Worthington Industries Reports Third Quarter Results; Net Income and EPS More Than Double
COLUMBUS, Ohio--March 17, 2004--Worthington Industries, Inc. today reported results for the three and nine-month periods ended February 29, 2004.Results
Net sales for the third quarter of fiscal 2004 were $558.1 million, an increase of 4% from last year's $536.6 million. Earnings were $24.5 million, up 117%, and earnings per diluted share were $0.28, up 115%, compared to earnings of $11.3 million, or $0.13 per diluted share, for the same period last year.
Third quarter results include the favorable impact of a $3.9 million pre-tax gain on the sale of certain assets in the Metal Framing business segment. This one-time gain had a $0.03 positive impact on earnings per share for the three and nine-month periods.
For the nine-month period, net sales declined 2% to $1,596.2 million from $1,629.9 million last year. Earnings were $47.3 million and earnings per diluted share were $0.55, compared to $59.6 million and $0.69, respectively, for the same period last year.
CEO Comments
"All three of our business segments were solid performers in the third quarter, and each posted its best sales and operating income of the fiscal year during what is a seasonally weak quarter," said John P. McConnell, Chairman and CEO of Worthington Industries. "In fact, this is the best performance for our Metal Framing segment since the Unimast acquisition, more than eighteen months ago.
"During the last two years we have accomplished two major initiatives - integrating Unimast and completing our fiscal 2002 plant consolidation plan. As a result, we have closed 12 facilities and realized $12 million in annualized savings, with much of the Unimast savings still to come.
"The benefits from these actions, as well as several smaller cost cutting efforts, are more visible now. Combined with a resurgent economy and rising price environment they led to widened spreads, reduced costs and improved profitability. A portion of the improvement this quarter is cyclical in nature, as lower priced inventory is liquidated in a rising price environment, and reverses itself when prices fall," stated McConnell.
"Applying the 'golden rule' in our dealings with our customers and suppliers is at the heart of our operating philosophy and is our focus as we manage through the extraordinary price increases in the industry. This focus, with support from an improved business environment and past cost reduction efforts, has us well positioned to generate solid returns," concluded McConnell.
Detailed Results
In the Processed Steel Products segment, quarterly net sales rose 1%, or $3.9 million, to $325.8 million from $321.9 million in the comparable quarter of fiscal 2003. The increase in net sales was due to modest volume increases from a year ago. Average selling prices, although increased from recent quarters, were below year ago levels. Operating income improved as the spread between selling prices and material costs widened, while only partially recovering some of the erosion in these spreads over the past two years.
In the Metal Framing segment, net sales increased 9%, or $12.0 million, to a record $147.0 million from $135.0 million in the comparable quarter of fiscal 2003. Despite continued weakness in the commercial construction market, volumes were up 7% and prices rose 2% from the year ago quarter. Operating income improved due to a $3.9 million gain on the sale of certain assets acquired in the Unimast acquisition and widening spreads between selling prices and material costs. Selling price increases, driven by surging raw material costs, have partially restored margins.
In the Pressure Cylinders segment, net sales increased 8%, or $5.7 million, to $81.4 million from $75.7 million in the comparable quarter of fiscal 2003. Unit volumes were up 3% overall as strength in the domestic market was offset by weaker European demand. European revenues rose despite lower volumes as the weakened dollar boosted reported revenues in dollars by $3.8 million. Operating income increased as a result of stronger domestic volumes, a shift in mix to higher margin products and operating improvements in the European facilities.
Worthington's unconsolidated joint ventures contributed positively to third quarter results. Equity in net income of six unconsolidated affiliates totaled $8.3 million, up 20% from $6.9 million in the year ago quarter. The improvement was due to strong results from Worthington Armstrong Venture (WAVE) and TWB Company.
Outlook
The fourth quarter is typically Worthington's strongest due to increased seasonal demand in all three business segments. Improvements in economic and industry conditions may positively impact the major customer segments - automotive and commercial construction. While "Big 3" vehicle production is projected to be flat for the fiscal fourth quarter relative to last year, it is expected to increase 18% from the third quarter. Additionally, the U.S. Census Bureau's index of private construction spending confirms that commercial construction activity is beginning to trend upward from five-year lows reached in December 2002.
Other
Dividend declared
On February 19, 2004, the board of directors declared a quarterly cash dividend of $0.16 per share payable March 29, 2004, to shareholders of record March 15, 2004.
Corporate Profile
Worthington Industries is a leading diversified metal processing company with annual net sales of more than $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 nearly 8,000 people and operates 63 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 third quarter results during its quarterly conference call today, March 17, 2004, 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 facility shutdowns and consolidations; new products and markets; 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, 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 facility closures and the consolidation of operations; our ability to realize price increases, 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 facility 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 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 governmental regulations, both in the United States and abroad; and other risks described from time to time in our filings with the United States Securities and Exchange Commission.
WORTHINGTON INDUSTRIES, INC.
