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Worthington Reports Third Quarter Fiscal 2011 Results


COLUMBUS, Ohio, Mar 31, 2011 (BUSINESS WIRE) --

Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $569.4 million and net earnings of $26.3 million, or $0.35 per share, for its fiscal 2011 third quarter ended February 28, 2011. In last year's third quarter, the Company reported net sales of $451.1 million and a net loss of $17.7 million, or $0.22 per share, which included $0.28 per share in impairment and restructuring charges.

Comparative financial highlights for the three- and nine-month periods are as follows:

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






Net sales $569.4 $580.7 $451.1 $1,766.9 $1,316.6
Operating income (loss) 28.0 12.9 (35.3) 62.0 (20.6)
Equity income 17.0 16.2 14.6 51.5 45.8
Net earnings (loss) 26.3 14.5 (17.7) 63.1 12.2
Earnings (loss) per share $0.35 $0.20 $(0.22) $0.84 $0.15

"We are very pleased with the excellent results this quarter and continue to see positive signs of recovery in many of our markets," said John McConnell, Chairman and CEO. "Our businesses have continued to perform well as we have remained focused on enhancing our earnings potential, improving our operating efficiencies, and investing in businesses that will help us achieve our goals."

Consolidated Quarterly Results

Net sales for the third quarter ended February 28, 2011, were $569.4 million, up 26% from the comparable quarter last year, when net sales were $451.1 million. An overall increase in volumes had a $79.1 million positive impact on net sales as both Steel Processing and Pressure Cylinders segments showed improvements.

Gross margin for the current quarter was $88.3 million, or 16% of net sales, compared to $57.7 million, or 13% of net sales, for the prior year quarter. The $30.6 million increase in gross margin is primarily due to increased volumes in both Steel Processing and Pressure Cylinders. Inventory holding gains helped margins in both the current quarter and prior year quarter. SG&A expenses were $2.3 million higher than the prior year quarter primarily due to increased profit sharing, bonus and wage expenses offset by lower legal and bad debt expense. The prior year quarter included $4.9 million in litigation related expenses.

Operating income for the quarter was $28.0 million, up $63.3 million versus last year's operating loss. Increased volumes and better spreads between average selling prices and the cost of steel were the drivers for the increase in operating income. The prior year quarter included $35.5 million of pre-tax impairment and restructuring charges primarily related to the former Construction Services businesses.

Interest expense was $4.5 million in the quarter, up from $1.9 million in the prior year mainly due to the higher interest rate on the $150.0 million, 6.5% unsecured notes, issued in April 2010 to lock in long-term financing.

Equity in net income from unconsolidated joint ventures was $17.0 million, an increase of $2.4 million from the comparable year-ago quarter, on sales of $201.7 million. WAVE represented the majority of equity earnings contributing $14.1 million of earnings in the current quarter. TWB and Serviacero contributed equity income of $1.3 million and $1.0 million, respectively.

For the quarter, income tax expense of $11.9 million compared to an income tax benefit of $6.7 million for the comparable prior year period. The current year quarter reflects an estimated annual effective tax rate of 32.3% compared to 34.9% for the prior year quarter, before the impact of discrete tax adjustments. The discrete adjustments were minimal for the current quarter, but were $11.8 million for the prior year quarter, primarily due to the tax impact of the previously mentioned impairment charges.

Balance Sheet

At quarter end, total debt was $331.0 million, down $43.0 million from the previous quarter ended November 30, 2010, as a reduction of working capital lowered short-term borrowing needs. As of February 28, 2011, the Company had utilized $80.0 million of its $100.0 million trade accounts receivable securitization facility, and had no borrowings outstanding on the $400.0 million revolving credit facility.

Cash provided by operating activities for the quarter was $65.1 million, compared to cash used by operations of $14.1 million in the year-ago quarter and cash provided by operating activities of $59.5 million from the previous quarter.

During the current quarter, the Company invested $5.1 million in property, plant and equipment and paid $19.5 million, net of cash acquired, for a 60% ownership interest in Nitin Cylinders Limited, as described in the highlights section below.

