WOR Worthington Enterprises Inc

Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $731.1 million and a net loss of $74.0 million, or $(1.40) per diluted share, for its fiscal 2021 second quarter ended November 30, 2020. In the second quarter of fiscal 2020, the Company reported net sales of $827.6 million and net earnings of $52.1 million, or $0.93 per diluted share. Results in both the current and prior year quarter were impacted by several unique items, as summarized below, including a combined pre-tax loss of $148.4 million, or $(2.18) per diluted share, in the current quarter related to the Company’s investment in Nikola Corporation (“Nikola”). See Recent Developments below for further information regarding the Company’s investment in Nikola.  

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

		2Q 2021								2Q 2020
		Pre-Tax				EPS				Pre-Tax			EPS
Impairment and restructuring charges		$	(11.4	)		$	(0.17	)		$	-		$	-
Incremental expenses related to Nikola gains			(4.6	)			(0.07	)			-			-
Unrealized loss on investment in Nikola			(143.8	)			(2.11	)			-			-
Gain on sale of WAVE international operations		$	-			$	-			$	23.1		$	0.33

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

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

		2Q 2021				2Q 2020				6M 2021			6M 2020
Net sales		$	731.1			$	827.6			$	1,434.0		$	1,683.5
Operating income			37.4				32.1				7.2			17.5
Equity income			25.6				47.3				49.3			72.1
Net earnings (loss)			(74.0	)			52.1				542.6			47.3
Earnings (loss) per diluted share		$	(1.40	)		$	0.93			$	9.97		$	0.84

“We had an outstanding second quarter, despite some noise in the numbers, due to continued great work by our teams as we navigate the challenges of the ongoing COVID-19 pandemic,” said President & CEO Andy Rose.  “Steel Processing delivered strong year over year earnings growth, aided by stable automotive and construction demand and improving agricultural demand.  Pressure Cylinders continued to experience solid demand for its consumer products, particularly for portable propane and helium products, while headwinds persisted in Europe and the oil & gas business.”     

Consolidated Quarterly Results

Net sales for the second quarter of fiscal 2021 were $731.1 million, down 12% from the comparable quarter in the prior year, when net sales were $827.6 million. The decrease was driven primarily by lower average selling prices in Steel Processing, lower volumes in the oil and gas equipment business in Pressure Cylinders, and the divestiture of the engineered cabs business in the prior year.           Gross margin increased $14.9 million over the prior year quarter to $135.5 million as lower conversion costs and improved spreads in Steel Processing were partially offset by a decline in the oil and gas equipment business in Pressure Cylinders.   

Operating income for the current quarter was $37.4 million, an increase of $5.2 million over the prior year quarter. The impact of higher gross margin and lower SG&A expense was partially offset by higher combined impairment and restructuring charges, and the profit sharing and bonus expenses related to the Company’s investment in Nikola.

Interest expense was $7.5 million for the current quarter, compared to $7.3 million in the prior year quarter. The increase was due primarily to higher average debt levels.

Equity income from unconsolidated joint ventures decreased $21.7 million from the prior year quarter, which included a $23.1 million pre-tax gain related to the sale of WAVE’s international operations. Excluding the gain in the prior year quarter, equity income increased $1.4 million primarily due to higher contributions from Serviacero. The Company received cash distributions of $30.2 million from its unconsolidated joint ventures during the quarter.

Income tax benefit was $19.4 million in the current quarter compared to income tax expense of $15.9 million in the prior year quarter. The current quarter income tax benefit was due to the unrealized mark-to-market loss on the Company’s investment in Nikola. Tax expense in the current quarter reflects an estimated annual effective rate of 21.5% compared to 24.8% for the prior year quarter.

Balance Sheet

At quarter-end, total debt was $707.5 million, relatively consistent with debt at August 31, 2020, and the Company had $713.1 million of cash.  

Quarterly Segment Results

Steel Processing’s net sales totaled $468.7 million, down 9%, or $48.2 million, from the comparable prior year quarter driven by lower average selling prices. Operating income of $37.8 million was $20.7 million higher than the prior year quarter as the impact of lower average selling prices was more than offset by lower conversion costs, improved spreads, and the lack of inventory holding losses, which negatively impacted the prior year quarter by an estimated $6.5 million. The mix of direct versus toll tons processed was 48% to 52% in the current quarter, compared to 49% to 51% in the prior year quarter.  

Pressure Cylinders’ net sales totaled $262.3 million, down 10%, or $27.9 million, from the comparable prior year quarter due primarily to lower volume in the oil and gas equipment business. Operating income of $3.3 million was $12.3 million less than the prior year quarter. The decrease was driven by current quarter impairment and restructuring charges, which totaled $11.1 million, and lower volume in the oil and gas equipment business, partially offset by lower SG&A expense and improvements in the industrial products business.

Recent Developments

• In October 2020, the Company sold its cryogenic trailer and hydrogen trailer business, including the Theodore, Ala. manufacturing site, to Chart Industries, Inc. and its cryo-science and microbulk business to IC Biomedical US, LLC. The combined sale proceeds from the two transactions were $21.2 million, resulting in a pre-tax loss of $7.1 million within restructuring and other expense.
• During the second quarter of fiscal 2021, the Company repurchased a total of 857,980 of its common shares for $38.6 million, at an average purchase price of $44.95.
• During the second quarter of fiscal 2021, the Company recognized a combined pre-tax loss of $148.4 million, or $(2.18) per diluted share, related to its investment in Nikola comprised of an unrealized mark-to-market loss of $143.8 million and $4.6 million of profit sharing and bonus expenses.   At quarter end, the Company owned 7,048,020 shares of Nikola common stock.

