Worthington Reports Second Quarter Fiscal 2016 Results
/EINPresswire.com/ -- COLUMBUS, OH -- (Marketwired) -- 12/16/15 -- Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $699.8 million and net earnings of $23.2 million, or $0.36 per diluted share, for its fiscal 2016 second quarter ended November 30, 2015, which included pre-tax impairment and restructuring charges totaling $24.5 million, which reduced earnings per diluted share by $0.24. Impairment and restructuring charges in the current quarter related primarily to the write-down of certain long-lived assets within the Oil & Gas Equipment business. In the second quarter of fiscal 2015, the Company reported net sales of $871.0 million and net earnings of $29.5 million, or $0.43 per diluted share. Net earnings in the second quarter of the prior year included pre-tax impairment and restructuring charges, which reduced earnings per diluted share by $0.12.
Financial highlights for the current and comparative periods are as follows:
(U.S. dollars in millions, except per share data)
2Q 2016 1Q 2016 2Q 2015 6M2016 6M2015
--------- --------- --------- --------- ---------
Net sales $ 699.8 $ 758.1 $ 871.0 $ 1,457.9 $ 1,733.4
Operating income 12.0 31.0 33.2 43.0 85.4
Equity income 29.2 26.6 22.3 55.8 50.2
Net earnings 23.2 31.4 29.5 54.7 73.6
EPS, diluted $ 0.36 $ 0.48 $ 0.43 $ 0.84 $ 1.06
"We had a solid performance for the quarter in the face of some market weakness," said John McConnell, Chairman and CEO. "We have responded to the softer markets by lowering manufacturing costs to help improve results in those businesses." McConnell added, "The majority of our joint ventures delivered good results in the quarter."
Consolidated Quarterly Results
Net sales for the second quarter of fiscal 2016 were $699.8 million, down 19.7% from the comparable quarter in the prior year, when net sales were $871.0 million. The decrease was the result of lower volume in nearly all business segments, combined with lower average selling prices in Steel Processing driven by the market decline in steel prices and in Engineered Cabs due to product mix.
Gross margin declined $16.0 million from the prior year quarter to $109.2 million due to lower volume, partially offset by lower manufacturing expenses and a favorable pricing spread.
Operating income for the current quarter was $12.0 million, a decrease of $21.2 million from the prior year quarter. In addition to the lower gross margin, operating income in the current quarter was negatively impacted by higher impairment and restructuring charges, totaling $24.5 million, but partially offset by lower SG&A expenses. The impairment and restructuring charges resulted primarily from the write-down of certain long-lived assets within Pressure Cylinders' Oil & Gas Equipment business and the closure of Steel Processing's stainless steel business.
Interest expense was $7.8 million for the current quarter, compared to $9.7 million in the comparable period of the prior year. The decrease resulted from lower average debt levels, partially due to the lower market price of steel, which favorably impacts working capital.
The Company's portion of equity income from unconsolidated joint ventures increased $6.9 million from the prior year quarter to $29.2 million. Joint venture sales totaled $389.2 million for the current quarter. Higher contributions from the WAVE, ClarkDietrich and ArtiFlex joint ventures were partially offset by lower earnings at Serviacero and WSP. Equity income from ClarkDietrich was favorably impacted by $4.0 million due to a legal settlement. The Company received cash distributions of $18.9 million from unconsolidated joint ventures during the quarter.
Income tax expense was $8.8 million in the current quarter compared to $15.6 million in the comparable quarter in the prior year. The decrease was primarily due to lower net earnings. The current quarter tax expense reflected an estimated annual effective rate of 31.2% compared to 33.5% for the prior year quarter.
Balance Sheet
At quarter-end, total debt was $629.4 million, down $41.3 million from May 31, 2015, due to lower short-term borrowings. As of November 30, 2015, $25.2 million was drawn on the Company's $500 million revolving credit facility and $20.0 million was outstanding under the Company's trade accounts receivable securitization facility. The Company had $27.4 million of cash at quarter-end.
Quarterly Segment Results
Steel Processing's net sales of $467.8 million were down 15%, or $84.9 million, from the comparable prior year quarter as the additional sales from the January 2015 Rome Strip Steel acquisition were more than offset by lower volume and lower average selling prices. Operating income of $26.6 million was $7.2 million lower than the prior year quarter due primarily to lower volume that was partially offset by lower manufacturing expenses.
