SOURCE: Worthington Industries, Inc.

Worthington Industries, Inc.

March 27, 2014 08:25 ET

Worthington Reports Third Quarter Fiscal 2014 Results

COLUMBUS, OH--(Marketwired - Mar 27, 2014) - Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $773.2 million and net earnings of $40.6 million, or $0.57 per diluted share, for its fiscal 2014 third quarter ended February 28, 2014. In the third quarter of the prior year, the Company reported net sales of $619.5 million and net earnings of $37.1 million, or $0.52 per diluted share.

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

 
(U.S. dollars in millions, except per share data)
    3Q 2014   2Q 2014   3Q 2013   9M2014   9M2013
Net sales   $ 773.2   $ 769.9   $ 619.5   $ 2,235.4   $ 1,908.2
Operating income     45.3     19.5     33.4     103.4     95.6
Equity income     21.2     21.1     25.7     69.2     73.6
Net earnings     40.6     23.0     37.1     118.1     102.9
Earnings per share   $ 0.57   $ 0.32   $ 0.52   $ 1.64   $ 1.46
                               

"We had a strong quarter, the best third quarter earnings per share in our history, with solid earnings growth despite enduring extreme weather conditions which hampered some of our business activity," said John McConnell, Chairman and CEO. "Steel Processing had a very good quarter with strong volume from the automotive and construction markets. Pressure Cylinders had strong contributions from our branded consumer products, oilfield products, and the heating tank business."

Consolidated Quarterly Results

Net sales for the third quarter ended February 28, 2014 were $773.2 million, up 25% from the comparable quarter in the prior year, when net sales were $619.5 million. The increase resulted from higher overall volumes, which were aided by the impact of acquisitions.

Gross margin for the current quarter was $122.5 million, compared to $97.0 million in the prior year quarter. The $25.5 million increase was primarily the result of an increase in volumes and to a lesser extent an improved spread between average selling prices and material costs.

Operating income for the current quarter was $45.3 million, compared to $33.4 million in the prior year quarter, due to the improvement in gross margin which was partially offset by a $12.5 million increase in SG&A expenses primarily from the impact of acquisitions and higher profit sharing and bonus expense. Operating income in the current quarter also included restructuring charges of $1.5 million mainly due to a $1.4 million severance accrual for the recently announced closure of the Baltimore, Md. steel facility.

Interest expense of $6.2 million in the quarter was essentially flat versus the prior year quarter.

Equity in net income from unconsolidated joint ventures decreased $4.5 million from the prior year quarter to $21.2 million on sales of $340.6 million. The decrease was primarily from the consolidation of TWB and lower income at ClarkDietrich and WAVE. Since July 31, 2013, TWB's results have been consolidated rather than reported as equity income. Equity income from ClarkDietrich and WAVE was lower by $2.1 million and $1.6 million, respectively, on lower volumes related to severe weather conditions. However, all joint ventures posted positive results, led by WAVE, Serviacero and ClarkDietrich, which contributed $15.5 million, $3.1 million, and $1.0 million of equity income, respectively.

Income tax expense increased slightly from $16.2 million in the prior year quarter to $16.6 million in the current quarter, as the impact of higher net earnings was substantially offset by certain favorable discrete tax adjustments. The current quarter income tax expense reflects an estimated annual effective tax rate of 27.3% compared to 31.8% for the prior year quarter.

Balance Sheet

At quarter end, total debt was $441.8 million, down $8.4 million from November 30, 2013 due to lower short-term borrowings. As of February 28, 2014, the Company had utilized $20.0 million of its $100.0 million trade accounts receivable securitization facility, and $9.7 million was drawn on the Company's $425.0 million revolving credit facility.

Quarterly Segment Results

Steel Processing's net sales of $478.0 million were up 35%, or $124.1 million, from the prior year quarter, on higher volumes resulting primarily from the consolidation of TWB and increased sales in the automotive, construction and agriculture markets. Operating income increased by $10.6 million to $28.3 million due primarily to higher overall volumes. The overall improvement in operating income was partially offset by $1.4 million of severance costs accrued in connection with the previously announced closure of the Baltimore steel facility.

Pressure Cylinders' net sales of $233.3 million were up 14%, or $28.1 million, from the comparable prior year quarter driven by the recently acquired oilfield equipment and strong retail product volumes. Operating income was $21.3 million, up $3.4 million from the prior year quarter, due to the increase in volumes combined with an improvement in operating margins.

Engineered Cabs' net sales of $51.5 million were up 6%, or $2.9 million, from the comparable prior year quarter driven by higher volumes. Operating loss of $1.1 million represents a $1.2 million decrease from the operating income in the prior year quarter, as the increase in net sales was more than offset by higher manufacturing and SG&A expenses.

