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 December 16, 2015 - 6:28 PM EST
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Worthington Reports Second Quarter Fiscal 2016 Results

COLUMBUS, OH--(Marketwired - Dec 16, 2015) -  Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $699.8 million and net earnings of $23.2 million, or $0.36 per diluted share, for its fiscal 2016 second quarter ended November 30, 2015, which included pre-tax impairment and restructuring charges totaling $24.5 million, which reduced earnings per diluted share by $0.24. Impairment and restructuring charges in the current quarter related primarily to the write-down of certain long-lived assets within the Oil & Gas Equipment business. In the second quarter of fiscal 2015, the Company reported net sales of $871.0 million and net earnings of $29.5 million, or $0.43 per diluted share. Net earnings in the second quarter of the prior year included pre-tax impairment and restructuring charges, which reduced earnings per diluted share by $0.12.

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

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

                     
    2Q 2016   1Q 2016   2Q 2015   6M2016   6M2015
Net sales   $ 699.8   $ 758.1   $ 871.0   $ 1,457.9   $ 1,733.4
Operating income     12.0     31.0     33.2     43.0     85.4
Equity income     29.2     26.6     22.3     55.8     50.2
Net earnings     23.2     31.4     29.5     54.7     73.6
EPS, diluted   $ 0.36   $ 0.48   $ 0.43   $ 0.84   $ 1.06
                               

"We had a solid performance for the quarter in the face of some market weakness," said John McConnell, Chairman and CEO. "We have responded to the softer markets by lowering manufacturing costs to help improve results in those businesses." McConnell added, "The majority of our joint ventures delivered good results in the quarter."

Consolidated Quarterly Results

Net sales for the second quarter of fiscal 2016 were $699.8 million, down 19.7% from the comparable quarter in the prior year, when net sales were $871.0 million. The decrease was the result of lower volume in nearly all business segments, combined with lower average selling prices in Steel Processing driven by the market decline in steel prices and in Engineered Cabs due to product mix.

Gross margin declined $16.0 million from the prior year quarter to $109.2 million due to lower volume, partially offset by lower manufacturing expenses and a favorable pricing spread.

Operating income for the current quarter was $12.0 million, a decrease of $21.2 million from the prior year quarter. In addition to the lower gross margin, operating income in the current quarter was negatively impacted by higher impairment and restructuring charges, totaling $24.5 million, but partially offset by lower SG&A expenses. The impairment and restructuring charges resulted primarily from the write-down of certain long-lived assets within Pressure Cylinders' Oil & Gas Equipment business and the closure of Steel Processing's stainless steel business.

Interest expense was $7.8 million for the current quarter, compared to $9.7 million in the comparable period of the prior year. The decrease resulted from lower average debt levels, partially due to the lower market price of steel, which favorably impacts working capital. 

The Company's portion of equity income from unconsolidated joint ventures increased $6.9 million from the prior year quarter to $29.2 million. Joint venture sales totaled $389.2 million for the current quarter. Higher contributions from the WAVE, ClarkDietrich and ArtiFlex joint ventures were partially offset by lower earnings at Serviacero and WSP. Equity income from ClarkDietrich was favorably impacted by $4.0 million due to a legal settlement. The Company received cash distributions of $18.9 million from unconsolidated joint ventures during the quarter.

Income tax expense was $8.8 million in the current quarter compared to $15.6 million in the comparable quarter in the prior year. The decrease was primarily due to lower net earnings. The current quarter tax expense reflected an estimated annual effective rate of 31.2% compared to 33.5% for the prior year quarter. 

Balance Sheet

At quarter-end, total debt was $629.4 million, down $41.3 million from May 31, 2015, due to lower short-term borrowings. As of November 30, 2015, $25.2 million was drawn on the Company's $500 million revolving credit facility and $20.0 million was outstanding under the Company's trade accounts receivable securitization facility. The Company had $27.4 million of cash at quarter-end.

Quarterly Segment Results

Steel Processing's net sales of $467.8 million were down 15%, or $84.9 million, from the comparable prior year quarter as the additional sales from the January 2015 Rome Strip Steel acquisition were more than offset by lower volume and lower average selling prices. Operating income of $26.6 million was $7.2 million lower than the prior year quarter due primarily to lower volume that was partially offset by lower manufacturing expenses.

Pressure Cylinders' net sales of $201.2 million were down 20%, or $51.6 million, from the comparable prior year quarter driven primarily by a 65% volume decrease in Oil & Gas Equipment business and the May 2015 disposition of our Mississippi facility. The operating loss of $10.3 million was $19.9 million lower than the prior year operating income of $9.6 million primarily due to higher impairment charges coupled with a decline in the Oil & Gas Equipment business, which were partially offset by improvements in Industrial and Consumer Products.