Pressure Cylinders' net sales of $201.2 million were down 20%, or $51.6 million, from the comparable prior year quarter driven primarily by a 65% volume decrease in Oil & Gas Equipment business and the May 2015 disposition of our Mississippi facility. The operating loss of $10.3 million was $19.9 million lower than the prior year operating income of $9.6 million primarily due to higher impairment charges coupled with a decline in the Oil & Gas Equipment business, which were partially offset by improvements in Industrial and Consumer Products.
Engineered Cabs' net sales of $28.7 million were $22.8 million, or 44%, below the prior year quarter due to declines in market demand, the January 2015 sale of the assets of Advanced Component Technologies, Inc., and the September 2015 closure of the Florence, South Carolina facility. The operating loss in the current quarter decreased $1.3 million to $4.3 million as manufacturing and SG&A expenses were reduced to match the lower demand.
The "Other" category includes the Construction Services and Energy Innovations businesses, as well as non-allocated corporate expenses. Net sales in the "Other" category were $2.1 million, a decrease of $11.8 million from the prior year quarter as the Construction Services business has been substantially wound down. The Construction Services business reported a $0.2 million loss for the quarter.
Recent Business Developments
- On December 7, 2015, the Company completed the acquisition of the global CryoScience business of Taylor Wharton, including a manufacturing facility in Theodore, Ala. for $31.4 million. The asset purchase was made pursuant to the Chapter 11 bankruptcy proceedings of Taylor Wharton.
- During the quarter, the Company repurchased a total of 1,500,000 common shares for $43.9 million at an average price of $29.26.
- On December 16, 2015, the Board of Directors declared a quarterly dividend of $0.19 per share payable on March 29, 2016 to shareholders of record on March 15, 2016.
Outlook
"Our legacy businesses are performing well despite some market softness and challenging conditions in steel pricing," McConnell said. "We remain committed to growing our Company and adding value to our shareholders investment in us."
Conference Call
Worthington will review fiscal 2016 second quarter results during its quarterly conference call on December 17, 2015, at 10:30 a.m., Eastern Time. Details regarding the conference call can be found on the Company web site at www.WorthingtonIndustries.com.
About Worthington Industries
Worthington Industries is a leading global diversified metals manufacturing company with 2015 fiscal year sales of $3.4 billion. Headquartered in Columbus, Ohio, Worthington is North America's premier value-added steel processor providing customers with wide ranging capabilities, products and services for a variety of markets including automotive, construction and agriculture; a global leader in manufacturing pressure cylinders for industrial gas and cryogenic applications, CNG and LNG storage, transportation and alternative fuel tanks, oil and gas equipment, and brand consumer products for camping, grilling, hand torch solutions and helium balloon kits; and a manufacturer of operator cabs for heavy mobile industrial equipment; laser welded blanks for light weighting applications; automotive racking solutions; and through joint ventures, complete ceiling grid solutions; automotive tooling and stampings; and steel framing for commercial construction. Worthington employs approximately 10,000 people and operates 83 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 the basis for an unwavering commitment to the customer, supplier, and shareholder, and as the Company's foundation for one of the strongest employee-employer partnerships in American industry.
Safe Harbor Statement
The Company wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995 (the "Act"). Statements by the Company relating to outlook, strategy or business plans; the ability to correct performance issues at operations; future or expected growth, forward momentum, performance, sales, volumes, cash flows, earnings, balance sheet strengths, debt, financial condition or other financial measures; projected profitability potential, capacity, and working capital needs; demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; pricing trends for raw materials and finished goods and the impact of pricing changes; anticipated capital expenditures and asset sales; anticipated improvements and efficiencies in costs, operations, sales, inventory management, sourcing and the supply chain and the results thereof; the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, newly-created joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to maintain margins and capture and maintain market share and to develop or take advantage of future opportunities, customer initiatives, new businesses, new products and new markets; expectations for Company and customer inventories, jobs and orders; expectations for the economy and markets or improvements therein; expected benefits from transformation plans, cost reduction efforts and other new initiatives; expectations for increasing volatility or improving and sustainable earnings, earnings potential, margins or shareholder value; effects of judicial rulings and other non-historical matters constitute "forward-looking statements" within the meaning of the Act. Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, the effect of national, regional and worldwide economic conditions generally and within major product markets, including a recurrent slowing economy; the effect of conditions in national and worldwide financial markets; lower oil prices as a factor in demand for products; product demand and pricing; changes in product mix, product substitution and market acceptance of the Company's products; fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities and other items required by operations; effects of facility closures and the consolidation of operations; the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction, oil and gas, and other industries in which the Company participates; failure to maintain appropriate levels of inventories; financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom the Company does business; the ability to realize targeted expense reductions from headcount reductions, facility closures and other cost reduction efforts; the ability to realize other cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from transformation initiatives, on a timely basis; the overall success of, and the ability to integrate newly-acquired businesses and joint ventures, maintain and develop their customers, and achieve synergies and other expected benefits and cost savings therefrom; capacity levels and efficiencies, within facilities, within major product markets and within the industry as a whole; the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, acts of war or terrorist activities or other causes; changes in customer demand, inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability, foreign currency exposure and the acceptance of our products in these markets; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; the outcome of adverse claims experience with respect to workers' compensation, product recalls or product liability, casualty events or other matters; deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies; level of imports and import prices in the Company's markets; the impact of judicial rulings and governmental regulations, both in the United States and abroad, including those adopted by the United States Securities and Exchange Commission and other governmental agencies as contemplated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; the effect of changes to healthcare laws in the United States which may increase our healthcare and other costs and negatively impact our operations and financial results; and other risks described from time to time in the Company's filings with the United States Securities and Exchange Commission, including those described in "Part I - Item 1A. - Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended May 31, 2015.
