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Worthington Reports First Quarter Fiscal 2013 Results


Sep 26, 2012 (Marketwire via COMTEX) --Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $666.0 million and net earnings of $34.0 million, or $0.49 per share, for its fiscal 2013 first quarter ended August 31, 2012. For last year's first quarter, the Company reported net sales of $602.4 million and net earnings of $25.7 million, or $0.35 per share.

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

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

    1Q 2013   4Q 2012   1Q 2012
Net sales   $666.0   $755.4   $602.4
Operating income   33.4   59.5   21.2
Equity income   22.6   22.2   24.7
Net earnings   34.0   52.1   25.7
Earnings per share   $0.49   $0.75   $0.35

"I am pleased with the results of our first quarter," said John McConnell, Chairman and CEO of Worthington Industries. "Steel Processing, while still benefitting from automotive demand, experienced declining steel pricing during the quarter. Pressure Cylinders had strong volume in its product lines and increased demand in the alternative fuel business and Engineered Cabs delivered good results." McConnell added, "We continue to position the Company to grow both organically and by adding new businesses." 

Consolidated Quarterly Results

Net sales for the first quarter ended August 31, 2012, were $666.0 million, up 11% from the comparable quarter in the prior year, when net sales were $602.4 million. Of the increase, $112.0 million related to increased volume, which includes $87.5 million from the combined acquisitions of Angus Industries, reported under the Engineered Cabs segment, and the acquisitions in Pressure Cylinders. The increase in volume was partially offset by lower average selling prices, primarily in Steel Processing, which were affected by the declining market price of steel. 

Gross margin for the current quarter was $93.7 million, compared to $71.5 million in the prior year quarter. The $22.2 million increase was mainly the result of the acquisitions and a more favorable product mix.

SG&A expense increased $14.1 million over the prior year quarter driven by the impact of acquisitions and reduced expenses in the prior year quarter of $4.4 million from the favorable settlement of a legal dispute.

Operating income for the current quarter was $33.4 million, compared to $21.2 million in the prior year quarter. The $12.2 million increase is mostly due to acquisitions and the $4.1 million reduction in the net losses from impairments, restructuring charges and joint venture transactions. In the current quarter, we incurred a $1.6 million charge related to certain impaired assets in Pressure Cylinders, $0.4 million in restructuring charges, and $1.2 million in gains related to asset sales from the joint venture transactions.

Interest expense was $5.3 million in the quarter, compared to $4.7 million in the comparable period in the prior year primarily due to the impact of higher average debt levels.

Equity in net income from unconsolidated joint ventures was $22.6 million, a decrease of $2.1 million from the comparable quarter in the prior year, on sales of $446.9 million. In the current quarter, WAVE contributed $18.4 million of earnings and TWB contributed $2.6 million, with the balance of $1.6 million from the remaining joint ventures. 

For the current quarter, income tax expense of $16.1 million increased from $13.3 million in the prior year quarter due primarily to higher earnings. The current quarter income tax expense reflects an estimated annual effective tax rate of 32.6% compared to 32.4% for the prior year quarter.

Balance Sheet

At quarter end, total debt was $459.6 million, down $74.1 million from May 31, 2012. During the current quarter, the Company issued $150.0 million of 12-year unsecured Senior Notes through a private placement and used the net proceeds to repay a portion of the borrowings outstanding under the Company's trade accounts receivable securitization and revolving credit facilities. As of August 31, 2012, the Company had utilized $15.0 million of its $150.0 million trade accounts receivable securitization facility, and $30.4 million was drawn on the Company's $425.0 million revolving credit facility.

Quarterly Segment Results

Steel Processing's net sales of $380.0 million were down 7%, or $28.2 million, from the prior year quarter. Lower average selling prices decreased net sales by $42.6 million, while a change in product mix favorably impacted net sales by $14.4 million. The mix of direct versus toll tons processed was 54% to 46% this quarter, compared with a 51% to 49% mix in the comparable quarter of the prior year. Operating income decreased slightly by $0.3 million as a favorable change in product mix was offset by a decrease in the spread between selling and material prices.