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 $10.5 million, a decrease of $1.3 million from the prior year quarter, mostly due to the Construction Services business. The "Other" category reported a loss of $3.2 million driven by losses within Construction Services. The Military and Mid-Rise businesses within construction services are no longer core to the Company's strategy and are in the process of being exited.

Recent Business Developments

  • On January 24, 2014, the Company acquired a 75% interest in Aritas Basincli Kaplar Sanayi A.S., one of Europe's leading LNG (liquefied natural gas) and cryogenic technology companies. The remaining 25% stake was retained by the previous owners.

  • During the quarter, the Company purchased a total of 1,000,000 common shares for $40.8 million at an average price of $40.76.

  • On March 26, 2014, the board of directors declared a quarterly dividend of $0.15 per share payable on June 27, 2014 to shareholders of record on June 13, 2014.

Outlook

"We anticipate the fourth quarter, historically our strongest, to yield a solid performance to finish out our fiscal year," McConnell said. "We will continue to pursue our strategy of growth with our existing businesses as well as through acquisition opportunities in growing markets."

Conference Call

Worthington will review third quarter results during its quarterly conference call on March 27, 2014, at 1:30 p.m., Eastern Daylight Time. Details regarding the conference call can be found on the Company web site at www.WorthingtonIndustries.com.

Corporate Profile

Worthington Industries is a leading diversified metals manufacturing company with 2013 fiscal year sales of $2.6 billion. The Columbus, Ohio based company is North America's premier value-added steel processor and a leader in manufactured metal products, such as propane, oxygen, refrigerant and industrial cylinders, hand torches, camping cylinders, scuba tanks, compressed natural gas storage cylinders, helium balloon kits and exploration, recovery and production tanks for global energy markets; custom-engineered open and enclosed cabs and operator stations for heavy mobile equipment; laser welded blanks; steel pallets and racks; and through joint ventures, suspension grid systems for concealed and lay-in panel ceilings, current and past model automotive service stampings and light gauge steel framing for commercial and residential construction. Worthington employs approximately 10,000 people and operates 82 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 an unwavering commitment to the customer, supplier, and shareholder, and it serves as the Company's foundation for one of the strongest employee-employer partnerships in American industry.

Safe Harbor Statement

The Company wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements by the Company relating to outlook, strategy or business plans; or future or expected growth, performance, sales, volumes, cash flows, earnings, balance sheet strengths, debt, financial condition or other financial measures; projected profitability potential, capacity, and working capital needs; demand trends for the Company or its markets; 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 or the supply chain and the results thereof; the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, newly-created joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to maintain margins and capture and maintain market share and to develop or take advantage of future opportunities, new products and new markets; expectations for Company and customer inventories, jobs and orders; expectations for the economy and markets or improvements therein; expected benefits from transformation plans, cost reduction efforts and other new initiatives; expectations for increasing volatility or improving and sustaining earnings, earnings potential, margins or shareholder value; effects of judicial rulings and other non-historical matters constitute "forward-looking statements" within the meaning of the Act. Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the effect of legislation or regulations relating to the United States debt and budget, which may be adverse due to its impact on tax increases, governmental spending, and customer confidence and spending; 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 new markets; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; the outcome of adverse claims experience with respect to workers' compensation, product recalls or product liability, casualty events or other matters; deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies; level of imports and import prices in the Company's markets; the impact of judicial and governmental agency rulings as well as the impact of 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, 2013.

   
   
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF EARNINGS  
(In thousands, except per share amounts)  
                         
    Three Months Ended     Nine Months Ended  
    February 28,     February 28,  
    2014     2013     2014     2013  
Net sales   $ 773,230     $ 619,527     $ 2,235,421     $ 1,908,184  
Cost of goods sold     650,743       522,501       1,873,738       1,622,651  
  Gross margin     122,487       97,026       361,683       285,533  
Selling, general and administrative expense     75,680       63,221       225,615       187,744  
Impairment of long-lived assets     -       -       35,375       1,520  
Restructuring and other expense (income)     1,398       146       (3,781 )     1,811  
Joint venture transactions     120       253       1,048       (1,188 )
  Operating income     45,289       33,406       103,426       95,646  
Other income (expense):                                
  Miscellaneous income     488       596       13,897       1,064  
  Interest expense     (6,196 )     (6,158 )     (18,694 )     (17,751 )
  Equity in net income of unconsolidated affiliates     21,186       25,716       69,223       73,580  
  Earnings before income taxes     60,767       53,560       167,852       152,539  
Income tax expense     16,556       16,229       38,948       47,721  
Net earnings     44,211       37,331       128,904       104,818  
Net earnings attributable to noncontrolling interest     3,608       200       10,767       1,899  
Net earnings attributable to controlling interest   $ 40,603     $ 37,131     $ 118,137     $ 102,919  
                                 
