Worthington Industries Reports Second Quarter Results
COLUMBUS, Ohio--Dec. 1, 20037, 2003--Worthington Industries, Inc. today reported results for the three and six-month periods ended November 30, 2003.Results
Net sales for the second quarter of fiscal 2004 were $540.1 million, a decrease of 5% from last year's record $567.9 million. Earnings were $16.9 million and earnings per diluted share were $0.20, compared to second quarter earnings of $20.7 million, or $0.24 per diluted share, for the same period last year.
For the six-month period, net sales declined 5% to $1,038.1 million from $1,093.4 million last year. Earnings were $22.8 million and earnings per diluted share were $0.26, compared to $48.2 million and $0.56, respectively, for the same period last year.
CEO Comments
"This quarter was much improved from our first quarter," said John P. McConnell, Chairman and CEO of Worthington Industries, "as all three business segments had stronger sales and operating income. Worthington's unbroken record of profitability has been helped by both our Pressure Cylinders business segment and our unconsolidated joint ventures, which consistently and significantly contribute to revenues and earnings.
"I am encouraged by our performance this quarter. Although the results for the Processed Steel Products and Metal Framing segments remained below last year's levels, Processed Steel Products strengthened throughout the quarter," said McConnell.
"Metal Framing experienced higher than anticipated costs associated with the integration of Unimast. These added costs, related primarily to equipment and facilities upgrades, concluded during the quarter.
"We expect both segments to show improvement coinciding with a generally stronger economy and higher steel prices," stated McConnell.
Detailed Results
Within the Processed Steel Products segment, quarterly net sales fell 9%, or $31.3 million, to $321.4 million from $352.7 million in the comparable quarter of fiscal 2003. The decrease in net sales was due to a decline in tolling volume from a year ago and reduced direct selling prices. Excluding the benefit of an $8.7 million restructuring credit recognized in the same quarter last year, operating income declined as a result of spread compression between selling prices and material costs.
Within the Metal Framing segment, net sales decreased 1%, or $1.7 million, to $142.4 million from $144.1 million in the comparable quarter of fiscal 2003. Despite continued weakness in the commercial construction market, volumes were up 9%, but prices were lower than the year ago quarter. Excluding the impact of a $1.6 million restructuring charge taken last year, operating income declined due to spread compression between selling prices and material costs. However, pricing was up 4% from the first quarter, due to price increases initiated September 1st.
Within the Pressure Cylinders segment, net sales increased 7%, or $4.9 million, to $72.4 million from $67.5 million in the comparable quarter of fiscal 2003. North American volumes of propane and refrigerant cylinders were each up more than 20%. European revenues, however, were flat on significantly lower volumes as the weakened dollar boosted reported revenues in dollars by $3.5 million. Excluding the impact of a $1.4 million restructuring charge taken in the year ago quarter, operating income decreased $1.2 million due primarily to the reduced European volumes.
Worthington's unconsolidated joint ventures contributed positively to second quarter results. Equity in net income of six unconsolidated affiliates totaled $8.4 million, up 17% from $7.2 million in the year ago quarter. The improvement was due to strong results from Worthington Armstrong Venture (WAVE), increased ownership in TWB, and better results at Aegis Metal Framing.
Income tax expense in the current quarter was favorably impacted by a $1.4 million adjustment resulting from a change in the estimate for deferred taxes. This favorable impact was partially offset by an increase in the effective tax rate for fiscal 2004 from 36.5% to 37.0%.
Outlook
The third quarter is typically Worthington's softest as all three business segments are impacted by reduced demand due to weather and holiday related slowdowns. Although economic and industry conditions are improving, conditions in major customer segments - automotive and commercial construction - may continue to be challenging.
"Big 3" vehicle production is projected to be down 2% for the coming fiscal quarter relative to last year and down 9% from this quarter. Additionally, the U.S. Census Bureau's index of private construction spending confirms that commercial construction activity remains near five-year lows.
Other
Dividend declared
On November 20, 2003, the board of directors declared a quarterly cash dividend of $0.16 per share payable December 29, 2003, to shareholders of record December 15, 2003.