Pressure Cylinders' net sales of $194.2 million were up 15% from the comparable prior year quarter. Pressure Cylinders' operating income was $15.0 million, up $3.1 million from the prior year quarter, which included a $4.4 million non-recurring legal dispute benefit. Acquisitions, combined with an improvement in the existing operations, drove the results. 

Engineered Cabs, consisting of the operations of Angus Industries Inc. acquired on December 29, 2011, generated net sales of $64.5 million in the current quarter and reported operating income of $4.7 million. 

The entities included in "Other" are the Construction, Energy and Steel Packaging operating segments, as well as other non-allocated expenses. Operations in "Other" reported net sales of $27.3 million, which was $1.9 million higher than in the prior year quarter mostly due to our Military Construction business. These operations reported a combined loss of $2.3 million for the quarter primarily resulting from losses generated in the construction business due to the difficult economic environment.

Recent Developments

  • On June 27, 2012, the Company declared a quarterly dividend of $0.13 per share, an increase of $0.01 per share from the prior quarter. The dividend is payable on September 28, 2012, to shareholders of record September 14, 2012.

  • On August 10, 2012, the Company issued $150 million of 12-year unsecured Senior Notes due 2024 through a private placement with Prudential Capital Group. The notes bear interest at a fixed rate of 4.60%.

  • On September 17, 2012, the Company acquired the Westerman Companies, a manufacturer of tanks and pressure vessels for the oil and gas, nuclear and marine markets. The purchase price was $70 million, of which approximately $6 million went to pay down Westerman debt. These operations will be reported in the Pressure Cylinders' operating segment.


"We remain confident in our strategy, but the economic recovery is lacking momentum as there is uncertainty on a number of fronts," McConnell said. "We have started to see some slowing in automotive, agriculture and mining markets, but it is unclear if this will turn into a longer term issue and what the impact may be on our volumes. Our recent Pressure Cylinders acquisition of the Westerman Companies positions us well in the growing oil and gas markets, as well as for nuclear and marine products. We also see opportunities to expand the oil & gas business around the Utica and Marcellus shale drilling, and we see demand in our alternative fuel business growing." 

Conference Call

Worthington will review first quarter results during its quarterly conference call on September 27, 2012, at 10:30 a.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 2012 fiscal year sales of $2.5 billion. The Columbus, Ohio based company is North America's premier value-added steel processor and a leader in manufactured pressure cylinders, such as propane, oxygen and helium tanks, hand torches, refrigerant and industrial cylinders, camping cylinders, exploration, recovery and production products for global energy markets; scuba tanks, and compressed natural gas storage cylinders; custom-engineered open and enclosed cabs and operator stations for heavy mobile equipment; framing systems for mid-rise buildings; steel pallets and racks; and through joint ventures, suspension grid systems for concealed and lay-in panel ceilings, current and past model automotive service stampings, laser welded blanks, and light gauge steel framing for commercial and residential construction. Worthington employs more than 10,000 people and operates 82 facilities in 12 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 acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, newly-created joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to maintain margins and capture and maintain market share and to develop or take advantage of future opportunities, new products and new markets; expectations for Company and customer inventories, jobs and orders; expectations for the economy and markets or improvements therein; expected benefits from transformation plans, cost reduction efforts and other new initiatives; expectations for increasing volatility or improving and sustaining earnings, earnings potential, margins or shareholder value; effects of judicial rulings and other non-historical matters constitute "forward-looking statements" within the meaning of the Act. Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the effect of conditions in national and worldwide financial markets; product demand and pricing; changes in product mix, product substitution and market acceptance of the Company's products; fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities and other items required by operations; effects of facility closures and the consolidation of operations; the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction and other industries in which the Company participates; failure to maintain appropriate levels of inventories; financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom the Company does business; the ability to realize targeted expense reductions from headcount reductions, facility closures and other cost reduction efforts; the ability to realize other cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from transformation initiatives, on a timely basis; the overall success of, and the ability to integrate, newly-acquired businesses and achieve synergies and other expected benefits and cost savings therefrom; capacity levels and efficiencies, within facilities, within major product markets and within the industry as a whole; the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, acts of war or terrorist activities or other causes; changes in customer demand, inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability, foreign currency exposure and the acceptance of our products in new markets; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; the outcome of adverse claims experience with respect to workers' compensation, product recalls or product liability, casualty events or other matters; deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies; level of imports and import prices in the Company's markets; the impact of judicial rulings and governmental regulations, 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, 2012.

