SOURCE: Worthington Industries, Inc.

Worthington Industries, Inc.

September 28, 2016 08:45 ET

Worthington Reports First Quarter Fiscal 2017 Results

COLUMBUS, OH--(Marketwired - Sep 28, 2016) - Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $737.5 million and net earnings of $65.6 million, or $1.02 per diluted share, for its fiscal 2017 first quarter ended August 31, 2016. Net earnings in the quarter included pre-tax restructuring charges totaling $1.3 million. The after-tax impact of these charges reduced earnings per diluted share by $0.01. In the first quarter of fiscal 2016, the Company reported net sales of $758.1 million and net earnings of $32.0 million, or $0.48 per diluted share. Net earnings in the first quarter of fiscal 2016 included pre-tax impairment and restructuring charges totaling $6.1 million, which reduced earnings per diluted share by $0.06.

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

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

             
    1Q 2017   4Q 2016   1Q 2016
Net sales   $ 737.5   $ 714.7   $ 758.1
Operating income     64.9     54.0     31.0
Equity income     34.5     34.1     26.6
Net earnings     65.6     58.5     32.0
Earnings per diluted share   $ 1.02   $ 0.92   $ 0.48
                   

"We had a strong performance in our first quarter and delivered record earnings per share thanks to great results from our Steel Processing business segment and our joint venture ClarkDietrich," said John McConnell, Chairman and CEO. "We benefitted from rising steel prices and strong demand in the automotive and construction markets while the agriculture and oil and gas markets remained weak."

Consolidated Quarterly Results

Net sales for the first quarter of fiscal 2017 were $737.5 million, down 3% from the comparable quarter in the prior year, when net sales were $758.1 million. The decrease was the result of lower volume in certain Pressure Cylinders businesses and Engineered Cabs, partially offset by contributions from recent acquisitions.

Gross margin increased $34.3 million from the prior year quarter to $147.3 million on a favorable pricing spread in Steel Processing due primarily to inventory holding gains in the current quarter compared to inventory holding losses in the prior year quarter, partially offset by lower volume in Pressure Cylinders.

Operating income for the current quarter was $64.9 million, an increase of $33.9 million from the prior year quarter. The increase was due to higher gross margin and the favorable impact of lower impairment and restructuring charges, partially offset by higher SG&A expense. SG&A expense increased as a result of the impact of acquisitions and higher profit sharing and bonus expense.

Interest expense was unchanged from the prior year quarter at $7.9 million.

The Company's portion of equity income from unconsolidated joint ventures increased $8.0 million from the prior year quarter to $34.5 million on a $6 million higher contribution from ClarkDietrich, and improvements at ArtiFlex and Serviacero. The Company received cash dividends of $38.4 million from unconsolidated joint ventures during the quarter.

Income tax expense was $23.9 million in the current quarter compared to $14.2 million in the prior year quarter. The increase was primarily due to higher earnings, partially offset by $5.8 million in favorable discrete items recorded in the quarter. Tax expense in the current quarter reflects an estimated annual effective rate of 31.2% compared to 31.7% for the prior year quarter.

Balance Sheet

At quarter-end, total debt was $579.8 million, down $1.2 million from May 31, 2016, due to lower short-term borrowings. The Company had $181.5 million of cash at quarter-end.

Quarterly Segment Results

Steel Processing's net sales of $505.7 million were up 3%, or $14.9 million, from the comparable prior year quarter driven by higher volume due to the consolidation of the WSP joint venture effective March 1, 2016. Operating income of $54.8 million was $31.1 million higher than the prior year quarter on favorable spreads from inventory holding gains in the current quarter compared to inventory holding losses in the prior year quarter. The mix of direct versus toll tons processed was 52% to 48% in the current quarter, compared to 60% to 40% in the prior year quarter. The change in mix was primarily the result of the consolidation of the WSP joint venture.

