Worthington Reports Fourth Quarter and Fiscal Year Results

COLUMBUS, OH--(Marketwired - Jun 29, 2016) - Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $714.7 million and net earnings of $58.5 million, or $0.92 per diluted share, for its fiscal 2016 fourth quarter ended May 31, 2016. Net earnings in the quarter include pre-tax restructuring charges totaling $1.9 million and a $6.9 million pre-tax gain related to the consolidation of the results of the Company's Worthington Specialty Processing (WSP) joint venture with U.S. Steel, as described under "Fiscal 2016 Highlights" below. The net after-tax impact of these items increased earnings per diluted share by $0.05.

In the fourth quarter of fiscal 2015, the Company reported net sales of $846.0 million and net earnings of $28.9 million, or $0.44 per diluted share. Net earnings in the fourth quarter of fiscal 2015 included pre-tax impairment and restructuring charges totaling $6.5 million, which reduced earnings per diluted share by $0.08.

For the fiscal year ended May 31, 2016, the Company reported net sales of $2.8 billion and net earnings of $143.7 million, or $2.22 per diluted share, up from net earnings of $76.8 million, or $1.12 per diluted share, in the prior year. Net sales were down 17% year over year, or $564.5 million, driven primarily by lower average selling prices in Steel Processing and lower volume in Pressure Cylinders and Engineered Cabs. Fiscal year 2016 net earnings were adversely affected by pre-tax impairment and restructuring charges in the net amount of $33.1 million, which when combined with the $6.9 million pre-tax gain related to the consolidation of the WSP joint venture, reduced earnings per diluted share by $0.26. Impairment and restructuring charges in the prior year resulted in a net pre-tax charge of $107.1 million, which reduced earnings per diluted share by $1.00.

Financial highlights for the current and comparative periods are as follows:

(U.S. dollars in millions, except per share data)
		4Q 2016			3Q 2016			4Q 2015			12M 2016			12M 2015
Net sales		$	714.7		$	647.1		$	846.0		$	2,819.7		$	3,384.2
Operating income			54.0			25.1			27.2			122.1			60.6
Equity income			34.1			25.0			18.4			115.0			87.5
Net earnings			58.5			29.8			28.9			143.7			76.8
Earnings per diluted share		$	0.92		$	0.47		$	0.44		$	2.22		$	1.12

"We ended fiscal year 2016 with a very good fourth quarter which drove annual earnings per share to a record $2.22," said John McConnell, Chairman and CEO. "We had excellent results in the fourth quarter in Steel Processing, our joint ventures, especially WAVE, and the industrial and consumer products businesses in Pressure Cylinders. I want to thank each of our employees for their dedication and hard work in challenging times and for taking advantage of opportunities to improve and help the Company grow."

Consolidated Quarterly Results

Net sales for the fourth quarter of fiscal 2016 were $714.7 million, down 16% from the comparable quarter in the prior year, when net sales were $846.0 million. The decrease was the result of lower average selling prices in Steel Processing, as a result of lower steel prices, and lower volume in certain Pressure Cylinders businesses, and Engineered Cabs.

Gross margin increased $24.2 million from the prior year quarter to $134.5 million due to a favorable pricing spread and the favorable impact of inventory holding gains in Steel Processing in the current quarter compared to inventory holding losses in the prior year quarter, partially offset by lower volume in Pressure Cylinders and Engineered Cabs.

Operating income for the current quarter was $54.0 million, an increase of $26.8 million from the prior year quarter. The increase was due to higher gross margin, and the favorable impact of lower impairment and restructuring charges.

Interest expense was $8.1 million for the current quarter, compared to $8.2 million in the prior year quarter. The decrease was due to lower short-term borrowings.

The Company's portion of equity income from unconsolidated joint ventures increased $15.7 million from the prior year quarter to $34.1 million on higher contributions from all the joint ventures. Joint venture sales totaled $393.3 million for the current quarter. The Company received cash distributions of $21.2 million from unconsolidated joint ventures during the quarter.

