Worthington Reports Fourth Quarter and Fiscal Year Results
COLUMBUS, OH -- (Marketwired) -- 06/24/15 -- Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $846.0 million and net earnings of $28.9 million, or $0.44 per diluted share, for its fiscal 2015 fourth quarter ended May 31, 2015. Net earnings in the quarter include pre-tax impairment, restructuring and other charges totaling $6.5 million. The after-tax impact of these charges reduced earnings per diluted share by $0.08.
In the fourth quarter of the prior year, the Company reported net sales of $891.0 million and net earnings of $33.2 million, or $0.47 per diluted share. Included in the prior year quarter were several impairment and other non-recurring items which resulted in a net pre-tax charge of $16.1 million. The after-tax impact of this net charge reduced earnings per diluted share by $0.13.
For the fiscal year ended May 31, 2015, the Company reported net sales of $3.4 billion and net earnings of $76.8 million, or $1.12 per diluted share. Net sales were up 8%, or $257.8 million, driven primarily by acquisitions in Steel Processing and Pressure Cylinders. Current year net earnings were adversely affected by pre-tax impairment, restructuring and other charges totaling $107.1 million, including a non-cash impairment charge of $83.9 million related to the Company's Engineered Cabs business. The after-tax impact of these charges reduced earnings per diluted share by $1.00. Impairment and other non-recurring items in the prior year resulted in net pre-tax charge of $36.0 million. The after-tax impact of this net charge reduced earnings per diluted share by $0.22.
Financial highlights for the current and comparative periods are as follows:
(U.S. dollars in millions, except per share data)
4Q 2015 3Q 2015 4Q 2014 12M2015 12M2014
-------- -------- -------- -------- --------
Net sales $ 846.0 $ 804.8 $ 891.0 $3,384.2 $3,126.4
Operating income (loss) 27.2 (52.1) 32.3 60.6 135.8
Equity income 18.4 18.8 22.2 87.5 91.5
Net earnings (loss) 28.9 (25.7) 33.2 76.8 151.3
Earnings (loss) per share $ 0.44 $ (0.39) $ 0.47 $ 1.12 $ 2.11
"We had a solid quarter and we generated solid earnings for fiscal 2015; however, we did not meet our goal of year-over-year growth," said John McConnell, Chairman and CEO. "There were a number of factors that contributed to the softer year-over-year results, including falling steel prices, the downturn in oil and gas markets, and operations issues at certain facilities which are being addressed." McConnell added, "We continue to pursue growth opportunities, organically as well as through acquisitions."
Consolidated Quarterly Results
Net sales for the fourth quarter ended May 31, 2015 were $846.0 million, down 5% from the comparable quarter in the prior year, when net sales were $891.0 million. The decrease was driven by lower volume in Steel Processing and Pressure Cylinders and lower average selling prices in Steel Processing as a result of lower steel prices.
Gross margin declined $20.5 million from the prior year quarter to $110.3 million. The overall positive impact from the recent acquisitions was more than offset by lower volume in Pressure Cylinders and higher inventory holding losses in Steel Processing due to falling steel prices.
Operating income for the current quarter was $27.2 million, a decrease of $5.1 million from the prior year quarter. The decrease in gross margin was partially offset by lower impairment and restructuring charges.
Interest expense was $8.2 million for the current quarter, compared to $8.0 million in the comparable period of the prior year, as average debt levels and average interest rates were relatively unchanged.
Equity in net income from unconsolidated joint ventures decreased $3.8 million from the prior year quarter to $18.4 million on sales of $372.3 million. The overall decrease in earnings was led by a $2.5 million decrease at Serviacero, which was negatively impacted by the falling price of steel.
Income tax expense was $6.2 million in the current quarter compared to $18.4 million in the comparable quarter in the prior year. The decrease was due to lower earnings and a discrete tax adjustment related to foreign tax credits. The current quarter tax expense reflected an effective rate of 17.8% compared to 35.7% for the prior year quarter.
