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Worthington Reports Second Quarter Fiscal 2020 Results

COLUMBUS, Ohio, Dec. 17, 2019 (GLOBE NEWSWIRE) -- Worthington Industries, Inc. (WOR) today reported net sales of $827.6 million and net earnings of $52.1 million, or $0.93 per diluted share, for its fiscal 2020 second quarter ended November 30, 2019. Net earnings for the current quarter benefited from a pre-tax gain of $23.1 million, or $0.33 per share, recorded in equity income related to the sale of the international operations of the WAVE joint venture. Estimated current quarter inventory holding losses in Steel Processing were $6.5 million, or $0.09 per share. In the second quarter of fiscal 2019, the Company reported net sales of $958.2 million and net earnings of $34.0 million, or $0.57 per diluted share. Estimated inventory holding gains of $0.8 million in the prior year quarter were largely offset by pre-tax restructuring charges of $0.4 million.

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

(U.S. dollars in millions, except per share amounts)

2Q 2020

1Q 2020

2Q 2019

6M 2020

6M 2019

Net sales

$

827.6

$

855.9

$

958.2

$

1,683.5

$

1,946.3

Operating income (loss)

32.1

(14.6

)

35.9

17.5

86.8

Equity income

47.3

24.8

21.1

72.1

51.1

Net earnings (loss)

52.1

(4.8

)

34.0

47.3

88.9

Earnings (loss) per diluted share

$

0.93

$

(0.09

)

$

0.57

$

0.84

$

1.48

“We delivered solid results for the quarter despite some market softness and challenging conditions in steel pricing,” said John McConnell, Chairman and CEO. “Pressure Cylinders volumes were up, led by strong demand in the consumer products and oil and gas businesses. Overall, we returned to year-over-year earnings growth for the quarter and I’m pleased with the way our teams continue to perform in markets that are being impacted by trade wars and economic uncertainty.”

Consolidated Quarterly Results

Net sales for the second quarter of fiscal 2020 were $827.6 million, down 14% from the comparable quarter in the prior year, when net sales were $958.2 million. The decrease was primarily driven by lower average direct selling prices due to a decline in the market price of steel and lower direct volume in Steel Processing.

Gross margin decreased $0.3 million from the prior year quarter to $120.6 million as higher contributions from Pressure Cylinders were largely offset by declines at Steel Processing.

Operating income for the current quarter was down $3.7 million from the prior year quarter to $32.1 million. The combined impact of lower gross margin and higher SG&A expense drove the decline.

Interest expense was $7.3 million for the current quarter, compared to $9.5 million in the prior year quarter. The decrease was due primarily to lower average debt levels and lower average interest rates resulting from the debt refinancing transactions completed earlier in the year.

Equity income from unconsolidated joint ventures increased $26.3 million over the prior year quarter to $47.3 million. The current quarter included a pre-tax gain of $23.1 million at WAVE related to the sale of the international operations. The remaining increase was primarily due to a $5.4 million increase in equity income from ClarkDietrich, driven by improved margins and increased volumes, but was partially offset by lower results at Serviacero. The current quarter was also negatively impacted by $1.5 million of losses related to our retained interest in the newly-formed Cabs company, which consisted primarily of transaction-related expenses incurred at the new company. The Company received cash distributions of $27.5 million from unconsolidated joint ventures during the quarter.

Income tax expense was $15.9 million in the current quarter compared to $11.1 million in the prior year quarter. The increase was due primarily to higher earnings associated with the $23.1 million gain recognized at WAVE. Tax expense in the current quarter reflects an estimated annual effective income tax rate of 24.8% versus 23.4% in the prior year quarter.

Balance Sheet

Total debt was down slightly from August 31, 2019 to $698.8 million and the Company had $72.3 million of cash on hand at quarter-end.

Quarterly Segment Results

Steel Processing’s net sales totaled $516.9 million, down 19%, or $118.1 million, from the comparable prior year quarter driven by lower average selling prices and lower direct volume, partially offset by higher toll volume. Operating income of $17.2 million was $7.8 million less than the prior year quarter due to the unfavorable impact of inventory holding losses and lower direct volume, partially offset by improved direct spreads and higher toll volume. The mix of direct versus toll tons processed was 49% to 51% in the current quarter, compared to 56% to 44% in the prior year quarter.

Pressure Cylinders’ net sales totaled $290.1 million, down 1%, or $4.3 million, from the comparable prior year quarter due to the impact of divestitures and lower volumes in the industrial products business, partially offset by higher volumes in both the consumer products and oil and gas equipment businesses. Operating income of $15.6 million was $0.9 million higher than the prior year quarter as the impact of higher volumes in consumer products and overall improvements in oil and gas equipment more than offset the unfavorable impact of lower volumes in the industrial products business.