(In thousands, except per share amounts)  
    Three Months Ended  
    August 31,  
    2012     2011  
Net sales   $ 666,035     $ 602,387  
Cost of goods sold     572,384       530,925  
  Gross margin     93,651       71,462  
Selling, general and administrative expense     59,422       45,361  
Impairment of long-lived assets     1,570       -  
Restructuring and other expense     403       1,703  
Joint venture transactions     (1,162 )     3,215  
  Operating income     33,418       21,183  
Other income (expense):                
  Miscellaneous income     165       401  
  Interest expense     (5,259 )     (4,688 )
  Equity in net income of unconsolidated affiliates     22,643       24,697  
  Earnings before income taxes     50,967       41,593  
Income tax expense     16,102       13,252  
Net earnings     34,865       28,341  
Net earnings attributable to noncontrolling interest     903       2,688  
Net earnings attributable to controlling interest   $ 33,962     $ 25,653  
Average common shares outstanding     68,278       71,518  
Earnings per share attributable to controlling interest   $ 0.50     $ 0.36  
Average common shares outstanding     69,571       72,418  
Earnings per share attributable to controlling interest   $ 0.49     $ 0.35  
Common shares outstanding at end of period     68,679       70,042  
Cash dividends declared per share   $ 0.13     $ 0.12  
(In thousands)
    August 31,   May 31,
    2012   2012
Current assets:            
  Cash and cash equivalents   $ 30,481   $ 41,028
  Receivables, less allowances of $3,593 and $3,329 at August 31, 2012 and May 31, 2012, respectively     359,660     400,869
    Raw materials     206,656     211,543
    Work in process     93,681     115,510
    Finished products     83,245     74,887
      Total inventories     383,582     401,940
  Income taxes receivable     1,394     892
  Assets held for sale     11,768     7,202
  Deferred income taxes     20,397     20,906
  Prepaid expenses and other current assets     38,903     41,402
    Total current assets     846,185     914,239
Investments in unconsolidated affiliates     244,087     240,882
Goodwill     156,754     156,681
Other intangible assets, net of accumulated amortization of $18,040 and $16,103 at August 31, 2012 and May 31, 2012, respectively     98,695     100,333
Other assets     18,900     22,585
Property, plant and equipment, net     440,885     443,077
Total assets   $ 1,805,506   $ 1,877,797
Liabilities and equity            
Current liabilities:            
  Accounts payable   $ 237,885   $ 252,334
  Short-term borrowings     51,234     274,923
  Accrued compensation, contributions to employee benefit plans and related taxes     47,624     71,271
  Dividends payable     9,371     8,478
  Other accrued items     38,634     38,231
  Income taxes payable     6,721     11,697
  Current maturities of long-term debt     1,256     1,329
    Total current liabilities     392,725     658,263
Other liabilities     69,371     72,371
Distributions in excess of investment in unconsolidated affiliate     64,801     69,165
Long-term debt     407,097     257,462
Deferred income taxes     79,131     73,099
    Total liabilities     1,013,125     1,130,360
Shareholders' equity - controlling interest     741,104     697,174
Noncontrolling interest     51,277     50,263
    Total equity     792,381     747,437
Total liabilities and equity   $ 1,805,506   $ 1,877,797
(In thousands)  
    Three Months Ended  
    August 31,  
    2012     2011  
Operating activities                
Net earnings   $ 34,865     $ 28,341  
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:                
  Depreciation and amortization     14,987       12,854  
  Impairment of long-lived assets     1,570       -  
  Provision for deferred income taxes     4,679       7,678  
  Bad debt expense     7       29  
