SOURCE: Worthington Industries, Inc.

Worthington Industries, Inc.

December 19, 2016 17:16 ET

Worthington Reports Second Quarter Fiscal 2017 Results

COLUMBUS, OH--(Marketwired - Dec 19, 2016) - Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $727.8 million and net earnings of $46.6 million, or $0.72 per diluted share, for its fiscal 2017 second quarter ended November 30, 2016. Net earnings in the quarter included pre-tax restructuring charges totaling $3.3 million. The after-tax impact of these charges reduced earnings per diluted share by $0.03. In the second quarter of fiscal 2016, the Company reported net sales of $699.8 million and net earnings of $23.4 million, or $0.36 per diluted share. Net earnings in the second quarter of fiscal 2016 included pre-tax impairment and restructuring charges totaling $24.5 million. The after-tax impact of these charges reduced earnings per diluted share by $0.24.

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

 
(U.S. dollars in millions, except per share data)
 
    2Q 2017   1Q 2017   2Q 2016   6M 2017   6M 2016
Net sales   $ 727.8   $ 737.5   $ 699.8   $ 1,465.3   $ 1,457.9
Operating income     43.0     64.9     12.0     107.9     43.0
Equity income     27.1     34.5     29.2     61.7     55.8
Net earnings     46.6     65.6     23.4     112.1     55.3
Earnings per diluted share   $ 0.72   $ 1.02   $ 0.36   $ 1.74   $ 0.85
                               

"We had a good second quarter with overall improving results and solid year-over-year growth," said John McConnell, Chairman and CEO. "The Steel Processing business had a record second quarter and our joint ventures were steady. Results were mixed in Pressure Cylinders due to depressed oil and gas markets and declines in industrial products; consumer products had an excellent quarter. Demand was down in Engineered Cabs."

Consolidated Quarterly Results

Net sales for the second quarter of fiscal 2017 were $727.8 million, up 4% from the comparable quarter in the prior year, when net sales were $699.8 million. The increase was the result of higher average direct selling prices in Steel Processing, partially offset by lower volume in Engineered Cabs and certain Pressure Cylinders businesses.

Gross margin increased $13.6 million from the prior year quarter to $122.8 million on a favorable pricing spread in Steel Processing and contributions from the WSP joint venture, which was consolidated effective March 1, 2016.

Operating income for the current quarter was $43.0 million, an increase of $31.1 million from the prior year quarter. The increase was due to lower impairment and restructuring charges in the current quarter combined with an improved gross margin, partially offset by higher SG&A expense primarily related to recent acquisitions.

Interest expense was $7.7 million for the current quarter, compared to $7.8 million in the prior year quarter. The decrease was due to lower short-term borrowings.

Equity income from unconsolidated joint ventures decreased $2.1 million from the prior year quarter to $27.1 million on lower contributions from ClarkDietrich. Equity income from ClarkDietrich in the prior year quarter was favorably impacted by $4.0 million due to a legal settlement. The Company received cash distributions of $24.3 million from unconsolidated joint ventures during the quarter, a 90% cash conversion on equity income.

Income tax expense was $13.5 million in the current quarter compared to $8.7 million in the prior year quarter. The increase was primarily due to higher earnings, partially offset by $6.3 million in favorable discrete items recorded in the quarter. Tax expense in the current quarter reflects an estimated annual effective rate of 28.5% compared to 30.9% for the prior year quarter.

Balance Sheet

At quarter-end, total debt was $577.4 million, down $2.4 million from August 31, 2016, due to lower short-term borrowings. The Company had $175.2 million of cash at quarter-end.

Quarterly Segment Results

Steel Processing's net sales of $508.8 million were up 9%, or $41.0 million, from the comparable prior year quarter driven by higher average direct selling prices and higher tolling volume due to the consolidation of the WSP joint venture effective March 1, 2016. Operating income of $35.4 million was $8.8 million higher than the prior year quarter due to a favorable pricing spread and contributions from the WSP joint venture. The mix of direct versus toll tons processed was 49% to 51% in the current quarter, compared to 62% to 38% in the prior year quarter. The change in mix was primarily the result of the consolidation of the WSP joint venture effective March 1, 2016.