Balance Sheet
At quarter end, total debt was $670.7 million, down $29.1 million from February 28, 2015, due to lower short-term borrowings. The Company had $31.1 million of cash at quarter end.
Quarterly Segment Results
Steel Processing's net sales of $540.0 million were down 4%, or $23.6 million, from the prior year on lower toll volume and lower average selling prices. Operating income of $22.6 million was $10.8 million lower than the prior year quarter due to lower toll volume and higher inventory holding losses.
Pressure Cylinders' net sales of $251.6 million were down 5%, or $12.6 million, from the comparable prior year quarter driven by lower volume and lower average selling prices. Operating income of $10.3 million was $4.3 million higher than the prior year quarter as a decrease in total impairment and restructuring charges more than offset the declines in oil and gas equipment and industrial products. Operating income in the prior year quarter also benefited from a $4.9 million litigation gain in SG&A.
Engineered Cabs' net sales of $46.5 million were $6.2 million below the prior year quarter due to the January 2015 sale of the assets of Advanced Component Technologies, Inc. and lower volume in the agriculture market. The $3.7 million operating loss in the current quarter showed a $0.5 million improvement over the prior year quarter due to lower SG&A expenses.
The "Other" category includes the Construction Services and Energy Innovations businesses, as well as non-allocated corporate expenses. Operations in the "Other" category reported net sales of $8.0 million, a decrease of $2.6 million from the prior year quarter as both the Construction Services and Energy Innovations businesses reported lower volumes. The operating loss of $1.9 million was driven primarily by losses within the Construction Services business, which the Company is exiting.
Recent Business Developments
- On April 23, 2015, the Company amended its five-year, revolving credit facility, increasing commitments under the facility by $75.0 million, to a total of $500.0 million, and extending the maturity by three years to April 2020.
- During the quarter, the Company repurchased a total of 1,095,387 common shares for $29.1 million at an average price of $26.54.
- On June 24, 2015, the Board of Directors declared a quarterly dividend of $0.19 per share payable on September 29, 2015 to shareholders of record on September 15, 2015.
Outlook
"We are confident in our Company's strategy to drive growth and our continuous improvement initiatives. The economy has shown some resiliency in automotive and an improving construction market, but there are other areas, like agriculture, where it is less than robust," McConnell noted, "We are seeing a more stabilized steel pricing environment."
Conference Call
Worthington will review fourth quarter and full-year results during its quarterly conference call on June 25, 2015, at 10:30 a.m., Eastern Daylight Saving 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 2015 fiscal year sales of $3.4 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 brand 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 11,000 people and operates 83 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; projected profitability potential, capacity, and working capital needs; demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; pricing trends for raw materials and finished goods and the impact of pricing changes; 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; the ability to make acquisitions and 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 operate profitably and generate cash 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; expected benefits from transformation plans, cost reduction efforts and other new initiatives; expectations for increasing volatility or improving and sustaining 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; 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 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, 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, 2014.