  Equity in net income of unconsolidated affiliates, net of distributions     (7,358 )     (5,069 )
  Net loss (gain) on sale of assets     2,310       (415 )
  Stock-based compensation     3,193       3,201  
Changes in assets and liabilities:                
  Receivables     38,116       27,374  
  Inventories     17,019       5,915  
  Prepaid expenses and other current assets     (145 )     611  
  Other assets     2,847       1,273  
  Accounts payable and accrued expenses     (39,573 )     (96,848 )
  Other liabilities     (1,519 )     216  
Net cash provided (used) by operating activities     70,998       (14,840 )
Investing activities                
  Investment in property, plant and equipment, net     (16,705 )     (6,472 )
  Acquisitions, net of cash acquired     -       (41,000 )
  Distributions from unconsolidated affiliates     -       (785 )
  Proceeds from sale of assets     6,585       5,041  
Net cash used by investing activities     (10,120 )     (43,216 )
Financing activities                
  Net proceeds from (repayments of) short-term borrowings     (223,688 )     76,250  
  Proceeds from long-term debt     150,000       -  
  Principal payments on long-term debt     (442 )     -  
  Proceeds from issuance of common shares     10,855       8,208  
  Payments to noncontrolling interest     -       (3,120 )
  Repurchase of common shares     -       (35,405 )
  Dividends paid     (8,150 )     (7,169 )
Net cash provided (used) in financing activities     (71,425 )     38,764  
Decrease in cash and cash equivalents     (10,547 )     (19,292 )
Cash and cash equivalents at beginning of period     41,028       56,167  
Cash and cash equivalents at end of period   $ 30,481     $ 36,875  
(In thousands)  
This supplemental information is provided to assist in the analysis of the results of operations.  
    Three Months Ended  
    August 31,  
    2012     2011  
  Steel Processing (tons)     695       703  
  Pressure Cylinders (units)     21,469       14,593  
Net sales:                
  Steel Processing   $ 379,972     $ 408,174  
  Pressure Cylinders     194,236       168,829  
  Engineered Cabs     64,495       -  
  Other     27,332       25,384  
    Total net sales   $ 666,035     $ 602,387  
Material cost:                
  Steel Processing   $ 279,734     $ 306,650  
  Pressure Cylinders     92,084       86,553  
  Engineered Cabs     32,111       -  
Operating income (loss):                
  Steel Processing   $ 16,019     $ 16,276  
  Pressure Cylinders     15,026       11,915  
  Engineered Cabs     4,694       -  
  Other     (2,321 )     (7,008 )
    Total operating income   $ 33,418     $ 21,183  
The following provides detail of impairment of long-lived assets, restructuring and other expense, and joint venture transactions included in operating income by segment presented above.  
      Three Months Ended  
      August 31,  
      2012       2011  
Impairment of long-lived assets and restructuring and other expense:                
  Steel Processing   $ -     $ -  
  Pressure Cylinders     1,576       -  
  Engineered Cabs     -       -  
  Other     397       1,703  
    Total impairment of long-lived assets and restructuring and other expense   $ 1,973     $ 1,703  
      Three Months Ended  
      August 31,  
      2012       2011  
Joint venture transactions:                
  Steel Processing   $ -     $ -  
  Pressure Cylinders     -       -  
  Engineered Cabs     -       -  
  Other     (1,162 )     3,215  
    Total joint venture transactions   $ (1,162 )   $ 3,215  
        Cathy M. Lyttle
        VP, Corporate Communications and Investor Relations
        Phone: (614) 438-3077
        E-mail: Email Contact 
        Sonya L. Higginbotham 
        Director, Corporate Communications
        Phone: (614) 438-7391 
        E-mail: Email Contact

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