Pressure Cylinders' net sales of $194.7 million were down 3%, or $6.5 million, from the comparable prior year quarter. The decline was driven by lower volume in the oil & gas equipment and industrial products businesses, partially offset by higher average selling prices in consumer products due to an improved product mix. Operating income of $11.3 million was $21.6 million higher than the prior year quarter due to lower impairment and restructuring charges in the current quarter. Declines in the industrial products and oil & gas equipment businesses were largely offset by improvements in consumer products. 

Engineered Cabs' net sales of $22.5 million were down $6.2 million, or 22%, from the prior year quarter due to declines in market demand. The operating loss of $3.4 million was $0.9 million less than the prior year quarter due to 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 $1.9 million, a decrease of $0.3 million. The operating loss of $0.3 million for the quarter was driven primarily by losses in the energy innovations business.

Outlook

"I am pleased with the performance of our Company in the first half of fiscal 2017. We experienced some weak markets, but our employees continue to work hard to make improvements, aided by our recently launched Transformation 2.0 that we will continue to roll out in the new year." McConnell added, "I am encouraged by the early views of the economic outlook for 2017 and look forward to pursuing growth opportunities."

Conference Call

Worthington will review fiscal 2017 second quarter results during its quarterly conference call on December 20, 2016, at 2:30 p.m., Eastern 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 79 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
November 30,
    Six Months Ended
November 30,
 
    2016     2015     2016     2015  
Net sales   $ 727,780     $ 699,816     $ 1,465,329     $ 1,457,963  
Cost of goods sold     604,977       590,637       1,195,244       1,235,768  
  Gross margin     122,803       109,179       270,085       222,195  
Selling, general and administrative expense     76,487       72,722       157,543       148,673  
Impairment of long-lived assets     -       22,962       -       25,962  
Restructuring and other expense     3,272       1,523       4,600       4,592  
  Operating income     43,044       11,972       107,942       42,968  
Other income (expense):                                
  Miscellaneous income, net     872       996       1,735       418  
  Interest expense     (7,658 )     (7,799 )     (15,528 )     (15,653 )
  Equity in net income of unconsolidated affiliates     27,124       29,247       61,668       55,828  
  Earnings before income taxes     63,382       34,416       155,817       83,561  
Income tax expense     13,515       8,665       37,414       22,815  
Net earnings     49,867       25,751       118,403       60,746  
Net earnings attributable to noncontrolling interests     3,302       2,375       6,271       5,402  
Net earnings attributable to controlling interest   $ 46,565     $ 23,376     $ 112,132     $ 55,344  
                                 
Basic                                
Average common shares outstanding     62,348       62,676       62,115       63,338  
Earnings per share attributable to controlling interest   $ 0.75     $ 0.37     $ 1.81     $ 0.87  
                                 
Diluted                                
Average common shares outstanding     64,725       64,663       64,599       65,350  
Earnings per share attributable to controlling interest   $ 0.72     $ 0.36     $ 1.74     $ 0.85  
                                 
                                 
Common shares outstanding at end of period     62,562       62,101       62,562       62,101  
                                 
Cash dividends declared per share   $ 0.20     $ 0.19     $ 0.40     $ 0.38  
                                 
 
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    November 30,   May 31,
    2016   2016
Assets        
Current assets:        
  Cash and cash equivalents   $ 175,180   $ 84,188
  Receivables, less allowances of $3,499 and $4,579 at November 30, 2016 and May 31, 2016, respectively     429,011     439,688
  Inventories:            
    Raw materials     168,586     162,427
    Work in process     85,933     86,892
    Finished products     83,339     70,016
      Total inventories     337,858     319,335
  Income taxes receivable     7,997     10,535
  Assets held for sale     10,050     10,079
  Prepaid expenses and other current assets     47,385     51,290
    Total current assets     1,007,481     915,115
Investments in unconsolidated affiliates     203,508     191,826
Goodwill     243,918     246,067
Other intangible assets, net of accumulated amortization of $56,220 and $49,532 at November 30, 2016 and May 31, 2016, respectively     88,588     96,164
Other assets     27,914     29,254
Property, plant and equipment:            
  Land     18,397     18,537
  Buildings and improvements     257,950     256,973
  Machinery and equipment     973,941     945,951
  Construction in progress     34,732     48,156
    Total property, plant and equipment     1,285,020     1,269,617
    Less: accumulated depreciation     713,705     686,779
Total property, plant and equipment, net     571,315     582,838
Total assets   $ 2,142,724   $ 2,061,264
             
