SOURCE: Worthington Industries, Inc.

Worthington Industries, Inc.

September 24, 2014 18:01 ET

Worthington Reports First Quarter Fiscal 2015 Results

COLUMBUS, OH--(Marketwired - Sep 24, 2014) - Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $862.4 million and net earnings of $44.2 million, or $0.63 per diluted share, for its fiscal 2015 first quarter ended August 31, 2014. In last year's first quarter, the Company reported net sales of $692.3 million and net earnings of $54.6 million, or $0.76 per diluted share. Net earnings in the current quarter include pre-tax impairment and restructuring charges totaling $2.1 million, which reduced earnings per diluted share by $0.02. Net earnings in the first quarter of the prior year included an $11.0 million pre-tax gain and a $4.5 million favorable tax adjustment related to the acquisition of an additional 10% interest in the laser welded blanks joint venture, TWB, in July of 2013. The impact of these two items netted with restructuring and impairment charges increased earnings by $0.18 per diluted share in the prior year quarter.

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

 
(U.S. dollars in millions, except per share data)
 
    1Q 2015   4Q 2014   1Q 2014
Net sales   $862.4   $891.0   $692.3
Operating income   52.2   32.3   38.6
Equity income   27.9   22.2   27.0
Net earnings   44.2   33.2   54.6
Earnings per share   $0.63   $0.47   $0.76
             

"Our company reported very good results for our first quarter as we work to deliver consistent earnings growth," John McConnell, Chairman and CEO, said. "Our Steel Processing business led the way with strong volumes from the automotive market. Pressure Cylinders' recent acquisitions in the oil and gas equipment market are helping drive their results along with increased volumes in the non-refillable refrigerant and heating systems products. While the Engineered Cabs business continues to operate in a weak market, we are seeing some improvement in their operations." McConnell added, "Our joint ventures performed well with Serviacero and WAVE as solid contributors."

Consolidated Quarterly Results

Net sales for the first quarter were $862.4 million, up 25% from the comparable quarter in the prior year, when net sales were $692.3 million. The increase was driven largely by the consolidation of TWB and increased volume in Steel Processing, and the acquisitions in Pressure Cylinders.

Gross margin for the current quarter was $129.5 million, an increase of $18.5 million over the prior year quarter. Gross margin in the current quarter benefited from a higher spread between average selling prices and material cost due in part to a more favorable product mix in Pressure Cylinders and higher inventory holding gains in Steel Processing.

Operating income for the current quarter was $52.2 million, an increase of $13.6 million from the prior year quarter, as the improvement in gross margin was partially offset by a $3.7 million increase in SG&A expense due to the impact of acquisitions. Operating income in the current period included a pre-tax impairment charge of $2.0 million related to the Company's stainless steel business, Precision Specialty Metals.

Interest expense was $9.5 million for the current quarter, compared to $6.2 million in the comparable period in the prior year. The increase was due to the impact of higher average debt levels and higher average interest rates resulting from an increase in the usage of long-term debt versus short-term debt.

Equity in net income from unconsolidated joint ventures increased $1.0 million over the prior year quarter to $27.9 million on net sales of $392.6 million. The overall increase was driven by Serviacero and WAVE, where Worthington's portion of equity income increased by $1.9 million and $1.3 million, respectively. However, income from ClarkDietrich decreased $0.9 million on lower volumes. Additionally, the consolidation of TWB lowered equity income by $1.8 million in the current quarter.

Income tax expense was $22.1 million in the current quarter compared to $13.9 million in the comparable quarter in the prior year. The increase was due primarily to the favorable tax impact associated with the consolidation of TWB in the prior year quarter. The current quarter tax expense reflected an effective rate of 32.8% compared to 28.9% for the prior year quarter.

Balance Sheet

Total debt of $666.6 million at quarter end was essentially flat from May 31, 2014. The Company had $146.9 million of cash at quarter end, a portion of which will be used to repay $100.0 million of current notes due in December 2014.