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
November 30, November 30,
------------------------ ------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
Net sales $ 699,816 $ 871,012 $ 1,457,963 $ 1,733,426
Cost of goods sold 590,637 745,789 1,235,768 1,478,696
----------- ----------- ----------- -----------
Gross margin 109,179 125,223 222,195 254,730
Selling, general and
administrative expense 72,722 77,308 148,673 152,563
Impairment of long-lived
assets 22,962 14,235 25,962 16,185
Restructuring and other
expense 1,523 488 4,592 588
----------- ----------- ----------- -----------
Operating income 11,972 33,192 42,968 85,394
Other income (expense):
Miscellaneous income 996 1,220 418 1,543
Interest expense (7,799) (9,676) (15,653) (19,192)
Equity in net income
of unconsolidated
affiliates 29,247 22,319 55,828 50,243
----------- ----------- ----------- -----------
Earnings before income
taxes 34,416 47,055 83,561 117,988
Income tax expense 8,800 15,600 23,508 37,713
----------- ----------- ----------- -----------
Net earnings 25,616 31,455 60,053 80,275
Net earnings
attributable to
noncontrolling
interests 2,375 1,993 5,402 6,645
----------- ----------- ----------- -----------
Net earnings
attributable to
controlling interest $ 23,241 $ 29,462 $ 54,651 $ 73,630
=========== =========== =========== ===========
Basic
Average common shares
outstanding 62,676 67,105 63,338 67,337
----------- ----------- ----------- -----------
Earnings per share
attributable to
controlling interest $ 0.37 $ 0.44 0.86 $ 1.09
=========== =========== =========== ===========
Diluted
Average common shares
outstanding 64,527 69,181 65,015 69,780
----------- ----------- ----------- -----------
Earnings per share
attributable to
controlling interest $ 0.36 $ 0.43 $ 0.84 $ 1.06
=========== =========== =========== ===========
Common shares
outstanding at end of
period 62,101 66,912 62,101 66,912
Cash dividends declared
per share $ 0.19 $ 0.18 $ 0.38 $ 0.36
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
November 30, May 31,
2015 2015
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 27,354 $ 31,067
Receivables, less allowances of $3,163 and
$3,085 at November 30, 2015 and May 31,
2015, respectively 407,371 474,292
Inventories:
Raw materials 177,044 181,975
Work in process 89,877 107,069
Finished products 84,232 85,931
------------- -------------
Total inventories 351,153 374,975
Income taxes receivable 3,491 12,119
Assets held for sale 12,646 23,412
Deferred income taxes 21,356 22,034
Prepaid expenses and other current assets 48,525 54,294
------------- -------------
Total current assets 871,896 992,193
Investments in unconsolidated affiliates 210,116 196,776
Goodwill 237,110 238,999
Other intangible assets, net of accumulated
amortization of $42,744 and $47,547 at
November 30, 2015 and May 31, 2015,
respectively 90,070 119,117
Other assets 25,676 24,867
Property, plant & equipment:
Land 14,367 16,017
Buildings and improvements 224,104 218,182
Machinery and equipment 900,433 872,986
Construction in progress 52,174 40,753
------------- -------------
Total property, plant & equipment 1,191,078 1,147,938
Less: accumulated depreciation 664,941 634,748
------------- -------------
Property, plant and equipment, net 526,137 513,190
------------- -------------
Total assets $ 1,961,005 $ 2,085,142
============= =============
Liabilities and equity
Current liabilities:
Accounts payable $ 265,984 $ 294,129
Short-term borrowings 49,538 90,550
Accrued compensation, contributions to
employee benefit plans and related taxes 59,016 66,252
Dividends payable 13,293 12,862
Other accrued items 61,039 56,913
Income taxes payable 2,049 2,845
