Worthington Reports Third Quarter Results
COLUMBUS, Ohio--March 22, 2006--Worthington Industries, Inc. today reported results for the three and nine-month periods ended February 28, 2006.Net sales for the third quarter of fiscal 2006 were $681.5 million, a decrease of 9% from last year's record $747.4 million. Third quarter net earnings were $19.2 million and earnings per diluted share were $0.21, compared to the record $33.1 million, or $0.37 per diluted share, of the same period last year. Results for the third quarter of fiscal 2006 included adjustments related to prior periods which negatively impacted net earnings and earnings per share by $3.2 million, or $0.04 per diluted share, respectively (see Adjustments below).
For the nine-month period, net sales of $2,075.2 million were 8% below $2,261.9 million last year. Net earnings were $86.6 million and earnings per diluted share were $0.97, compared to $138.6 million and $1.57, respectively, for the same period last year.
"Our third quarter started with a much slower than anticipated December for our steel processing and metal framing segments, and although there was improvement in January and a stronger February, the results for the quarter remained short of our goal," stated John P. McConnell, Chairman and CEO. He added, "We were pleased by the good results in our pressure cylinder segment and, looking ahead, we're off to a good fourth quarter."
Segment Results
In the Steel Processing segment, quarterly net sales of $351.9 million were 15%, or $62.7 million lower than $414.6 million in the comparable quarter of fiscal 2005. The decrease in net sales was the result of lower selling prices (down 14%) as volumes were flat. Operating income declined from the year ago period as spreads between selling prices and material costs fell from near record levels and manufacturing expenses (such as freight, zinc and natural gas) increased. A weak December depressed results for what is a seasonally slow quarter.
In the Metal Framing segment, net sales of $179.7 million were 7%, or $14.0 million lower than $193.7 million in the comparable quarter of fiscal 2005. Higher volumes (6%) partially offset the effect of lower pricing (down 13%) as market pricing decreased from the elevated levels of last year. A narrower spread between selling prices and material costs was primarily responsible for the decline in operating income from last year. Higher freight costs also negatively impacted both material costs and manufacturing expenses.
In the Pressure Cylinders segment, net sales decreased 2%, or $1.7 million, to $110.6 million from $112.3 million in the comparable quarter of fiscal 2005. The strengthened U.S. dollar vs. the euro negatively impacted reported U.S. dollar sales of the European operations by $2.8 million. While unit volumes were down 6% due to decreased sales of 14.1 oz. disposable cylinders, average selling prices increased 5%. Operating income was comparable to the year ago period and better than historical norms for this seasonally slow quarter.
Joint Venture Results
Worthington's six unconsolidated joint ventures contributed $8.2 million in equity income, down 45% or $6.6 million from $14.8 million in the year ago quarter. An unfavorable $6.1 million income tax adjustment at Acerex, a Mexican steel processing venture, offset record performance at the largest of the joint ventures, Worthington Armstrong Venture (WAVE), which manufactures ceiling grid for the commercial and residential construction markets.
Other
Adjustments
Operating results for the three months ended February 28, 2006, include the net impact of three adjustments related to the accrual of expenses in prior periods. The impact of these adjustments reduces current quarter net earnings by $3.2 million, or $0.04 per share.
Had these adjustments been recorded in prior periods, estimated earnings in fiscal 2006 would increase by $0.01 per share and earnings in fiscal 2005 would have decreased by $0.01 per share. A description of the issues and the impact of the adjustments in the current quarter are as follows:
-- Under-accrual of income taxes over the last five years at the Acerex joint venture in Mexico resulted in a $6.1 million decrease to equity income in the current quarter.
-- Under-accrual of consulting expenses during the previous five quarters resulted in a $4.0 million increase to selling, general and administrative expenses in the current quarter.
-- Over-accrual in the consolidated income tax provision over the last nine years relating to the foreign earnings of the WAVE joint venture resulted in a $3.2 million reduction to income tax expense in the current quarter.
The combined impact of these adjustments is not material to previously reported earnings for any prior fiscal year, estimated income for fiscal 2006 or to the trend of earnings.
Dividend declared
On February 23, 2006, the board of directors declared a quarterly cash dividend of $0.17 per share payable March 29, 2006, to shareholders of record March 15, 2006. This will be the 153rd consecutive quarter that Worthington has paid a dividend since it became a public company in 1968.
Conference Call
Worthington will review its third quarter results during its quarterly conference call today, March 22, 2006, at 1:30 p.m. Eastern Standard Time. Details on the conference call can be found on the company web site at www.WorthingtonIndustries.com
Corporate Profile
Worthington Industries is a leading diversified metal processing company with annual sales of approximately $3 billion. The Columbus, Ohio, based company is North America's premier 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 7,500 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. Worthington Industries is listed as one of America's Most Admired Companies and one of the 100 Best Companies to Work For in America by Fortune magazine.
