Worthington Reports First Quarter Results

Worthington Industries, Inc. (NYSE:WOR) today reported results for the three months ended August 31, 2006. (U.S. dollars in millions, except per share data) 1Q2007 4Q2006 1Q2006 Net sales $778.7  $822.0  $694.1  Operating income 54.7  54.8  27.5  Equity income 18.3  20.8  13.2  Net earnings 43.2  59.4  28.4  Earnings per share $0.48  $0.67  $0.32  Net sales of $778.7 million were a first quarter record, increasing 12% from first quarter 2006 net sales of $694.1 million. First quarter 2007 net earnings of $43.2 million, or $0.48 per diluted share, were up 52% from first quarter 2006 net earnings of $28.4 million, or $0.32 per diluted share. "This first quarter reflects good results -- in some cases, great results -- at all three business segments and our joint ventures. As key segments of the economy began to slow during the quarter, our management team performed well in balancing volumes and margins,” said John P. McConnell, Chairman and CEO. First Quarter Highlights Quarterly net sales of $778.7 million were the best first quarter sales in the company’s history. Operating income doubled compared to the year ago first quarter. Quarterly net sales and operating income in the Pressure Cylinders segment represented a first quarter record of $121.5 million and $16.7 million, respectively. Quarterly equity income, from six unconsolidated joint ventures, totaled $18.3 million due to record performance at Worthington Armstrong Venture (WAVE) and record first quarter performance at TWB and Aegis. Volumes were up in Steel Processing compared to the year ago first quarter. Unit selling prices were up in all three business segments -- Steel Processing, Metal Framing and Pressure Cylinders -- compared to the year ago first quarter, and in Steel Processing and Metal Framing compared to last quarter. Spreads between selling prices and material costs widened in all three business segments compared to the year ago first quarter, and in Steel Processing and Metal Framing compared to last quarter. The August 16, 2006, acquisition of Precision Specialty Metals (PSM), a processor of stainless steel located in Los Angeles, California, contributed $2.5 million in sales to the Steel Processing segment for the time it was owned during the quarter. The ratio of total debt to capitalization was 27.9% at quarter end compared to 31.6% a year ago. Annualized return on equity was 18.0% in the first quarter of fiscal 2007 compared to 13.7% in the first quarter of fiscal 2006. Quarterly Segment Results In the Steel Processing segment, quarterly net sales rose 14%, or $49.4 million, to $401.0 million from $351.6 million in the comparable quarter of fiscal 2006. The increase in net sales was due to higher pricing (up 6%) and higher volumes (up 7%) relative to the prior year. Operating income more than doubled due to the combination of higher volumes and a wider spread between selling prices and material costs compared to depressed spreads in the first quarter of fiscal 2006. In the Metal Framing segment, net sales increased 3% or $7.0 million, to $212.3 million from $205.3 million in the comparable quarter of fiscal 2006. Average selling prices improved 15%, more than offsetting an overall volume decline of 10%, as measured in tons. A portion of the tonnage decline was attributable to increased sales of the new Ultrasteel product which is lighter than traditional framing products per linear foot. Operating income for the quarter rose 71% compared to the prior year as a result of a better spread between selling prices and material costs. In the Pressure Cylinders segment, net sales increased 13%, or $14.4 million, to $121.5 million from $107.1 million in the comparable quarter of fiscal 2006. Average selling prices improved significantly due to product mix and price increases in certain product lines, to cover increased material costs. Strong results in Europe, improved volumes in several North American product lines, and plant consolidation savings led to a doubling in operating income from the prior year. Worthington’s joint ventures added significantly to first quarter results. Equity in the net income of six unconsolidated affiliates totaled $18.3 million for the quarter, compared to $13.2 million in the year ago quarter, a 38% increase. The improvement was due to record first quarter earnings at WAVE, TWB and Aegis. Outlook Demand in two of Worthington’s key end markets, commercial construction (especially office buildings) and automotive, may continue to soften. Recent announcements of production cuts by General Motors, Ford and Chrysler will create a more challenging