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Worthington Reports 1st Quarter Fiscal 2011 Results

09/30/2010 - Worthington Industries, Inc. reported net earnings of $23.3 million on net sales of $616.8 million for its fiscal 2011 first quarter ended August 31, 2010.

Worthington Industries, Inc. reported net earnings of $23.3 million on net sales of $616.8 million for its fiscal 2011 first quarter ended August 31, 2010.
 
The $23.3 million net earnings ($0.30 per share) compare to net earnings of $33.1 million ($0.42 per share) in the previous quarter, and net earnings of $6.7 million ($0.08 per share) in the year-ago first quarter.
 

Worthington’s Steel Processing segment reported net sales of $354.9 million for the first quarter, up $173.3 million (95%) 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 of $16.6 million reflected a $15.8 million improvement. Higher volumes contributed $26.5 million to operating income offset by higher manufacturing and SG&A expenses.
 
The company noted that margins continue to benefit from better inventory management and operating improvements implemented as part of its ongoing Transformation effort. SG&A expenses were higher primarily due to increased wages, profit sharing and bonus expenses.
Net sales of $616.8 million compare to net sales of $626.4 million in the previous quarter and net sales of $417.5 million in the year-ago first quarter. 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.

 
“We had an excellent performance this quarter,” said John P. McConnell, Chairman and CEO. “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.”
 
Worthington’s first quarter gross margin was $78.9 million (13% of net sales), which represents a 60% increase over the year-ago quarter’s gross margin of $49.2 million (12% of net sales). The company said 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 year-ago first 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.
 
Operating income was $22.5 million, driven higher by the increase in volume and the improved spreads, offset by increased SG&A.
 
Cash used in the quarter by operating activities 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.
 
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,” commented McConnell. “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.”
 
Worthington Industries is a leading diversified metals manufacturing company with 2010 fiscal year sales of approximately $1.9 billion. The Columbus, Ohio based company 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, with earning money for its shareholders as 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.