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WORTHINGTON INDUSTRIES INC
Symbol U : WOR
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Worthington Reports Second Quarter Fiscal 2013 Results

2013-01-03 08:35 ET - News Release

COLUMBUS, OH -- (Marketwire) -- 01/03/13

Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $622.6 million and net earnings of $31.8 million, or $0.45 per share, for its fiscal 2013 second quarter ended November 30, 2012. In the second quarter of the prior year, the Company reported net sales of $565.7 million and net earnings of $12.0 million, or $0.17 per share. The prior year period included $9.7 million or $0.10 per share of charges related to the voluntary recall of propylene cylinders, which is now essentially complete. The current quarter included an additional $1.0 million of expense related to the recall.

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

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


                   2Q 2013  1Q 2013  2Q 2012  6M2013   6M2012
Net sales           $622.6   $666.0   $565.7 $1,288.7 $1,168.0
Operating income      28.8     33.4      2.8     62.2     24.0
Equity income         25.2     22.6     21.9     47.9     46.6
Net earnings          31.8     34.0     12.0     65.8     37.6
Earnings per share   $0.45    $0.49    $0.17    $0.94    $0.53

"We had strong performances from most of our businesses in the second quarter, with volume increases in Pressure Cylinders, and a steady performance from Steel Processing, offset by softness in Engineered Cabs," said John McConnell, Chairman and CEO. "Our year-over-year performance improved despite declining steel prices, thanks to contributions from recent acquisitions. We are very pleased with the results of our latest acquisition, Westerman, whose products include tanks for use in on-site production in shale drilling activity."

Consolidated Quarterly Results

Net sales for the second quarter were $622.6 million, up 10% from the comparable quarter in the prior year, when net sales were $565.7 million. An increase in volume was partially offset by lower average selling prices, primarily in Steel Processing, which were affected by the declining market price of steel. Most of the volume increase resulted from the acquisition of Angus Industries, reported under the Engineered Cabs segment, and two acquisitions in Pressure Cylinders.

Gross margin for the current quarter was $94.9 million, compared to $56.6 million in the prior year quarter. The $38.3 million increase was the result of acquisitions, a more favorable product mix, lower inventory holding losses for Steel Processing, and the impact of the voluntary product recall in Pressure Cylinders. The gross margin for the current quarter included $1.0 million of product recall charges compared to $9.7 million in the comparable quarter in the prior year.

SG&A expense increased $12.2 million over the prior year quarter driven by the impact of acquisitions and higher profit sharing and bonus expense resulting from higher net earnings.

Operating income for the current quarter was $28.8 million, compared to $2.8 million in the prior year quarter. The $26.0 million increase was mostly due to the impact of the voluntary product recall in the prior year quarter, lower inventory holding losses in Steel Processing and acquisitions. The combined impact of impairments, restructuring charges and joint venture transactions was essentially flat from the prior year quarter. In the current quarter, $1.3 million of restructuring charges were incurred in connection with the wind-down of the commercial stairs business and a net gain of $0.3 million related to the joint venture transactions, which consisted primarily of gains on asset disposals.

Interest expense was $6.3 million in the quarter, compared to $4.8 million in the comparable period in the prior year primarily due to the impact of higher average debt levels.

Equity in net income from unconsolidated joint ventures was $25.2 million, an increase of $3.3 million from the comparable quarter in the prior year, on sales of $438.3 million. In the current quarter, WAVE contributed $14.8 million of earnings and TWB contributed $3.8 million. In addition, ClarkDietrich and ArtiFlex contributed $2.4 million and $1.7 million of earnings, respectively.

For the current quarter, income tax expense of $15.4 million increased from $6.1 million in the prior year quarter due to higher earnings. The current quarter income tax expense reflects an estimated annual effective tax rate of 32.7% compared to 32.9% for the prior year quarter.

Balance Sheet

At quarter end, total debt was $452.0 million, down $7.6 million from August 31, 2012, due to lower short-term borrowings. As of November 30, 2012, the Company had utilized $15.0 million of its $150.0 million trade accounts receivable securitization facility, and $23.1 million was drawn on the Company's $425.0 million revolving credit facility.

