Worthington Industries Inc. (WOR) recently reported fiscal first-quarter results. The company said GAAP net income slumped 90.2% year over year to $6.7 million, compared to $68.6 million in the year-ago period. Excluding restructuring charges, adjusted earnings per share came in at 11 cents, which topped the Zacks Consensus Estimate by 7 cents.
Worthington is a diversified metal processing company focused on steel processing and manufactured metal products, such as metal framing, pressure cylinders, automotive past- and current-model year service stampings as well as metal ceiling grid systems and laser-welded blanks. The company operates 63 manufacturing facilities across 10 countries supported by 6,400 employees.
During the quarter, net sales plunged 54.3% year over year to $417.5 million as a dramatic decline in demand from key construction and automotive sectors led to a slump in volumes across all segments.
The Steel Processing segment’s sales slipped 60.5% year over year to $181.6 million primarily due to a 47% fall in volumes to 401,000 tons, partially offset by a temporary boost in demand driven by the Cash for Clunkers program. Metal Framing recorded a 59% year over year contraction in sales to $95.4 million as volumes dipped 46% to 83,000 tons while average selling prices declined by 24%, compared to the year-ago quarter. Pressure Cylinders contracted 31.7% year over year to $101.3 million as volumes slipped across all categories, particularly in the European industrial and refrigerant gas business.
Sluggish revenues adversely affected gross profit as it slumped 67.6% year over year to $49.2 million, while gross margin reduced by 480 basis points (bps) to 11.8%. Selling, general and administrative expenses fell 21.1% year over year to $50 million, mainly due the company’s cost management initiatives, which included salary cuts and staff reductions.
Worthington also recorded restructuring charges of $3.6 million in the quarter related to facility closures in the Metal Framing segment. Accordingly, the company recorded an operating loss of $4.5 million, compared to an operating profit of $79.7 million in the year-ago period.
Cash generated from operations during the quarter was $96.2 million, compared to $22.3 million last year chiefly due to the company’s inventory liquidation efforts. The cash was primarily utilized to reduce total debt by $24.1 million to $215.3 million. Other major uses of cash included, capital expenditure ($7.8 million), dividends ($7.9 million) and acquisition of high pressure cylinders maker, Structural Composites Industries LLC ($9.7 million). The company also stated that it now has $340 million available under the $435 million revolving credit facility.
Moving forward, management expects a normal seasonal dip in demand beginning in November and bottoming in December. The company stated that it expects volumes to trend upwards next year, adding that it will cautiously monitor the opening months of 2010.
The Zacks Consensus Estimate on the company’s earnings for the fiscal year ending May 2010 is currently pegged at 46 cents per share, which has moved up by 2 cents over the past week. Moreover, the most accurate estimate is even bullish at 63 cents per share.
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