Quarterly Segment Results

Steel Processing's net sales of $301.8 million were up 30%, or $69.5 million, over the prior year quarter. A 16% increase in volumes increased sales by $47.9 million over the prior year quarter. The largest increase came from higher value added processing for the automotive market, aided by the contribution from the Gibraltar strip steel acquisition. This change in the product mix combined with a higher average cost of steel in the current quarter, resulted in an increase in the average selling price and a $21.6 million increase in net sales. The mix of direct versus toll tons processed was 54% to 46% this quarter, compared to 51% to 49% a year ago.

Operating income of $14.2 million was $6.7 million higher than the prior year quarter. Higher volumes contributed $5.9 million to the improved operating income and a favorable pricing spread increased operating income by $10.2 million, partially offset by higher manufacturing and SG&A expenses.

Pressure Cylinders' net sales of $135.9 million were up 17% from the year ago quarter. Volumes for the European operations improved dramatically as the industrial gas and automotive markets continued to recover from the global economic downturn. Stable conditions in North American markets led to a 7% increase in revenues from these operations. Operating income increased 164% from the prior year quarter to $10.8 million, driven by the solid performance in the North American operations and a return to profitability in European operations.

Metal Framing's net sales of $81.4 million were up 21%, or $13.9 million, from the prior year quarter as higher selling prices, driven by the cost of steel, increased net sales by $12.5 million. Volumes were up 1%, increasing net sales by $1.4 million. The impact of higher average selling prices increased margins by $8.7 million while lower manufacturing expenses improved margins by $1.8 million. The current quarter operating income was $2.7 million, compared to an operating loss of $9.1 million in the prior year quarter. As a result of the transaction described in the Highlights section below, operations of the Metal Framing segment have essentially been contributed into a new joint venture effective March 1, 2011. A 25% interest was retained in this joint venture, which will be unconsolidated, with its results reported as equity in net income of unconsolidated affiliates in the Company's consolidated statements of earnings.

Company Outlook

"We remain optimistic about the current business environment. While the potential remains for some uneven results, we are confident that the overall trend will continue to be positive year over year gains in our current businesses," McConnell said. "We will also continue to build our international presence and explore opportunities to augment our current platform with acquisitions that meet our criteria of increasing our margins and decreasing the volatility of our earnings."

Dividend Declared

On February 28, 2011, the Board of Directors declared a quarterly cash dividend of $0.10 per share which was paid on March 29, 2011, to shareholders of record on March 15, 2011.


  • On December 22, 2010, the Company completed the acquisition of a 60% interest in Nitin Cylinders Limited, an Indian manufacturer of high pressure, seamless steel cylinders for compressed natural gas storage (CNG). The joint venture is called Worthington Nitin Cylinders.
  • On January 4, 2011, the Company announced a joint venture with Hubei Modern Urban Construction & Development Group Co., Ltd. of China to manufacture light gauge steel framing products and to design, engineer, and supply steel-framed mid-rise residential buildings in five Central Chinese provinces.
  • On February 15, 2011, Worthington's recently formed Global Group announced a memorandum of understanding with Gestamp Renewables group to create a 50/50 joint venture which will focus on producing towers for wind turbines being constructed in North America. The joint venture agreement was signed on March 18, 2011. The joint venture, Gestamp Worthington Wind Steel, LLC, chose Cheyenne, Wyo. as the site of its initial production facility.
  • On February 22, 2011, the Company reached an agreement in principle with Marubeni-Itochu Steel America Inc. (MISA) to combine Dietrich Metal Framing and ClarkWestern Building Systems in a newly-formed joint venture. This agreement closed effective March 1, 2011. In the transaction, Worthington received a 25% interest in the new joint venture, ClarkDietrich Building Systems LLC, as well as the assets of three MISA Metals Inc. steel processing locations. The joint venture will be unconsolidated and the steel processing assets and locations will be reported under the Steel Processing segment.

Conference Call

Worthington will review third quarter results during its quarterly conference call today, March 31, 2011, 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 with 2010 fiscal year sales of approximately $1.9 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, and scuba tanks; framing systems and stairs for mid-rise buildings; current and past model automotive service stampings; steel pallets and racks; and through joint ventures, suspension grid systems for concealed and lay-in panel ceilings, laser welded blanks, compressed natural gas storage cylinders, and light gauge steel framing for commercial and residential construction. Worthington employs approximately 7,000 people and operates 74 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; 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 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 capture and maintain margins and 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 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 and other expected benefits therefrom; the overall success of newly created joint ventures, including the demand for their products, and the ability to achieve the anticipated benefits therefrom; capacity levels and efficiencies, within facilities 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 doingbusiness internationally, including economic, political and socialinstability, 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; 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, including those adopted by the United States Securities and Exchange Commission and other governmental agencies as contemplated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, 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, 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, 2010.