Quarterly Segment Results

Steel Processing's net sales of $339.3 million were down 9%, or $34.1 million, from the prior year quarter, as lower average selling prices and a decrease in volumes negatively impacted net sales by $29.2 million and $4.9 million, respectively. The decline in volumes was driven by the wind down of unprofitable customer accounts from the MISA Metals acquisition in fiscal 2012. The mix of direct versus toll tons processed was 55% to 45% this quarter, compared with a 51% to 49% mix in the comparable quarter of the prior year. Operating income increased by $5.9 million due primarily to lower inventory holding losses in the current quarter.

Pressure Cylinders' net sales of $207.5 million were up 17% from the comparable prior year quarter driven almost entirely by the impact of acquisitions. Pressure Cylinders' operating income was $17.1 million, up $16.5 million from the prior year quarter, which included a $9.7 million charge related to the voluntary product recall. Acquisitions, combined with an improvement in existing operations, drove the remainder of the increase.

Engineered Cabs, consisting of the operations of Angus Industries Inc. acquired on December 29, 2011, generated net sales of $57.8 million in the current quarter and reported operating income of $0.6 million. These results were impacted by lower volumes resulting from production delays at several top customers experiencing slower growth.

The entities included in "Other" are the Construction, Energy Innovations and Steel Packaging operating segments, as well as other non-allocated expenses. Operations in "Other" reported net sales of $18.0 million, which was $2.5 million higher than in the prior year quarter, mostly due to the Military Construction business. These operations reported a combined loss of $2.1 million for the quarter primarily driven by $1.3 million of restructuring charges incurred in connection with the wind-down of the commercial stairs business.

Recent Developments

  • On September 17, 2012, the Company acquired the outstanding common shares of Westerman, Inc., a leading manufacturer of tanks and pressure vessels for the oil and gas and nuclear markets as well as hoists for marine applications. The business is now a part of the Pressure Cylinders segment.

  • A quarterly dividend of $0.13 per common share was declared by the Company's Board of Directors on September 27, 2012, payable on December 28, 2012 to shareholders of record as of December 14, 2012.

  • On December 10, 2012, the Company's Board of Directors declared an additional cash dividend totaling $0.26 per common share. The dividend was paid on December 28, 2012 to shareholders of record as of December 21, 2012. This dividend represents an acceleration of the dividend payments for the third and fourth quarters of fiscal 2013.

  • On October 31, 2012, the Company completed the sale of its air brake tank business in the Czech Republic. A $1.6 million impairment charge related to this transaction was recorded in the previous quarter.

Outlook

"We expect to see the normal seasonality in our traditional markets in the third quarter," McConnell said. "We do think that the delay by lawmakers in addressing the country's fiscal crisis has resulted in a pullback in some areas of the economy. While this may impact some of our cyclical businesses, we continue to anticipate good performance in our higher growth cylinder operations serving retail, alternative fuels and energy markets." McConnell added, "Our strategy to optimize our businesses continues across the Company as the Transformation takes hold in Pressure Cylinders and is moving into the Engineered Cabs facilities. We anticipate improvements in both of these businesses over the next several quarters. We will also continue to look for other opportunities to grow the Company organically and through new businesses."

Conference Call

Worthington will review second quarter results during its quarterly conference call on January 3, 2013, at 1:30 p.m., Eastern Standard 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 2012 fiscal year sales of $2.5 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, refrigerant and industrial cylinders, camping cylinders, exploration, recovery and production products for global energy markets; scuba tanks, and compressed natural gas storage cylinders; custom-engineered open and enclosed cabs and operator stations for heavy mobile equipment; framing systems for mid-rise buildings; 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, laser welded blanks, and light gauge steel framing for commercial and residential construction. Worthington employs more than 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 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 and the supply chain and the results thereof; the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, newly-created joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to maintain margins and capture and maintain market share and to develop or take advantage of future opportunities, new products and new markets; expectations for Company and customer inventories, jobs and orders; expectations for the economy and markets or improvements therein; expected benefits from transformation plans, cost reduction efforts and other new initiatives; expectations for increasing volatility or improving and sustaining earnings, earnings potential, margins or shareholder value; effects of judicial rulings and other non-historical matters constitute "forward-looking statements" within the meaning of the Act. Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the outcome of negotiations surrounding the United States "fiscal cliff", which, even if resolved, 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 rulings and governmental regulations, both in the United states and abroad, including those adopted by the United State 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, 2012.