Engineered Cabs' net sales of $28.7 million were $22.8 million, or 44%, below the prior year quarter due to declines in market demand, the January 2015 sale of the assets of Advanced Component Technologies, Inc., and the September 2015 closure of the Florence, South Carolina facility. The operating loss in the current quarter decreased $1.3 million to $4.3 million as manufacturing and SG&A expenses were reduced to match the lower demand.

The "Other" category includes the Construction Services and Energy Innovations businesses, as well as non-allocated corporate expenses. Net sales in the "Other" category were $2.1 million, a decrease of $11.8 million from the prior year quarter as the Construction Services business has been substantially wound down. The Construction Services business reported a $0.2 million loss for the quarter. 

Recent Business Developments

  • 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 $31.4 million. The asset purchase was made pursuant to the Chapter 11 bankruptcy proceedings of Taylor Wharton.

  • During the quarter, the Company repurchased a total of 1,500,000 common shares for $43.9 million at an average price of $29.26.

  • On December 16, 2015, the Board of Directors declared a quarterly dividend of $0.19 per share payable on March 29, 2016 to shareholders of record on March 15, 2016.

Outlook

"Our legacy businesses are performing well despite some market softness and challenging conditions in steel pricing," McConnell said. "We remain committed to growing our Company and adding value to our shareholders investment in us."

Conference Call

Worthington will review fiscal 2016 second quarter results during its quarterly conference call on December 17, 2015, at 10:30 a.m., Eastern 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 10,000 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 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, 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, 2015.

   
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF EARNINGS  
(In thousands, except per share amounts)  
   
                         
    Three Months Ended     Six Months Ended  
    November 30,     November 30,  
    2015     2014     2015     2014  
Net sales   $ 699,816     $ 871,012     $ 1,457,963     $ 1,733,426  
Cost of goods sold     590,637       745,789       1,235,768       1,478,696  
  Gross margin     109,179       125,223       222,195       254,730  
Selling, general and administrative expense     72,722       77,308       148,673       152,563  
Impairment of long-lived assets     22,962       14,235       25,962       16,185  
Restructuring and other expense     1,523       488       4,592       588  
  Operating income     11,972       33,192       42,968       85,394  
Other income (expense):                                
  Miscellaneous income     996       1,220       418       1,543  
  Interest expense     (7,799 )     (9,676 )     (15,653 )     (19,192 )
  Equity in net income of unconsolidated affiliates     29,247       22,319       55,828       50,243  
  Earnings before income taxes     34,416       47,055       83,561       117,988  
Income tax expense     8,800       15,600       23,508       37,713  
Net earnings     25,616       31,455       60,053       80,275  
Net earnings attributable to noncontrolling interests     2,375       1,993       5,402       6,645  
Net earnings attributable to controlling interest   $ 23,241     $ 29,462     $ 54,651     $ 73,630  
                                 
Basic                                
Average common shares outstanding     62,676       67,105       63,338       67,337  
Earnings per share attributable to controlling interest   $ 0.37     $ 0.44       0.86     $ 1.09  
                                 
Diluted                                
Average common shares outstanding     64,527       69,181       65,015       69,780  
Earnings per share attributable to controlling interest   $ 0.36     $ 0.43     $ 0.84     $ 1.06  
                                 
                                 
Common shares outstanding at end of period     62,101       66,912       62,101       66,912  
                                 
Cash dividends declared per share   $ 0.19     $ 0.18     $ 0.38     $ 0.36  
                                 
                                 
                                 
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
    November 30,   May 31,
    2015   2015
Assets            
Current assets:            
  Cash and cash equivalents   $ 27,354   $ 31,067
  Receivables, less allowances of $3,163 and $3,085 at November 30, 2015 and May 31, 2015, respectively     407,371     474,292
  Inventories:            
    Raw materials     177,044     181,975
    Work in process     89,877     107,069
    Finished products     84,232     85,931
      Total inventories     351,153     374,975
  Income taxes receivable     3,491     12,119
  Assets held for sale     12,646     23,412
  Deferred income taxes     21,356     22,034
  Prepaid expenses and other current assets     48,525     54,294
    Total current assets     871,896     992,193
Investments in unconsolidated affiliates     210,116     196,776
Goodwill     237,110     238,999
Other intangible assets, net of accumulated amortization of $42,744 and $47,547 at November 30, 2015 and May 31, 2015, respectively     90,070     119,117
Other assets     25,676     24,867
Property, plant & equipment:            
  Land     14,367     16,017
  Buildings and improvements     224,104     218,182
  Machinery and equipment     900,433     872,986
  Construction in progress     52,174     40,753
    Total property, plant & equipment     1,191,078     1,147,938
    Less: accumulated depreciation     664,941     634,748
Property, plant and equipment, net     526,137     513,190
Total assets   $ 1,961,005   $ 2,085,142
             