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 or expected performance, sales, operating results and earnings per share; projected capacity and working capital needs; pricing trends for raw materials and finished goods; anticipated capital expenditures and asset sales; projected timing, results, costs, charges and expenditures related to facility dispositions, shutdowns and consolidations; new products and markets; expectations for the economy 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 operations; effects of facility closures and the consolidation of operations; the ability to realize cost savings and operational efficiencies on a timely basis; the ability to integrate newly acquired businesses and achieve synergies therefrom; capacity levels and efficiencies within facilities and within the industry as a whole; financial difficulties (including bankruptcy filings) of customers, suppliers, joint venture partners and others with whom the company does business; the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the effect of adverse weather on customers, markets, facilities and shipping operations; changes in customer inventories, spending patterns and supplier choices; 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 judicial rulings and governmental regulations, both in the United States and abroad; and other risks described from time to time in filings with the United States Securities and Exchange Commission.
WORTHINGTON INDUSTRIES, INC.
EARNINGS HIGHLIGHTS
(Unaudited)
(In Thousands, Except Per Share)
Three Months Ended Nine Months Ended
February 28, February 28,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net sales $681,548 $747,414 $2,075,211 $2,261,922
Cost of goods sold 602,646 638,262 1,817,549 1,868,608
----------- ----------- ----------- -----------
Gross margin 78,902 109,152 257,662 393,314
Selling, general &
administrative
expense 53,345 54,160 154,899 175,121
Impairment charges and
other - - - 5,608
----------- ----------- ----------- -----------
Operating income 25,557 54,992 102,763 212,585
Other income
(expense):
Miscellaneous income
(expense) (255) (812) (60) (7,144)
Interest expense (6,875) (6,749) (20,157) (18,123)
Equity in net income
of unconsolidated
affiliates 8,178 14,772 35,565 39,808
----------- ----------- ----------- -----------
Earnings before
income taxes 26,605 62,203 118,111 227,126
Income tax expense 7,448 29,081 31,519 88,522
----------- ----------- ----------- -----------
Net earnings $19,157 $33,122 $86,592 $138,604
=========== =========== =========== ===========
Average common shares
outstanding - diluted 89,152 88,698 88,870 88,492
----------- ----------- ----------- -----------
Earnings per share
- diluted $0.21 $0.37 $0.97 $1.57
=========== =========== =========== ===========
Common shares
outstanding at end of
period 88,523 87,865 88,523 87,865
Cash dividends
declared per common
share $0.17 $0.17 $0.51 $0.49
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands)
February 28, May 31,
2006 2005
------------ ------------
ASSETS
Current assets
Cash and cash equivalents $71,370 $57,249
Short-term investments 42,071 -
Receivables, net 363,900 404,506
Inventories 445,639 425,723
Deferred income taxes 19,289 19,490
Other current assets 54,846 31,365
------------ ------------
Total current assets 997,115 938,333
Investments in unconsolidated affiliates 142,995 136,856
Goodwill 176,298 168,267
Other assets 43,765 33,593
Property, plant and equipment, net 549,061 552,956
------------ ------------
Total assets $1,909,234 $1,830,005
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $321,047 $280,181
Current maturities of long-term debt 142,409 143,432
Other current liabilities 105,622 121,830
------------ ------------
Total current liabilities 569,078 545,443
Other liabilities 100,893 99,264
Long-term debt 245,000 245,000
Deferred income taxes 117,500 119,462
Shareholders' equity 876,763 820,836
------------ ------------
Total liabilities and shareholders' equity $1,909,234 $1,830,005
============ ============
WORTHINGTON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, In Thousands)
Three Months Ended Nine Months Ended
February 28, February 28,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Operating activities
Net earnings $19,157 $33,122 $86,592 $138,604
Adjustments to reconcile net
earnings to net cash
provided (used) by
operating activities:
Depreciation and
amortization 14,024 14,072 44,133 42,579
Impairment charges and
other - - - 5,608
Other adjustments 1,340 6,469 (7,811) (28,621)
Changes in assets and
liabilities:
Accounts receivable (13,427) (98,872) 46,487 (45,051)
Inventories (56,289) (14,526) (20,070) (113,653)