                        WORTHINGTON INDUSTRIES, INC.
                    CONSOLIDATED STATEMENTS OF EARNINGS
                  (In thousands, except per share amounts)


                               Three Months Ended       Six Months Ended
                                  November 30,            November 30,
                             ----------------------  ----------------------
                                2012        2011        2012        2011
                             ----------  ----------  ----------  ----------
Net sales                    $  622,622  $  565,652  $1,288,657  $1,168,039
Cost of goods sold              527,766     509,046   1,100,150   1,039,971
                             ----------  ----------  ----------  ----------
  Gross margin                   94,856      56,606     188,507     128,068
Selling, general and
 administrative expense          65,101      52,901     124,523      98,262
Impairment of long-lived
 assets                             (50)          -       1,520           -
Restructuring and other
 expense                          1,262       2,048       1,665       3,751
Joint venture transactions         (279)     (1,192)     (1,441)      2,023
                             ----------  ----------  ----------  ----------
  Operating income               28,822       2,849      62,240      24,032
Other income (expense):
  Miscellaneous income              303         279         468         680
  Interest expense               (6,334)     (4,756)    (11,593)     (9,444)
  Equity in net income of
   unconsolidated affiliates     25,221      21,912      47,864      46,609
                             ----------  ----------  ----------  ----------
  Earnings before income
   taxes                         48,012      20,284      98,979      61,877
Income tax expense               15,390       6,083      31,492      19,336
                             ----------  ----------  ----------  ----------
Net earnings                     32,622      14,201      67,487      42,541
Net earnings attributable to
 noncontrolling interest            796       2,216       1,699       4,904
                             ----------  ----------  ----------  ----------
Net earnings attributable to
 controlling interest        $   31,826  $   11,985  $   65,788  $   37,637
                             ==========  ==========  ==========  ==========

Basic
Average common shares
 outstanding                     68,934      69,350      68,604      70,440
                             ----------  ----------  ----------  ----------
Earnings per share
 attributable to controlling
 interest                    $     0.46  $     0.17  $     0.96  $     0.53
                             ==========  ==========  ==========  ==========

Diluted
Average common shares
 outstanding                     70,411      69,356      69,834      70,925
                             ----------  ----------  ----------  ----------
Earnings per share
 attributable to controlling
 interest                    $     0.45  $     0.17  $     0.94  $     0.53
                             ==========  ==========  ==========  ==========


Common shares outstanding at
 end of period                   69,060      68,937      69,060      68,937

Cash dividends declared per
 share                       $     0.13  $     0.12  $     0.26  $     0.24



                        WORTHINGTON INDUSTRIES, INC.
                         CONSOLIDATED BALANCE SHEETS
                               (In thousands)

                                                  November 30,     May 31,
                                                      2012          2012
                                                  ------------  ------------
Assets
Current assets:
  Cash and cash equivalents                       $     32,889  $     41,028
  Receivables, less allowances of $4,139 and
   $3,329 at November 30, 2012 and May 31, 2012,
   respectively                                        334,912       400,869
  Inventories:
    Raw materials                                      180,690       211,543
    Work in process                                     89,766       115,510
    Finished products                                   87,768        74,887
                                                  ------------  ------------
      Total inventories                                358,224       401,940
  Income taxes receivable                                6,869           892
  Assets held for sale                                   3,697         7,202
  Deferred income taxes                                 19,963        20,906
  Prepaid expenses and other current assets             38,560        41,402
                                                  ------------  ------------
    Total current assets                               795,114       914,239