Pressure Cylinders' net sales of $205.2 million were down 9%, or $19.2 million, from the comparable prior year quarter. The decline was driven by lower volume in the oil & gas equipment and industrial products businesses. Operating income of $14.1 million was $2.7 million lower than the prior year quarter primarily due to declines in oil & gas equipment, as improvement in consumer products offset smaller declines in industrial products and cryogenics.

Engineered Cabs' net sales of $25.6 million were down $13.0 million, or 34%, from the prior year quarter due to declines in market demand. The operating loss of $1.8 million was $7.4 million less than the prior year quarter due to lower impairment and restructuring charges, improved gross margin and lower SG&A expense.

The "Other" category includes the energy innovations business, as well as non-allocated corporate expenses. Net sales in the "Other" category were $1.1 million, a decrease of $3.3 million from the prior year quarter, as the construction services business has ceased operations. The operating loss of $2.1 million for the quarter was driven primarily by a $1.5 million increase in accrued legal expense.

Outlook

"We believe that most of our markets will remain steady as we finish calendar year 2016 with normal seasonal slowdowns in automotive production," McConnell said. "Our Transformation efforts are gaining traction in Pressure Cylinders, new product design is advancing in consumer products and its industrial products business is expanding the professional wholesale market into Europe this quarter." McConnell added, "We're off to a great start for fiscal 2017 and will to continue to navigate the ups and downs of the economy."

Conference Call

Worthington will review fiscal 2017 first quarter and full-year results during its quarterly conference call on September 28, 2016, at 2:30 p.m., Eastern Daylight 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 2016 fiscal year sales of $2.8 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 & gas equipment, and consumer products for camping, grilling, hand torch solutions 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 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; pricing trends for raw materials and finished goods and the impact of pricing changes; demand trends for us or our markets; additions to product lines and opportunities to participate in new markets; expected benefits from Transformation efforts; 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 profitability potential, capacity, and working capital needs; 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, 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; expectations for increasing volatility or improving and sustainable 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 global economic conditions generally and within major product markets, including a recurrent slowing economy; the effect of conditions in national and worldwide financial markets; lower oil prices as a factor in demand for products; product demand and pricing; changes in product mix, product substitution and market acceptance of our 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, oil and gas, and other industries in which we participate; 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 we do 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 industries 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, civil unrest, international conflicts, 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 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 us in the application of our significant accounting policies; level of imports and import prices in our 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; cyber security risks; 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, 2016.

   
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF EARNINGS  
(In thousands, except per share amounts)  
   
    Three Months Ended August 31,  
    2016     2015  
Net sales   $ 737,549     $ 758,147  
Cost of goods sold     590,267       645,131  
  Gross margin     147,282       113,016  
Selling, general and administrative expense     81,056       75,951  
Impairment of long-lived assets     -       3,000  
Restructuring and other expense     1,328       3,069  
  Operating income     64,898       30,996  
Other income (expense):                
  Miscellaneous income (expense), net     863       (578 )
  Interest expense     (7,870 )     (7,854 )
  Equity in net income of unconsolidated affiliates     34,544       26,581  
  Earnings before income taxes     92,435       49,145  
Income tax expense     23,899       14,150  
Net earnings     68,536       34,995  
Net earnings attributable to noncontrolling interests     2,969       3,027  
Net earnings attributable to controlling interest   $ 65,567     $ 31,968  
                 
Basic                
Average common shares outstanding     61,885       63,993  
Earnings per share attributable to controlling interest   $ 1.06     $ 0.50  
                 
Diluted                
Average common shares outstanding     64,337       66,065  
Earnings per share attributable to controlling interest   $ 1.02     $ 0.48  
                 