Accounts payable 6,779 13,626 39,857 900
Other changes (15,543) (17,813) (27,272) (33,644)
--------- --------- --------- ---------
Net cash provided (used)
by operating activities (43,959) (63,922) 161,916 (33,278)
Investing activities
Investment in property,
plant and equipment, net (18,088) (11,548) (43,101) (30,879)
Investment in aircraft (16,250) - (16,250) -
Acquisitions, net of cash
acquired (6) (81) (6,776) (64,970)
Investment in unconsolidated
affiliate - - - (1,500)
Proceeds from sale of assets 272 172 3,054 83,976
Purchases of short-term
investments (200,492) (72,875) (443,745) (72,875)
Sales of short-term
investments 253,675 63,475 401,674 63,475
--------- --------- --------- ---------
Net cash provided (used)
by investing activities 19,111 (20,857) (105,144) (22,773)
Financing activities
Proceeds from long-term debt - 99,480 - 99,480
Principal payments on
long-term debt (521) (542) (1,011) (2,560)
Dividends paid (15,012) (14,052) (44,932) (41,953)
Other 3,029 (5,113) 3,292 5,244
--------- --------- --------- ---------
Net cash provided (used)
by financing activities (12,504) 79,773 (42,651) 60,211
--------- --------- --------- ---------
Increase (decrease) in cash
and cash equivalents (37,352) (5,006) 14,121 4,160
Cash and cash equivalents at
beginning of period 108,722 11,143 57,249 1,977
--------- --------- --------- ---------
Cash and cash equivalents at
end of period $71,370 $6,137 $71,370 $6,137
========= ========= ========= =========
WORTHINGTON INDUSTRIES, INC.
SUPPLEMENTAL DATA
(Unaudited, In Thousands)
This supplemental information is provided to assist in the analysis of
the results of operations. As required by the changes in our
reporting segments during the second quarter of fiscal 2006, we have
restated the year-to-date information for fiscal 2006 and all the
information for fiscal 2005 to conform with the current reporting of
our segment information. For comparative purposes, we have also
presented the previously reported information for fiscal 2005 under
the heading "As Reported".
Three Months Ended
February 28,
--------------------------------------
2005
-------------------------
2006 Restated As Reported
------------ ------------ ------------
Volume:
Steel Processing (tons) 863 870 875
Metal Framing (tons) 163 153 153
Pressure Cylinders (units) (1) 10,679 11,404 11,404
Net sales:
Steel Processing $351,933 $414,557 $435,704
Metal Framing 179,659 193,673 194,610
Pressure Cylinders 110,629 112,347 112,347
Other 39,327 26,837 4,753
------------ ------------ ------------
Total Net Sales $681,548 $747,414 $747,414
============ ============ ============
Material cost:
Steel Processing $269,853 $308,649 $318,172
Metal Framing 113,762 122,579 123,082
Pressure Cylinders 51,853 53,847 53,847
Operating income:
Steel Processing (2) $10,621 $31,207 $30,912
Metal Framing 5,768 14,951 14,088
Pressure Cylinders 9,881 10,450 10,450
Other (713) (1,616) (458)
------------ ------------ ------------
Total Operating Income $25,557 $54,992 $54,992
============ ============ ============
Nine Months Ended
February 28,
--------------------------------------
2005
-------------------------
2006 Restated As Reported
------------ ------------ ------------
Volume:
Steel Processing (tons) 2,618 2,733 2,750
Metal Framing (tons) 518 477 477
Pressure Cylinders (units) (1) 36,229 23,582 23,582
Net sales:
Steel Processing $1,068,018 $1,280,847 $1,344,362
Metal Framing 577,178 621,746 624,773
Pressure Cylinders 324,145 280,055 280,055
Other 105,870 79,274 12,732
------------ ------------ ------------
Total Net Sales $2,075,211 $2,261,922 $2,261,922
============ ============ ============
Material cost:
Steel Processing $811,249 $928,219 $955,822
Metal Framing 370,558 350,489 351,567
Pressure Cylinders 157,172 131,385 131,385
Operating income:
Steel Processing (2) $43,647 $101,762 $101,316
Metal Framing 30,020 95,160 90,808
Pressure Cylinders 29,049 22,467 22,467
Other 47 (6,804) (2,006)
------------ ------------ ------------
Total Operating Income $102,763 $212,585 $212,585
============ ============ ============
----------------------------------------------------------------------
(1) The propane and specialty cylinder assets acquired from Western
Industries effective September 17, 2004, contributed 7,116 and 7,519
units for the three months ended February 28, 2006 and 2005,
respectively. On a year-to-date basis, as of February 28, 2006 and
2005, these assets contributed 26,102 and 13,536 units, respectively.
(2) The $5,608 "impairment charge and other" recorded in the first
quarter of fiscal 2005 relates to the sale of the Decatur facility
and is included in Steel Processing's segment operating income above.