Investments in unconsolidated affiliates               252,347       240,882
Goodwill                                               179,837       156,681
Other intangible assets, net of accumulated
 amortization of $20,546 and $16,103 at November
 30, 2012 and May 31, 2012, respectively               114,807       100,333
Other assets                                            18,649        22,585
Property, plant and equipment, net                     460,081       443,077
                                                  ------------  ------------
Total assets                                      $  1,820,835  $  1,877,797
                                                  ============  ============

Liabilities and equity
Current liabilities:
  Accounts payable                                $    218,971  $    252,334
  Short-term borrowings                                 43,978       274,923
  Accrued compensation, contributions to employee
   benefit plans and related taxes                      52,903        71,271
  Dividends payable                                      9,541         8,478
  Other accrued items                                   34,446        38,231
  Income taxes payable                                   1,802        11,697
  Current maturities of long-term debt                   1,183         1,329
                                                  ------------  ------------
    Total current liabilities                          362,824       658,263

Other liabilities                                       72,994        72,371
Distributions in excess of investment in
 unconsolidated affiliate                               64,966        69,165
Long-term debt                                         406,811       257,462
Deferred income taxes                                   90,764        73,099
                                                  ------------  ------------
  Total liabilities                                    998,359     1,130,360

Shareholders' equity - controlling interest            776,146       697,174
Noncontrolling interest                                 46,330        50,263
                                                  ------------  ------------
  Total equity                                         822,476       747,437
                                                  ------------  ------------
Total liabilities and equity                      $  1,820,835  $  1,877,797
                                                  ============  ============



                        WORTHINGTON INDUSTRIES, INC.
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)

                               Three Months Ended       Six Months Ended
                                  November 30,            November 30,
                             ----------------------  ----------------------
                                2012        2011        2012        2011
                             ----------  ----------  ----------  ----------
Operating activities
Net earnings                 $   32,622  $   14,201  $   67,487  $   42,541
Adjustments to reconcile net
 earnings to net cash
 provided by operating
 activities:
  Depreciation and
   amortization                  16,101      13,119      31,088      25,973
  Impairment of long-lived
   assets                           (50)          -       1,520           -
  Provision for deferred
   income taxes                  (1,320)        500       3,359       8,178
  Bad debt expense (income)         492        (140)        499        (111)
  Equity in net income of
   unconsolidated affiliates,
   net of distributions          (7,057)      2,782     (14,415)     (2,287)
  Net gain on sale of assets     (2,379)     (1,653)        (69)     (2,068)
  Stock-based compensation        3,740       2,578       6,933       5,779
Changes in assets and
 liabilities:
  Receivables                    30,634      28,717      68,750      56,092
  Inventories                    40,882      48,860      57,901      54,775
  Prepaid expenses and other
   current assets                 1,747       2,940       1,602       3,550
  Other assets                       90       1,567       2,937       2,840
  Accounts payable and
   accrued expenses             (30,618)    (50,281)    (70,191)   (147,129)
  Other liabilities               3,497       1,165       1,978       1,382
                             ----------  ----------  ----------  ----------
Net cash provided by
 operating activities            88,381      64,355     159,379      49,515
                             ----------  ----------  ----------  ----------

Investing activities
  Investment in property,
   plant and equipment, net      (7,911)     (3,559)    (24,616)    (10,031)
  Acquisitions, net of cash
   acquired                     (62,110)    (38,782)    (62,110)    (79,782)
  Distributions from
   unconsolidated affiliates          -           -           -        (785)
  Proceeds from sale of
   assets                         9,090       6,306      15,675      11,347
                             ----------  ----------  ----------  ----------
Net cash used by investing
 activities                     (60,931)    (36,035)    (71,051)    (79,251)
                             ----------  ----------  ----------  ----------