                 
Common shares outstanding at end of period     62,179       63,343  
                 
Cash dividends declared per share   $ 0.20     $ 0.19  
                 
 
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    August 31,   May 31,
    2016   2016
Assets            
Current assets:            
  Cash and cash equivalents   $ 181,525   $ 84,188
  Receivables, less allowances of $3,866 and $4,579 at August 31, 2016 and May 31, 2016, respectively     416,529     439,688
  Inventories:            
    Raw materials     192,117     162,427
    Work in process     104,418     86,892
    Finished products     73,198     70,016
      Total inventories     369,733     319,335
  Income taxes receivable     2,498     10,535
  Assets held for sale     10,052     10,079
  Prepaid expenses and other current assets     52,129     51,290
    Total current assets     1,032,466     915,115
Investments in unconsolidated affiliates     200,048     191,826
Goodwill     246,204     246,067
Other intangible assets, net of accumulated amortization of $52,998 and $49,532 at August 31, 2016 and May 31, 2016, respectively     92,689     96,164
Other assets     29,775     29,254
Property, plant and equipment:            
  Land     18,537     18,537
  Buildings and improvements     259,682     256,973
  Machinery and equipment     974,219     945,951
  Construction in progress     30,789     48,156
    Total property, plant and equipment     1,283,227     1,269,617
    Less: accumulated depreciation     702,456     686,779
Total property, plant and equipment, net     580,771     582,838
Total assets   $ 2,181,953   $ 2,061,264
             
Liabilities and equity            
Current liabilities:            
  Accounts payable   $ 325,299   $ 290,432
  Short-term borrowings     1,534     2,651
  Accrued compensation, contributions to employee benefit plans and related taxes     69,204     75,105
  Dividends payable     14,212     13,471
  Other accrued items     49,453     45,056
  Income taxes payable     15,639     2,501
  Current maturities of long-term debt     867     862
    Total current liabilities     476,208     430,078
Other liabilities     63,229     63,487
Distributions in excess of investment in unconsolidated affiliate     66,192     52,983
Long-term debt     577,408     577,491
Deferred income taxes     17,836     17,379
  Total liabilities     1,200,873     1,141,418
Shareholders' equity - controlling interest     855,962     793,371
Noncontrolling interests     125,118     126,475
  Total equity     981,080     919,846
Total liabilities and equity   $ 2,181,953   $ 2,061,264
             
   
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
   
    Three Months Ended August 31,  
    2016     2015  
Operating activities:                
Net earnings   $ 68,536     $ 34,995  
Adjustments to reconcile net earnings to net cash provided by operating activities:                
  Depreciation and amortization     21,831       21,440  
  Impairment of long-lived assets     -       3,000  
  Provision for (benefit from) deferred income taxes     20       (5,540 )
  Bad debt (income) expense     (81 )     10  
  Equity in net income of unconsolidated affiliates, net of distributions     3,898       (5,513 )
  Net loss on sale of assets     4,396       1,606  
  Stock-based compensation     3,136       3,777  
Changes in assets and liabilities, net of impact of acquisitions:                
  Receivables     16,954       42,629  
  Inventories     (50,398 )     (7,824 )
  Prepaid expenses and other current assets     7,162       11,166  
  Other assets     1,246       442  
  Accounts payable and accrued expenses     43,061       41,626  
  Other liabilities     1,144       (3,187 )
Net cash provided by operating activities     120,905       138,627  
                 
Investing activities:                
  Investment in property, plant and equipment     (16,316 )     (38,497 )
  Investments in unconsolidated affiliates     -       (1,687 )
  Proceeds from sale of assets     157       131  
Net cash used by investing activities     (16,159 )     (40,053 )
                 
Financing activities:                
  Net repayments of short-term borrowings     (1,117 )     (68,511 )
  Proceeds from long-term debt     -       921  
  Principal payments on long-term debt     (219 )     (208 )
  Proceeds from (payments for) issuance of common shares     5,821       (602 )
  Payments to noncontrolling interests     -       (3,336 )
  Repurchase of common shares     -       (27,582 )
  Dividends paid     (11,894 )     (11,551 )
Net cash used by financing activities     (7,409 )     (110,869 )
                 
Increase (decrease) in cash and cash equivalents     97,337       (12,295 )
Cash and cash equivalents at beginning of period     84,188       31,067  
Cash and cash equivalents at end of period   $ 181,525     $ 18,772  
                 
   
WORTHINGTON INDUSTRIES, INC.  
SUPPLEMENTAL DATA  
(In thousands, except volume)  
   
This supplemental information is provided to assist in the analysis of the results of operations.  
   