Income tax expense was $24.8 million in the current quarter compared to $6.2 million in the prior year quarter. The increase was primarily due to higher earnings. Tax expense in the current quarter reflects an effective rate of 29.8% compared to 17.8% for the prior year quarter.

Balance Sheet

At quarter-end, total debt was $583.5 million, down $27.6 million from February 29, 2016, due to lower short-term borrowings. The Company had $84.2 million of cash at quarter-end.

Quarterly Segment Results

Steel Processing's net sales of $466.0 million were down 14%, or $73.9 million, from the comparable prior year quarter driven primarily by lower average selling prices. Operating income of $40.4 million was $17.9 million higher than the prior year quarter due to a favorable pricing spread and the favorable impact of inventory holding gains in the current quarter compared to inventory holding losses in the prior year quarter. The mix of direct versus toll tons processed was 52% to 48% in the current quarter, compared to 62% to 38% in the prior year quarter. The change in mix was primarily the result of the consolidation of the WSP joint venture effective March 1, 2016.

Pressure Cylinders' net sales of $218.6 million were down 13%, or $33.0 million, from the comparable prior year quarter. The decline was driven primarily by a 61% volume decrease in the oil & gas equipment business. Operating income of $12.9 million was $2.6 million higher than the prior year quarter on lower impairment and restructuring charges and improvements in the industrial and consumer products businesses. Declines in the oil & gas equipment business partially offset the overall improvement in Pressure Cylinders' operating income.

Engineered Cabs' net sales of $29.1 million were down $17.4 million, or 37%, below the prior year quarter due to declines in market demand and the September 2015 closure of the Florence, S.C. facility. The operating loss was $2.0 million less than the prior year quarter.

The "Other" category includes the Energy Innovations businesses, as well as non-allocated corporate expenses. Net sales in the "Other" category were $1.0 million, a decrease of $7.0 million from the prior year quarter as the Construction Services business has ceased operations. The Construction Services business reported a $0.3 million loss for the quarter as operations were wound down.

Fiscal 2016 Highlights

• On March 1, 2016, the Company obtained operating control of the WSP joint venture with U.S. Steel. As a result, the Company began consolidating the results of WSP within the financial results of Steel Processing as of March 1, 2016. The ownership percentages remained unchanged with Worthington at 51% and U.S. Steel at 49%.
  
  

• 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 $30.6 million. The asset purchase was made pursuant to the Chapter 11 bankruptcy proceedings of Taylor Wharton and became part of Pressure Cylinders upon closing.
  
  

• During Fiscal 2016, the Company repurchased a total of 3,500,000 common shares for $99.8 million at an average price of $28.53.

Outlook

"While we expect some headwinds to continue, our legacy businesses are performing well and we anticipate a good start to our new fiscal year," McConnell said. "The Company's two underperforming businesses, engineered cabs and oil and gas, are in better positions with smaller footprints and the cryogenics business is repositioning with its moves to new facilities later this year and new markets. And, all of our efforts in Transformation 2.0 and innovation will help us continue to improve and achieve our goals for growth in each of our businesses."

