Worthington Reports Fourth Quarter and Fiscal Year Results

COLUMBUS, Ohio, June 29, 2016 – Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $714.7 million and net earnings of $58.5 million, or $0.92 per diluted share, for its fiscal 2016 fourth quarter ended May 31, 2016. Net earnings in the quarter include pre-tax restructuring charges totaling $1.9 million and a $6.9 million pre-tax gain related to the consolidation of the results of the Company's Worthington Specialty Processing (WSP) joint venture with U.S. Steel, as described under "Fiscal 2016 Highlights" below. The net after-tax impact of these items increased earnings per diluted share by $0.05.

In the fourth quarter of fiscal 2015, the Company reported net sales of $846.0 million and net earnings of $28.9 million, or $0.44 per diluted share.  Net earnings in the fourth quarter of fiscal 2015 included pre-tax impairment and restructuring charges totaling $6.5 million, which reduced earnings per diluted share by $0.08.

For the fiscal year ended May 31, 2016, the Company reported net sales of $2.8 billion and net earnings of $143.7 million, or $2.22 per diluted share, up from net earnings of $76.8 million, or $1.12 per diluted share, in the prior year.  Net sales were down 17% year over year, or $564.5 million, driven primarily by lower average selling prices in Steel Processing and lower volume in Pressure Cylinders and Engineered Cabs.  Fiscal year 2016 net earnings were adversely affected by pre-tax impairment and restructuring charges in the net amount of $33.1 million, which when combined with the $6.9 million pre-tax gain related to the consolidation of the WSP joint venture, reduced earnings per diluted share by $0.26.  Impairment and restructuring charges in the prior year resulted in a net pre-tax charge of $107.1 million, which reduced earnings per diluted share by $1.00.

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

 

 

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"We ended fiscal year 2016 with a very good fourth quarter which drove annual earnings per share to a record $2.22," said John McConnell, Chairman and CEO.  "We had excellent results in the fourth quarter in Steel Processing, our joint ventures, especially WAVE, and the industrial and consumer products businesses in Pressure Cylinders.  I want to thank each of our employees for their dedication and hard work in challenging times and for taking advantage of opportunities to improve and help the Company grow."

Consolidated Quarterly Results

Net sales for the fourth quarter of fiscal 2016 were $714.7 million, down 16% from the comparable quarter in the prior year, when net sales were $846.0 million. The decrease was the result of lower average selling prices in Steel Processing, as a result of lower steel prices, and lower volume in certain Pressure Cylinders businesses, and Engineered Cabs.

Gross margin increased $24.2 million from the prior year quarter to $134.5 million due to a favorable pricing spread and the favorable impact of inventory holding gains in Steel Processing in the current quarter compared to inventory holding losses in the prior year quarter, partially offset by lower volume in Pressure Cylinders and Engineered Cabs.

Operating income for the current quarter was $54.0 million, an increase of $26.8 million from the prior year quarter.  The increase was due to higher gross margin, and the favorable impact of lower impairment and restructuring charges.

Interest expense was $8.1 million for the current quarter, compared to $8.2 million in the prior year quarter. The decrease was due to lower short-term borrowings.

The Company's portion of equity income from unconsolidated joint ventures increased $15.7 million from the prior year quarter to $34.1 million on higher contributions from all the joint ventures.  Joint venture sales totaled $393.3 million for the current quarter.  The Company received cash distributions of $21.2 million from unconsolidated joint ventures during the quarter.

 

 

 

 

Income tax expense was $24.8 million in the current quarter compared to $6.2 million in the prior year quarter.  The increase was primarily due to higher earnings.  Tax expense in the current quarter reflects an effective rate of 29.8% compared to 17.8% for the prior year quarter.

Balance Sheet

At quarter-end, total debt was $583.5 million, down $27.6 million from February 29, 2016, due to lower short-term borrowings.  The Company had $84.2 million of cash at quarter-end.

Quarterly Segment Results

Steel Processing's net sales of $466.0 million were down 14%, or $73.9 million, from the comparable prior year quarter driven primarily by lower average selling prices.  Operating income of $40.4 million was $17.9 million higher than the prior year quarter due to a favorable pricing spread and the favorable impact of inventory holding gains in the current quarter compared to inventory holding losses in the prior year quarter.  The mix of direct versus toll tons processed was 52% to 48% in the current quarter, compared to 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 $218.6 million were down 13%, or $33.0 million, from the comparable prior year quarter.  The decline was driven primarily by a 61% volume decrease in the oil & gas equipment business.  Operating income of $12.9 million was $2.6 million higher than the prior year quarter on lower impairment and restructuring charges and improvements in the industrial and consumer products businesses.  Declines in the oil & gas equipment business partially offset the overall improvement in Pressure Cylinders' operating income.

Engineered Cabs' net sales of $29.1 million were down $17.4 million, or 37%, below the prior year quarter due to declines in market demand and the September 2015 closure of the Florence, S.C. facility.  The operating loss was $2.0 million less than the prior year quarter.

 

 

 

 

 

 

The "Other" category includes the Energy Innovations businesses, as well as non-allocated corporate expenses.  Net sales in the "Other" category were $1.0 million, a decrease of $7.0 million from the prior year quarter as the Construction Services business has ceased operations.  The Construction Services business reported a $0.3 million loss for the quarter as operations were wound down.

Fiscal 2016 Highlights

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On March 1, 2016, the Company obtained operating control of the WSP joint venture with U.S. Steel. As a result, the Company began consolidating the results of WSP within the financial results of Steel Processing as of March 1, 2016.  The ownership percentages remained unchanged with Worthington at 51% and U.S. Steel at 49%.

·

On December 7, 2015, the Company completed the acquisition of the global CryoScience business of Taylor Wharton, including a manufacturing facility in Theodore, Ala. for $30.6 million. The asset purchase was made pursuant to the Chapter 11 bankruptcy proceedings of Taylor Wharton and became part of Pressure Cylinders upon closing.

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During Fiscal 2016, the Company repurchased a total of 3,500,000 common shares for $99.8 million at an average price of $28.53.

Outlook

"While we expect some headwinds to continue, our legacy businesses are performing well and we anticipate a good start to our new fiscal year," McConnell said.  "The Company's two underperforming businesses, engineered cabs and oil and gas, are in better positions with smaller footprints and the cryogenics business is repositioning with its moves to new facilities later this year and new markets.  And, all of our efforts in Transformation 2.0 and innovation will help us continue to improve and achieve our goals for growth in each of our businesses."

Conference Call

Worthington will review fiscal 2016 fourth quarter and full-year results during its quarterly conference call on June 29, 2016, at 2:30 p.m., Eastern Daylight Time.  Details regarding the conference call can be found on the Company web site at www.WorthingtonIndustries.com.

 

 

 

 

 

About Worthington Industries

Worthington Industries is a leading global diversified metals manufacturing company with 2016 fiscal year sales of $2.8 billion.  Headquartered in Columbus, Ohio, Worthington is North America's premier value-added steel processor providing customers with wide ranging capabilities, products and services for a variety of markets including automotive, construction and agriculture; a global leader in manufacturing pressure cylinders for industrial gas and cryogenic applications, CNG and LNG storage, transportation and alternative fuel tanks, oil and 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 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 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 and pricing trends for raw materials and finished goods and the impact of pricing and pricing changes; demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; expected benefits for 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; 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 reduce costs and improve operations 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 worldwide 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 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, oil and gas, heavy equipment 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, and innovation efforts, 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 these 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 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, 2015.

 

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