   
    Three Months Ended August 31,  
    2016     2015  
Volume:                
  Steel Processing (tons)     1,031,498       866,376  
  Pressure Cylinders (units)     18,791,723       19,219,410  
                 
Net sales:                
  Steel Processing   $ 505,674     $ 490,800  
  Pressure Cylinders     205,209       224,394  
  Engineered Cabs     25,581       38,617  
  Other     1,085       4,336  
    Total net sales   $ 737,549     $ 758,147  
                 
Material cost:                
  Steel Processing   $ 312,715     $ 348,245  
  Pressure Cylinders     82,928       99,064  
  Engineered Cabs     11,247       17,981  
                 
Selling, general and administrative expense:                
  Steel Processing   $ 36,882     $ 32,915  
  Pressure Cylinders     36,990       36,874  
  Engineered Cabs     3,951       5,408  
  Other     3,233       754  
    Total selling, general and administrative expense   $ 81,056     $ 75,951  
                 
Operating income (loss):                
  Steel Processing   $ 54,782     $ 23,638  
  Pressure Cylinders     14,105       16,819  
  Engineered Cabs     (1,843 )     (9,291 )
  Other     (2,146 )     (170 )
    Total operating income   $ 64,898     $ 30,996  
                 
Equity income (loss) by unconsolidated affiliate:                
  WAVE   $ 20,746     $ 22,041  
  ClarkDietrich     8,667       2,646  
  Serviacero     1,952       803  
  ArtiFlex     2,893       1,546  
  WSP     -       753  
  Other     286       (1,208 )
    Total equity income   $ 34,544     $ 26,581  
                 
   
WORTHINGTON INDUSTRIES, INC.  
SUPPLEMENTAL DATA  
(In thousands, except volume)  
   
The following provides detail of Pressure Cylinders volume and net sales by principal class of products.  
   
    Three Months Ended August 31,  
    2016   2015  
Volume (units):              
  Consumer products     12,088,912     11,977,945  
  Industrial products     6,561,139     7,147,952  
  Alternative fuels     136,062     91,956  
  Oil & gas equipment     756     1,320  
  Cryogenics     4,854     237  
    Total Pressure Cylinders     18,791,723     19,219,410  
               
Net sales:              
  Consumer products   $ 60,626   $ 54,958  
  Industrial products     90,020     105,106  
  Alternative fuels     29,762     24,818  
  Oil & gas equipment     14,461     32,884  
  Cryogenics     10,340     6,628  
    Total Pressure Cylinders   $ 205,209   $ 224,394  
   
   
The following provides detail of impairment of long-lived assets and restructuring and other expense included in operating income by segment.  
   
    Three Months Ended August 31,  
    2016   2015  
Impairment of long-lived assets:              
  Steel Processing   $ -   $ -  
  Pressure Cylinders     -     -  
  Engineered Cabs     -     3,000  
  Other     -     -  
    Total impairment of long-lived assets   $ -   $ 3,000  
               
Restructuring and other expense (income):              
  Steel Processing   $ 966   $ 462  
  Pressure Cylinders     146     731  
  Engineered Cabs     206     1,878  
  Other     10     (2 )
    Total restructuring and other expense   $ 1,328   $ 3,069  
               

Contact Information

  • Cathy M. Lyttle
    VP, Corporate Communications and Investor Relations
    (614) 438-3077
    Email Contact

    Sonya L. Higginbotham
    Director, Corporate Communications
    (614) 438-7391
    Email Contact

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