Conference Call

Worthington will review fiscal 2016 fourth quarter and full-year results during its quarterly conference call on June 29, 2016, at 2:30 p.m., Eastern Daylight 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 2016 fiscal year sales of $2.8 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 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 82 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; pricing and pricing trends for raw materials and finished goods and the impact of pricing and pricing changes; demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; expected benefits for Transformation efforts; 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; projected profitability potential, capacity, and working capital needs; the ability to make acquisitions; 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 reduce costs and improve operations 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; 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, heavy equipment 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, and innovation efforts, 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 May 31,								Twelve Months Ended May 31,
			2016				2015				2016				2015
Net sales			$	714,671			$	846,023			$	2,819,714			$	3,384,234
Cost of goods sold				580,196				735,711				2,367,121				2,920,701
	Gross margin			134,475				110,312				452,593				463,533
Selling, general and administrative expense				78,580				76,593				297,402				295,920
Impairment of goodwill and long-lived assets				-				2,344				25,962				100,129
Restructuring and other expense				1,883				4,162				7,177				6,927
	Operating income			54,012				27,213				122,052				60,557
Other income (expense):
	Miscellaneous income (expense), net			7,544				(961	)			11,267				795
	Interest expense			(8,131	)			(8,227	)			(31,670	)			(35,800	)
	Equity in net income of unconsolidated affiliates			34,144				18,433				114,966				87,476
	Earnings before income taxes			87,569				36,458				216,615				113,028
Income tax expense				24,831				6,232				58,987				25,772
Net earnings				62,738				30,226				157,628				87,256
Net earnings attributable to noncontrolling interests				4,215				1,361				13,913				10,471
Net earnings attributable to controlling interest			$	58,523			$	28,865			$	143,715			$	76,785
Basic
Average common shares outstanding				61,453				64,217				62,469				66,309
Earnings per share attributable to controlling interest			$	0.95			$	0.45			$	2.30			$	1.16
Diluted
Average common shares outstanding				63,933				65,767				64,755				68,483
Earnings per share attributable to controlling interest			$	0.92			$	0.44			$	2.22			$	1.12
Common shares outstanding at end of period				61,534				64,141				61,534				64,141
Cash dividends declared per share			$	0.19			$	0.18			$	0.76			$	0.72

WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
					May 31,			May 31,
					2016			2015
Assets
Current assets:
	Cash and cash equivalents				$	84,188		$	31,067
	Receivables, less allowances of $4,579 and $3,085 at May 31, 2016 and May 31, 2015, respectively					439,688			474,292
	Inventories:
		Raw materials				162,427			181,975
		Work in process				86,892			107,069
		Finished products				70,016			85,931
			Total inventories			319,335			374,975
	Income taxes receivable					10,535			12,119
	Assets held for sale					10,079			23,412
	Deferred income taxes					-			22,034
	Prepaid expenses and other current assets					51,635			54,294
		Total current assets				915,460			992,193
Investments in unconsolidated affiliates						191,826			196,776
Goodwill						246,067			238,999
Other intangible assets, net of accumulated amortization of $49,532 and $47,547 at May 31, 2016 and May 31, 2015, respectively						96,164			119,117
Other assets						31,400			24,867
Property, plant and equipment:
	Land					18,537			16,017
	Buildings and improvements					256,973			218,182
	Machinery and equipment					945,951			872,986
	Construction in progress					48,156			40,753
		Total property, plant and equipment				1,269,617			1,147,938
		Less: accumulated depreciation				686,779			634,748
Total property, plant and equipment, net						582,838			513,190
Total assets					$	2,063,755		$	2,085,142
Liabilities and equity
Current liabilities:
	Accounts payable				$	290,432		$	294,129
	Short-term borrowings					2,651			90,550
	Accrued compensation, contributions to employee benefit plans and related taxes					75,105			66,252
	Dividends payable					13,471			12,862
	Other accrued items					45,056			56,913
	Income taxes payable					2,501			2,845
	Current maturities of long-term debt					862			841
		Total current liabilities				430,078			524,392
Other liabilities						63,487			58,269
Distributions in excess of investment in unconsolidated affiliate						52,983			61,585
Long-term debt						579,982			579,352
Deferred income taxes						17,379			21,495
		Total liabilities				1,143,909			1,245,093
Shareholders' equity - controlling interest						793,371			749,112
Noncontrolling interest						126,475			90,937
		Total equity				919,846			840,049
Total liabilities and equity					$	2,063,755		$	2,085,142

WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
			Three Months Ended May 31,								Twelve Months Ended May 31,
			2016				2015				2016				2015
Operating activities:
Net earnings			$	62,738			$	30,226			$	157,628			$	87,256
Adjustments to reconcile net earnings to net cash provided by operating activities:
	Depreciation and amortization			21,951				21,760				84,699				85,089
	Impairment of goodwill and long-lived assets			-				2,344				25,962				100,129
	Provision (benefit) for deferred income taxes			13,423				1,401				7,354				(39,960	)
	Bad debt expense			151				365				346				259
	Equity in net income of unconsolidated affiliates, net of distributions			(12,949	)			(3,925	)			(29,473	)			(12,299	)
	Net (gain) loss on sale of assets			(5,363	)			(204	)			(12,996	)			3,277
	Stock-based compensation			4,552				5,005				15,836				17,916
	Excess tax benefits - stock-based compensation			-				(762	)			-				(7,178	)
	Gain on previously held equity interest in WSP			(6,877	)			-				(6,877	)			-
Changes in assets and liabilities, net of impact of acquisitions:
	Receivables			(10,674	)			21,097				66,117				32,011
	Inventories			5,319				98,033				66,351				54,108
	Prepaid expenses and other current assets			9,003				(4,113	)			18,327				(15,295	)
	Other assets			(511	)			(4,014	)			(4,530	)			1,617
	Accounts payable and accrued expenses			37,645				(93,245	)			20,180				(83,190	)
	Other liabilities			(892	)			743				4,460				(9,365	)
Net cash provided by operating activities				117,516				74,711				413,384				214,375
Investing activities:
	Investment in property, plant and equipment			(21,571	)			(22,990	)			(97,036	)			(96,255	)
	Investment in notes receivable			-				-				-				(7,300	)
	Acquisitions, net of cash acquired			-				191				(34,206	)			(105,291	)
	Investments in unconsolidated affiliates			-				-				(5,595	)			(8,230	)
	Proceeds from sale of assets and insurance			(89	)			10,194				9,797				14,007
Net cash used by investing activities				(21,660	)			(12,605	)			(127,040	)			(203,069	)
Financing activities:
	Net proceeds from (repayments of) short-term borrowings			(28,115	)			(33,597	)			(85,843	)			79,047
	Proceeds from long-term debt			-				4,176				921				30,572
	Principal payments on long-term debt			(218	)			(207	)			(862	)			(102,852	)
	Proceeds from issuance of common shares			2,896				1,283				8,707				2,910
	Excess tax benefits - stock-based compensation			-				762				-				7,178
	Payments to noncontrolling interest			-				(1,312	)			(9,106	)			(13,379	)
	Repurchase of common shares			-				(32,945	)			(99,847	)			(127,360	)
	Dividends paid			(11,663	)			(11,667	)			(47,193	)			(46,434	)
Net cash used by financing activities				(37,100	)			(73,507	)			(233,223	)			(170,318	)
Increase (decrease) in cash and cash equivalents				58,756				(11,401	)			53,121				(159,012	)
Cash and cash equivalents at beginning of period				25,432				42,468				31,067				190,079
Cash and cash equivalents at end of period			$	84,188			$	31,067			$	84,188			$	31,067

