News Details

COLUMBUS, OH -- (Marketwired) -- 03/25/15 -- Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $804.8 million and a net loss of $25.7 million, or a loss of $0.39 per diluted share, for its fiscal 2015 third quarter ended February 28, 2015. These results included a non-cash impairment charge of $81.6 million for the Company's Engineered Cabs business, related to goodwill and long-lived assets and $2.3 million of severance expense related to the recently announced workforce reductions in Oil & Gas Equipment. The after-tax impact of these charges reduced earnings by $52.9 million, or $0.78 per diluted share. In last year's third quarter, the Company reported net sales of $773.2 million and net earnings of $40.6 million, or $0.57 per diluted share.

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

"Despite a challenging quarter, the overall health of the company is good," said John McConnell, Chairman and CEO. "We had solid volumes in Steel Processing, but the dramatic fall in steel prices throughout the quarter negatively impacted results. The automotive and heavy truck markets continued to be strong along with most other markets, but we continue to see weakness in the agriculture market. Pressure Cylinders is right-sizing its Oil & Gas Equipment operations as the softness in that market was starting to be reflected in our customer orders." McConnell added, "We are also reorganizing the Engineered Cabs business with the announced closure of the Florence facility and the consolidation of the business."

Consolidated Quarterly Results

Net sales for the third quarter ended February 28, 2015, were $804.8 million, a 4% increase over the comparable quarter in the prior year, when net sales were $773.2 million. The $31.6 million increase was primarily driven by acquisitions in the Steel Processing and Pressure Cylinders segments.

Gross margin declined $24.0 million from the prior year quarter to $98.5 million. The positive impact from the recent acquisitions was more than offset by higher inventory holding losses fueled by rapidly falling steel prices in Steel Processing and lower volumes in Consumer and Industrial Products in Pressure Cylinders.

On Tuesday, the Company announced its decision to close its Engineered Cabs facility in Florence, S.C., which resulted in the $81.6 million impairment of goodwill and long-lived assets in the current quarter. As a result, operating income decreased $97.3 million from the prior year.

Excluding the impairment charge, operating income was down $15.7 million, driven largely by inventory holding losses, lower Pressure Cylinders volumes and increased manufacturing expenses. SG&A expenses were down $8.9 million from the prior year quarter as lower earnings resulted in lower profit sharing and bonus expenses.

Interest expense of $8.4 million in the current quarter was $2.2 million higher than the $6.2 million reported in the comparable period of the prior year. The increase was due to the impact of higher average debt levels resulting from the issuance of $250.0 million of 4.55% unsecured senior notes in April 2014. However, interest in the current quarter was down $1.3 million from the second quarter of the current year as $100.0 million of 2004 notes matured and were repaid in December 2014.

Equity in net income from unconsolidated joint ventures of $18.8 million was $2.4 million lower than the $21.2 million from the prior year quarter on combined net sales of $356.6 million versus $340.6 million in the prior year quarter. The overall decrease in earnings was led by a $3.3 million decrease at Serviacero, which was negatively impacted by the falling price of steel, and a $0.8 million decrease from ClarkDietrich on lower volumes. The equity income from ArtiFlex was $2.3 million higher than the prior year quarter.

Income tax showed a benefit of $18.2 million as a result of the impairment charge. Excluding the charge, income tax expense would have been $10.9 million in the current quarter compared to $16.6 million in the comparable quarter of the prior year. The lower earnings in the current quarter more than offset the impact of a higher effective tax rate. Tax expense in the current quarter reflects an estimated annual effective rate of 30.9% compared to 27.3% for the prior year quarter.

Balance Sheet

At quarter end, total debt was $699.9 million, up $14.2 million from November 30, 2014, as a result of borrowings against a long-term credit facility entered into by the consolidated joint venture in Turkey. The Company had $42.5 million of cash at quarter end.

Quarterly Segment Results

Steel Processing's net sales of $500.7 million were up 5%, or $22.7 million, due to the recent acquisition of Rome Strip Steel and increased volume. Operating income of $16.4 million was $11.9 million lower than the prior year quarter due to inventory holding losses in the current quarter caused by the rapidly falling price of steel combined with higher manufacturing expenses. This was partially offset by lower SG&A expenses resulting from a decrease in profit sharing and bonus accruals.

Pressure Cylinders' net sales of $248.1 million were up 6%, or $14.8 million, from the comparable prior year quarter driven by recent acquisitions. Operating income of $18.6 million was $2.7 million lower than the prior year quarter as contributions from recent acquisitions were more than offset by the $2.3 million severance accrual in Oil & Gas Equipment and decreases in Industrial and Consumer Products.

Engineered Cabs' net sales of $45.4 million were $6.1 million below the prior year quarter due to lower tooling revenue from startup programs and the January 2015 sale of the assets of Advanced Component Technologies, Inc. Excluding the impact of the impairment charge described above, operating loss in the current quarter increased $3.4 million due to lower average pricing and high operating costs at the Florence facility.

