COLUMBUS, Ohio, Dec. 18, 2018 (GLOBE NEWSWIRE) — Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $958.2 million and net earnings of $34.0 million, or $0.57 per diluted share, for its fiscal 2019 second quarter ended November 30, 2018.  Net earnings in the quarter included pre-tax restructuring charges totaling $0.4 million, which reduced earnings per diluted share by $0.01.  In the second quarter of fiscal 2018, the Company reported net sales of $871.3 million and net earnings of $39.4 million, or $0.62 per diluted share.  Net earnings in the second quarter of fiscal 2018 included pre-tax impairment charges of $8.3 million and a net pre-tax restructuring gain of $9.7 million, which combined to increase earnings per diluted share by $0.01.

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

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

	2Q 2019			1Q 2019			2Q 2018			6M 2019			6M 2018
Net sales	$	958.2		$	988.1		$	871.3		$	1,946.3		$	1,719.5
Operating income		35.9			50.9			52.1			86.8			94.3
Equity income		21.1			30.0			16.4			51.1			43.8
Net earnings		34.0			54.9			39.4			88.9			84.9
Earnings per diluted share	$	0.57		$	0.91		$	0.62		$	1.48		$	1.33

“I am pleased with the way our teams executed in a challenging environment,” said John McConnell, Chairman and CEO.  “We faced headwinds in the quarter due to rising input costs and lower spreads in our Steel Processing business, but volumes for our key markets remained solid and our employees continue to work hard to make improvements.”

Consolidated Quarterly Results

Net sales for the second quarter of fiscal 2019 were $958.2 million, up 10% over the comparable quarter in the prior year, when net sales were $871.3 million. The increase was primarily driven by higher average direct selling prices in Steel Processing, partially offset by lower net sales in the consumer products business in Pressure Cylinders.   
                                                                                                  
Gross margin for the current quarter decreased $19.1 million from the prior year quarter to $120.9 million.  The decrease was driven by compressed direct spreads in Steel Processing and lower volume and higher material and conversion costs in Pressure Cylinders.

Operating income for the current quarter was $35.9 million, a decrease of $16.2 million from the prior year quarter.  The impact of lower gross margin was partially offset by lower SG&A expense which was down $4.8 million, due primarily to lower profit sharing and bonus accruals.

Interest expense was $9.5 million for the current quarter, compared to $10.0 million in the prior year quarter.  The decrease was due primarily to lower average debt levels.

Equity income from unconsolidated joint ventures increased $4.6 million over the prior year quarter to $21.1 million primarily on higher contributions from WAVE, up $4.7 million from the prior year quarter when a new cost-sharing agreement between the joint venture and its partners resulted in a $3.6 million reduction in equity income.  The Company received cash distributions of $90.5 million from its unconsolidated joint ventures during the quarter, including $60.0 million of one-time special distributions from WAVE.  

Income tax expense was $11.1 million in the current quarter compared to $18.2 million in the prior year quarter.  The decrease was due primarily to lower earnings and a lower statutory federal corporate income tax rate as a result of the Tax Cuts and Jobs Act which lowered the corporate income tax rate from 35% to 21% effective January 1, 2018.  Tax expense in the current quarter reflects an estimated annual effective income tax rate of 23.4% compared to 30.0% for the prior year quarter.

Balance Sheet

At quarter-end, total debt was $749.8 million, down $0.3 million from August 31, 2018.  The Company had $93.0 million of cash at quarter-end. 

Quarterly Segment Results

Steel Processing’s net sales totaled $635.0 million, up 18%, or $96.6 million, over the comparable prior year quarter driven primarily by higher average direct selling prices.  Operating income of $25.0 million was $16.1 million less than the prior year quarter when the sale of the PSM real estate resulted in a net restructuring gain of $10.3 million.  Excluding the gain, operating income was down $5.8 million driven primarily by lower direct spreads, which continue to be negatively impacted by an expanding gap between the cost of steel and scrap prices.   The mix of direct versus toll tons processed was 56% to 44% in the current quarter, compared to 57% to 43% in the prior year quarter.