Liabilities and equity            
Current liabilities:            
  Accounts payable   $ 265,984   $ 294,129
  Short-term borrowings     49,538     90,550
  Accrued compensation, contributions to employee benefit plans and related taxes     59,016     66,252
  Dividends payable     13,293     12,862
  Other accrued items     61,039     56,913
  Income taxes payable     2,049     2,845
  Current maturities of long-term debt     851     841
    Total current liabilities     451,770     524,392
Other liabilities     63,429     58,269
Distributions in excess of investment in unconsolidated affiliate     58,214     61,585
Long-term debt     579,016     579,352
Deferred income taxes     4,802     21,495
    Total liabilities     1,157,231     1,245,093
Shareholders' equity - controlling interest     713,006     749,112
Noncontrolling interests     90,768     90,937
    Total equity     803,774     840,049
Total liabilities and equity   $ 1,961,005   $ 2,085,142
                         
                         
                         
WORTHINGTON INDUSTRIES, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
   
                         
    Three Months Ended     Six Months Ended  
    November 30,     November 30,  
    2015     2014     2015     2014  
Operating activities                                
Net earnings   $ 25,616     $ 31,455     $ 60,053     $ 80,275  
Adjustments to reconcile net earnings to net cash provided by operating activities:                                
  Depreciation and amortization     20,547       21,200       41,987       41,567  
  Impairment of long-lived assets     22,962       14,235       25,962       16,185  
  Provision for deferred income taxes     (9,851 )     (5,492 )     (15,391 )     (6,027 )
  Bad debt expense (income)     (2 )     143       8       (60 )
  Equity in net income of unconsolidated affiliates, net of distributions     (10,389 )     (813 )     (15,902 )     (7,803 )
  Net loss (gain) on sale of assets     (5,854 )     2,370       (4,248 )     (460 )
  Stock-based compensation     3,880       4,498       7,657       8,853  
  Excess tax benefits - stock-based compensation     (434 )     (621 )     (1,258 )     (5,753 )
Changes in assets and liabilities, net of impact of acquisitions:                                
  Receivables     23,474       (6,916 )     66,103       5,836  
  Inventories     31,645       16,087       23,821       (35,130 )
  Prepaid expenses and other current assets     17,467       (5,232 )     28,633       (8,104 )
  Other assets     (3,245 )     3,095       (2,803 )     3,216  
  Accounts payable and accrued expenses     (72,711 )     (72,095 )     (30,527 )     (30,205 )
  Other liabilities     7,487       (505 )     4,300       (6,496 )
Net cash provided by operating activities     50,592       1,409       188,395       55,894  
                                 
Investing activities                                
  Investment in property, plant and equipment     (21,995 )     (23,273 )     (60,492 )     (47,146 )
  Investment in notes receivable     -       (2,300 )     -       (7,300 )
  Acquisitions, net of cash acquired     (2,950 )     (14,543 )     (2,950 )     (51,093 )
  Investments in unconsolidated affiliates     (226 )     129       (1,913 )     (3,671 )
  Proceeds from sale of assets and insurance     9,325       921       9,456       1,186  
Net cash used by investing activities     (15,846 )     (39,066 )     (55,899 )     (108,024 )
                                 
Financing activities                                
  Net proceeds from (repayments of) short-term borrowings     27,499       (196 )     (41,012 )     359  
  Proceeds from long-term debt     -       20,480       921       20,480  
  Principal payments on long-term debt     (220 )     (511 )     (428 )     (813 )
  Payments for issuance of common shares     3,666       566       3,064       (454 )
  Excess tax benefits - stock-based compensation     434       621       1,258       5,753  
  Payments to noncontrolling interests     (1,564 )     -       (4,900 )     (2,867 )
  Repurchase of common shares     (43,914 )     (21,549 )     (71,496 )     (41,620 )
  Dividends paid     (12,065 )     (12,138 )     (23,616 )     (22,250 )
Net cash used by financing activities     (26,164 )     (12,727 )     (136,209 )     (41,412 )
                                 
Increase (decrease) in cash and cash equivalents     8,582       (50,384 )     (3,713 )     (93,542 )
Cash and cash equivalents at beginning of period     18,772       146,921       31,067       190,079  
Cash and cash equivalents at end of period   $ 27,354     $ 96,537     $ 27,354     $ 96,537  
   
   
   
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     Six Months Ended  
      November 30,     November 30,  
      2015     2014     2015     2014  
Volume:                                
  Steel Processing (tons)     828,208       898,505       1,694,584       1,803,966  
  Pressure Cylinders (units)     16,558,823       19,090,046       35,778,233       39,460,432  
                                   
