 6.5%. The Company also utilized $45.0 million of its $100.0 million trade accounts receivable securitization facility. No amount was drawn on the $435.0 million revolving credit facility at the end of the current quarter. The Company remains well within compliance on its debt covenants.

Cash used by operating activities for the quarter was $9.6 million, compared to cash provided by operations of $50.6 million in the year-ago quarter and cash used by operating activities of $14.1 million from the third quarter. As volumes have grown in the current year, so has the need for additional working capital. Also during the current quarter, the Company spent $7.7 million on capital expenditures, primarily on upgrades to Pressure Cylinders' production lines.

Quarterly Segment Results

Steel Processing's net sales of $349.6 million were up 95%, or $170.5 million over the prior year quarter. Higher volumes increased sales by $146.9 million while higher average selling prices increased sales by $23.6 million. Sales volumes grew 74% over the prior year quarter and 26% versus the third quarter due to increased sales to the automotive, agricultural, and construction markets and the contribution from the Gibraltar strip steel assets acquired in February 2010.

Steel Processing's mix of direct versus toll tons processed was 58% to 42% this quarter, the same as the year ago quarter. Operating income improved $50.4 million to $28.3 million, from the prior year's operating loss of $22.1 million. Higher spreads and volumes offset by increased variable manufacturing expenses drove the increase. Margins continue to benefit from better inventory management and operating improvements implemented as part of the Company's ongoing Transformation plan. SG&A expenses were higher due to increased profit sharing and bonus expenses and a modest increase in bad debt expense.

Pressure Cylinders' net sales of $144.8 million were up 12% from the year ago quarter. A 20% increase in net sales in the North American operations was partially offset by an 18% decrease in European operations. The North American operations experienced volume increases in refrigerant cylinders and propane heating tanks. In addition, the acquisitions of Piper and SCI contributed sales of $13.4 million. Industrial gas cylinder volumes in Europe were 11% below the year ago quarter but significantly higher than levels earlier this fiscal year. Air brake tank volumes in the Czech Republic facility improved 85% over the very depressed year ago levels on improving market conditions. Operating income increased 73% from the prior year quarter to $16.0 million, aided by solid North American operations, and slowly improving European operations.

Metal Framing's net sales of $87.1 million were down 21%, or $23.5 million, from the prior year quarter and volumes were down 25%. This segment has been negatively impacted by a dramatically weakened commercial construction market and pricing pressures. Operating income was $0.4 million, $3.9 million better than the prior year's loss, due to the impact of improved margins, lower SG&A expense, and lower restructuring charges.


"We began to recover from the global recession this fiscal year, rebounding from the only year with an earnings loss in Company history in fiscal year 2009," McConnell stated. "We have optimized our existing businesses and captured growth opportunities that fit our strategy. As we begin our new fiscal year, we will stay focused on growing the business both organically and through new acquisitions. Our operational efficiency improvement, consolidated sourcing and customer service will continue to be the drivers that lead us to sustainable earnings. We believe the economic environment in which we operate will continue to improve, though not linearly, over the next 24 months."