Liabilities and equity            
Current liabilities:            
  Accounts payable   $ 278,192   $ 290,432
  Short-term borrowings     497     2,651
  Accrued compensation, contributions to employee benefit plans and related taxes     65,308     75,105
  Dividends payable     14,182     13,471
  Other accrued items     41,815     45,056
  Income taxes payable     3,364     2,501
  Current maturities of long-term debt     873     862
    Total current liabilities     404,231     430,078
Other liabilities     63,910     63,487
Distributions in excess of investment in unconsolidated affiliate     67,516     52,983
Long-term debt     576,038     577,491
Deferred income taxes, net     20,267     17,379
    Total liabilities     1,131,962     1,141,418
Shareholders' equity - controlling interest     884,940     793,371
Noncontrolling interests     125,822     126,475
    Total equity     1,010,762     919,846
Total liabilities and equity   $ 2,142,724   $ 2,061,264
             
 
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
    Three Months Ended
November 30,
    Six Months Ended
November 30,
 
    2016     2015     2016     2015  
Operating activities:                        
Net earnings   $ 49,867     $ 25,751     $ 118,403     $ 60,746  
Adjustments to reconcile net earnings to net cash provided by operating activities:                                
  Depreciation and amortization     21,645       20,547       43,476       41,987  
  Impairment of long-lived assets     -       22,962       -       25,962  
  Provision for (benefit from) deferred income taxes     2,316       (9,851 )     2,336       (15,391 )
  Bad debt (income) expense     232       (2 )     151       8  
  Equity in net income of unconsolidated affiliates, net of distributions     (2,824 )     (10,389 )     1,074       (15,902 )
  Net (gain) loss on sale of assets     (2,912 )     (5,854 )     1,484       (4,248 )
  Stock-based compensation     3,824       3,880       6,960       7,657  
Changes in assets and liabilities, net of impact of acquisitions:                                
  Receivables     (7,156 )     23,474       9,798       66,103  
  Inventories     31,875       31,645       (18,523 )     23,821  
  Prepaid expenses and other current assets     (1,737 )     17,467       5,425       28,633  
  Other assets     1,165       (3,245 )     2,411       (2,803 )
  Accounts payable and accrued expenses     (65,946 )     (72,846 )     (22,885 )     (31,220 )
  Other liabilities     950       7,487       2,094       4,300  
Net cash provided by operating activities     31,299       51,026       152,204       189,653  
                                 
Investing activities:                                
  Investment in property, plant and equipment     (14,730 )     (21,995 )     (31,046 )     (60,492 )
  Acquisitions, net of cash acquired     -       (2,950 )     -       (2,950 )
  Investments in unconsolidated affiliates     -       (226 )     -       (1,913 )
  Proceeds from sale of assets     799       9,325       956       9,456  
Net cash used by investing activities     (13,931 )     (15,846 )     (30,090 )     (55,899 )
                                 
Financing activities:                                
  Net proceeds from (repayments of) short-term borrowings     (1,037 )     27,499       (2,154 )     (41,012 )
  Proceeds from long-term debt     -       -       -       921  
  Principal payments on long-term debt     (218 )     (220 )     (437 )     (428 )
  Proceeds from issuance of common shares, net of tax withholdings     (2,849 )     3,666       2,972       3,064  
  Payments to noncontrolling interests     (6,781 )     (1,564 )     (6,781 )     (4,900 )
  Repurchase of common shares     -       (43,914 )     -       (71,496 )
  Dividends paid     (12,828 )     (12,065 )     (24,722 )     (23,616 )
Net cash used by financing activities     (23,713 )     (26,598 )     (31,122 )     (137,467 )
                                 
Increase (decrease) in cash and cash equivalents     (6,345 )     8,582       90,992       (3,713 )
Cash and cash equivalents at beginning of period     181,525       18,772       84,188       31,067  
Cash and cash equivalents at end of period   $ 175,180     $ 27,354     $ 175,180     $ 27,354  
                                 
 
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
November 30,
    Six Months Ended
November 30,
 