Recent Developments

  • On Sept. 30, 2019, WAVE completed the sale of its international operations to Knauf International GmbH resulting in a pre-tax gain of $23.1 million in equity income.

  • On Oct. 7, 2019, the Company purchased the operating assets of Heidtman’s pickling and slitting facility in Cleveland, Ohio for $29.6 million.

  • On Nov. 1, 2019, the Company contributed substantially all of the net assets of the former Engineered Cabs segment to a newly-formed company that simultaneously acquired another cabs manufacturer. In exchange for the contributed net assets, the Company received a 20% minority ownership interest in the new company.

Outlook

“The Company is operating well, and we are optimistic about our momentum going forward,” McConnell said. “We believe most of our markets should remain steady but do anticipate continued weakness in Europe and will remain focused on driving future improvement through solid execution of our strategies.”

Conference Call

Worthington will review fiscal 2020 second quarter results during its quarterly conference call on December 17, 2019, at 2:00 p.m., Eastern Time. Details regarding the conference call can be found on the Company website at www.WorthingtonIndustries.com.

About Worthington Industries

Worthington Industries (WOR) is a leading industrial manufacturing company delivering innovative solutions to customers that span many industries including transportation, construction, industrial, agriculture, retail and energy. Worthington is North America’s premier value-added steel processor and producer of laser welded products; and a leading global supplier of pressure cylinders and accessories for applications such as fuel storage, water systems, outdoor living, tools and celebrations. The Company’s brands, primarily sold in retail stores, include Coleman®, Bernzomatic®, Balloon Time®, Mag Torch® and Well-X-Trol®. Worthington’s WAVE joint venture with Armstrong is the North American leader in innovative ceiling solutions.

Headquartered in Columbus, Ohio, Worthington operates 54 facilities in 15 states and six countries, sells into over 90 countries and employs approximately 9,000 people. Founded in 1955, the Company follows a people-first philosophy with earning money for its shareholders as its first corporate goal. Relentlessly finding new ways to drive progress and practicing a shared commitment to transformation, Worthington makes better solutions possible for customers, employees, shareholders and communities.

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; future or expected growth, growth potential, forward momentum, performance, competitive position, sales, volumes, cash flows, earnings, margins, balance sheet strengths, debt, financial condition or other financial measures; pricing trends for raw materials and finished goods and the impact of pricing changes; the ability to improve or maintain margins; expected demand or demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; expected benefits from Transformation and innovation efforts; the ability to improve performance and competitive position at the Company’s operations; anticipated working capital needs, 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; the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; projected capacity and the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to 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 generating 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 global economic conditions generally and within major product markets, including a recurrent slowing economy; the effect of conditions in national and worldwide financial markets; the impact of tariffs, the adoption of trade restrictions affecting the Company’s products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships; 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; the outcome of adverse claims experience with respect to workers’ compensation, product recalls or product liability, casualty events or other matters; 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 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 industries in which the Company participates 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, interruption in utility services, civil unrest, international conflicts, 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 exchange rate exposure and the acceptance of the Company’s products in global markets; the ability to improve and maintain 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, 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 healthcare laws in the United States and potential changes for such laws which may increase the Company’s healthcare and other costs and negatively impact the Company’s operations and financial results; cyber security risks; the effects of privacy and information security laws and standards; 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 the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2019.


WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)

Three Months Ended
November 30,

Six Months Ended
November 30,

2019

2018

2019

2018

Net sales

$

827,637

$

958,226

$

1,683,496

$

1,946,333

Cost of goods sold

707,026

837,292

1,445,594

1,682,402

Gross margin

120,611

120,934

237,902

263,931

Selling, general and administrative expense

88,543

84,668

179,366

175,309

Impairment of long-lived assets

-

-

40,601

2,381

Restructuring and other expense (income), net

(50

)

402

405

(534

)

Operating income

32,118

35,864

17,530

86,775

Other income (expense):

Miscellaneous income, net

636

1,432

1,331

1,697

Interest expense

(7,315

)

(9,472

)

(16,795

)

(19,200

)

Loss on extinguishment of debt

-

-

(4,034

)