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
May 31, May 31,
---------------------- ----------------------
2015 2014 2015 2014
---------- ---------- ---------- ----------
Net sales $ 846,023 $ 891,005 $3,384,234 $3,126,426
Cost of goods sold 735,711 760,169 2,920,701 2,633,907
---------- ---------- ---------- ----------
Gross margin 110,312 130,836 463,533 492,519
Selling, general and
administrative expense 76,593 74,781 295,920 300,396
Impairment of goodwill and
long-lived assets 2,344 22,871 100,129 58,246
Restructuring and other
expense (income) 4,023 869 6,514 (2,912)
Joint venture transactions 139 (12) 413 1,036
---------- ---------- ---------- ----------
Operating income 27,213 32,327 60,557 135,753
Other income (expense):
Miscellaneous income
(expense) (961) 3,066 795 16,963
Interest expense (8,227) (7,977) (35,800) (26,671)
Equity in net income of
unconsolidated affiliates 18,433 22,233 87,476 91,456
---------- ---------- ---------- ----------
Earnings before income
taxes 36,458 49,649 113,028 217,501
Income tax expense 6,232 18,401 25,772 57,349
---------- ---------- ---------- ----------
Net earnings 30,226 31,248 87,256 160,152
Net earnings (loss)
attributable to
noncontrolling interest 1,361 (1,915) 10,471 8,852
---------- ---------- ---------- ----------
Net earnings attributable to
controlling interest $ 28,865 $ 33,163 $ 76,785 $ 151,300
========== ========== ========== ==========
Basic
Average common shares
outstanding 64,217 67,980 66,309 68,944
---------- ---------- ---------- ----------
Earnings per share
attributable to controlling
interest $ 0.45 $ 0.49 $ 1.16 $ 2.19
========== ========== ========== ==========
Diluted
Average common shares
outstanding 65,767 70,441 68,483 71,664
---------- ---------- ---------- ----------
Earnings per share
attributable to controlling
interest $ 0.44 $ 0.47 $ 1.12 $ 2.11
========== ========== ========== ==========
Common shares outstanding at
end of period 64,141 67,408 64,141 67,408
Cash dividends declared per
share $ 0.18 $ 0.15 $ 0.72 $ 0.60
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
May 31, May 31,
2015 2014
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 31,067 $ 190,079
Receivables, less allowances of $3,085 and $3,043 at
May 31, 2015 and May 31, 2014, respectively 474,292 493,127
Inventories:
Raw materials 181,975 213,173
Work in process 107,069 105,872
Finished products 85,931 90,957
---------- ----------
Total inventories 374,975 410,002
Income taxes receivable 12,119 5,438
Assets held for sale 23,412 32,235
Deferred income taxes 22,034 24,272
Prepaid expenses and other current assets 54,294 43,769
---------- ----------
Total current assets 992,193 1,198,922
Investments in unconsolidated affiliates 196,776 179,113
Goodwill 238,999 251,093
Other intangible assets, net of accumulated
amortization of $47,547 and $35,506 at May 31, 2015
and May 31, 2014, respectively 119,117 145,993
Other assets 24,867 22,399
Property, plant & equipment:
Land 16,017 15,260
Buildings and improvements 218,182 213,848
Machinery and equipment 872,986 848,889
Construction in progress 40,753 32,135
---------- ----------
Total property, plant & equipment 1,147,938 1,110,132
Less: accumulated depreciation 634,748 611,271
---------- ----------
Property, plant and equipment, net 513,190 498,861
---------- ----------
Total assets $2,085,142 $2,296,381
========== ==========
Liabilities and equity
Current liabilities:
Accounts payable $ 294,129 $ 333,744
Short-term borrowings 90,550 10,362
Accrued compensation, contributions to employee
benefit plansand related taxes 66,252 78,514
Dividends payable 12,862 11,044
Other accrued items 56,913 49,873
Income taxes payable 2,845 4,953
Current maturities of long-term debt 841 101,173
---------- ----------
Total current liabilities 524,392 589,663
Other liabilities 58,269 76,426
Distributions in excess of investment in
unconsolidated affiliate 61,585 59,287
Long-term debt 579,352 554,790
Deferred income taxes 21,495 71,333
---------- ----------
Total liabilities 1,245,093 1,351,499
Shareholders' equity - controlling interests 749,112 850,812
Noncontrolling interests 90,937 94,070
---------- ----------
Total equity 840,049 944,882
---------- ----------
Total liabilities and equity $2,085,142 $2,296,381
========== ==========
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Twelve Months Ended
May 31, May 31,
-------------------- --------------------
2015 2014 2015 2014
--------- --------- --------- ---------
Operating activities
Net earnings $ 30,226 $ 31,248 $ 87,256 $ 160,152