Current maturities of long-term debt 851 841
------------- -------------
Total current liabilities 451,770 524,392
Other liabilities 63,429 58,269
Distributions in excess of investment in
unconsolidated affiliate 58,214 61,585
Long-term debt 579,016 579,352
Deferred income taxes 4,802 21,495
------------- -------------
Total liabilities 1,157,231 1,245,093
Shareholders' equity - controlling interest 713,006 749,112
Noncontrolling interests 90,768 90,937
------------- -------------
Total equity 803,774 840,049
------------- -------------
Total liabilities and equity $ 1,961,005 $ 2,085,142
============= =============
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Six Months Ended
November 30, November 30,
---------------------- ----------------------
2015 2014 2015 2014
---------- ---------- ---------- ----------
Operating activities
Net earnings $ 25,616 $ 31,455 $ 60,053 $ 80,275
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Depreciation and
amortization 20,547 21,200 41,987 41,567
Impairment of long-lived
assets 22,962 14,235 25,962 16,185
Provision for deferred
income taxes (9,851) (5,492) (15,391) (6,027)
Bad debt expense (income) (2) 143 8 (60)
Equity in net income of
unconsolidated
affiliates, net of
distributions (10,389) (813) (15,902) (7,803)
Net loss (gain) on sale of
assets (5,854) 2,370 (4,248) (460)
Stock-based compensation 3,880 4,498 7,657 8,853
Excess tax benefits -
stock-based compensation (434) (621) (1,258) (5,753)
Changes in assets and
liabilities, net of impact
of acquisitions:
Receivables 23,474 (6,916) 66,103 5,836
Inventories 31,645 16,087 23,821 (35,130)
Prepaid expenses and other
current assets 17,467 (5,232) 28,633 (8,104)
Other assets (3,245) 3,095 (2,803) 3,216
Accounts payable and
accrued expenses (72,711) (72,095) (30,527) (30,205)
Other liabilities 7,487 (505) 4,300 (6,496)
---------- ---------- ---------- ----------
Net cash provided by
operating activities 50,592 1,409 188,395 55,894
---------- ---------- ---------- ----------
Investing activities
Investment in property,
plant and equipment (21,995) (23,273) (60,492) (47,146)
Investment in notes
receivable - (2,300) - (7,300)
Acquisitions, net of cash
acquired (2,950) (14,543) (2,950) (51,093)
Investments in
unconsolidated affiliates (226) 129 (1,913) (3,671)
Proceeds from sale of
assets and insurance 9,325 921 9,456 1,186
---------- ---------- ---------- ----------
Net cash used by investing
activities (15,846) (39,066) (55,899) (108,024)
---------- ---------- ---------- ----------
Financing activities
Net proceeds from
(repayments of) short-
term borrowings 27,499 (196) (41,012) 359
Proceeds from long-term
debt - 20,480 921 20,480
Principal payments on
long-term debt (220) (511) (428) (813)
Payments for issuance of
common shares 3,666 566 3,064 (454)
Excess tax benefits -
stock-based compensation 434 621 1,258 5,753
Payments to noncontrolling
interests (1,564) - (4,900) (2,867)
Repurchase of common
shares (43,914) (21,549) (71,496) (41,620)
Dividends paid (12,065) (12,138) (23,616) (22,250)
---------- ---------- ---------- ----------
Net cash used by financing
activities (26,164) (12,727) (136,209) (41,412)
---------- ---------- ---------- ----------
Increase (decrease) in cash
and cash equivalents 8,582 (50,384) (3,713) (93,542)
Cash and cash equivalents at
beginning of period 18,772 146,921 31,067 190,079
---------- ---------- ---------- ----------
Cash and cash equivalents at
end of period $ 27,354 $ 96,537 $ 27,354 $ 96,537
========== ========== ========== ==========
WORTHINGTON INDUSTRIES, INC.
SUPPLEMENTAL DATA
(In thousands, except volume)
This supplemental information is provided to assist in the analysis of the
results of operations.