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 May 31,								Twelve Months Ended May 31,
				2016				2015				2016				2015
Volume:
	Steel Processing (tons)				1,028,278				875,121				3,523,429				3,509,703
	Pressure Cylinders (units)				19,458,765				22,082,614				72,230,021				81,112,610
Net sales:
	Steel Processing			$	466,023			$	539,954			$	1,843,661			$	2,145,744
	Pressure Cylinders				218,610				251,613				844,898				1,001,402
	Engineered Cabs				29,077				46,469				121,946				192,953
	Other				961				7,987				9,209				44,135
		Total net sales		$	714,671			$	846,023			$	2,819,714			$	3,384,234
Material cost:
	Steel Processing			$	289,897			$	396,142			$	1,245,051			$	1,567,325
	Pressure Cylinders				90,372				122,832				359,802				474,319
	Engineered Cabs				13,579				22,774				57,326				89,309
Selling, general and administrative expense:
	Steel Processing			$	36,969			$	33,872			$	132,827			$	123,372
	Pressure Cylinders				37,675				37,026				143,853				141,092
	Engineered Cabs				4,249				5,903				18,506				26,128
	Other				(313	)			(208	)			2,216				5,328
		Total selling, general and administrative expense		$	78,580			$	76,593			$	297,402			$	295,920
Operating income (loss):
	Steel Processing			$	40,427			$	22,555			$	112,001			$	108,707
	Pressure Cylinders				12,896				10,316				28,375				58,113
	Engineered Cabs				(1,697	)			(3,726	)			(19,331	)			(97,260	)
	Other				2,386				(1,932	)			1,007				(9,003	)
		Total operating income		$	54,012			$	27,213			$	122,052			$	60,557
Equity income (loss) by unconsolidated affiliate:
	WAVE			$	22,887			$	16,307			$	82,725			$	70,649
	ClarkDietrich				4,346				542				14,635				2,950
	Serviacero				3,399				(25	)			6,253				3,272
	ArtiFlex				3,183				1,158				10,336				7,199
	WSP				-				423				1,665				2,913
	Other				329				28				(648	)			493
		Total equity income		$	34,144			$	18,433			$	114,966			$	87,476

WORTHINGTON INDUSTRIES, INC.
SUPPLEMENTAL DATA
(In thousands, except volume)
The following provides detail of Pressure Cylinders volume and net sales by principal class of products.
				Three Months Ended May 31,							Twelve Months Ended May 31,
				2016			2015				2016				2015
Volume (units):
	Consumer Products				12,318,962			13,550,943				45,298,605				48,964,578
	Industrial Products*				7,004,562			7,521,044				26,493,737				26,426,519
		Mississippi*			-			893,532				-				5,278,597
	Alternative Fuels				127,430			115,105				422,630				431,954
	Oil and Gas Equipment				664			1,717				3,668				10,246
	Cryogenics				7,147			273				11,381				716
		Total Pressure Cylinders			19,458,765			22,082,614				72,230,021				81,112,610
Net sales:
	Consumer Products			$	61,882		$	56,948			$	217,427			$	217,738
	Industrial Products*				103,449			113,369				406,571				413,154
		Mississippi*			-			5,154				-				26,827
	Alternative Fuels				27,676			26,205				98,746				94,468
	Oil and Gas Equipment				15,170			46,073				90,271				230,525
	Cryogenics				10,433			3,864				31,883				18,690
		Total Pressure Cylinders		$	218,610		$	251,613			$	844,898			$	1,001,402
* Mississippi, an industrial gas facility, was sold in May 2015. It has been broken out so as not to distort the Industrial Products comparisons as the products previously produced at the Mississippi facility have been discontinued.
The following provides detail of impairment of long-lived assets and restructuring and other expense included in operating income by segment.
				Three Months Ended May 31,							Twelve Months Ended May 31,
				2016			2015				2016				2015
Impairment of goodwill and long-lived assets:
	Steel Processing			$	-		$	-			$	-			$	3,050
	Pressure Cylinders				-			2,344				22,962				11,911
	Engineered Cabs				-			-				3,000				83,989
	Other				-			-				-				1,179
		Total impairment of goodwill and long-lived assets		$	-		$	2,344			$	25,962			$	100,129
Restructuring and other expense (income):
	Steel Processing			$	322		$	130			$	4,110			$	72
	Pressure Cylinders				708			3,482				392				6,408
	Engineered Cabs				511			(19	)			3,570				(332	)
	Other				342			569				(895	)			779
		Total restructuring and other expense		$	1,883		$	4,162			$	7,177			$	6,927