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Worthington Reports First Quarter 2012 Results
09/29/2011 - Worthington Industries reported net earnings of $25.7 million on net sales of $602.4 million for its fiscal 2012 first quarter ended August 31, 2011.
Worthington Industries, Inc. reported net earnings of $25.7 million on net sales of $602.4 million for its fiscal 2012 first quarter ended August 31, 2011.
The $25.7 million net earnings ($0.35 per share) compare to net earnings of $22.4 million ($0.29 per share) in the year-ago first quarter. Net sales of $602.4 million compare to net sales of $616.8 million in last year’s first quarter.
“We had a good first quarter in Steel Processing and excellent results from our ceiling grid system joint venture WAVE,” John P. McConnell, Chairman and CEO, said. “The year-over-year comparisons show strength in the areas where we have focused to improve our performance and lessen the volatility of earnings, particularly in Steel Processing. We expect to continue to perform well, barring further economic deterioration.”
McConnell added, “The acquisition of the BernzOmatic product lines in Pressure Cylinders is positively contributing to that segment’s results as this business integrated quickly. We expect the Cylinders segment to stay focused on growing their market presence through new customers and additional acquisitions. We feel good about how Worthington Industries is positioned with our strong balance sheet and improved operations. However, the stalled economy, and the uncertainty surrounding it, has hindered a quicker and more robust recovery which has an impact on our customers.”
Consolidated Quarterly Results — Comparison of current consolidated results to previous quarters is impacted by the following transactions:
Metal Framing Business — Effective March 1, 2011, the Metal Framing business, including all of the related working capital and six of the 13 facilities, was contributed to a joint venture with ClarkWestern Building Systems. In exchange for the contributed assets, Worthington Industries received a 25% interest in the new joint venture, ClarkDietrich Building Systems (ClarkDietrich), as well as the assets of certain MISA Metals, Inc. (MMI) steel processing locations. Since that date, Worthington’s 25% portion of the results of ClarkDietrich are included in the equity in net income of unconsolidated affiliates line in the consolidated statement of earnings and the results of operations from the MMI assets have been included in Steel Processing.
Automotive Body Panel Subsidiary — Effective May 9, 2011, our automotive body panel subsidiary, previously included in Other, was contributed to a new joint venture with International Tooling Solutions, LLC. Worthington Industries received a 50% non-controlling interest in this new joint venture, ArtiFlex Manufacturing, LLC (ArtiFlex), with Worthington’s portion of the results of ArtiFlex included in the equity in net income of unconsolidated affiliates line in the consolidated statement of earnings.
BernzOmatic — On July 1, 2011, Pressure Cylinders purchased substantially all of the net assets of the BernzOmatic business (Bernz) from Irwin Industrial Tool Company. The impact of the Bernz acquisition is included in the results of the Pressure Cylinders segment. As part of this transaction, the dispute that existed with Bernz was settled, which resulted in a $4.4 million reduction in SG&A expense in the current quarter.
First quarter net sales of $602.4 million reflect a 2% decrease from net sales of $616.8 million in the year-ago first quarter. The company said that sales increases for the Steel Processing (+15%) and Pressure Cylinders (+24%) segments were more than offset by the impact of the deconsolidation of the company’s former metal framing and automotive body panels operations. Excluding the deconsolidated operations, net sales rose 18% from the prior year quarter primarily due to the acquisitions and higher average selling prices as the average cost of steel increased 16% over the comparable prior year quarter.
Gross margin was $71.5 million (12% of net sales), which compares to a gross margin of $78.9 million (13% of net sales) in the prior-year quarter. The company said the decrease was primarily due to the impact of the deconsolidated operations.
Excluding the deconsolidated operations, gross margin increased 3% from the prior year quarter, despite inventory holding losses in the current quarter versus holding gains in the prior year quarter. The company benefited from a favorable change in the customer and product mix.
Operating income was $21.2 million, essentially flat versus the comparable year-ago quarter. According to the company, operating income was adversely affected by restructuring and joint venture transaction expenses.
Interest expense for the quarter was $4.7 million, the same as in the prior year as the impact of higher average debt levels was offset by lower interest rates.
Equity in net income from unconsolidated joint ventures was $24.7 million, an increase of $6.4 million from the year-ago first quarter, on sales of $427.8 million.
Balance Sheet — At quarter end, the company’s total debt was $459.5 million, up $76.3 million from May 31, 2011, as an increase in working capital, the acquisition of Bernz and the repurchase of common shares raised short-term borrowing needs. The company had utilized $80.0 million of its $100.0 million trade accounts receivable securitization facility, and $126.7 million was drawn on its $400.0 million revolving credit facility as of August 31, 2011.
Worthington Industries is a leading diversified metals manufacturing company with 2011 fiscal year sales of $2.4 billion. The Columbus, Ohio based company is a value-added steel processor and a market leader for a wide range of products. Worthington employs approximately 8000 people and operates 73 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.