The "Other" category includes Construction Services and Energy Innovations operating segments, as well as non-allocated corporate expenses. Operations in the "Other" category reported net sales of $10.6 million, slightly higher than the $10.5 million reported in the prior year quarter. Increased revenue in the Energy Innovations business was mostly offset by lower revenue in Construction Services. The "Other" category reported losses of $1.3 million, which were $1.9 million lower than the prior year quarter. The improvement resulted from lower losses within Construction Services.

Recent Business Developments

• On January 16, 2015, the Company acquired Rome Strip Steel Company, Inc. Located in Rome, N.Y., Rome manufactures cold rolled steel to extremely tight tolerances. It will be integrated into the Steel Processing business segment of Worthington and adds a third, high value-add, cold rolling and annealing production facility to the Company.
  
  
• On January 30, 2015, the Company sold the assets of Advanced Component Technologies, Inc. (ACT) located in Northwood, Iowa. ACT was a facility within the Engineered Cabs segment.
  
  
• During the quarter, the Company repurchased a total of 1.9 million common shares for $56.6 million at an average price of $28.46.
  
  
• On March 12, 2015, WAVE, Worthington's joint venture with Armstrong World Industries, Inc., acquired the Axiom® and Serpentina® ceiling system manufacturing capabilities from Fry Reglet Corporation.
  
  
• On March 24, 2015, the Company announced its decision to close the Engineered Cabs Florence, S.C. location resulting in an impairment charge of $81.6 million and also announced a workforce reduction in several Oil and Gas Equipment locations due to slowing demand.
  
  
• At its Board meeting on March 25, 2015, the directors of Worthington Industries declared a quarterly dividend of $0.18 per share payable on June 29, 2015 to shareholders of record on June 12, 2015.
  
  

Outlook

"We remain focused on our goal to grow our earnings and improve our operations," said John McConnell, Chairman and CEO. "The Company has grown rapidly in recent years, both organically and through acquisitions, and that growth has helped increase our earnings. However, we will continue to take action when fundamental market conditions change or when a credible plan is not attainable to meet our targets for a particular business. We do anticipate lower steel pricing will continue to be a headwind in the upcoming quarter, but we expect automotive and heavy truck volumes to remain strong."

Conference Call

Worthington will review third quarter results during its quarterly conference call on March 26, 2015, at 10:30 a.m. ET. Details regarding the conference call can be found on the Company website at www.WorthingtonIndustries.com.

About Worthington Industries

Worthington Industries is a leading global diversified metals manufacturing company with 2014 fiscal year sales of $3.1 billion. Headquartered in Columbus, Ohio, Worthington is North America's premier value-added steel processor providing customers with wide ranging capabilities, products and services for a variety of markets including automotive, construction and agriculture; a global leader in manufacturing pressure cylinders for industrial gas and cryogenic applications, CNG and LNG storage, transportation and alternative fuel tanks, oil and gas equipment, and brand consumer products for camping, grilling, hand torch solutions, scuba diving and helium balloon kits; and a manufacturer of operator cabs for heavy mobile industrial equipment; laser welded blanks for light weighting applications; automotive racking solutions; and through joint ventures, complete ceiling grid solutions; automotive tooling and stampings; and steel framing for commercial construction. Worthington employs approximately 11,000 people and operates 84 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 the basis for an unwavering commitment to the customer, supplier, and shareholder, and 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 outlook, strategy or business plans; the ability to correct performance issues at operations; future or expected growth, forward momentum, performance, sales, volumes, cash flows, earnings, balance sheet strengths, debt, financial condition or other financial measures; projected profitability potential, capacity, and working capital needs; pricing trends for raw materials and finished goods and the impact of pricing changes; 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; anticipated capital expenditures and asset sales; demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; the ability to maintain margins and capture and maintain market share and to develop or take advantage of future opportunities, customer initiatives, new businesses, 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 recurrent slowing economy; the effect of conditions in national and worldwide financial markets; product demand and pricing; fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities and other items required by operations; the ability to realize targeted expense reductions from headcount reductions, facility closures and other cost reduction efforts; effects of facility closures and the consolidation of operations; the effect of financial difficulties, consolidation and other changes within the steel, automotive, oil and gas, construction and other industries in which the Company participates; failure to maintain appropriate levels of inventories; changes in product mix, product substitution and market acceptance of the Company's products; 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 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 joint ventures, maintain and develop their customers, 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 these 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, both in the United States and abroad, 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; the effect of changes to healthcare laws in the United States which may increase our healthcare and other costs and negatively impact our operations and financial results; 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, 2014.

CONTACTS:
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

Source: Worthington Industries, Inc.