EARNINGS HIGHLIGHTS
(In Thousands, Except Per Share)
Three Months Ended Nine Months Ended
----------------------- -----------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 558,067 $ 536,584 $1,596,180 $1,629,945
Cost of goods sold 471,534 471,101 1,393,422 1,394,668
---------- ---------- ---------- ----------
Gross margin 86,533 65,483 202,758 235,277
Selling, general &
administrative
expense 49,046 46,253 135,909 139,808
Restructuring credit - - - (5,622)
---------- ---------- ---------- ----------
Operating income 37,487 19,230 66,849 101,091
Other income
(expense):
Miscellaneous
expense (1,258) (1,979) (1,761) (5,636)
Nonrecurring loss - - - (5,400)
Interest expense (5,581) (6,317) (16,737) (18,760)
Equity in net
income of
unconsolidated
affiliates 8,288 6,910 24,615 22,512
---------- ---------- ---------- ----------
Earnings before
income taxes 38,936 17,844 72,966 93,807
Income tax expense 14,407 6,513 25,637 34,239
---------- ---------- ---------- ----------
Net earnings $ 24,529 $ 11,331 $ 47,329 $ 59,568
========== ========== ========== ==========
Average common shares
outstanding - diluted 87,191 86,531 86,736 86,621
---------- ---------- ---------- ----------
Earnings per
share - diluted $ 0.28 $ 0.13 $ 0.55 $ 0.69
========== ========== ========== ==========
Common shares
outstanding at
end of period 86,518 85,896 86,518 85,896
Cash dividends
declared per
common share $ 0.16 $ 0.16 $ 0.48 $ 0.48
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
Feb. 29, May 31,
2004 2003
----------- -----------
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $ 7,166 $ 1,139
Accounts receivable, net 237,104 169,967
Inventories 299,480 268,983
Income taxes receivable - 11,304
Deferred income taxes 21,345 20,783
Other current assets 30,972 34,070
---------- ----------
Total current assets 596,067 506,246
Investments in unconsolidated affiliates 93,519 81,221
Goodwill 118,275 116,781
Other assets 33,473 30,777
Property, plant and equipment, net 715,973 743,044
---------- ----------
Total assets $1,557,307 $1,478,069
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 268,925 $ 222,987
Notes payable 4,146 1,145
Current maturities of long-term debt 1,380 1,194
Other current liabilities 103,118 92,845
---------- ----------
Total current liabilities 377,569 318,171
Other liabilities 95,237 90,471
Long-term debt 288,448 289,689
Deferred income taxes 142,593 143,444
Shareholders' equity 653,460 636,294
---------- ----------
Total liabilities and
shareholders' equity $1,557,307 $1,478,069
========== ==========
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Nine Months Ended
-----------------------
Feb. 29, Feb. 28,
2004 2003
----------- -----------
(Unaudited) (Unaudited)
Operating activities
Net earnings $ 47,329 $ 59,568
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 50,381 53,203
Restructuring credit - (5,622)
Nonrecurring loss - 5,400
Other adjustments (8,144) 14,353
Changes in current assets and
liabilities (27,313) (11,897)
---------- ----------
Net cash provided by
operating activities 62,253 115,005
Investing activities
Investment in property, plant and
equipment, net (23,564) (18,973)
Acquisitions, net of cash acquired - (113,740)
Investment in unconsolidated affiliate (490) -
Proceeds from sale of assets 4,976 17,171
---------- ----------
Net cash used by investing activities (19,078) (115,542)
Financing activities
Proceeds from short-term borrowings 3,001 40,179
Proceeds from long-term debt - 674
Principal payments on long-term debt (1,266) (588)
Dividends paid (41,322) (41,124)
Other 2,439 1,453
---------- ----------
Net cash provided (used) by
financing activities (37,148) 594
---------- ----------
Increase in cash and cash equivalents 6,027 57
Cash and cash equivalents at beginning of
period 1,139 496
---------- ----------
Cash and cash equivalents at end of period $ 7,166 $ 553
========== ==========
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 Nine Months Ended
----------------------- -----------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Volume:
Processed Steel
Products (tons) 960 941 2,776 2,921
Metal Framing (tons) 184 172 574 506
Pressure Cylinders
(units) 3,573 3,464 9,414 10,341
Net sales:
Processed Steel
Products $ 325,767 $ 321,880 $ 934,344 $ 993,481
Metal Framing 146,999 134,992 430,480 399,908
Pressure Cylinders 81,444 75,739 220,413 225,324
Other 3,857 3,973 10,943 11,232
---------- ---------- ---------- ----------
Total net sales $ 558,067 $ 536,584 $1,596,180 $1,629,945
========== ========== ========== ==========
Material cost:
Processed Steel
Products $ 210,059 $ 218,792 $ 611,886 $ 644,315
Metal Framing 80,343 77,873 259,522 225,441
Pressure Cylinders 34,314 32,821 93,428 98,599
Operating income:
Processed Steel
Products $ 17,862 $ 8,994 $ 39,794 $ 63,311
Metal Framing 12,956 4,012 10,173 22,284
Pressure Cylinders 7,964 7,189 18,357 21,016
Other (1,295) (965) (1,475) (5,520)
---------- ---------- ---------- ----------
Total
operating income $ 37,487 $ 19,230 $ 66,849 $ 101,091
========== ========== ========== ==========
The following provides detail of the restructuring credit included in
the operating income by segment presented above.
Three Months Ended Nine Months Ended
----------------------- -----------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Pre-tax
restructuring
(credit) expense
by segment
Processed Steel
Products $ - $ - $ - $ (8,717)
Metal Framing - - - 1,574
Pressure Cylinders - - - 1,420
Other - - - 101
---------- ---------- ---------- ----------
Total
restructuring
credit $ - $ - $ - $ (5,622)
========== ========== ========== ==========