Corporate Profile
Worthington Industries is a leading diversified metal processing company with annual sales of approximately $2 billion. The Columbus, Ohio, based company is North America's premier value-added steel processor and a leader in manufactured metal products such as automotive past model service stampings, pressure cylinders, metal framing, metal ceiling grid systems and laser welded blanks. Worthington employs more than 7,500 people and operates 62 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.
Conference Call
Worthington will review its second quarter results during its quarterly conference call today, December 17, 2003, at 1:30 p.m. Eastern Standard Time. Details on the conference call can be found on the company's web site at www.WorthingtonIndustries.com
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 future sales, operating results and earnings per share; projected capacity and working capital needs; pricing trends for raw materials and finished goods; anticipated capital expenditures; projected timing, results, costs, charges and expenditures related to plant shutdowns and consolidations; new products and markets; and other non-historical trends 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, product demand and pricing, changes in product mix and market acceptance of products; fluctuations in pricing, quality or availability of raw materials (particularly steel), supplies, utilities and other items required by our operations; effects of plant closures and the consolidation of operations and our ability to realize expected cost savings and operational efficiencies on a timely basis; our ability to integrate newly acquired businesses with current businesses; capacity levels and efficiencies within our facilities and within the industry as a whole; financial difficulties of customers, suppliers, joint venture partners and others with whom we do business; the effect of national, regional and worldwide economic conditions generally and within our major product markets, including a prolonged or substantial economic downturn; the effect of adverse weather on plant and shipping operations; changes in customer spending patterns and supplier choices and risks associated with doing business internationally, including economic, political and social instability and foreign currency exposure; acts of war and terrorist activities; the ability to improve processes and business practices to keep pace with the economic, competitive and technological environment; deviation of actual results from estimated 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 governmental regulations, both in the United States and abroad; and other risks described from time to time in our filings with the Securities and Exchange Commission.
WORTHINGTON INDUSTRIES, INC.
EARNINGS HIGHLIGHTS
(In Thousands, Except Per Share)
Three Months Ended Six Months Ended
November 30, November 30,
----------------------- -----------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 540,078 $ 567,897 $1,038,113 $1,093,361
Cost of goods sold 472,836 487,527 921,888 923,567
---------- ---------- ---------- ----------
Gross margin 67,242 80,370 116,225 169,794
Selling, general &
administrative
expense 45,243 46,452 86,863 93,555
Restructuring credit - (5,622) - (5,622)
---------- ---------- ---------- ----------
Operating
income 21,999 39,540 29,362 81,861
Other income
(expense):
Miscellaneous
expense (114) (2,316) (503) (3,657)
Nonrecurring loss - (5,400) - (5,400)
Interest expense (5,565) (6,340) (11,156) (12,443)
Equity in net
income of
unconsolidated
affiliates 8,391 7,187 16,327 15,602
---------- ---------- ---------- ----------
Earnings before
income taxes 24,711 32,671 34,030 75,963
Income tax expense 7,828 11,924 11,230 27,726
---------- ---------- ---------- ----------
Net earnings $ 16,883 $ 20,747 $ 22,800 $ 48,237
========== ========== ========== ==========
Average common shares
outstanding - diluted 86,503 86,834 86,510 86,666
---------- ---------- ---------- ----------
Earnings
per share -
diluted $ 0.20 $ 0.24 $ 0.26 $ 0.56
========== ========== ========== ==========
Common shares
outstanding at
end of period 86,134 85,838 86,134 85,838
Cash dividends
declared per
common share $ 0.16 $ 0.16 $ 0.32 $ 0.32
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