-

Equity in net income of unconsolidated affiliates

47,346

21,087

72,113

51,095

Earnings before income taxes

72,785

48,911

70,145

120,367

Income tax expense

15,863

11,119

15,678

25,617

Net earnings

56,922

37,792

54,467

94,750

Net earnings attributable to noncontrolling interests

4,836

3,790

7,157

5,806

Net earnings attributable to controlling interest

$

52,086

$

34,002

$

47,310

$

88,944

Basic

Average common shares outstanding

55,059

57,716

55,150

58,226

Earnings per share attributable to controlling interest

$

0.95

$

0.59

$

0.86

$

1.53

Diluted

Average common shares outstanding

56,072

59,338

56,205

60,013

Earnings per share attributable to controlling interest

$

0.93

$

0.57

$

0.84

$

1.48

Common shares outstanding at end of period

55,094

56,957

55,094

56,957

Cash dividends declared per share

$

0.24

$

0.23

$

0.48

$

0.46


WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

November 30,

May 31,

2019

2019

Assets

Current assets:

Cash and cash equivalents

$

72,260

$

92,363

Receivables, less allowances of $1,407 and $1,150 at November 30, 2019 and May 31, 2019, respectively

477,228

501,944

Inventories:

Raw materials

190,310

268,607

Work in process

82,400

113,848

Finished products

107,077

101,825

Total inventories

379,787

484,280

Income taxes receivable

12,557

10,894

Assets held for sale

1,731

6,924

Prepaid expenses and other current assets

67,083

69,508

Total current assets

1,010,646

1,165,913

Investments in unconsolidated affiliates

225,791

214,930

Operating lease assets

37,864

-

Goodwill

341,850

334,607

Other intangible assets, net of accumulated amortization of $92,889 and $87,759 at November 30, 2019 and May 31, 2019, respectively

190,703

196,059

Other assets

33,612

20,623

Property, plant and equipment:

Land

23,028

23,996

Buildings and improvements

301,713

310,112

Machinery and equipment

1,043,314

1,049,068

Construction in progress

58,039

49,423

Total property, plant and equipment

1,426,094

1,432,599

Less: accumulated depreciation

857,599

853,935

Total property, plant and equipment, net

568,495

578,664

Total assets

$

2,408,961

$

2,510,796

Liabilities and equity

Current liabilities:

Accounts payable

$

330,959

$

393,517

Accrued compensation, contributions to employee benefit plans and related taxes

62,932

78,155

Dividends payable

14,364

14,431

Other accrued items

54,102

59,810

Current operating lease liabilities

11,201

-

Income taxes payable

33

1,164

Current maturities of long-term debt

272

150,943

Total current liabilities

473,863

698,020

Other liabilities

72,639

69,976

Distributions in excess of investment in unconsolidated affiliate

97,243

121,948

Long-term debt

698,531

598,356

Noncurrent operating lease liabilities

30,065

-

Deferred income taxes, net

77,877

74,102

Total liabilities

1,450,218

1,562,402

Shareholders' equity - controlling interest

835,891

831,246

Noncontrolling interests

122,852

117,148

Total equity

958,743

948,394

Total liabilities and equity

$

2,408,961

$

2,510,796


WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Three Months Ended
November 30,

Six Months Ended
November 30,

2019

2018

2019

2018

Operating activities:

Net earnings

$

56,922

$

37,792

$

54,467

$

94,750

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization

22,596

23,525

46,773

48,018

Impairment of long-lived assets

-

-

40,601

2,381

Provision for deferred income taxes

6,843

3,289

3,345

22,223

Bad debt expense

143

32

311

253

Equity in net income of unconsolidated affiliates, net of distributions

(19,879

)

14,182

(14,797

)

4,163

Net (gain) loss on sale of assets

(17

)

(312

)

601

2,403

Stock-based compensation

3,280

3,456

7,275

6,612

Loss on extinguishment of debt

-

-

4,034

-

Changes in assets and liabilities, net of impact of acquisitions:

Receivables

(5,456

)

40,838

9,525

54,247

Inventories

43,601

5,866

87,883

(37,471

)

Accounts payable

(20,743

)

(72,974

)

(57,977

)

(70,160

)

Accrued compensation and employee benefits

9,619

3,556

(13,596

)

(27,378

)

Other operating items, net

7,251

(14,546

)

84

(24,892

)

Net cash provided by operating activities

104,160

44,704

168,529

75,149

Investing activities:

Investment in property, plant and equipment

(28,381

)

(21,741

)

(50,555

)

(41,175

)

Acquisitions, net of cash acquired

(29,283

)

-

(29,283

)

-

Distributions from unconsolidated affiliate

-

55,201

-

55,201

Proceeds from sale of assets

23

170

9,199

20,447

Net cash provided (used) by investing activities

(57,641

)

33,630

(70,639

)

34,473

Financing activities:

Proceeds from long-term debt, net of issuance costs

(134

)