Basic                                
Average common shares outstanding     68,895       69,791       69,268       68,998  
Earnings per share attributable to controlling interest   $ 0.59     $ 0.53     $ 1.71     $ 1.49  
                                 
Diluted                                
Average common shares outstanding     71,528       71,914       71,910       70,501  
Earnings per share attributable to controlling interest   $ 0.57     $ 0.52     $ 1.64     $ 1.46  
                                 
                                 
Common shares outstanding at end of period     68,302       70,168       68,302       70,168  
                                 
Cash dividends declared per share   $ 0.15     $ 0.26     $ 0.45     $ 0.52  
                                 
                                 
 
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
         
    February 28,   May 31,
    2014   2013
Assets            
Current assets:            
  Cash and cash equivalents   $ 52,886   $ 51,385
  Receivables, less allowances of $2,807 and $3,408 at February 28, 2014 and May 31, 2013, respectively    
467,927
   
394,327
  Inventories:            
    Raw materials     214,510     175,093
    Work in process     123,011     103,861
    Finished products     103,823     77,814
      Total inventories     441,344     356,768
  Income taxes receivable     9,346     724
  Assets held for sale     2,435     3,040
  Deferred income taxes     23,984     21,928
  Prepaid expenses and other current assets     45,678     38,711
    Total current assets     1,043,600     866,883
             
Investments in unconsolidated affiliates     175,454     246,125
Goodwill     237,553     213,858
Other intangible assets, net of accumulated amortization of $32,667 and $26,669 at February 28, 2014 and May 31, 2013, respectively    
141,446
   
147,144
Other assets     16,876     17,417
Property, plant & equipment:            
  Property, plant & equipment at cost     1,133,536     1,052,636
  Less: accumulated depreciation     622,558     593,206
Property, plant and equipment, net     510,978     459,430
Total assets   $ 2,125,907   $ 1,950,857
             
Liabilities and equity            
Current liabilities:            
  Accounts payable   $ 379,230   $ 222,696
  Short-term borrowings     35,356     113,728
  Accrued compensation, contributions to employee benefit plans and related taxes     78,944     68,043
  Dividends payable     11,022     551
  Other accrued items     38,552     36,536
  Income taxes payable     4,879     6,268
  Current maturities of long-term debt     101,114     1,092
    Total current liabilities     649,097     448,914
             
Other liabilities     73,467     70,882
Distributions in excess of investment in unconsolidated affiliate     62,387     63,187
Long-term debt     305,370     406,236
Deferred income taxes     77,673     89,401
    Total liabilities     1,167,994     1,078,620
             
Shareholders' equity - controlling interest     861,020     830,822
Noncontrolling interest     96,893     41,415
    Total equity     957,913     872,237
Total liabilities and equity   $ 2,125,907   $ 1,950,857
             
             
                         
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
               
    Three Months Ended     Nine Months Ended  
    February 28,     February 28,  
    2014     2013     2014     2013  
Operating activities                                
Net earnings   $ 44,211     $ 37,331     $ 128,904     $ 104,818  
Adjustments to reconcile net earnings to net cash provided by operating activities:                                
  Depreciation and amortization     20,208       17,048       59,763       48,136  
  Impairment of long-lived assets     -       -       35,375       1,520  
  Provision for deferred income taxes     1,278       6,491       (20,256 )     9,850  
  Bad debt expense (income)     (134 )     76       (430 )     575  
  Equity in net income of unconsolidated affiliates, net of distributions     1,048       (4,841 )     (8,373 )     (19,256 )
  Net gain (loss) on sale of assets     990       (153 )     (10,860 )     (222 )
  Stock-based compensation     4,705       3,653       13,207       10,586  
  Excess tax benefits - stock-based compensation     (1,462 )     (3,455 )     (7,294 )     (3,455 )
  Gain on previously held equity interest in TWB     -       -       (11,000 )     -  
Changes in assets and liabilities, net of impact of acquisitions:                                
  Receivables     (30,228 )     (41,672 )     (14,999 )     27,078  
  Inventories     (38,260 )     (15,158 )     (59,583 )     42,743  
  Prepaid expenses and other current assets     2,429       32       4,136       1,634  
  Other assets     (762 )     198       (187 )     3,135  
  Accounts payable and accrued expenses     91,485       35,320       108,185       (34,871 )
  Other liabilities     1,316       1,434       4,019       3,412  
Net cash provided by operating activities     96,824       36,304       220,607       195,683  
                                 