November 30, May 31,
2003 2003
------------- -------------
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $ 2,008 $ 1,139
Accounts receivable, net 204,228 169,967
Inventories 262,701 268,983
Income taxes receivable - 11,304
Deferred income taxes 20,643 20,783
Other current assets 30,942 34,070
------------ ------------
Total current assets 520,522 506,246
Investments in unconsolidated affiliates 87,997 81,221
Goodwill 117,249 116,781
Other assets 31,591 30,777
Property, plant and equipment, net 722,548 743,044
------------ ------------
Total assets $ 1,479,907 $ 1,478,069
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 234,422 $ 222,987
Notes payable 249 1,145
Current maturities of long-term debt 1,215 1,194
Other current liabilities 84,113 92,845
------------ ------------
Total current liabilities 319,999 318,171
Other liabilities 94,306 90,471
Long-term debt 289,122 289,689
Deferred income taxes 141,010 143,444
Shareholders' equity 635,470 636,294
------------ ------------
Total liabilities and
shareholders' equity $ 1,479,907 $ 1,478,069
============ ============
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Six Months Ended
November 30,
-----------------------
2003 2002
----------- -----------
(Unaudited) (Unaudited)
Operating activities
Net earnings $ 22,800 $ 48,237
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 33,706 35,705
Restructuring credit - (5,622)
Nonrecurring loss - 5,400
Other adjustments (3,775) 17,191
Changes in current assets
and liabilities (8,823) 31,654
---------- ----------
Net cash provided by
operating activities 43,908 132,565
Investing activities
Investment in property, plant
and equipment, net (14,268) (13,657)
Acquisitions, net of cash acquired - (113,740)
Investment in unconsolidated affiliate (490) -
Proceeds from sale of assets 2,937 12,956
---------- ----------
Net cash used by investing activities (11,821) (114,441)
Financing activities
Proceeds from (payments on)
short-term borrowings (896) 9,258
Principal payments on long-term debt (608) (464)
Dividends paid (27,525) (27,366)
Other (2,189) 666
---------- ----------
Net cash used by financing activities (31,218) (17,906)
---------- ----------
Increase in cash and cash equivalents 869 218
Cash and cash equivalents at
beginning of period 1,139 496
---------- ----------
Cash and cash equivalents at end of period $ 2,008 $ 714
========== ==========
WORTHINGTON INDUSTRIES, INC.
SUPPLEMENTAL DATA
(In Thousands)
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,
----------------------- -----------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Volume:
Processed Steel
Products (tons)
Direct 593 592 1,111 1,149
Toll 373 416 705 831
Metal Framing (tons) 192 176 390 334
Pressure Cylinders
(units) 2,718 2,844 5,841 6,877
Net sales:
Processed Steel
Products
Direct $ 302,151 $ 332,452 $ 574,043 $ 631,337
Toll 19,227 20,228 34,533 40,264
Metal Framing 142,417 144,078 283,481 264,916
Pressure Cylinders 72,434 67,449 138,969 149,585
Other 3,849 3,690 7,087 7,259
---------- ---------- ---------- ----------
Total net sales $ 540,078 $ 567,897 $1,038,113 $1,093,361
========== ========== ========== ==========
Material cost:
Processed Steel
Products
Direct $ 212,841 $ 231,041 $ 401,826 $ 425,523
Toll - - - -
Metal Framing 86,225 87,296 179,179 147,568
Pressure Cylinders 30,094 28,276 59,114 65,777
Operating income:
Processed Steel
Products $ 13,762 $ 32,000 $ 21,931 $ 54,317
Metal Framing 871 1,908 (2,783) 18,272
Pressure Cylinders 6,855 6,633 10,393 13,827
Other 511 (1,001) (179) (4,555)
---------- ---------- ---------- ----------
Total operating
income $ 21,999 $ 39,540 $ 29,362 $ 81,861
========== ========== ========== ==========
The following provides detail of the restructuring credit included in
the operating income by segment presented above.
Three Months Ended Six Months Ended
November 30, November 30,
----------------------- -----------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Pre-tax restructuring
(credit) expense by
segment
Processed Steel
Products $ - $ (8,717) $ - $ (8,717)
Metal Framing - 1,574 - 1,574
Pressure Cylinders - 1,420 - 1,420
Other - 101 - 101
---------- ---------- ---------- ----------
Total
restructuring
credit $ - $ (5,622) $ - $ (5,622)
========== ========== ========== ==========