Fiscal 2010 Highlights/Activities

  • June 1, 2009, purchased the assets related to the business of Piper Metal Forming Corporation, U.S. Respiratory, Inc. and Pacific Cylinders, Inc, for $9.7 million. These assets and expenses have been included in the Pressure Cylinders business segment.
  • July 13, 2009, the Serviacero Worthington joint venture opened its greenfield steel processing facility near Monterrey, Mexico. The 65,000 square foot facility has rail access and currently operates a slitting and packaging line.
  • August 12, 2009, the Metal Framing segment announced the formation of a joint venture with ClarkWestern Building Systems to co-develop a new drywall framing product. ProSTUDTM is lightweight and features a number of technological advances to enhance rigidity.
  • September 3, 2009, purchased California-based Structural Composites Industries, LLC (SCI). SCI produces lightweight, aluminum-lined, composite-wrapped high pressure cylinders which add to Pressure Cylinders' growing product line.
  • September 30, 2009, announced the consolidation, within the Metal Framing segment, of the Joliet, Ill. roll forming operations into the Hammond, Ind. facility.
  • October 5, 2009, the Metal Framing segment announced a significant building code endorsement for metal lath and lath trim products.
  • November 2, 2009, the Metal Framing segment announced the formation of a strategic alliance with Bailey Metal Products Limited (Bailey) that included the sale of the Metal Framing operations in Canada to Bailey. The agreement provides for Bailey to be the exclusive distributor of Metal Framing's proprietary and vinyl products in Canada. Bailey has licensed its paper-faced metal corner bead product to Metal Framing to manufacture and sell in most of the United States.
  • February 1, 2010, acquired the steel processing assets of Gibraltar Strip Steel. The acquisition expands the capabilities of the existing cold-rolled strip business and the ability to service the needs of new and existing customers.
  • March 2010, the greenfield WAVE manufacturing facility near Pune, India began shipping suspended ceiling grid product. This is the eighth manufacturing location for the joint venture between Worthington and Armstrong.
  • April 8, 2010, raised $150 million aggregate principal amount of senior notes due 2020. The notes bear interest at a rate of 6.50%. The net proceeds from the offering were used to repay a portion of the outstanding borrowings under the revolving credit facility and amounts outstanding under the revolving trade accounts receivable securitization facility.


Dividend Declared

On May 25, 2010, the Board of Directors declared a quarterly cash dividend of $0.10 per share payable on June 29, 2010, to shareholders of record June 15, 2010.

Conference Call

Worthington will review fourth quarter results during its quarterly conference call on July 1, 2010, at 1:30 p.m., Eastern Daylight Saving Time. Details regarding the conference call can be found on the Company web site at

Corporate Profile

Worthington Industries is a leading diversified metals manufacturing company. The Columbus, Ohio based company is North America's premier value-added steel processor and a leader in manufactured pressure cylinders products such as propane, oxygen and helium tanks, hand torches, camping cylinders, and scuba tanks; light gauge steel framing for commercial and residential construction; framing systems and stairs for mid-rise buildings; metal ceiling grid systems; current and past model automotive service stampings; steel pallets and racks; and laser welded blanks. Worthington employs approximately 6,400 people and operates 64 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; the sustainability of earnings; projected profitability potential, capacity and working capital needs; demand trends for the Company or its 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; projected timing, results, benefits, costs, charges and expenditures related to acquisitions, headcount reductions and facility dispositions, shutdowns and consolidations; the alignment of operations with demand; the ability to capture and maintain margins and market share and to develop or take advantage of future opportunities, new products and 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 improving earnings, 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 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 pricing, quality or availability of raw materials (particularlysteel), 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 head count 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 achieve synergies from such acquisitions; capacity levels and efficiencies within facilities and within the industry as a whole; the effect of disruption in business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, labor issues, acts of war or terrorist activities or other causes; changes in customer demand, inventories, spending patterns, product choices, and supplier choices; risks associated with doingbusiness internationally, including economic, political and socialinstability, 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 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; and other risks described from time to time in the Company's filings with the United States Securities and Exchange Commission.


(In thousands, except per share)
Three Months Ended Twelve Months Ended
May 31, May 31,
2010 2009 2010 2009
Net sales $ 626,413 $ 471,570 $ 1,943,034 $ 2,631,267
Cost of goods sold 520,630 434,240 1,663,104 2,456,533
Gross margin 105,783 37,330 279,930 174,734
Selling, general and administrative expense 62,673 50,526 218,315 210,046
Impairment of long-lived assets - - 35,409 96,943
Restructuring and other expense 503 6,044 4,243 43,041
Operating income (loss) 42,607 (19,240)   21,963 (175,296)  
Other income (expense):
Miscellaneous income (expense) (109)   (993)   1,127 (2,329)  
Gain on sale of investment in Aegis - - - 8,331
Interest expense (3,086)   (4,326)   (9,534   (20,734)  
Equity in net income of unconsolidated affiliates 18,759 8,732 64,601 48,589
Earnings (loss) before income taxes 58,171 (15,827   78,157 (141,439)  
Income tax expense (benefit) 22,778 (2,875   26,650 (37,754)  
Net earnings (loss) 35,393 (12,952 ) 51,507 (103,685)  
Net earnings attributable to noncontrolling interest 2,336 786 6,266 4,529
Net earnings (loss) attributable to controlling interest $ 33,057 $ (13,738)   $ 45,241 $ (108,214)  