Three Months Ended Six Months Ended
November 30, November 30,
------------------------ ------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
Volume:
Steel Processing
(tons) 828,208 898,505 1,694,584 1,803,966
Pressure Cylinders
(units) 16,558,823 19,090,046 35,778,233 39,460,432
Net sales:
Steel Processing $ 467,812 $ 552,756 $ 958,612 $ 1,105,087
Pressure Cylinders 201,173 252,744 425,567 501,703
Engineered Cabs 28,699 51,540 67,316 101,094
Other 2,132 13,972 6,468 25,542
----------- ----------- ----------- -----------
Total net sales $ 699,816 $ 871,012 $ 1,457,963 $ 1,733,426
=========== =========== =========== ===========
Material cost:
Steel Processing $ 322,507 $ 400,677 $ 670,752 $ 795,569
Pressure Cylinders 85,498 115,832 184,562 234,269
Engineered Cabs 13,437 23,674 31,418 45,696
Selling, general and
administrative expense:
Steel Processing $ 32,925 $ 30,253 $ 65,840 $ 62,153
Pressure Cylinders 33,915 35,941 70,789 70,954
Engineered Cabs 4,800 7,086 10,208 13,910
Other 1,082 4,028 1,836 5,546
----------- ----------- ----------- -----------
Total selling,
general and
administrative
expense $ 72,722 $ 77,308 $ 148,673 $ 152,563
=========== =========== =========== ===========
Operating income (loss):
Steel Processing $ 26,642 $ 33,877 $ 50,280 $ 69,746
Pressure Cylinders (10,309) 9,580 6,510 29,186
Engineered Cabs (4,290) (5,609) (13,581) (7,754)
Other (71) (4,656) (241) (5,784)
----------- ----------- ----------- -----------
Total operating
income $ 11,972 $ 33,192 $ 42,968 $ 85,394
=========== =========== =========== ===========
The following provides detail of Pressure Cylinders volume and net sales by
principal class of products.
Three Months Ended Six Months Ended
November 30, November 30,
------------------------ ------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
Volume (units):
Consumer Products 10,523,692 11,240,094 22,501,637 23,586,725
Industrial Products* 5,926,739 6,161,759 13,074,691 12,668,561
Mississippi* - 1,577,717 - 2,987,407
Alternative Fuels 107,121 107,300 199,077 211,389
Oil and Gas Equipment 1,044 2,994 2,364 5,981
Cryogenics 227 182 464 369
----------- ----------- ----------- -----------
Total Pressure
Cylinders 16,558,823 19,090,046 35,778,233 39,460,432
=========== =========== =========== ===========
Net sales:
Consumer Products $ 49,484 $ 51,317 $ 104,442 $ 106,916
Industrial Products* 97,601 99,146 202,707 201,363
Mississippi* - 6,331 - 13,205
Alternative Fuels 23,954 22,822 48,772 44,602
Oil and Gas Equipment 25,041 66,886 57,925 124,222
Cryogenics 5,093 6,242 11,721 11,395
----------- ----------- ----------- -----------
Total Pressure
Cylinders $ 201,173 $ 252,744 $ 425,567 $ 501,703
=========== =========== =========== ===========
* Mississippi, an industrial gas facility, was sold in May 2015. It has
been broken out so as not to distort the Industrial Products
comparisons.
WORTHINGTON INDUSTRIES, INC.
SUPPLEMENTAL DATA
(In thousands)
The following provides detail of impairment of long-lived assets and
restructuring and other expense included in operating income by segment.
Three Months Ended Six Months Ended
November 30, November 30,
-------------------- --------------------
2015 2014 2015 2014
--------- --------- --------- ---------
Impairment of long-lived assets:
Steel Processing $ - $ 1,100 $ - $ 3,050
Pressure Cylinders 22,962 9,567 22,962 9,567
Engineered Cabs - 2,389 3,000 2,389
Other - 1,179 - 1,179
--------- --------- --------- ---------
Total impairment of long-lived
assets $ 22,962 $ 14,235 $ 25,962 $ 16,185
========= ========= ========= =========
Restructuring and other expense
(income):
Steel Processing $ 2,258 $ - $ 2,720 $ (30)
Pressure Cylinders (16) 405 715 428
Engineered Cabs 765 - 2,643 -
Other (1,484) 83 (1,486) 190
--------- --------- --------- ---------
Total restructuring and other
expense $ 1,523 $ 488 $ 4,592 $ 588
========= ========= ========= =========
CONTACTS:
Cathy M. Lyttle
VP, Corporate Communications and Investor Relations
Phone: (614) 438-3077
E-mail: Email Contact
Sonya L. Higginbotham
Director, Corporate Communications
Phone: (614) 438-7391
E-mail: Email Contact
200 Old Wilson Bridge Rd.
Columbus, Ohio 43085
WorthingtonIndustries.com
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