Investing activities                                
  Investment in property, plant and equipment     (21,743 )     (9,786 )     (52,157 )     (34,402 )
  Acquisitions, net of cash acquired     (35,599 )     -       17,634       (62,110 )
  Distributions from unconsolidated affiliates     -       -       9,223       -  
  Proceeds from sale of assets     580       552       24,313       16,227  
Net cash used by investing activities     (56,762 )     (9,234 )     (987 )     (80,285 )
                                 
Financing activities                                
  Net payments of short-term borrowings     (8,347 )     (13,390 )     (78,624 )     (251,586 )
  Proceeds from long-term debt     -       -       -       150,000  
  Principal payments on long-term debt     (286 )     (365 )     (855 )     (1,170 )
  Proceeds from (payments for) issuance of common shares     (1,241 )     17,332       5,246       32,960  
  Excess tax benefits - stock-based compensation     1,462       3,455       7,294       3,455  
  Payments to noncontrolling interest     (36,512 )     (2,592 )     (39,150 )     (8,582 )
  Repurchase of common shares     (40,762 )     -       (91,078 )     -  
  Dividends paid     (10,545 )     (27,040 )     (20,952 )     (44,144 )
Net cash used by financing activities     (96,231 )     (22,600 )     (218,119 )     (119,067 )
                                 
Increase (decrease) in cash and cash equivalents     (56,169 )     4,470       1,501       (3,669 )
Cash and cash equivalents at beginning of period     109,055       32,889       51,385       41,028  
Cash and cash equivalents at end of period   $ 52,886     $ 37,359     $ 52,886     $ 37,359  
                                 
                                 
   
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     Nine Months Ended  
    February 28,     February 28,  
    2014     2013     2014     2013  
Volume:                                
  Steel Processing (tons)     796       636       2,333       1,956  
  Pressure Cylinders (units)     23,115       17,861       61,656       58,826  
                                 
                                 
Net sales:                                
  Steel Processing   $ 477,983     $ 353,879     $ 1,372,558     $ 1,082,998  
  Pressure Cylinders     233,290       205,206       664,212       606,936  
  Engineered Cabs     51,485       48,628       147,814       170,927  
  Other     10,472       11,814       50,837       47,323  
    Total net sales   $ 773,230     $ 619,527     $ 2,235,421     $ 1,908,184  
                                 
Material cost:                                
  Steel Processing   $ 342,254     $ 251,688     $ 979,826     $ 776,891  
  Pressure Cylinders     105,600       95,604       302,414       285,247  
  Engineered Cabs     22,586       23,806       66,215       85,857  
                                 
Selling, general and administrative expense:                                
  Steel Processing   $ 32,457     $ 26,605     $ 95,914     $ 80,610  
  Pressure Cylinders     32,717       27,383       95,984       75,581  
  Engineered Cabs     7,628       6,036       22,625       20,570  
  Other     2,878       3,197       11,092       10,983  
    Total selling, general and administrative expense   $ 75,680     $ 63,221     $ 225,615     $ 187,744  
                                 
Operating income (loss):                                
  Steel Processing   $ 28,264     $ 17,701     $ 85,713     $ 48,166  
  Pressure Cylinders     21,278       17,860       49,007       49,965  
  Engineered Cabs     (1,088 )     108       (22,284 )     5,367  
  Other     (3,165 )     (2,263 )     (9,010 )     (7,852 )
    Total operating income   $ 45,289     $ 33,406     $ 103,426     $ 95,646  
                                 
                                 
The following provides detail of impairment of long-lived assets, restructuring and other expense, and joint venture transactions included in operating income by segment presented above.  
                                 
    Three Months Ended     Nine Months Ended  
    February 28,     February 28,  
    2014     2013     2014     2013  
Impairment of long-lived assets and restructuring and other expense (income):                                
                             
  Steel Processing   $ 1,380     $ -     $ 1,259     $ -  
  Pressure Cylinders     412       177       10,599       1,703  
  Engineered Cabs     -       -       19,100       -  
  Other     (394 )     (31 )     636       1,628  
    Total impairment of long-lived assets and restructuring and other expense   $ 1,398     $ 146     $ 31,594     $ 3,331  
                                 
                                 
    Three Months Ended     Nine Months Ended  
    February 28,     February 28,  
    2014     2013     2014     2013  
Joint venture transactions:                                
  Steel Processing   $ -     $ -     $ -     $ -  
  Pressure Cylinders     -       -       -       -  
  Engineered Cabs     -       -       -       -  
  Other     120       253       1,048       (1,188 )
    Total joint venture transactions   $ 120     $ 253     $ 1,048     $ (1,188 )
                                 
                                 

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