Average common shares outstanding 79,200 78,936 79,127 78,903
Earnings (loss) per share attributable to controlling interest $ 0.42 $ (0.17)   $ 0.57 $ (1.37)  


Average common shares outstanding 79,224 78,936 79,143 78,903
Earnings (loss) per share attributable to controlling interest $ 0.42 $ (0.17)   $ 0.57 $ (1.37)  
Common shares outstanding at end of period 79,217 78,998 79,217 78,998
Cash dividends declared per share $ 0.10 $ 0.10 $ 0.40 $ 0.61
(In thousands)
May 31, May 31,
2010 2009
Current assets:
Cash and cash equivalents $ 59,016 $ 56,319

Receivables, less allowances of $5,752 and $12,470 at May 31, 2010 and 2009

301,455 182,881
Raw materials 177,819 141,082
Work in process 106,261 57,612
Finished products 80,251 71,878
Total inventories 364,331 270,572
Income taxes receivable 1,443 29,749
Assets held for sale 2,637 707
Deferred income taxes 21,964 24,868
Prepaid expenses and other current assets 31,439 33,839
Total current assets 782,285 598,935
Investments in unconsolidated affiliates 113,001 100,395
Goodwill 79,543 101,343

Other intangible assets, net of accumulated amortization of $17,768
and $15,328 at May 31, 2010 and 2009

23,964 23,642
Other assets 15,391 18,009
Property, plant and equipment, net 506,163 521,505
Total assets $ 1,520,347 $ 1,363,829
Liabilities and equity
Current liabilities:
Accounts payable $ 258,730 $ 136,215
Notes payable - 980
Accrued compensation, contributions to employee benefit plans and related taxes 62,413 34,503
Dividends payable 7,932 7,916
Other accrued items 41,635 49,488
Income taxes payable 9,092 4,965
Current maturities of long-term debt - 138,013
Total current liabilities 379,802 372,080
Other liabilities 68,380 65,400
Long-term debt 250,238 100,400
Deferred income taxes 71,893 82,986
Total liabilities 770,313 620,866
Shareholders' equity - controlling interest 711,413 706,069
Noncontrolling interest 38,621 36,894
Total equity 750,034 742,963
Total liabilities and equity $ 1,520,347 $ 1,363,829
(In thousands)
Three Months Ended Twelve Months Ended
May 31, May 31,
2010 2009 2010 2009
Operating activities
Net earnings (loss) attributable to controlling interest $ 33,057 $ (13,738)   $ 45,241 $ (108,214)  

Adjustments to reconcile net earnings (loss) attributable to controlling interest to net cash provided (used) by operating activities:

Depreciation and amortization 16,222 15,846 64,653 64,073
Impairment of long-lived assets - - 35,409 96,943
Restructuring and other expense, non-cash 161 1,178 3,408 8,925
Provision for deferred income taxes 63 (2,184)   (6,110)   (25,479)  
Bad debt expense 1,085 (1,221)   (900)   8,307
Equity in net income of unconsolidated affiliates, net of distributions (5,759)   (13,052)   (12,007)   8,491
Net earnings attributable to noncontrolling interest 2,336 786 6,266 4,529
Net (gain) loss on sale of assets 499 805 (3,908)   1,317
Stock-based compensation 1,166 1,476 4,570 5,767
Excess tax benefits - stock-based compensation (165)   (78)   (165)   (433)  
Gain on acquisitions and sales of subsidiary investments - - (891)   (8,331)  
Changes in assets and liabilities:
Receivables (103,084)   34,093 (114,892)   226,690
Inventories (42,459)   95,272 (64,499)   329,892
Prepaid expenses and other current assets 13,026 7,889 30,425 (20,805)  
Other assets (91)   (1,542)   205 (643)  
Accounts payable and accrued expenses 78,504 (76,355)   125,613 (321,798)  
Other liabilities (4,123)   1,470 (1,999)   (14,905)  
Net cash provided (used) by operating activities (9,562)   50,645 110,419 254,326
Investing activities
Investment in property, plant and equipment, net (7,727)   (14,659)   (34,319)   (64,154)  
Acquisitions, net of cash acquired 1,066 (1,824)   (63,098)   (42,199)  
Distributions from (investments in) unconsolidated affiliates, net (179)   16,820 (483)   20,362
Proceeds from sale of assets 1,287 3,142 15,950 6,883
Proceeds from sale of investments in unconsolidated affiliates - - - 25,863
Net cash provided (used) by investing activities (5,553)   3,479