-

101,464

-

Principal payments on long-term obligations and debt redemption costs

(490

)

(371

)

(154,467

)

(801

)

Payments for issuance of common shares, net of tax withholdings

(3,811

)

(658

)

(7,024

)

(4,749

)

Payments to noncontrolling interests

(1,453

)

(4,007

)

(1,453

)

(6,327

)

Repurchase of common shares

-

(63,581

)

(29,599

)

(100,433

)

Dividends paid

(13,954

)

(13,533

)

(26,914

)

(26,252

)

Net cash used by financing activities

(19,842

)

(82,150

)

(117,993

)

(138,562

)

Increase (decrease) in cash and cash equivalents

26,677

(3,816

)

(20,103

)

(28,940

)

Cash and cash equivalents at beginning of period

45,583

96,843

92,363

121,967

Cash and cash equivalents at end of period

$

72,260

$

93,027

$

72,260

$

93,027


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
November 30,

Six Months Ended
November 30,

2019

2018

2019

2018

Volume:

Steel Processing (tons)

1,004,847

950,977

1,896,234

1,934,067

Pressure Cylinders (units)

21,608,356

20,143,311

41,792,044

41,942,409

Net sales:

Steel Processing

$

516,937

$

635,043

$

1,040,312

$

1,295,530

Pressure Cylinders

290,136

294,447

594,532

594,800

Other

20,564

28,736

48,652

56,003

Total net sales

$

827,637

$

958,226

$

1,683,496

$

1,946,333

Material cost:

Steel Processing

$

370,760

$

482,915

$

767,202

$

961,002

Pressure Cylinders

127,112

133,442

253,982

272,186

Selling, general and administrative expense:

Steel Processing

$

37,482

$

33,959

$

72,998

$

73,996

Pressure Cylinders

48,749

44,805

95,215

91,578

Other

2,312

5,904

11,153

9,735

Total selling, general and administrative expense

$

88,543

$

84,668

$

179,366

$

175,309

Operating income (loss):

Steel Processing

$

17,172

$

25,016

$

23,340

$

64,676

Pressure Cylinders

15,647

14,758

45,270

29,491

Other

(701

)

(3,910

)

(51,080

)

(7,392

)

Total operating income

$

32,118

$

35,864

$

17,530

$

86,775

Equity income (loss) by unconsolidated affiliate:

WAVE

$

41,738

$

18,419

$

65,655

$

40,427

ClarkDietrich

4,917

(460

)

9,007

3,014

Serviacero Worthington

803

2,639

1,557

6,256

ArtiFlex

1,134

412

1,340

1,163

Other

(1,246

)

77

(5,446

)

235

Total equity income

$

47,346

$

21,087

$

72,113

$

51,095


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
November 30,

Six Months Ended
November 30,

2019

2018

2019

2018

Volume (units):

Consumer products

18,675,057

16,980,934

35,573,447

34,709,912

Industrial products

2,932,923

3,162,063

6,217,378

7,231,559

Oil & gas equipment

376

314

1,219

938

Total Pressure Cylinders

21,608,356

20,143,311

41,792,044

41,942,409

Net sales:

Consumer products

$

128,065

$

117,194

$

247,545

$

234,017

Industrial products

130,334

152,018

282,952

304,865

Oil & gas equipment

31,737

25,235

64,035

55,918

Total Pressure Cylinders

$

290,136

$

294,447

$

594,532

$

594,800

The following provides detail of impairment of long-lived assets and restructuring and other expense (income), net included in operating income by segment.

Three Months Ended
November 30,

Six Months Ended
November 30,

2019

2018

2019

2018

Impairment of long-lived assets:

Steel Processing

$

-

$

-

$

-

$

-

Pressure Cylinders

-

-

-

2,381

Other

-

-

40,601

-

Total impairment of long-lived assets

$

-

$

-

$

40,601

$

2,381

Restructuring and other expense (income), net:

Steel Processing

$

-

$

-

$

(26

)

$

(9

)

Pressure Cylinders

-

402

-

(525

)

Other

(50

)

-

431

-

Total restructuring and other expense (income), net

$

(50

)

$

402

$

405

$

(534

)


Contacts:
SONYA L. HIGGINBOTHAM
VP, CORPORATE COMMUNICATIONS AND BRAND MANAGEMENT
614.438.7391 | sonya.higginbotham@worthingtonindustries.com

MARCUS A. ROGIER
TREASURER AND INVESTOR RELATIONS OFFICER
614.840.4663 | marcus.rogier@worthingtonindustries.com

200 Old Wilson Bridge Rd. | Columbus, Ohio 43085
WorthingtonIndustries.com