Net sales:                                
  Steel Processing   $ 467,812     $ 552,756     $ 958,612     $ 1,105,087  
  Pressure Cylinders     201,173       252,744       425,567       501,703  
  Engineered Cabs     28,699       51,540       67,316       101,094  
  Other     2,132       13,972       6,468       25,542  
    Total net sales   $ 699,816     $ 871,012     $ 1,457,963     $ 1,733,426  
                                   
Material cost:                                
  Steel Processing   $ 322,507     $ 400,677     $ 670,752     $ 795,569  
  Pressure Cylinders     85,498       115,832       184,562       234,269  
  Engineered Cabs     13,437       23,674       31,418       45,696  
                                   
Selling, general and administrative expense:                                
  Steel Processing   $ 32,925     $ 30,253     $ 65,840     $ 62,153  
  Pressure Cylinders     33,915       35,941       70,789       70,954  
  Engineered Cabs     4,800       7,086       10,208       13,910  
  Other     1,082       4,028       1,836       5,546  
    Total selling, general and administrative expense   $ 72,722     $ 77,308     $ 148,673     $ 152,563  
                                   
Operating income (loss):                                
  Steel Processing   $ 26,642     $ 33,877     $ 50,280     $ 69,746  
  Pressure Cylinders     (10,309 )     9,580       6,510       29,186  
  Engineered Cabs     (4,290 )     (5,609 )     (13,581 )     (7,754 )
  Other     (71 )     (4,656 )     (241 )     (5,784 )
    Total operating income   $ 11,972     $ 33,192     $ 42,968     $ 85,394  
                                   
                                   
The following provides detail of Pressure Cylinders volume and net sales by principal class of products.  
                   
                   
      Three Months Ended     Six Months Ended  
      November 30,     November 30,  
      2015     2014     2015     2014  
Volume (units):                                
  Consumer Products     10,523,692       11,240,094       22,501,637       23,586,725  
  Industrial Products*     5,926,739       6,161,759       13,074,691       12,668,561  
  Mississippi*     -       1,577,717       -       2,987,407  
  Alternative Fuels     107,121       107,300       199,077       211,389  
  Oil and Gas Equipment     1,044       2,994       2,364       5,981  
  Cryogenics     227       182       464       369  
    Total Pressure Cylinders     16,558,823       19,090,046       35,778,233       39,460,432  
                                   
Net sales:                                
  Consumer Products   $ 49,484     $ 51,317     $ 104,442     $ 106,916  
  Industrial Products*     97,601       99,146       202,707       201,363  
  Mississippi*     -       6,331       -       13,205  
  Alternative Fuels     23,954       22,822       48,772       44,602  
  Oil and Gas Equipment     25,041       66,886       57,925       124,222  
  Cryogenics     5,093       6,242       11,721       11,395  
    Total Pressure Cylinders   $ 201,173     $ 252,744     $ 425,567     $ 501,703  
                                   
                                   
* Mississippi, an industrial gas facility, was sold in May 2015. It has been broken out so as not to distort the Industrial Products comparisons.  
   
   
   
WORTHINGTON INDUSTRIES, INC.  
SUPPLEMENTAL DATA  
(In thousands)  
                       
                       
The following provides detail of impairment of long-lived assets and restructuring and other expense included in operating income by segment.  
                       
                       
    Three Months Ended   Six Months Ended  
    November 30,   November 30,  
    2015     2014   2015     2014  
Impairment of long-lived assets:                              
  Steel Processing   $ -     $ 1,100   $ -     $ 3,050  
  Pressure Cylinders     22,962       9,567     22,962       9,567  
  Engineered Cabs     -       2,389     3,000       2,389  
  Other     -       1,179     -       1,179  
  Total impairment of long-lived assets   $ 22,962     $ 14,235   $ 25,962     $ 16,185  
                               
Restructuring and other expense (income):                              
  Steel Processing   $ 2,258     $ -   $ 2,720     $ (30 )
  Pressure Cylinders     (16 )     405     715       428  
  Engineered Cabs     765       -     2,643       -  
  Other     (1,484 )     83     (1,486 )     190  
  Total restructuring and other expense   $ 1,523     $ 488   $ 4,592     $ 588  
                               

CONTACTS:
Cathy M. Lyttle
VP, Corporate Communications and Investor Relations
Phone: (614) 438-3077
E-mail: Email Contact

Sonya L. Higginbotham
Director, Corporate Communications
Phone: (614) 438-7391
E-mail: Email Contact

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


Source: Marketwired (December 16, 2015 - 6:28 PM EST)

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