Worthington Reports Fourth Quarter and Fiscal Year Results
06/29/2007 - Worthington Industries reports net earnings of $38.2 million on net sales of $786.6 million for the fourth quarter, and net earnings of $113.9 million on net sales of $2,971.8 million for the twelve-month period ended May 31, 2007. Annual earnings were the third best in the company’s history, after fiscal 2005 and fiscal 2006.
Worthington Industries, Inc. reported net earnings of $38.2 million on net sales of $786.6 million for the fourth quarter, and net earnings of $113.9 million on net sales of $2,971.8 million for the twelve-month period ended May 31, 2007. Annual earnings were the third best in the company’s history, after fiscal 2005 and fiscal 2006.
Fourth Quarter Results—Net earnings of $38.2 million ($0.45 per diluted share) reflect a 36% fall from fourth quarter 2006 net earnings of $59.4 million ($0.67 per diluted share). Earnings in 2006 were aided by a $26.6 million pre-tax gain ($0.14 per share) on the April 2006 sale of a 50% interest in a Mexican steel processing joint venture. Excluding the gain in the prior-year period, fiscal 2007 fourth quarter earnings per share fell 15%.
Net sales of $786.6 million reflect a decline of 4% compared to net sales of $822.0 million for the fourth quarter of fiscal 2006.
Full Year Results—Net earnings of $113.9 million ($1.31 per diluted share) were down 22% from net earnings of $146.0 million ($1.64 per diluted share) for the same period last year. Excluding the 2006 gain mentioned above, earnings per share declined 13% from fiscal 2006, the second-best year in the company’s history.
Net sales of $2,971.8 million reflect a 3% increase from net sales of $2,897.2 million last year.
Cash provided by operating activities was $180.4 million, which compares to $227.1 million for fiscal 2006, while capital expenditures were $57.7 million and $60.1 million for the same periods.
Management Comments—“The fourth quarter was significant in that it represented an impressive turnaround from the third quarter and helped make fiscal 2007 our third best year,” said John McConnell, Chairman and CEO of Worthington Industries. “Our Pressure Cylinders segment and WAVE joint venture were major contributors with their record results. In addition, results in our Steel Processing segment were better than expected given the weak conditions in its two major end markets, automotive and construction. Lastly, our Metal Framing segment was significantly improved,” concluded McConnell.
Quarterly Segment Results—In the Steel Processing segment, quarterly net sales fell 14% ($57.6 million) to $360.5 million from $418.1 million in the comparable quarter of fiscal 2006. Worthington says the decrease was the result of lower volumes (down 14%) relative to the prior year, as average selling prices were flat. The average spread between selling prices and material costs improved 11%, due primarily to the new stainless processing business, but significantly lower volume with automotive and construction-related customers resulted in a decline in operating income this quarter compared to the prior year period.
In the Metal Framing segment, net sales decreased 11% ($23.5 million) to $195.6 million from $219.1 million in the comparable quarter of fiscal 2006. Relative to the prior year, Worthington said the decrease in net sales was the result of lower volumes (down 8%) and lower pricing (down 3%). Although Metal Framing had a small operating loss, results represented a significant turnaround from the third quarter of fiscal 2007. Compared to the prior quarter, volumes rose 14% and the spread between selling prices and material costs rose 37%, approaching more normal levels, as higher priced inventory was depleted.
In the Pressure Cylinders segment, net sales increased 23% ($31.6 million) to a record $169.3 million from $137.7 million in the comparable quarter of fiscal 2006. Worthington said the increase in net sales was due to higher volumes (up 10%) and higher average selling prices (up 12%). Average selling prices improved as a result of price increases in certain product lines and product mix. Strong performance in Europe and North America was the culmination of several multi-year initiatives to reduce costs, exit unprofitable product lines, introduce new product lines, consolidate facilities, and grow profitable lines through capacity and geographic expansion. These actions, along with a strong overall sales effort, led to a 29% improvement in operating income for the quarter. Operating income set a record for both the quarter and the year.
Worthington’s joint ventures added significantly to fourth quarter results. Equity in the net income of six unconsolidated affiliates totaled $16.7 million for the quarter, compared to a record $20.8 million in the year ago quarter. Fiscal 2007 was the best year in the history of the WAVE joint venture for both sales and earnings.
Cost Reduction Initiatives—As part of its continuing efforts to improve the company’s profitability, management has undertaken a review of each of its businesses and established clear profitability goals and objectives for each of them. In addition, management has targeted $35 to $40 million of incremental reductions to its cost structure through a combination of facility closures, productivity improvements and headcount reductions to be implemented during fiscal 2008.
Worthington Industries is a leading diversified metal processing company with annual sales of approximately $3 billion. The Columbus, Ohio, based company is a premier North American value-added steel processor and a leader in manufactured metal products such as metal framing, pressure cylinders, automotive past model service stampings, metal ceiling grid systems, and laser-welded blanks. Worthington employs more than 8,000 people and operates 64 facilities in 10 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, an unwavering commitment to the customer, and one of the strongest employee/employer partnerships in American industry serve as the company’s foundation.
