Worthington Reports Third Quarter Fiscal 2018 Results

COLUMBUS, Ohio, March 29, 2018 – Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $841.7 million and net earnings of $79.1 million, or $1.27 per diluted share, for its fiscal 2018 third quarter ended February 28, 2018.  Net earnings in the quarter included a tax benefit of $0.66 per diluted share related to the impact of discrete items and a lower statutory income tax rate resulting from the Tax Cuts and Jobs Act, which was enacted into federal law on December 22, 2017.  In the third quarter of fiscal 2017, the Company reported net sales of $703.4 million and net earnings of $35.9 million, or $0.55 per diluted share.  Net earnings in the third quarter of fiscal 2017 included pre-tax restructuring charges totaling $1.4 million, which reduced earnings per diluted share by $0.01.

“I am pleased with our solid results from our third quarter performance with year-over-year growth,” said John McConnell, Chairman and CEO. “Both our Steel Processing and Pressure Cylinders segments had good quarters with agriculture and heavy truck markets leading demand in steel, while cylinders saw strength in the consumer and industrial businesses.” 

Consolidated Quarterly Results 
 

Net sales for the third quarter of fiscal 2018 were $841.7 million, up 20% over the comparable quarter in the prior year, when net sales were $703.4 million. The increase was driven by contributions from the June 2, 2017 acquisition of Amtrol, higher average direct selling prices in Steel Processing, and higher overall volume in Pressure Cylinders businesses.

Gross margin increased $16.1 million over the prior year quarter to $127.1 million.  The increase was driven by contributions from Amtrol and improvements in the industrial and consumer products businesses within Pressure Cylinders.

Operating income for the current quarter was $42.8 million, an increase of $8.4 million over the prior year quarter.  The impact of higher gross margin was partially offset by higher SG&A expense, up $9.0 million, due primarily to the Amtrol acquisition.

Interest expense was $9.8 million for the current quarter, compared to $7.7 million in the prior year quarter.  The increase was due primarily to the July 28, 2017 issuance of $200.0 million of senior unsecured notes due August 1, 2032.

Equity income from unconsolidated joint ventures decreased $2.9 million from the prior year quarter to $19.8 million on lower contributions from WAVE and ClarkDietrich.  WAVE’s contribution to equity income was lower due to an increase in allocated costs resulting from a new cost-sharing agreement between the joint venture and its partners and lower volume. The Company’s portion of the increase in allocated costs for the current quarter was approximately $1.3 million, but this increased run rate is expected to decline 30% once the sale of the international business closes later in calendar 2018. ClarkDietrich’s contribution to equity income was $1.3 million lower than the prior year quarter as higher steel prices compressed margins. The Company received cash distributions of $22.6 million from unconsolidated joint ventures during the quarter for a total of $61.6 million for fiscal 2018, a cash conversion rate of 97% on equity income.

Income tax benefit was $24.0 million in the current quarter compared to expense of $11.1 million in the prior year quarter.  The change was due primarily to the impact of the recently enacted Tax Cuts and Jobs Act, which resulted in a net discrete tax benefit of $33.9 million.  The impact of the lower federal statutory income tax rate on current year earnings was $7.3 million. Tax expense in the current quarter reflects an estimated annual effective rate of 10.3% compared to 27.2% for the prior year quarter.

Balance Sheet

At quarter-end, total debt was $782.3 million, up $1.6 million from November 30, 2017.  The Company had $147.4 million of cash at quarter-end.

Quarterly Segment Results

Steel Processing’s net sales totaled $518.1 million, up 8%, or $39.9 million, over the comparable prior year quarter driven by higher average direct selling prices, partially offset by lower tolling volumes at certain consolidated joint ventures.  Operating income of $31.1 million was $5.1 million higher than the prior year quarter due to lower allocated corporate costs and a nominal increase in the spread between average selling prices and material cost. The mix of direct versus toll tons processed was 57% to 43% in the current quarter, compared to 52% to 48% in the prior year quarter.

Pressure Cylinders’ net sales totaled $295.5 million, up 49%, or $97.1 million, over the comparable prior year quarter due to contributions from the Amtrol acquisition and higher volumes across the businesses.  Operating income of $17.5 million was $7.4 million higher than the prior year quarter driven primarily by contributions from the Amtrol acquisition.  Improvements in the industrial and consumer products businesses were largely offset by a decline in the oil & gas equipment business.

Engineered Cabs’ net sales totaled $27.1 million, up $3.5 million, or 15%, over the prior year quarter on higher volume.  The operating loss of $4.1 million was $2.1 million higher than the prior year quarter due to higher manufacturing costs.

The “Other” category includes the energy innovations business, as well as non-allocated corporate expenses.  Net sales in the “Other” category were $1.0 million, a decrease of $2.3 million from the prior year quarter on lower sales in the energy innovations business.  The operating loss of $1.8 million represents unallocated corporate expenses.

Recent Business Developments

• During the quarter, the Company repurchased a total of 1,000,000 common shares for $47.4 million at an average price of $47.42.
• On January 16, 2018, the Company amended its existing accounts receivable securitization facility, reducing the borrowing capacity from $100 million to $50 million and extending the maturity to January 2019.
• On February 16, 2018, the Company amended its existing five-year, revolving credit facility, extending the maturity by three years to February 2023.  Borrowing capacity remained unchanged at $500 million.

Outlook

“The integration of our largest acquisition, Amtrol, continues to go well and we expect that in the fourth quarter demand will remain steady in most of the markets we serve,” McConnell added. 

Conference Call

Worthington will review fiscal 2018 third quarter results during its quarterly conference call on March 29, 2018 at 2:30 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 is a leading global diversified metals manufacturing company with2017 fiscal year sales of $3.0 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 propane, refrigerant and industrial gasses and cryogenic applications, water well tanks for commercial and residential uses, CNG and LNG storage, transportation and alternative fuel tanks, oil & 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 12,000 people and operates 86 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.