(In thousands, except per share data)
Three Months Ended Nine Months Ended
February 28, February 28,
2011 2010 2011 2010
Net sales $ 569,439 $ 451,113 $ 1,766,931 $ 1,316,621
Cost of goods sold 481,185 393,399 1,529,944 1,142,474
Gross margin 88,254 57,714 236,987 174,147
Selling, general and administrative expense 59,769 57,519 173,518 155,642
Impairment of long-lived assets - 32,706 - 35,409
Restructuring and other expense 464 2,775 1,452 3,740
Operating income (loss) 28,021 (35,286 ) 62,017 (20,644 )
Other income (expense):
Miscellaneous income (expense) (219 ) (134 ) (356 ) 1,236
Interest expense (4,533 ) (1,889 ) (14,079 ) (6,448 )
Equity in net income of unconsolidated affiliates 16,958 14,560 51,470 45,842
Earnings (loss) before income taxes 40,227 (22,749 ) 99,052 19,986
Income tax expense (benefit) 11,893 (6,650 ) 29,582 3,872
Net earnings (loss) 28,334 (16,099 ) 69,470 16,114
Net earnings attributable to noncontrolling interest 2,008 1,641 6,321 3,930
Net earnings (loss) attributable to controlling interest $ 26,326 $ (17,740 ) $ 63,149 $ 12,184


Average common shares outstanding 74,171 79,146 75,306 79,102
Earnings (loss) per share attributable to controlling interest $ 0.35 $ (0.22 ) $ 0.84 $ 0.15


Average common shares outstanding 75,001 79,146 75,687 79,116
Earnings (loss) per share attributable to controlling interest $ 0.35 $ (0.22 ) $ 0.83 $ 0.15
Common shares outstanding at end of period 74,195 79,175 74,195 79,175
Cash dividends declared per share $ 0.10 $ 0.10 $ 0.30 $ 0.30
(In thousands)
February 28, May 31,
2011 2010
Current assets:
Cash and cash equivalents $ 49,726 $ 59,016

Receivables, less allowances of $6,182 and $5,752 at
February 28, 2011 and May 31, 2010, respectively

345,209 301,455
Raw materials 177,201 177,819
Work in process 104,762 106,261
Finished products 90,608 80,251
Total inventories 372,571 364,331
Income taxes receivable 9,713 1,443
Assets held for sale - 2,637
Deferred income taxes 23,927 21,964
Prepaid expenses and other current assets 35,397 31,439
Total current assets 836,543 782,285
Investments in unconsolidated affiliates 125,069 113,001
Goodwill 93,943 79,543

Other intangible assets, net of accumulated amortization of $19,469
and $17,768 at February 28, 2011 and May 31, 2010, respectively

25,269 23,964
Other assets 16,591 15,391
Property, plant and equipment, net 495,628 506,163
Total assets $ 1,593,043 $ 1,520,347
Liabilities and equity
Current liabilities:
Accounts payable $ 265,803 $ 258,730
Short-term borrowings 80,778 -
Accrued compensation, contributions to employee benefit plans and related taxes 52,023 62,413
Dividends payable 7,424 7,932
Other accrued items 44,175 41,635
Income taxes payable - 9,092
Total current liabilities 450,203 379,802
Other liabilities 69,851 68,380
Long-term debt 250,250 250,238
Deferred income taxes 77,463 71,893
Total liabilities 847,767 770,313
Shareholders' equity - controlling interest 695,250 711,413
Noncontrolling interest 50,026 38,621
Total equity 745,276 750,034
Total liabilities and equity $ 1,593,043 $ 1,520,347
(In thousands)
Three Months Ended Nine Months Ended
February 28, February 28,
2011 2010 2011 2010
Operating activities
Net earnings (loss) $ 28,334 $ (16,099 ) $ 69,470 $ 16,114