Quarterly Segment Results

Steel Processing's net sales of $552.3 million were up 37%, or $149.9 million, from the prior year quarter primarily due to the consolidation of TWB and increased sales in the automotive market. Operating income increased by $13.2 million to $35.9 million due primarily to the increase in volume, the consolidation of TWB, and higher inventory holding gains.

Pressure Cylinders' net sales of $249.0 million were up 15%, or $32.1 million, from the comparable prior year quarter driven by recent acquisitions and higher average selling prices. Operating income increased slightly over the prior year quarter to $19.6 million, as the combined favorable impact of our improved product mix, higher selling prices and recent acquisitions were offset by an increase in manufacturing and SG&A expense.

Engineered Cabs' net sales increased $1.1 million in the current quarter to $49.6 million on higher volumes. Operating loss in the current quarter increased $1.8 million to $2.1 million as the overall increase in net sales was more than offset by higher manufacturing expense, related to the ramp up of new production and process improvement initiatives.

The "Other" category includes the Construction Services and Energy Innovations operating segments, as well as non-allocated corporate expenses. Operations in the "Other" category reported net sales of $11.6 million, a decrease of $12.9 million from the prior year quarter, mostly due to reductions in the Construction Services business. The "Other" category reported an operating loss of $1.1 million driven by losses within Construction Services.

Recent Business Developments

  • On August 1, 2014, the Company acquired Midstream Equipment Fabrication, LLC (MEF) for cash consideration of $35.2 million and the assumption of certain liabilities. MEF manufactures patented horizontal heated and high pressure separators used to separate oilfield fluids and gas for customers drilling in the Eagle Ford Shale and is well-situated to serve customers in the Permian Basin.

  • On July 31, 2014, the Company acquired James Russell Engineering Works, Inc. (JRE) for cash consideration of $1.6 million. JRE manufactures aluminum and stainless steel cryogenic transport trailers used for hauling liquid oxygen, nitrogen, argon, hydrogen and liquefied natural gas (LNG) for top producers and distributors of industrial gases and LNG.

  • During the quarter, the Company repurchased a total of 490,800 common shares for $20.1 million at an average price of $40.90.

  • On September 24, 2014, the board of directors declared a quarterly dividend of $0.18 per share payable on December 29, 2014 to shareholders of record on December 15, 2014.

Outlook

"We anticipate continued steady volumes from the automotive markets, as light vehicle sales have increased, due to some strengthening in parts of the economy and improving consumer confidence," McConnell said. "In Pressure Cylinders, we are well positioned to deliver natural gas storage and production equipment at the well site, through transportation and distribution solutions in LNG, and with products that convert natural gas to fuel. We believe that there are excellent growth opportunities across many of the energy-related markets, which we will continue to pursue organically and through acquisitions."

Conference Call

Worthington will review first quarter results during its quarterly conference call on September 25, 2014, at 10:30 a.m., Eastern Daylight Saving Time. Details regarding the conference call can be found on the Company web site 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 10,000 people and operates 80 facilities in 10 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; 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; additions to product lines and opportunities to participate in new 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 recurrent slowing economy; 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 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.

   
   
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF EARNINGS  
(In thousands, except per share amounts)  
   
    Three Months Ended  
    August 31,  
    2014     2013  
Net sales   $ 862,414     $ 692,291  
Cost of goods sold     732,907       581,327  
  Gross margin     129,507       110,964  
Selling, general and administrative expense     75,255       71,540  
Impairment of long-lived assets     1,950       4,641  
Restructuring and other income     (7 )     (3,997 )
Joint venture transactions     107       142  
  Operating income     52,202       38,638  
Other income (expense):                
  Miscellaneous income     323       10,937  
  Interest expense     (9,516 )     (6,240 )
  Equity in net income of unconsolidated affiliates     27,924       26,951  
  Earnings before income taxes     70,933       70,286  
Income tax expense     22,113       13,933  
Net earnings     48,820       56,353  
Net earnings attributable to noncontrolling interest     4,652       1,796  
Net earnings attributable to controlling interest   $ 44,168     $ 54,557  
                 