Financing activities
  Net proceeds from
   (repayments of) short-term
   borrowings                   (14,508)     16,881    (238,196)     93,131
  Proceeds from long-term
   debt                               -           -     150,000           -
  Principal payments on long-
   term debt                       (363)          -        (805)          -
  Proceeds from issuance of
   common shares                  4,773         315      15,628       8,523
  Dividends paid to
   noncontrolling interest,
   net of contributions          (5,990)     (3,456)     (5,990)     (6,576)
  Repurchase of common shares         -     (16,715)          -     (52,120)
  Dividends paid                 (8,954)     (8,414)    (17,104)    (15,583)
                             ----------  ----------  ----------  ----------
Net cash provided (used) in
 financing activities           (25,042)    (11,389)    (96,467)     27,375
                             ----------  ----------  ----------  ----------

Increase (decrease) in cash
 and cash equivalents             2,408      16,931      (8,139)     (2,361)
Cash and cash equivalents at
 beginning of period             30,481      36,875      41,028      56,167
                             ----------  ----------  ----------  ----------
Cash and cash equivalents at
 end of period               $   32,889  $   53,806  $   32,889  $   53,806
                             ==========  ==========  ==========  ==========



                        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       Six Months Ended
                                  November 30,            November 30,
                             ----------------------  ----------------------
                                2012        2011        2012        2011
                             ----------  ----------  ----------  ----------
Volume:
  Steel Processing (tons)           626         681       1,321       1,385
  Pressure Cylinders (units)     19,496      14,585      40,965      29,178

Net sales:
  Steel Processing           $  339,313  $  373,462  $  719,285  $  781,636
  Pressure Cylinders            207,494     176,717     401,730     345,546
  Engineered Cabs                57,804           -     122,299           -
  Other                          18,011      15,473      45,343      40,857
                             ----------  ----------  ----------  ----------
      Total net sales        $  622,622  $  565,652  $1,288,657  $1,168,039
                             ==========  ==========  ==========  ==========

Material cost:
  Steel Processing           $  241,161  $  281,784  $  520,895     588,434
  Pressure Cylinders             97,559      90,461     189,643     177,013
  Engineered Cabs                29,940           -      62,051           -

Selling, general and
 administrative expense:
  Steel Processing           $   26,889  $   25,888  $   52,873  $   51,368
  Pressure Cylinders             26,040      21,909      48,198      35,736
  Engineered Cabs                 7,558           -      14,534           -
  Other                           4,614       5,104       8,918      11,158
                             ----------  ----------  ----------  ----------
      Total selling, general
       and administrative
       expense               $   65,101  $   52,901  $  124,523  $   98,262
                             ==========  ==========  ==========  ==========

Operating income (loss):
  Steel Processing           $   13,314  $    7,387  $   29,333  $   23,664
  Pressure Cylinders             17,079         531      32,105      12,446
  Engineered Cabs                   565           -       5,259           -
  Other                          (2,136)     (5,069)     (4,457)    (12,078)
                             ----------  ----------  ----------  ----------
      Total operating income $   28,822  $    2,849  $   62,240  $   24,032
                             ==========  ==========  ==========  ==========

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       Six Months Ended
                                  November 30,            November 30,
                             ----------------------  ----------------------
                                2012        2011        2012        2011
                             ----------  ----------  ----------  ----------
Impairment of long-lived
 assets and restructuring and
 other expense:
  Steel Processing           $        -  $        -  $        -  $        -
  Pressure Cylinders                (50)          -       1,526           -
  Engineered Cabs                     -           -           -           -
  Other                           1,262       2,048       1,659       3,751
                             ----------  ----------  ----------  ----------
      Total impairment of
       long-lived assets and
       restructuring and
       other expense         $    1,212  $    2,048  $    3,185  $    3,751
                             ==========  ==========  ==========  ==========

                               Three Months Ended       Six Months Ended
                                  November 30,            November 30,
                             ----------------------  ----------------------
                                2012        2011        2012        2011
                             ----------  ----------  ----------  ----------
Joint venture transactions:
  Steel Processing           $        -  $        -  $        -  $        -
  Pressure Cylinders                  -           -           -           -
  Engineered Cabs                     -           -           -           -
  Other                            (279)     (1,192)     (1,441)      2,023
                             ----------  ----------  ----------  ----------
      Total joint venture
       transactions          $     (279) $   (1,192) $   (1,441) $    2,023
                             ==========  ==========  ==========  ==========

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

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