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

Depreciation and amortization 15,789 16,103 47,259 48,431
Impairment of long-lived assets - 32,706 - 35,409
Restructuring and other expense, non-cash - 147 225 3,247
Provision for deferred income taxes 7,778 (4,870 ) 3,314 (6,173 )
Bad debt expense (income) 215 967 996 (1,986 )
Equity in net income of unconsolidated affiliates, net of distributions (2,997 ) (2,090 ) (6,813 ) (6,248 )
Net gain on sale of assets (1,191 ) (115 ) (1,521 ) (4,407 )
Stock-based compensation 1,603 1,254 4,635 3,404

Gain on acquisition

- - - (891 )
Changes in assets and liabilities:
Receivables (24,591 ) (17,081 ) (39,713 ) (11,807 )
Inventories (21,601 ) (31,438 ) 4,729 (22,040 )
Prepaid expenses and other current assets (5,435 ) (2,536 ) (4,740 ) 17,399
Other assets (2,020 ) 112 (1,212 ) 296
Accounts payable and accrued expenses 68,840 8,053 (25,302 ) 47,109
Other liabilities 354 767 4,012 2,124
Net cash provided (used) by operating activities 65,078 (14,120 ) 55,339 119,981
Investing activities
Investment in property, plant and equipment, net (5,101 ) (5,638 ) (15,911 ) (26,592 )
Acquisitions, net of cash acquired (19,515 ) (30,100 ) (31,690 ) (64,164 )
Investments in unconsolidated affiliates, net - (568 ) - (304 )
Proceeds from sale of assets 183 185 6,690 14,663
Net cash used by investing activities (24,433 ) (36,121 )

(40,911 ) (76,397 )

Financing activities

Net proceeds from (repayments of) short-term borrowings (42,957 ) 63,779 80,778 119,020
Principal payments on long-term debt - (19,459 ) - (138,010 )
Proceeds from issuance of common shares 1,077 720 2,415 2,060
Payments to noncontrolling interest (2,496 ) (1,619 ) (9,072 ) (4,539 )
Repurchase of common shares - - (75,092 ) -
Dividends paid (7,413 ) (7,928 ) (22,747 ) (23,741 )
Net cash provided (used) by financing activities (51,789 ) 35,493 (23,718 ) (45,210 )
Decrease in cash and cash equivalents (11,144 ) (14,748 ) (9,290 ) (1,626 )
Cash and cash equivalents at beginning of period 60,870 69,441 59,016 56,319
Cash and cash equivalents at end of period $ 49,726 $ 54,693 $ 49,726 $ 54,693
(In thousands)
This supplemental information is provided to assist in the analysis of the results of operations.
Three Months Ended Nine Months Ended
February 28, February 28,
2011 2010 2011 2010
Steel Processing (tons) 590 512 1,815 1,410
Pressure Cylinders (units) 14,617 14,000 42,570 40,420
Metal Framing (tons) 59 58 184 211
Net sales:
Steel Processing $ 301,752 $ 232,219 $ 973,763 $ 639,362
Pressure Cylinders 135,921 116,538 408,213 322,771
Metal Framing 81,382 67,517 242,970 243,529
Other 50,384 34,839 141,985 110,959
Total net sales $ 569,439 $ 451,113 $ 1,766,931 $ 1,316,621
Material cost:
Steel Processing $ 210,654 $ 164,555 $ 704,686 $ 446,878
Pressure Cylinders 61,073 50,667 187,374 142,371
Metal Framing 48,041 43,542 159,886 146,320
Operating income (loss):
Steel Processing $ 14,213 $ 7,465 $ 39,260 $ 23,008
Pressure Cylinders 10,849 4,095 29,926 14,072
Metal Framing 2,723 (9,087 ) (7,890 ) (10,565 )
Other 236 (37,759 ) 721 (47,159 )
Total operating income (loss) $ 28,021 $ (35,286 ) $ 62,017 $ (20,644 )

The following provides detail of impairment of long-lived assets and restructuring and other expense (income) included in operating income (loss) by segment presented above.

Three Months Ended Nine Months Ended
February 28, February 28,
2011 2010 2011 2010

Pre-tax impairment of long-lived assets and restructuring and
other expense (income) by segment:

Steel Processing $ 70 $ 286 $ (303 ) $ 461
Pressure Cylinders - 12 - 307
Metal Framing 411 2,014 1,387 2,995
Other (17 ) 33,169 368 35,386
Total impairment of long-lived assets and restructuring and other expense $ 464 $ 35,481 $ 1,452 $ 39,149

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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