environment for the Steel Processing segment. Uncertainty regarding the economy and interest rates, coupled with relatively high material prices, has contributed to delays in planned commercial construction starts by customers of the Metal Framing segment. Other end markets served by the Pressure Cylinders segment and certain of the company’s joint ventures continue to be strong and stable. Other Dividend Declared On August 23, 2006, the board of directors declared a quarterly cash dividend of $0.17 per share payable September 29, 2006, to shareholders of record on September 15, 2006. Conference Call Worthington will review first quarter results during its quarterly conference call tomorrow, September 27, 2006, at 8:30 a.m. Eastern Daylight Time. Details on the conference call can be found on the company web site at www.WorthingtonIndustries.com Corporate Profile Worthington Industries is a leading diversified metal processing company with annual sales of approximately $3 billion. The Columbus, Ohio, based company is North America’s premier value-added steel processor and a leader in manufactured metal products such as metal framing, pressure cylinders, automotive past model service stampings, metal ceiling grid systems and laser welded blanks. Worthington employs more than 8,000 people and operates 62 facilities in 10 countries. Founded in 1955, the company operates under a long-standing corporate philosophy rooted in the golden rule, with earning money for its shareholders as the first corporate goal. This philosophy, an unwavering commitment to the customer, and one of the strongest employee/employer partnerships in American industry serve as the company’s foundation. Worthington Industries is listed as one of America’s Most Admired Companies and one of the 100 Best Companies to Work For in America by Fortune magazine. 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 future or expected performance, sales, operating results and earnings per share; projected capacity and working capital needs; pricing trends for raw materials and finished goods; anticipated capital expenditures and asset sales; projected timing, results, costs, charges and expenditures related to acquisitions or to facility dispositions, shutdowns and consolidations; new products and markets; expectations for customer inventories, jobs and orders; expectations for the economy and markets; expected benefits from new initiatives; 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, product demand and pricing; changes in product mix and market acceptance of the company’s products; fluctuations in pricing, quality or availability of raw materials (particularly steel), supplies, utilities and other items required by operations; effects of facility closures and the consolidation of operations; the effect of consolidation and other changes within the steel, automotive, construction and related industries; failure to maintain appropriate levels of inventories; the ability to realize cost savings and operational efficiencies on a timely basis; the overall success of, and the ability to integrate, newly-acquired businesses and achieve synergies therefrom; capacity levels and efficiencies within facilities and within the industry as a whole; financial difficulties (including bankruptcy filings) of customers, suppliers, joint venture partners and others with whom the company does business; the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the effect of disruption in 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 inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability, and foreign currency exposure; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; adverse claims experience with respect to workers compensation, product recalls or 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; and other risks described from time to time in the company’s filings with the United States Securities and Exchange Commission. WORTHINGTON INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (in thousands, except per share)   Three Months Ended August 31, 2006  2005  Net sales $ 778,720  $ 694,147  Cost of goods sold 657,369  618,795  Gross margin 121,351  75,352    Selling, general and administrative expense 66,626  47,807  Operating income 54,725  27,545  Other income (expense): Miscellaneous income (expense) (365) 358  Interest expense (4,345) (6,727) Equity in net income of unconsolidated affiliates 18,279  13,212  Earnings before income taxes 68,294  34,388    Income tax expense 25,067  5,981    Net earnings $ 43,227  $ 28,407      Average common shares outstanding - basic 88,765  87,971  Earnings per share - basic $ 0.49  $ 0.32    Average common shares outstanding - diluted 89,415  88,470  Earnings per share - diluted $ 0.48  $ 0.32      Common shares outstanding at end of period 88,817  88,045    Cash dividends declared per common share $ 0.17  $ 0.17  WORTHINGTON INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)   August 31, May 31, 2006  2006  Assets Current assets: Cash and cash equivalents $ 17,009  $ 56,216  Short-term investments -  2,173  Receivables, less allowances of $4,850 and $4,964 at August 31, 2006 and May 31, 2006 399,993  404,553  Inventories: Raw materials 334,439  266,818  Work in process 118,744  104,244  Finished products 101,841  88,295  Total inventories 555,024  459,357    Assets held for sale 23,334  23,535  Deferred income taxes 15,563  15,854  Prepaid expenses and other current assets 37,172  34,553  Total current assets 1,048,095  996,241    Investments in unconsolidated affiliates 135,575  123,748  Goodwill 193,238  177,771  Other assets 48,856  55,733  Property, plant & equipment, net 555,057  546,904    Total assets $ 1,980,821  $ 1,900,397    Liabilities and shareholders' equity Current liabilities: Accounts payable $ 288,942  $ 362,883  Notes payable 130,782  7,684  Accrued compensation, contributions to employee benefit plans and related taxes 47,316  49,784  Dividends payable 15,099  15,078  Other accrued items 36,261  36,483  Income taxes payable 26,791  18,874  Total current liabilities 545,191  490,786    Other liabilities 54,152  55,249  Long-term debt 245,001  245,000  Deferred income taxes 113,565  114,610  Total liabilities 957,909  905,645    Minority interest 50,088  49,446  Shareholders' equity 972,824  945,306    Total liabilities and shareholders' equity $ 1,980,821  $ 1,900,397  WORTHINGTON INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)   Three Months Ended August 31, 2006  2005  Operating activities Net earnings $ 43,227  $ 28,407  Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization 14,931  14,360  Provision for deferred income taxes 844  (4,464) Equity in net income of unconsolidated affiliates, net of distributions received (10,660) (649) Minority interest in net income of consolidated subsidiaries 1,616  781  Net loss on sale of assets 825  840  Stock based compensation 791  -  Excess tax benefits - stock based compensation (200) -  Changes in assets and liabilities: Accounts receivable 8,570  57,700  Inventories (87,535) 55,339  Prepaid expenses and other current assets (2,381) (1,101) Other assets 494  (1,359) Accounts payable and accrued expenses (72,611) (32,081) Other liabilities (1,628) 3,755  Net cash provided (used) by operating activities (103,717) 121,528    Investing activities Investment in property, plant and equipment, net (16,823) (12,876) Acquisitions, net of cash acquired (31,150) -  Investment in unconsolidated affiliate (636) -  Proceeds from sale of assets 884  934  Purchases of short-term investments -  (67,999) Sales of short-term investments 2,173  30,000  Net cash used by investing activities (45,552) (49,941)   Financing activities Proceeds from short-term borrowings 123,090  -  Principal payments on long-term debt -  (513) Proceeds from issuance of common shares 1,850  1,295  Excess tax benefits - stock based compensation 200  -  Payments to minority interest -  (1,920) Dividends paid (15,078) (14,950) Net cash provided (used) by financing activities 110,062  (16,088)   Increase (decrease) in cash and cash equivalents (39,207) 55,499  Cash and cash equivalents at beginning of period 56,216  57,249  Cash and cash equivalents at end of period $ 17,009  $ 112,748  WORTHINGTON INDUSTRIES, INC. SUPPLEMENTAL DATA (Unaudited, in thousands)   This supplemental information is provided to assist in the analysis of the results of operations. As required by the changes in our reporting segments in the prior year, we have reclassified the information for the quarter ended August 31, 2005 to conform with the current reporting of our segment information.       Three Months Ended August 31, 2006  2005  Volume: Steel Processing (tons) 896  836  Metal Framing (tons) 166  184  Pressure Cylinders (units) 11,942  13,545    Net sales: Steel Processing $ 400,988  $ 351,627  Metal Framing 212,340  205,322  Pressure Cylinders 121,511  107,053  Other 43,881  30,145  Total net sales $ 778,720  $ 694,147    Material cost: Steel Processing $ 297,875  $ 278,597  Metal Framing 130,186  136,809  Pressure Cylinders 57,166  55,049    Operating income (loss): Steel Processing $ 20,797  $ 8,366  Metal Framing 17,781  10,396  Pressure Cylinders 16,670  7,954  Other (523) 829  Total operating income $ 54,725  $ 27,545