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 21,760 19,967 85,089 79,730
Impairment of goodwill and
long-lived assets 2,344 22,871 100,129 58,246
Benefit (provision) for
deferred income taxes 1,401 (5,660) (39,960) (25,916)
Bad debt expense 365 462 259 32
Equity in net income of
unconsolidated affiliates,
net of distributions (3,925) (6,960) (12,299) (15,333)
Net loss (gain) on sale of
assets (204) (352) 3,277 (11,212)
Stock-based compensation 5,005 8,810 17,916 22,017
Excess tax benefits - stock-
based compensation (762) (1,586) (7,178) (8,880)
Gain on previously held equity
interest in TWB - - - (11,000)
Changes in assets and
liabilities, net of impact of
acquisitions:
Receivables 21,097 (34,207) 32,011 (49,206)
Inventories 98,033 21,573 54,108 (38,010)
Prepaid expenses and other
current assets (4,113) (7,057) (15,295) (2,921)
Other assets (4,014) (5,091) 1,617 (5,278)
Accounts payable and accrued
expenses (93,245) (38,503) (83,190) 69,682
Other liabilities 743 2,924 (9,365) 6,943
--------- --------- --------- ---------
Net cash provided by operating
activities 74,711 8,439 214,375 229,046
--------- --------- --------- ---------
Investing activities
Investment in property, plant
and equipment (22,990) (19,181) (96,255) (71,338)
Investment in notes receivable - - (7,300) -
Acquisitions, net of cash
acquired 191 (29,151) (105,291) (11,517)
Distributions from
(investments in)
unconsolidated affiliates - - (8,230) 9,223
Proceeds from sale of assets
and insurance 10,194 3,125 14,007 27,438
--------- --------- --------- ---------
Net cash used by investing
activities (12,605) (45,207) (203,069) (46,194)
--------- --------- --------- ---------
Financing activities
Net proceeds from (repayments
of) short-term borrowings (33,597) (24,994) 79,047 (103,618)
Proceeds from long-term debt 4,176 247,566 30,572 247,566
Principal payments on long-
term debt (207) (364) (102,852) (1,219)
Proceeds from (payments for)
issuance of common shares 1,283 (628) 2,910 4,618
Excess tax benefits - stock-
based compensation 762 1,586 7,178 8,880
Payments to noncontrolling
interest (1,312) (1,819) (13,379) (40,969)
Repurchase of common shares (32,945) (37,140) (127,360) (128,218)
Dividends paid (11,667) (10,246) (46,434) (31,198)
--------- --------- --------- ---------
Net cash provided (used) by
financing activities (73,507) 173,961 (170,318) (44,158)
--------- --------- --------- ---------
Increase (decrease) in cash and
cash equivalents (11,401) 137,193 (159,012) 138,694
Cash and cash equivalents at
beginning of period 42,468 52,886 190,079 51,385
--------- --------- --------- ---------
Cash and cash equivalents at end
of period $ 31,067 $ 190,079 $ 31,067 $ 190,079
========= ========= ========= =========
WORTHINGTON INDUSTRIES, INC.
SUPPLEMENTAL DATA
(In thousands, except Pressure Cylinders units)
This supplemental information is provided to assist in the analysis of the
results of operations.
Three Months Ended Twelve Months Ended
May 31, May 31,
----------------------- -----------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
Volume:
Steel Processing (tons) 875 949 3,510 3,282
Pressure Cylinders
(units) 22,082,614 22,503,087 81,112,610 82,859,488
Net sales:
Steel Processing $ 539,954 $ 563,515 $ 2,145,744 $ 1,936,073
Pressure Cylinders 251,613 264,184 1,001,402 928,396
Engineered Cabs 46,469 52,714 192,953 200,528
Other 7,987 10,592 44,135 61,429
----------- ----------- ----------- -----------
Total net sales $ 846,023 $ 891,005 $ 3,384,234 $ 3,126,426
=========== =========== =========== ===========
Material cost:
Steel Processing $ 396,142 $ 412,183 $ 1,567,325 $ 1,392,009
Pressure Cylinders 122,832 124,442 474,319 426,856
Engineered Cabs 22,774 24,639 89,309 90,854
Selling, general and
administrative expense:
Steel Processing $ 33,872 $ 33,755 $ 123,372 $ 129,669
Pressure Cylinders 37,026 30,000 141,092 125,984
Engineered Cabs 5,903 7,995 26,128 30,620
Other (208) 3,031 5,328 14,123
----------- ----------- ----------- -----------
Total selling, general
and administrative
expense $ 76,593 $ 74,781 $ 295,920 $ 300,396
=========== =========== =========== ===========
Operating income (loss):
Steel Processing $ 22,555 $ 33,312 $ 108,707 $ 119,025
Pressure Cylinders 10,316 5,997 58,113 55,004
Engineered Cabs (3,726) (4,232) (97,260) (26,516)
Other (1,932) (2,750) (9,003) (11,760)
----------- ----------- ----------- -----------
Total operating income $ 27,213 $ 32,327 $ 60,557 $ 135,753
=========== =========== =========== ===========
The following provides detail of Pressure Cylinders volume and net sales by
principal class of products.
