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Worthington Reports Q2 Results

01/07/2010 - Worthington Industries, Inc. reports net sales of $448.0 million and net earnings of $23.2 million, or $0.29 per diluted share, for the fiscal 2010 second quarter ended November 30, 2009. The results show sequential improvement from the first quarter.

Worthington Industries, Inc. reported net sales of $448.0 million and net earnings of $23.2 million, or $0.29 per diluted share, for the fiscal 2010 second quarter ended November 30, 2009.
 
The results show sequential improvement from the first quarter, with increased margins due to higher steel prices, tighter cost controls, improved inventory management, and operational efficiencies particularly evident in Steel Processing, the company’s largest business segment.
 

Worthington’s Steel Processing Segment
 
In Steel Processing, quarterly net sales were down 36% to $225.6 million compared to the prior year. Direct tons shipped were down 13% compared to the prior year due to declines in automotive and construction; however, several market segments were up, including agriculture, heating and cooling, and infrastructure projects.
 
Toll volumes were down 4% year over year, but up 40% from the prior quarter. Operating income improved to $14.7 million from the prior year’s loss of $71.9 million, which included $57.4 million in charges related to inventory write-downs and restructuring.
 
The fiscal second quarter operating income also showed an improvement over the prior quarter’s operating income of $0.8 million.
In last year’s second quarter, the company posted a net loss of $164.7 million, or $2.09 per diluted share.

 
Second-Quarter Results—Second quarter sales of $448.0 million were down 40% compared to the same quarter last year, primarily due to lower average selling prices and lower sales volumes, according to Worthington. Q2 sales were up compared to the first quarter’s posting of $417.5 million.
 
Operating income improved to $19.1 million compared to an operating loss of $211.6 million for the prior year’s second quarter, which included $203.7 million of pre-tax charges related to inventory write-down, goodwill impairment, and restructuring. The improvement to operating income was driven by a more favorable spread between selling prices and material costs, and lower manufacturing expenses, according to Worthington.
 
Earnings per share of $0.29 for the current quarter compares to a loss of $2.09 in the prior year. The special charges mentioned reduced prior year earnings per share by $2.10.
 
Q2 results also showed improvements compared to the first quarter, in which an operating loss of $4.5 million was reported, and earnings per share were $0.08.
 
Six-Month Results—In the first six months of the fiscal year, sales were down 48% to $865.5 million. According to Worthington, this was largely driven by the reduction in sales volumes due to the decline in the automotive and construction markets, combined with the decline in the market price of steel, which had reached record levels in the first half of fiscal 2009.
 
Operating income was $14.6 million, up 111% from the prior year, which had included the previously mentioned charges.
 
Management Comments—“We had a very good quarter driven by improved volumes and spreads in Steel Processing and the benefits of our Transformation efforts,” said Chairman and CEO John P. McConnell. “Over the past two years, we have reduced costs, resized our businesses, reduced debt, and conserved cash across the company to produce positive results in a down cycle.
 
“Pressure Cylinders had a steady performance driven by good results in North America, where its retail products are performing well,” McConnell said. “It’s a different story in Europe, where depressed industrial markets are holding back Cylinders’ overall results.”
 
McConnell added, “Volume difficulties continue for our Metal Framing business due to the ongoing downturn in the commercial construction markets. This business continues to make progress in its Transformation efforts, and we are focused on remaining cash neutral this fiscal year, by keeping costs low, implementing operational efficiencies, and aggressively pursuing building projects with our value-added products.”
 
Outlook—“Reiterating what we stated at the end of our first quarter, we continue to operate in a historically low demand environment,” McConnell said. “While we are generally optimistic about the gradual return of the economy, we do not believe we will know how quickly our markets will rebound until the end of the third quarter, at the earliest.”
 
McConnell added, “We feel very good about Steel Processing’s position and the positive back-to-back quarterly performances it has delivered, as our operational improvements continue to gain momentum. However, we do not anticipate any near-term improvement in Metal Framing end markets.
 
“The Pressure Cylinders segment is performing well in the U.S., but we expect its European markets will remain challenging through this next quarter. WAVE will continue its focus on maintaining margin and market share despite anticipated lower volumes. We also expect to launch its new DC FlexZone product in the first part of 2010. We will continue to manage our strong balance sheet, while examining attractive opportunities for market share gains and high return acquisitions,” McConnell concluded.
 
Worthington Industries is a leading diversified metals manufacturing company with 2009 fiscal year sales of approximately $2.6 billion. The Columbus, Ohio-based company claims to be North America’s premier value-added steel processor and a leader in manufactured metal products such as light gauge steel framing for commercial and residential construction; framing systems and stairs for mid-rise buildings; pressure cylinders products such as propane, oxygen, and helium tanks, hand torches, camping cylinders, and scuba tanks; current and past model automotive service stampings; metal ceiling grid systems; steel pallets and racks; and laser welded blanks. Worthington employs about 6300 people and operates 61 facilities in 11 countries.