Worthington Industries, Inc. reported net sales of $666.0 million and net earnings of $34.0 million, or $0.49 per share, for its fiscal 2013 first quarter ended 31 August 2012. For last year’s first quarter, the company reported net sales of $602.4 million and net earnings of $25.7 million, or $0.35 per share.

"I am pleased with the results of our first quarter," said John McConnell, Chairman and CEO of Worthington Industries. "Steel Processing, while still benefitting from automotive demand, experienced declining steel pricing during the quarter. Pressure Cylinders had strong volume in its product lines and increased demand in the alternative fuel business and Engineered Cabs delivered good results." McConnell added, "We continue to position the Company to grow both organically and by adding new businesses."

Consolidated Quarterly Results
Net sales for the first quarter ended 31 August 2012, were $666.0 million, up 11% from the comparable quarter in the prior year, when net sales were $602.4 million. Of the increase, $112.0 million related to increased volume, which includes $87.5 million from the combined acquisitions of Angus Industries, reported under the Engineered Cabs segment, and the acquisitions in Pressure Cylinders. The 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.

Gross margin for the current quarter was $93.7 million, compared to $71.5 million in the prior year quarter. The $22.2 million increase was mainly the result of the acquisitions and a more favorable product mix.

SG&A expense increased $14.1 million over the prior year quarter driven by the impact of acquisitions and reduced expenses in the prior year quarter of $4.4 million from the favorable settlement of a legal dispute.

Operating income for the current quarter was $33.4 million, compared to $21.2 million in the prior year quarter. The $12.2 million increase is mostly due to acquisitions and the $4.1 million reduction in the net losses from impairments, restructuring charges and joint venture transactions. In the current quarter, we incurred a $1.6 million charge related to certain impaired assets in Pressure Cylinders, $0.4 million in restructuring charges, and $1.2 million in gains related to asset sales from the joint venture transactions.

Interest expense was $5.3 million in the quarter, compared to $4.7 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 $22.6 million, a decrease of $2.1 million from the comparable quarter in the prior year, on sales of $446.9 million. In the current quarter, WAVE contributed $18.4 million of earnings and TWB contributed $2.6 million, with the balance of $1.6 million from the remaining joint ventures.

For the current quarter, income tax expense of $16.1 million increased from $13.3 million in the prior year quarter due primarily to higher earnings. The current quarter income tax expense reflects an estimated annual effective tax rate of 32.6% compared to 32.4% for the prior year quarter.

Balance Sheet
At quarter end, total debt was $459.6 million, down $74.1 million from May 31, 2012. During the current quarter, the Company issued $150.0 million of 12-year unsecured Senior Notes through a private placement and used the net proceeds to repay a portion of the borrowings outstanding under the Company’s trade accounts receivable securitization and revolving credit facilities. As of August 31, 2012, the Company had utilized $15.0 million of its $150.0 million trade accounts receivable securitization facility, and $30.4 million was drawn on the Company’s $425.0 million revolving credit facility.

Quarterly Segment Results
Steel Processing’s net sales of $380.0 million were down 7%, or $28.2 million, from the prior year quarter. Lower average selling prices decreased net sales by $42.6 million, while a change in product mix favorably impacted net sales by $14.4 million. The mix of direct versus toll tons processed was 54% to 46% this quarter, compared with a 51% to 49% mix in the comparable quarter of the prior year. Operating income decreased slightly by $0.3 million as a favorable change in product mix was offset by a decrease in the spread between selling and material prices.

Pressure Cylinders’ net sales of $194.2 million were up 15% from the comparable prior year quarter. Pressure Cylinders’ operating income was $15.0 million, up $3.1 million from the prior year quarter, which included a $4.4 million non-recurring legal dispute benefit. Acquisitions, combined with an improvement in the existing operations, drove the results.

Engineered Cabs, consisting of the operations of Angus Industries Inc. acquired on December 29, 2011, generated net sales of $64.5 million in the current quarter and reported operating income of $4.7 million.

The entities included in "Other" are the Construction, Energy and Steel Packaging operating segments, as well as other non-allocated expenses. Operations in "Other" reported net sales of $27.3 million, which was $1.9 million higher than in the prior year quarter mostly due to our Military Construction business. These operations reported a combined loss of $2.3 million for the quarter primarily resulting from losses generated in the construction business due to the difficult economic environment.

Recent Developments
On 27 June 2012, the Company declared a quarterly dividend of $0.13 per share, an increase of $0.01 per share from the prior quarter. The dividend is payable on 28 September 2012, to shareholders of record 14 September 2012.

On 10 August 2012, the Company issued $150 million of 12-year unsecured Senior Notes due 2024 through a private placement with Prudential Capital Group. The notes bear interest at a fixed rate of 4.60%.

On 17 September 2012, the Company acquired the Westerman Companies, a manufacturer of tanks and pressure vessels for the oil and gas, nuclear and marine markets. The purchase price was $70 million, of which approximately $6 million went to pay down Westerman debt. These operations will be reported in the Pressure Cylinders’ operating segment.

Outlook
"We remain confident in our strategy, but the economic recovery is lacking momentum as there is uncertainty on a number of fronts," McConnell said. "We have started to see some slowing in automotive, agriculture and mining markets, but it is unclear if this will turn into a longer term issue and what the impact may be on our volumes. Our recent Pressure Cylinders acquisition of the Westerman Companies positions us well in the growing oil and gas markets, as well as for nuclear and marine products. We also see opportunities to expand the oil & gas business around the Utica and Marcellus shale drilling, and we see demand in our alternative fuel business growing."

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 12 countries.