Basic                
Average common shares outstanding     67,567       69,601  
Earnings per share attributable to controlling interest   $ 0.65     $ 0.78  
                 
Diluted                
Average common shares outstanding     69,738       72,083  
Earnings per share attributable to controlling interest   $ 0.63     $ 0.76  
                 
                 
Common shares outstanding at end of period     67,424       69,373  
                 
Cash dividends declared per share   $ 0.18     $ 0.15  
                 
                 
                 
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    August 31,   May 31,
    2014   2014
Assets            
Current assets:            
  Cash and cash equivalents   $ 146,921   $ 190,079
  Receivables, less allowances of $3,024 and $3,043 at August 31, 2014 and May 31, 2014, respectively     486,005     493,127
  Inventories:            
    Raw materials     237,427     213,173
    Work in process     138,616     105,872
    Finished products     91,519     90,957
      Total inventories     467,562     410,002
  Income taxes receivable     3,354     5,438
  Assets held for sale     31,749     32,235
  Deferred income taxes     23,321     24,272
  Prepaid expenses and other current assets     45,632     43,769
    Total current assets     1,204,544     1,198,922
             
Investments in unconsolidated affiliates     196,373     179,113
Goodwill     269,357     251,093
Other intangible assets, net of accumulated amortization of $40,182 and $35,506 at August 31, 2014 and May 31, 2014, respectively     153,018     145,993
Other assets     27,264     22,399
Property, plant & equipment:            
  Land     15,263     15,260
  Buildings and improvements     217,388     213,848
  Machinery and equipment     861,580     848,889
  Construction in progress     32,947     32,135
    Total property, plant & equipment     1,127,178     1,110,132
    Less: accumulated depreciation     623,038     611,271
Property, plant and equipment, net     504,140     498,861
Total assets   $ 2,354,696   $ 2,296,381
             
Liabilities and equity            
Current liabilities:            
  Accounts payable   $ 369,273   $ 333,744
  Short-term borrowings     10,965     10,362
  Accrued compensation, contributions to employee benefit plans and related taxes     66,973     78,514
  Dividends payable     12,954     11,044
  Other accrued items     60,569     49,873
  Income taxes payable     17,836     4,953
  Current maturities of long-term debt     101,182     101,173
    Total current liabilities     639,752     589,663
             
Other liabilities     74,178     76,426
Distributions in excess of investment in unconsolidated affiliate     57,772     59,287
Long-term debt     554,494     554,790
Deferred income taxes     69,766     71,333
    Total liabilities     1,395,962     1,351,499
             
Shareholders' equity - controlling interest     865,869     850,812
Noncontrolling interest     92,865     94,070
    Total equity     958,734     944,882
Total liabilities and equity   $ 2,354,696   $ 2,296,381
             
             
             
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
   
    Three Months Ended  
    August 31,  
    2014     2013  
Operating activities                
Net earnings   $ 48,820     $ 56,353  
Adjustments to reconcile net earnings to net cash provided by operating activities:                
  Depreciation and amortization     20,367       19,460  
  Impairment of long-lived assets     1,950       4,641  
  Provision for deferred income taxes     (535 )     (8,424 )
  Bad debt income     (203 )     (481 )
  Equity in net income of unconsolidated affiliates, net of distributions     (6,990 )     (5,915 )
  Net gain on sale of assets     (2,830 )     (4,662 )
  Stock-based compensation     4,355       3,780  
  Excess tax benefits - stock-based compensation     (5,132 )     (4,298 )
  Gain on previously held equity interest in TWB     -       (11,000 )
Changes in assets and liabilities, net of impact of acquisitions:                
  Receivables     12,752       7,655  
  Inventories     (51,217 )     515  
  Prepaid expenses and other current assets     (2,872 )     (2,365 )
  Other assets     121       436  
  Accounts payable and accrued expenses     41,890       40,622  
  Other liabilities     (5,991 )     (1,853 )
Net cash provided by operating activities     54,485       94,464  
                 