Pressure Cylinders’ net sales totaled $294.4 million, down 2%, or $6.5 million, as consumer products in the prior year quarter benefited from hurricane-driven demand.  Volume decreases in the industrial products and oil & gas equipment businesses were largely offset by favorable pricing and mix.   Operating income of $14.8 million was $9.9 million less than the prior year quarter as margins compressed due to higher material and conversion costs and lower volumes in both the industrial products and consumer products businesses. 

Engineered Cabs’ net sales totaled $28.7 million, down $1.7 million, or 6%, from the prior year quarter on lower volume.  The operating loss of $3.4 million was $1.8 million higher than the prior year quarter due to lower volume and startup costs associated with a new fabricated products operation.

Recent Business Developments

• During the quarter, the Company repurchased a total of 1,500,000 common shares for $63.6 million at an average price of $42.39.
• In September 2018, the Company received a cash distribution of $35.0 million from WAVE representing the primary portion of its share of the proceeds received by Armstrong World Industries, Inc. (“AWI”) in connection with the pending sale of the combined international operations of WAVE and AWI.  The Company expects to realize total proceeds of approximately $45 million in connection with the sale transaction.     
• In October 2018, the Company received a $25.0 million one-time special cash distribution from WAVE in connection with a financing transaction completed by WAVE in October 2018.
• On Aug. 22, 2018, Andy Rose was named President and continued to serve as Chief Financial Officer on an interim basis until Nov. 1, 2018, when the Company announced that Joseph Hayek was named Vice President and Chief Financial Officer.

Outlook

“Despite a challenging quarter, we are making good progress on recovering margins, and anticipate continued solid end market demand,” McConnell said.  “I am confident that our teams across the company are executing strategies focused on accelerating our growth, and delivering innovative solutions to our customers.”   

Conference Call

Worthington will review fiscal 2019 second quarter results during its quarterly conference call on December 18, 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 with 2018 fiscal year sales of $3.6 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 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; future or expected growth, growth potential, forward momentum, performance, competitive position, sales, volumes, cash flows, earnings, balance sheet strengths, debt, financial condition or other financial measures; pricing trends for raw materials and finished goods and the impact of pricing changes; 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 and 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, newly-created joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; the successful sale of the WAVE international business; projected capacity and 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; expectations for generating improving and sustainable earnings, earnings potential, margins or shareholder value; the expected impact of the provisions of the Tax Cuts and Jobs Act (the “TCJA”) on the Company; 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, and other changes in trade regulations; 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 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 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, 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; 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 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; the actual impact on the Company’s business of the TCJA differing materially from the Company’s estimates; 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, 2018.

Contacts:
SONYA L. HIGGINBOTHAM
VP, CORPORATE COMMUNICATIONS AND BRAND MANAGEMENT
614.438.7391 | [email protected]

MARCUS A. ROGIER
TREASURER AND INVESTOR RELATIONS OFFICER
614.840.4663 | [email protected]

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

WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
	Three Months Ended November 30,								Six Months Ended November 30,
		2018				2017				2018				2017
Net sales	$	958,226			$	871,266			$	1,946,333			$	1,719,503
Cost of goods sold		837,292				731,187				1,682,402				1,446,646
Gross margin		120,934				140,079				263,931				272,857
Selling, general and administrative expense		84,668				89,425				175,309				177,674
Impairment of goodwill and long-lived assets		–				8,289				2,381				8,289
Restructuring and other expense (income), net		402				(9,694	)			(534	)			(7,390	)
Operating income		35,864				52,059				86,775				94,284
Other income (expense):
Miscellaneous income, net		1,432				1,321				1,697				1,669
Interest expense		(9,472	)			(10,038	)			(19,200	)			(18,845	)
Equity in net income of unconsolidated affiliates		21,087				16,445				51,095				43,751
Earnings before income taxes		48,911				59,787				120,367				120,859
Income tax expense		11,119				18,165				25,617				31,163
Net earnings		37,792				41,622				94,750				89,696
Net earnings attributable to noncontrolling interests		3,790				2,219				5,806				4,759
Net earnings attributable to controlling interest	$	34,002			$	39,403			$	88,944			$	84,937
Basic
Average common shares outstanding		57,716				61,503				58,226				61,976
Earnings per share attributable to controlling interest	$	0.59			$	0.64			$	1.53			$	1.37
Diluted
Average common shares outstanding		59,338				63,468				60,013				64,044
Earnings per share attributable to controlling interest	$	0.57			$	0.62			$	1.48			$	1.33
Common shares outstanding at end of period		56,957				60,755				56,957				60,755
Cash dividends declared per share	$	0.23			$	0.21			$	0.46			$	0.42

WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
	November 30,				May 31,
	2018				2018
Assets
Current assets:
Cash and cash equivalents	$	93,027			$	121,967
Receivables, less allowances of $650 and $632 at November 30, 2018
and May 31, 2018, respectively		518,006				572,689
Inventories:
Raw materials		267,871				237,471
Work in process		111,158				122,977
Finished products		109,713				93,579
Total inventories		488,742				454,027
Income taxes receivable		18,079				1,650
Assets held for sale		7,395				30,655
Prepaid expenses and other current assets		62,367				60,134
Total current assets		1,187,616				1,241,122
Investments in unconsolidated affiliates		221,701				216,010
Goodwill		342,126				345,183
Other intangible assets, net of accumulated amortization of $82,659 and
$74,922 at November 30, 2018 and May 31, 2018, respectively		205,142				214,026
Other assets		21,570				20,476
Property, plant and equipment:
Land		24,066				24,229
Buildings and improvements		308,549				300,542
Machinery and equipment		1,045,864				1,030,720
Construction in progress		45,077				32,282
Total property, plant and equipment		1,423,556				1,387,773
Less: accumulated depreciation		839,274				802,803
Total property, plant and equipment, net		584,282				584,970
Total assets	$	2,562,437			$	2,621,787
Liabilities and equity
Current liabilities:
Accounts payable	$	406,444			$	473,485
Accrued compensation, contributions to employee benefit plans and
related taxes		69,611				96,487
Dividends payable		14,348				13,731
Other accrued items		57,864				57,125
Income taxes payable		1,276				4,593
Current maturities of long-term debt		1,387				1,474
Total current liabilities		550,930				646,895
Other liabilities		73,053				74,237
Distributions in excess of investment in unconsolidated affiliate		122,806				55,198
Long-term debt		748,392				748,894
Deferred income taxes, net		81,001				60,188
Total liabilities		1,576,182				1,585,412
Shareholders’ equity – controlling interest		868,672				918,769
Noncontrolling interests		117,583				117,606
Total equity		986,255				1,036,375
Total liabilities and equity	$	2,562,437			$	2,621,787

WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
	Three Months Ended November 30,								Six Months Ended November 30,
		2018				2017				2018				2017
Operating activities:
Net earnings	$	37,792			$	41,622			$	94,750			$	89,696
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		23,525				26,283				48,018				51,648
Impairment of goodwill and long-lived assets		–				8,289				2,381				8,289
Provision for (benefit from) deferred income taxes		3,289				(583	)			22,223				7,351
Bad debt (income) expense		32				41				253				(21	)
Equity in net income of unconsolidated affiliates, net of distributions		14,182				2,952				4,163				(4,803	)
Net (gain) loss on assets		(312	)			(10,680	)			2,403				(9,255	)
Stock-based compensation		3,456				3,787				6,612				7,194
Changes in assets and liabilities, net of impact of acquisitions:
Receivables		40,838				(46,097	)			54,247				16,581
Inventories		5,866				9,871				(37,471	)			(24,825	)
Prepaid expenses and other current assets		(13,249	)			3,622				(21,668	)			4,765
Other assets		(1,194	)			(626	)			(1,260	)			(976	)
Accounts payable and accrued expenses		(71,711	)			(21,577	)			(100,496	)			(48,368	)
Other liabilities		2,190				2,478				994				5,461
Net cash provided by operating activities		44,704				19,382				75,149				102,737
Investing activities:
Investment in property, plant and equipment		(21,741	)			(23,678	)			(41,175	)			(41,691	)
Acquisitions, net of cash acquired		–				(523	)			–				(285,028	)
Distributions from unconsolidated affiliates		55,201				–				55,201				–
Proceeds from sale of assets		170				16,312				20,447				16,739
Net cash provided (used) by investing activities		33,630				(7,889	)			34,473				(309,980	)
Financing activities:
Net proceeds from short-term borrowings, net of issuance costs		–				302				–				600
Proceeds from long-term debt, net of issuance costs		–				(594	)			–				197,685
Principal payments on long-term debt		(371	)			(220	)			(801	)			(439	)
Payments for issuance of common shares, net of tax withholdings		(658	)			(722	)			(4,749	)			(3,996	)
Payments to noncontrolling interests		(4,007	)			(3,196	)			(6,327	)			(3,916	)
Repurchase of common shares		(63,581	)			(67,448	)			(100,433	)			(112,524	)
Dividends paid		(13,533	)			(13,256	)			(26,252	)			(26,034	)
Net cash provided (used) by financing activities		(82,150	)			(85,134	)			(138,562	)			51,376
Decrease in cash and cash equivalents		(3,816	)			(73,641	)			(28,940	)			(155,867	)
Cash and cash equivalents at beginning of period		96,843				195,855				121,967				278,081
Cash and cash equivalents at end of period	$	93,027			$	122,214			$	93,027			$	122,214

