News Details

COLUMBUS, Ohio, Sep 29, 2010 (BUSINESS WIRE) --

Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $616.8 million and net earnings of $23.3 million, or $0.30 per share, for its fiscal 2011 first quarter ended August 31, 2010. In last year's first quarter, the Company reported net sales of $417.5 million and net earnings of $6.7 million, or $0.08 per share.

Comparative financial highlights for this quarter are as follows:

"We had an excellent performance this quarter," John P. McConnell, Chairman and CEO said. "While the slowly rebounding economy helped with modestly increased volumes, Steel Processing had impressive results along with Pressure Cylinders and our WAVE joint venture. We continue to be focused on excellence in operations, customer service and inventory management, as well as in our ability to grow through market share gains, new business and acquisitions."

Consolidated Results

Net sales for the first quarter ended August 31, 2010, were $616.8 million, up 48% from the comparable quarter last year, when net sales were $417.5 million. An overall increase in volumes had a $121.7 million positive impact on net sales as both Steel Processing and Pressure Cylinders showed improvements, while Metal Framing's volumes declined.

Gross margin for the current quarter was $78.9 million, or 13% of net sales. This represented a 60% increase over the prior year quarter's gross margin of $49.2 million, or 12% of net sales. The improvement was primarily due to increased volumes in both Steel Processing and Pressure Cylinders, partially due to acquisitions, and a slight improvement in the spread between average selling prices and the cost of steel. These improvements were somewhat offset by higher manufacturing labor expenses in the current quarter. In the prior year quarter, the economy had been in the worst part of the recession, particularly for the automotive sector, which resulted in lower Company earnings, base wage reductions and lower profit sharing and bonus expenses. In the current quarter, increased earnings resulted in higher profit sharing and bonus expenses.

SG&A expenses were $5.4 million higher than the prior year quarter primarily due to increased SG&A expenses from acquisitions as well as higher profit sharing, bonus and wage expenses.

Operating income for the quarter was $22.5 million, driven higher by the increase in volume and the improved spreads, offset by the increase in SG&A, noted above.

Interest expense was $4.7 million in the quarter, up from $2.5 million in the prior year quarter mainly due to higher debt levels and the rate on the $150 million 6.5% unsecured notes, issued in April.

Equity in net income from unconsolidated joint ventures was $18.3 million, an increase of $2.2 million from the comparable year-ago quarter, on sales of $213.1 million. While Worthington Armstrong Venture (WAVE) represents the majority of equity earnings, the TWB Company laser welding operation realized a $2.4 million improvement and was the primary driver for the increase over the prior year quarter.

For the quarter, income tax expense of $10.8 million compared to income tax expense of $3.3 million a year ago. The current quarter reflects an estimated annual effective tax rate of 32.5% compared to 33.6% last year, prior to the impact of discrete tax adjustments, which were minimal for both quarters.

Balance Sheet

At quarter end, total debt was $415.4 million, up $165.1 million from the previous quarter ended May 31, 2010, $65.0 million of the increase was attributable to new accounting rules effective June 1, 2010, that require the accounts receivable securitization facility to be recorded as debt. A total of $100.1 million was drawn on the revolving credit facility. The Company had also utilized $65.0 million of its $100.0 million trade accounts receivable securitization facility.

Cash used by operating activities for the quarter was $69.2 million, compared to cash provided by operations of $96.2 million in the year-ago quarter and cash used by operating activities of $9.6 million from the previous quarter. The increase in working capital is largely due to improving volumes compared to the year ago quarter.

During the current quarter, the Company spent $6.3 million in property, plant and equipment, and $12.2 million in the acquisition of the assets of Hy-Mark Cylinders. Additionally, the Company repurchased 4.8 million common shares for $67.4 million, of which $63.0 million was paid by the end of the quarter. This reduced the total outstanding shares to 74.5 million at quarter end.

Segment Results

Steel Processing's net sales of $354.9 million were up 95%, or $173.3 million, over the prior year quarter. Higher volumes increased sales by $110.8 million, which includes the contribution from the Gibraltar strip steel acquisition. Higher average selling prices increased sales by $62.5 million. Sales volumes grew 54% over the prior year quarter primarily in the automotive market.

