Worthington Reports Fiscal 3rd Quarter Results
04/05/2010 - Worthington Industries reported a net loss of $17.7 million on net sales of $451.1 million for the third quarter ended February 28, 2010, and net earnings of $12.2 million on net sales of $1,316.6 million for the first nine months of fiscal 2010.
Worthington Industries, Inc. reported a net loss of $17.7 million on net sales of $451.1 million for the third quarter ended February 28, 2010, and net earnings of $12.2 million on net sales of $1,316.6 million for the first nine months of fiscal 2010.
Third Quarter Results — The net loss of $17.7 million ($0.22 per share) compares to net income of $1.6 million ($0.02 per share) in last year’s third quarter.
Net sales of $451.1 million reflects a 10% compared to net sales of $501.1 million in last year’s third quarter, which the company said was primarily due to lower average selling prices across all segments. Even though the market price of steel was higher in the current quarter, average selling prices last year were higher since they included some fixed contract pricing that was in place when the market price of steel was at record highs. This combined with a change in the mix of products sold, lowered the average selling prices and reduced sales by $58.0 million.
An overall increase in volumes had an $8.0 million positive impact on net sales as both Steel Processing and Pressure Cylinders showed improvements, while Metal Framing’s volumes declined.
Results include pre-tax impairment and restructuring charges totaling $35.5 million ($0.28 per share) primarily related to the former Construction Services businesses, as well as $4.9 million ($0.04 per share) in charges and legal fees related to the litigation with BernzOmatic. The prior year third quarter included $16.3 million of pre-tax restructuring charges and an $8.3 million pre-tax gain on the sale of Aegis, which together reduced net income by $0.04 per share.
Gross margin was $57.7 million (13% of net sales0, representing a $17.8-million increase over the prior year quarter’s gross margin of $39.9 million (8% of net sales). An improved spread, primarily in Steel Processing, between the average selling price and the cost of steel improved the margin by $20.9 million. While volumes were up in both Steel Processing and Pressure Cylinders, the favorable impact was more than offset by declines in Metal Framing and Construction Services.
The operating loss of $35.3 million, driven primarily by impairment and restructuring charges, compares to an operating loss of $24.2 million in the year-ago quarter, which included $16.3 million of restructuring charges. Charges in this year’s quarter included a $24.7 million write-off of goodwill and an $8.0 million impairment of certain long-lived assets related to the Construction Services businesses. Management reorganized these businesses based on continued deterioration in this sector. The current quarter also includes $2.8 million of additional restructuring charges, primarily related to the ongoing transformation effort within the Metal Framing segment, which compares to restructuring charges in the prior year quarter related to the transformation effort in Steel Processing and Metal Framing.
Management Comments— “Our third quarter is always challenging with the short shipping months of December and February,” said John P. McConnell, Chairman and CEO. “But we are pleased that even with the additional impact from severe weather this year, our results were in line with our expectations before restructuring and one-time charges.
“We did see several positive signs during the quarter,” continued McConnell. “Steel Processing has been rapidly and successfully integrating the Gibraltar strip steel acquisition, which strengthens our cold-rolled strip strategy and is already contributing to earnings. January was Steel’s strongest shipping month since October of 2008. Pressure Cylinders had solid volumes in most product lines except for the industrial markets, particularly evident in Europe.”
McConnell added, “The Metal Framing and Construction Services businesses continue to struggle as demand in the commercial construction market has not yet bottomed. The impairment charge is the result of those market conditions. We have reorganized the businesses to help drive synergies with Metal Framing when volume returns. Our WAVE joint venture was a steady contributor along with improving performances from our other joint ventures.”
Nine Month Results — The fiscal year-to-date operating loss of $20.6 million compares to an operating loss of $156.1 million loss in the prior year, which had included significant one-time charges. Sales of $1,316.6 million reflect a 39% decrease compared to the comparable year-ago period, driven largely by the reduction in sales volumes, particularly in the automotive and construction markets. The company said sales were also impacted by the decline in the market price of steel as compared to the prior year, when it had reached record levels.
Company Outlook — “Markets have been slow to recover in most of our businesses. However, we remain very positive about the improvement efforts in operations, commercial sales and purchasing driven by our Transformation,” McConnell stated. “Steel Processing has clearly seen results from the Transformation effort and Metal Framing is in the midst of Transformation. Pressure Cylinders has positioned itself well to grow its business lines and actively pursue additional acquisition opportunities.
We believe we will see further improvements in the profitability of our Steel Processing business where demand is picking up and steel prices are on the rise,” continued McConnell. “Pressure Cylinders expects to maintain strong volumes for camping, gas grill and propane heating cylinders, and we believe improving economic conditions will lead to moderate improvements in European volumes from current levels. In Metal Framing, we believe the business can return to profitability down the road while it remains cash neutral in the near term.
“Customers are responding favorably to Dietrich’s new ProStud™ product and we believe they are starting to see improvements from the Transformation,” added McConnell. “This business has endured the downturn for an extended period and despite these ongoing challenges, the Metal Framing team remains committed to turning this business around.”
Worthington Industries is a leading diversified metals manufacturing company with 2009 fiscal year sales of approximately $2.6 billion. The Columbus, Ohio based company is a premium North American value-added steel processor and a leader in a wide range of manufactured metal products. Worthington employs approximately 6300 people and operates 64 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.