Three Months Ended Twelve Months Ended
May 31, May 31,
----------------------- -----------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
Volume (units):
Consumer Products 13,550,943 12,886,257 48,964,578 48,785,465
Industrial Products 8,414,576 9,493,075 31,705,116 33,623,049
Alternative Fuels 115,105 121,160 431,954 442,685
Oil and Gas Equipment 1,717 2,520 10,246 8,201
Cryogenics 273 75 716 88
----------- ----------- ----------- -----------
Total Pressure
Cylinders 22,082,614 22,503,087 81,112,610 82,859,488
=========== =========== =========== ===========
Net sales:
Consumer Products $ 57,158 $ 60,013 $ 219,355 $ 219,423
Industrial Products 118,361 129,383 438,050 455,296
Alternative Fuels 26,141 24,038 94,157 93,029
Oil and Gas Equipment 46,080 44,990 231,097 153,541
Cryogenics 3,873 5,760 18,743 7,107
----------- ----------- ----------- -----------
Total Pressure
Cylinders $ 251,613 $ 264,184 $ 1,001,402 $ 928,396
=========== =========== =========== ===========
WORTHINGTON INDUSTRIES, INC.
SUPPLEMENTAL DATA
(In thousands)
The following provides detail of impairment of goodwill and long-lived
assets, restructuring and other expense (income), and joint venture
transactions included in operating income by segment presented above.
Three Months Ended Twelve Months Ended
May 31, May 31,
------------------------ ------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
Impairment of goodwill
and long-lived assets:
Steel Processing $ - $ 2,500 $ 3,050 $ 7,141
Pressure Cylinders 2,344 20,371 11,911 32,005
Engineered Cabs - - 83,989 19,100
Other - - 1,179 -
----------- ----------- ----------- -----------
Total impairment of
goodwill and long-
lived assets $ 2,344 $ 22,871 $ 100,129 $ 58,246
=========== =========== =========== ===========
Restructuring and other
expense (income):
Steel Processing $ 130 $ - $ 72 $ (3,382)
Pressure Cylinders 3,482 289 6,408 (745)
Engineered Cabs (19) - (332) -
Other 430 580 366 1,215
----------- ----------- ----------- -----------
Total restructuring
and other expense
(income) $ 4,023 $ 869 $ 6,514 $ (2,912)
=========== =========== =========== ===========
Joint venture
transactions:
Steel Processing $ - $ - $ - $ -
Pressure Cylinders - - - -
Engineered Cabs - - - -
Other 139 (12) 413 1,036
----------- ----------- ----------- -----------
Total joint venture
transactions $ 139 $ (12) $ 413 $ 1,036
=========== =========== =========== ===========
Cathy M. Lyttle VP, Corporate Communications and Investor Relations 614.438.3077 Email Contact Sonya L. Higginbotham Director, Corporate Communications 614.438.7391 Email Contact 200 Old Wilson Bridge Rd. Columbus, Ohio 43085 WorthingtonIndustries.com
Source: Worthington Industries, Inc.