Investing activities                
  Investment in property, plant and equipment     (23,873 )     (13,354 )
  Investment in notes receivable     (5,000 )     -  
  Acquisitions, net of cash acquired     (36,550 )     52,957  
  Distributions from (investments in) unconsolidated affiliates     (3,800 )     5,555  
  Proceeds from sale of assets and insurance     265       7,647  
Net cash provided (used) by investing activities     (68,958 )     52,805  
                 
Financing activities                
  Net proceeds from (repayments of) short-term borrowings     555       (51,541 )
  Principal payments on long-term debt     (302 )     (284 )
  Proceeds from (payments for) issuance of common shares     (1,020 )     2,201  
  Excess tax benefits - stock-based compensation     5,132       4,298  
  Payments to noncontrolling interest     (2,867 )     (1,763 )
  Repurchase of common shares     (20,071 )     (30,516 )
  Dividends paid     (10,112 )     -  
Net cash used by financing activities     (28,685 )     (77,605 )
                 
Increase (decrease) in cash and cash equivalents     (43,158 )     69,664  
Cash and cash equivalents at beginning of period     190,079       51,385  
Cash and cash equivalents at end of period   $ 146,921     $ 121,049  
                 
                 
                 
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  
    August 31,  
    2014     2013  
Volume:                
  Steel Processing (tons)     905       720  
  Pressure Cylinders (units)     20,754       20,847  
                 
Net sales:                
  Steel Processing   $ 552,331     $ 402,441  
  Pressure Cylinders     248,959       216,900  
  Engineered Cabs     49,554       48,461  
  Other     11,570       24,489  
    Total net sales   $ 862,414     $ 692,291  
                 
Material cost:                
  Steel Processing   $ 394,892     $ 287,712  
  Pressure Cylinders     118,437       101,580  
  Engineered Cabs     22,022       22,107  
                 
Selling, general and administrative expense:                
  Steel Processing   $ 31,900     $ 28,819  
  Pressure Cylinders     35,013       30,637  
  Engineered Cabs     6,824       6,892  
  Other     1,518       5,192  
    Total selling, general and administrative expense   $ 75,255     $ 71,540  
                 
Operating income (loss):                
  Steel Processing   $ 35,869     $ 22,663  
  Pressure Cylinders     19,606       19,454  
  Engineered Cabs     (2,145 )     (304 )
  Other     (1,128 )     (3,175 )
    Total operating income   $ 52,202     $ 38,638  
                 
                 
The following provides detail of impairment of long-lived assets, restructuring and other expense (income), and joint venture transactions included in operating income by segment presented above.  
             
    Three Months Ended  
    August 31,  
    2014     2013  
Impairment of long-lived assets:                
  Steel Processing   $ 1,950     $ 4,641  
  Pressure Cylinders     -       -  
  Engineered Cabs     -       -  
  Other     -       -  
    Total impairment of long-lived assets   $ 1,950     $ 4,641  
                 
Restructuring and other expense (income):                
  Steel Processing   $ (30 )   $ (4,762 )
  Pressure Cylinders     23       402  
  Engineered Cabs     -       -  
  Other     -       363  
    Total restructuring and other income   $ (7 )   $ (3,997 )
                 
Joint venture transactions:                
  Steel Processing   $ -     $ -  
  Pressure Cylinders     -       -  
  Engineered Cabs     -       -  
  Other     107       142  
    Total joint venture transactions   $ 107     $ 142  
                     

Contact Information

  • 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

    200 Old Wilson Bridge Rd.
    Columbus, Ohio 43085
    WorthingtonIndustries.com