    2016     2015     2016     2015  
Volume:                        
  Steel Processing (tons)     1,020,147       828,208       2,051,645       1,694,584  
  Pressure Cylinders (units)     16,308,807       16,622,732       35,224,685       35,930,392  
                                 
Net sales:                                
  Steel Processing   $ 508,806     $ 467,812     $ 1,014,480     $ 958,612  
  Pressure Cylinders     194,661       201,173       399,870       425,567  
  Engineered Cabs     22,463       28,699       48,044       67,316  
  Other     1,850       2,132       2,935       6,468  
    Total net sales   $ 727,780     $ 699,816     $ 1,465,329     $ 1,457,963  
                                 
Material cost:                                
  Steel Processing   $ 338,988     $ 322,507     $ 651,703     $ 670,752  
  Pressure Cylinders     76,302       85,498       159,230       184,562  
  Engineered Cabs     10,173       13,437       21,420       31,418  
                                 
Selling, general and administrative expense:                                
  Steel Processing   $ 35,806     $ 32,925     $ 72,688     $ 65,840  
  Pressure Cylinders     35,530       33,915       72,520       70,789  
  Engineered Cabs     3,669       4,800       7,620       10,208  
  Other     1,482       1,082       4,715       1,836  
    Total selling, general and administrative expense   $ 76,487     $ 72,722     $ 157,543     $ 148,673  
                                 
Operating income (loss):                                
  Steel Processing   $ 35,448     $ 26,642     $ 90,230     $ 50,280  
  Pressure Cylinders     11,304       (10,309 )     25,409       6,510  
  Engineered Cabs     (3,381 )     (4,290 )     (5,224 )     (13,581 )
  Other     (327 )     (71 )     (2,473 )     (241 )
    Total operating income   $ 43,044     $ 11,972     $ 107,942     $ 42,968  
                                 
Equity income (loss) by unconsolidated affiliate:                                
  WAVE   $ 18,720     $ 19,119     $ 39,466     $ 41,160  
  ClarkDietrich     4,262       6,378       12,929       9,024  
  Serviacero     2,039       378       3,991       1,181  
  ArtiFlex     2,134       2,611       5,027       4,158  
  WSP     -       721       -       1,474  
  Other     (31 )     40       255       (1,169 )
    Total equity income   $ 27,124     $ 29,247     $ 61,668     $ 55,828  
                                 
 
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
November 30,
    Six Months Ended
November 30,
 
    2016     2015     2016     2015  
Volume (units):                        
  Consumer products     10,383,747       10,523,692       22,472,659       22,501,637  
  Industrial products     5,790,436       5,990,875       12,480,584       13,227,314  
  Alternative fuels     134,190       107,121       270,252       199,077  
  Oil & gas equipment     434       1,044       1,190       2,364  
    Total Pressure Cylinders     16,308,807       16,622,732       35,224,685       35,930,392  
                                 
Net sales:                                
  Consumer products   $ 55,435     $ 49,484     $ 116,061     $ 104,442  
  Industrial products     98,868       102,694       199,228       214,428  
  Alternative fuels     29,170       23,954       58,932       48,772  
  Oil & gas equipment     11,188       25,041       25,649       57,925  
    Total Pressure Cylinders   $ 194,661     $ 201,173     $ 399,870     $ 425,567  
   
   
The following provides detail of impairment of long-lived assets and restructuring and other expense included in operating income (loss) by segment.  
   
    Three Months Ended
November 30,
    Six Months Ended
November 30,
 
    2016     2015     2016     2015  
Impairment of long-lived assets:                                
  Steel Processing   $ -     $ -     $ -     $ -  
  Pressure Cylinders     -       22,962       -       22,962  
  Engineered Cabs     -       -       -       3,000  
  Other     -       -       -       -  
    Total impairment of long-lived assets   $ -     $ 22,962     $ -     $ 25,962  
                                 
Restructuring and other expense (income):                                
  Steel Processing   $ 318     $ 2,258     $ 1,284     $ 2,720  
  Pressure Cylinders     1,963       (16 )     2,109       715  
  Engineered Cabs     1,004       765       1,210       2,643  
  Other     (13 )     (1,484 )     (3 )     (1,486 )
    Total restructuring and other expense   $ 3,272     $ 1,523     $ 4,600     $ 4,592  
                                 

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