Worthington Industries Reaps Benefits from Acquisitions, but Suffers from Weak Steel Prices in Fiscal 2013

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Researched by Industrial Info Resources (Sugar Land, Texas)--Diversified metals manufacturer Worthington Industries Incorporated (NYSE:WOR) (Columbus, Ohio) reported mixed results for the final quarter and full 2013 fiscal year. Although acquisitions proved to be a major benefit to the company's sales, weaker selling prices and a string of impairment and restructuring charges had a significant impact on the bottom line. Net earnings were reported to be $33.52 million for the quarter, a 35.63% decrease from fourth-quarter 2012, and $136.44 million for the year, an 18.03% increase from fiscal 2012.

Net sales stood at $704.06 million for the quarter, a 6.8% decrease from the same period last year, and $2.61 billion for the year, a 3.06% increase from fiscal 2012. A major reason for the quarterly decline was lower average selling prices; in the Steel Processing segment alone, softer prices had a negative impact of $30.9 million. Lower direct and toll processing volumes diminished the segment's sales by $24.1 million, although executives said this was mostly due to a single tolling customer.

Still, the Pressure Cylinders segment reported stronger retail and alternative-fuel sales. It was boosted by the September 2012 acquisition of Westerman Incorporated, and leading manufacturer of tanks and pressure vessels for the oil, gas and nuclear markets, and the April 2013 acquisition of Palmer Mfg. & Tank Incorporated, a manufacturer of steel and fiberglass tanks and processing equipment of the oil and gas markets. Although net sales in the segment improved on a quarterly basis, operating income was lower, mostly due to a $5 million impairment charge related to a joint venture in India and a $2.5 million severance charge related to the company's closing of its operations in Medina, New York.

Worthington's joint ventures performed well during the quarter and year, with WAVE, TWB and ClarkDietrich contributing $15.3 million, $3.7 million and $2.9 million of equity income, respectively.

As part of its North American Metals & Minerals Project Database, Industrial Info is keeping tabs on 22 operational plants owned by Worthington, including 11 in Ohio, two in Maryland and two in Mexico. The Ohio-based facilities include a steel-galvanizing plant in Monroe; a value-added steel rolls plant in Columbus; and a propane cylinders plant in Westerville.

"We announced during the quarter our intention to invest capital to increase our cold-rolling and annealing capacity and productivity," said Mark Russell, the president and chief operating officer of Worthington, in a conference call. "Specialty strip is steel's highest value-added product, and we intend to maintain world-class capabilities to meet or exceed customer needs going forward.

"Our transformation approach, combined with the strong performance of our recently acquired entities, continues to yield impressive results in Cylinders. Restructuring charges include the consolidations of all [subsidiary] BernzOmatic production into one location, which will further decrease costs and increase productivity going forward."

John McConnell, the chairman and chief executive officer of Worthingon, is optimistic about the company's performance in the near future, anticipating a gradual improvement in commercial construction and noting that the automotive industry is saw fewer summer shutdowns. He also expects the two acquisitions in the Pressure Cylinders segment to continue to improve overall performance.

"We begin fiscal 2014 with optimism and excitement: optimism that the strengthening of the broader economy and, in particular, the early-stage strengthening of single-family and construction markets," McConnell said in the conference call. "I'm excited about the future organic growth in all our businesses and our acquisition pipeline."

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