Steel Processing's mix of direct versus toll tons processed was 58% to 42% this quarter, consistent with the mix a year ago. Operating income improved by $15.8 million to $16.6 million. Higher volumes contributed $26.5 million to operating income offset by higher manufacturing and SG&A expenses. Margins continue to benefit from better inventory management and operating improvements implemented as part of the ongoing Transformation effort. SG&A expenses were higher primarily due to increased wages, profit sharing and bonus expenses as explained above.

Pressure Cylinders' net sales of $136.1 million were up 34% from the year ago quarter. The North American operations experienced volume increases in refrigerant, high pressure and propane cylinders, in addition to being aided by the acquisitions of SCI and Hy-Mark. Overall volumes for the European operations improved as the industrial gas and automotive markets began to recover from the global economic downturn. Operating income increased 86% from the prior year quarter to $11 million, driven by solid North American operations, and the gradual improvement and return to modest profitability in Europe.

Metal Framing's net sales of $84.5 million were down 11%, or $10.9 million, from the prior year quarter and volumes were down 23%, reducing net sales by $24.7 million. The impact of higher material costs was offset by higher average selling prices. This segment has been negatively impacted by a dramatically weakened commercial construction market and pricing pressures, however, the operating loss of $3.9 million was 8% better than the prior year quarter.

Company Outlook

"Although we are operating in an environment with volumes well below historical levels, we have been able to produce solid results in most of our businesses. In Steel Processing, we have clearly benefited from our focus on improvement at all levels. This has been a key to this business segment's increasing profitability, along with a slowly improving economy and our recent strip steel acquisition." McConnell added, "Pressure Cylinders is starting to benefit from slowly improving European markets and we would expect continued solid demand from most North American product lines. Our third main business segment, Metal Framing, will continue to work hard at staying cash neutral while it remains dramatically impacted by the commercial construction market, which seems in no hurry to improve.

"We are pursuing opportunities to take our mid-rise construction system to global markets and initial efforts are being well-received," McConnell said. "We also will continue to search for strategic growth opportunities to help expand our results."

Dividend Declared

On August 30, 2010, the Board of Directors declared a quarterly cash dividend of $0.10 per share which was paid September 29, 2010, to shareholders of record on September 15, 2010.

Conference Call

Worthington will review first quarter results during its quarterly conference call, September 30, 2010, 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.

Corporate Profile

Worthington Industries is a leading diversified metals manufacturing company with 2010 fiscal year sales of approximately $1.9 billion. The Columbus, Ohio based company is North America's premier value-added steel processor and a leader in manufactured pressure cylinders, such as propane, oxygen and helium tanks, hand torches, camping cylinders, CNG, and scuba tanks; light gauge steel framing for commercial and residential construction; framing systems and stairs for mid-rise buildings; current and past model automotive service stampings; metal ceiling grid systems; steel pallets and racks; and laser welded blanks. Worthington employs approximately 6,500 people and operates 65 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 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, working capital needs; demand trends for the Company or its 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, projected timing, results, benefits, costs, charges and expenditures related to acquisitions, 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 capture and maintain margins and market share and to develop or take advantage of future opportunities, new products and markets; expectations for Company and customer inventories, jobs and orders; expectations for the economy and markets or improvements in the economy or markets; expected benefits from Transformation plans, cost reduction efforts and other new initiatives; expectations for improving and sustaining earnings, 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 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 pricing, quality or availability of raw materials (particularlysteel), 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 head count 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 achieve synergies therefrom; capacity levels and efficiencies, within facilities 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 doingbusiness internationally, including economic, political and socialinstability, and foreign currency exposure; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; 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, 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, both in the United States and abroad; and other risks described from time to time in the Company's filings with the United States Securities and Exchange Commission.

SOURCE: Worthington Industries, Inc.

Worthington Industries, Inc.
Cathy M. Lyttle, 614-438-3077
VP, Corporate Communications and Investor Relations
E-mail: cmlyttle@WorthingtonIndustries.com
or
Sonya L. Higginbotham, 614-438-7391
Director, Corporate Communications
E-mail: slhiggin@WorthingtonIndustries.com
or
www.WorthingtonIndustries.com