(81,950)   (53,245)  

Financing activities

Net proceeds from (payments on) short-term borrowings (120,000)   (6,860)   (980)   (142,385)  
Proceeds from long-term debt, net 146,942 -

146,942 -
Principal payments on long-term debt (3)   (6,989)   (138,013)   (7,241)  
Proceeds from issuance of common shares 253 1,371 2,313 3,899
Excess tax benefits - stock-based compensation 165 78 165 433
Dividends paid to noncontrolling interest - (3,936)   (4,539)   (7,152)  
Repurchase of common shares - - - (12,402)  
Dividends paid (7,919)   (13,412)   (31,660)   (53,686)  
Net cash provided (used) by financing activities 19,438 (29,748)   (25,772)   (218,534)  
Increase (decrease) in cash and cash equivalents 4,323 24,376 2,697 (17,453)  
Cash and cash equivalents at beginning of period 54,693 31,943 56,319 73,772
Cash and cash equivalents at end of period $ 59,016 $ 56,319 $ 59,016 $ 56,319
(In thousands)
This supplemental information is provided to assist in the analysis of the results of operations.
Three Months Ended Twelve Months Ended
May 31, May 31,
2010 2009 2010 2009
Steel Processing (tons) 645 370 2,055 2,011
Pressure Cylinders (units) 15,016 14,152 55,436 47,639
Metal Framing (tons) 67 90 278 459
Net sales:
Steel Processing $ 349,588 $ 179,063 $ 988,950 $ 1,183,013
Pressure Cylinders 144,801 129,043 467,572 537,373
Metal Framing 87,049 110,529 330,578 661,024
Other 44,975 52,935 155,934 249,857
Total net sales $ 626,413 $ 471,570 $ 1,943,034 $ 2,631,267
Material cost:
Steel Processing $ 238,430 $ 149,516 $ 685,308 $ 991,832
Pressure Cylinders 65,881 64,098 208,252 257,451
Metal Framing 53,848 69,509 200,168 502,144
Operating income (loss):
Steel Processing $ 28,345 $ (22,052)   $ 51,353 $ (68,149)  
Pressure Cylinders 15,984 9,216 30,056 61,175
Metal Framing 379 (3,526)   (10,186)   (142,598)  
Other (2,101)   (2,878)   (49,260)   (25,724)  
Total operating income (loss) $ 42,607 $ (19,240)   $ 21,963 $ (175,296)  
The following provides detail of the impairment of long-lived assets and restructuring and other expense (income) included in the operating income (loss) by segment presented above.
Three Months Ended Twelve Months Ended
May 31, May 31,
2010 2009 2010 2009
Pre-tax impairment of long-lived assets and restructuring and other expense (income) by segment:
Steel Processing $ (949)   $ 838 $ (488)   $ 3,917
Pressure Cylinders 2 1,038 309 1,045
Metal Framing 897 2,089 3,892 110,536
Other 553 2,079 35,939 24,486

Total impairment of long-lived assets and restructuring and other expense

$ 503 $ 6,044 $ 39,652 $ 139,984

SOURCE: Worthington Industries, Inc.

Worthington Industries, Inc.
Cathy M. Lyttle, 614-438-3077
VP, Corporate Communications and Investor Relations
Sonya L. Higginbotham, 614-438-7391
Director, Corporate Communications

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