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,
		2018				2017				2018				2017
Volume:
Steel Processing (tons)		950,977				921,961				1,934,067				1,890,291
Pressure Cylinders (units)		20,143,311				23,321,823				41,942,409				43,763,099
Net sales:
Steel Processing	$	635,043			$	538,390			$	1,295,530			$	1,081,881
Pressure Cylinders		294,447				300,862				594,800				570,673
Engineered Cabs		28,729				30,404				55,981				62,350
Other		7				1,610				22				4,599
Total net sales	$	958,226			$	871,266			$	1,946,333			$	1,719,503
Material cost:
Steel Processing	$	482,915			$	380,328			$	961,002			$	759,548
Pressure Cylinders		133,442				129,981				272,186				250,612
Engineered Cabs		12,632				14,934				24,943				29,151
Selling, general and administrative expense:
Steel Processing	$	33,959			$	33,543			$	73,996			$	70,071
Pressure Cylinders		44,805				46,312				91,578				91,780
Engineered Cabs		4,463				4,233				8,925				8,502
Other		1,441				5,337				810				7,321
Total selling, general and administrative expense	$	84,668			$	89,425			$	175,309			$	177,674
Operating income (loss):
Steel Processing	$	25,016			$	41,130			$	64,676			$	74,002
Pressure Cylinders		14,758				24,675				29,491				35,133
Engineered Cabs		(3,371	)			(1,587	)			(7,682	)			(1,948	)
Other		(539	)			(12,159	)			290				(12,903	)
Total operating income	$	35,864			$	52,059			$	86,775			$	94,284
Equity income (loss) by unconsolidated affiliate:
WAVE	$	18,419			$	13,729			$	40,427			$	35,957
ClarkDietrich		(460	)			374				3,014				1,081
Serviacero Worthington		2,639				1,514				6,256				4,488
ArtiFlex		412				865				1,163				2,348
Other		77				(37	)			235				(123	)
Total equity income	$	21,087			$	16,445			$	51,095			$	43,751

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,
		2018			2017				2018				2017
Volume (units):
Consumer products		16,980,934			19,498,496				34,709,912				35,852,923
Industrial products		3,162,063			3,822,608				7,231,559				7,908,754
Oil & gas equipment		314			719				938				1,422
Total Pressure Cylinders		20,143,311			23,321,823				41,942,409				43,763,099
Net sales:
Consumer products	$	117,194		$	123,236			$	234,017			$	231,917
Industrial products		152,018			152,407				304,865				289,100
Oil & gas equipment		25,235			25,219				55,918				49,656
Total Pressure Cylinders	$	294,447		$	300,862			$	594,800			$	570,673
The following provides detail of impairment of goodwill and 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,
		2018			2017				2018				2017
Impairment of goodwill and long-lived assets:
Steel Processing	$	–		$	–			$	–			$	–
Pressure Cylinders		–			964				2,381				964
Engineered Cabs		–			–				–				–
Other		–			7,325				–				7,325
Total impairment of goodwill and long-lived assets	$	–		$	8,289			$	2,381			$	8,289
Restructuring and other expense (income), net:
Steel Processing	$	–		$	(10,335	)		$	(9	)		$	(10,056	)
Pressure Cylinders		402			488				(525	)			2,365
Engineered Cabs		–			(82	)			–				(78	)
Other		–			235				–				379
Total restructuring and other expense (income), net	$	402		$	(9,694	)		$	(534	)		$	(7,390	)