Outlook

“We are optimistic that demand for our key end markets will remain steady,” Rose said.  “The tight steel market, while challenging, is an opportunity to differentiate ourselves from our competitors.  As we enter 2021, we are well positioned, and will look to drive growth through innovation, transformation and strategic acquisitions.”

Conference Call

Worthington will review fiscal 2021 second quarter results during its quarterly conference call on December 17, 2020, at 2:00 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 (NYSE:WOR) is a leading industrial manufacturing company delivering innovative solutions to customers that span many industries including transportation, construction, industrial, agriculture, retail and energy. Worthington is North America’s premier value-added steel processor and producer of laser welded products; and a leading global supplier of pressure cylinders and accessories for applications such as fuel storage, water systems, outdoor living, tools and celebrations. The Company’s brands, primarily sold in retail stores, include Coleman®, Bernzomatic®, Balloon Time®, Mag Torch® and Well-X-Trol®. Worthington’s WAVE joint venture with Armstrong is the North American leader in innovative ceiling solutions.Headquartered in Columbus, Ohio, Worthington operates 51 facilities in 15 states and six countries, sells into over 90 countries and employs approximately 7,500 people. Founded in 1955, the Company follows a people-first philosophy with earning money for its shareholders as its first corporate goal. Relentlessly finding new ways to drive progress and practicing a shared commitment to transformation, Worthington makes better solutions possible for customers, employees, shareholders and communities.

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 the impacts from the Novel Coronavirus (COVID-19”) and the actions taken by governmental authorities and others related thereto, including our ability to continue operating facilities in connection therewith or to cut variable costs; future or expected cash positions, liquidity and ability to access financial markets and capital; outlook, strategy or business plans; future or expected growth, growth potential, forward momentum, performance, competitive position, sales, volumes, cash flows, earnings, margins, balance sheet strengths, debt, financial condition or other financial measures; pricing trends for raw materials and finished goods and the impact of pricing changes; the ability to improve or maintain margins; 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; 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, joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; projected capacity and the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to 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; 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 risks, uncertainties and impacts related to COVID-19 and other actual or potential public health emergencies and actions taken by governmental authorities or others in connection therewith, their potential impacts related to the ability and costs to continue to operate facilities and their potential to exacerbate other risks; the effect of national, regional and global economic conditions generally and within major product markets, including significant economic disruptions from COVID-19 and the actions taken therewith; the effect of conditions in national and worldwide financial markets and with respect to the ability of financial institutions to provide capital; 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, the closing of border crossings, and other changes in trade regulations or relationships; 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; the outcome of adverse claims experience with respect to workers’ compensation, product recalls or product liability, casualty events or other matters; 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 in which the Company participates 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, interruption in utility services, 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; deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies; the 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 governmental agencies as contemplated by the Coronavirus Aid, Relief and Economic Security (CARES) Act and 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 especially in light of the COVID-19 pandemic, which may increase the Company’s healthcare and other costs and negatively impact the Company’s operations and financial results; 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, 2020.

 

WORTHINGTON INDUSTRIES, INC.CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)(In thousands, except per share amounts)

	Three Months EndedNovember 30,								Six Months EndedNovember 30,
	2020				2019				2020				2019
Net sales	$	731,092			$	827,637			$	1,434,001			$	1,683,496
Cost of goods sold		595,618				707,026				1,185,169				1,445,594
Gross margin		135,474				120,611				248,832				237,902
Selling, general and administrative expense		82,129				88,543				164,325				179,366
Impairment of long-lived assets		3,815				-				13,739				40,601
Restructuring and other expense (income), net		7,596				(50	)			9,444				405
Incremental expenses related to Nikola gains		4,570				-				54,081				-
Operating income		37,364				32,118				7,243				17,530
Other income (expense):
Miscellaneous income, net		376				636				827				1,331
Interest expense		(7,548	)			(7,315	)			(15,138	)			(16,795	)
Equity in net income of unconsolidated affiliates		25,631				47,346				49,265				72,113
Gains (loss) on investment in Nikola		(143,780	)			-				652,362				-
Loss on extinguishment of debt		-				-				-				(4,034	)
Earnings (loss) before income taxes		(87,957	)			72,785				694,559				70,145
Income tax expense (benefit)		(19,445	)			15,863				144,333				15,678
Net earnings (loss)		(68,512	)			56,922				550,226				54,467
Net earnings attributable to noncontrolling interests		5,532				4,836				7,595				7,157
Net earnings (loss) attributable to controlling interest	$	(74,044	)		$	52,086			$	542,631			$	47,310
Basic
Average common shares outstanding		52,988				55,059				53,532				55,150
Earnings (loss) per share attributable to controlling interest	$	(1.40	)		$	0.95			$	10.14			$	0.86
Diluted
Average common shares outstanding		52,988				56,072				54,439				56,205
Earnings (loss) per share attributable to controlling interest	$	(1.40	)		$	0.93			$	9.97			$	0.84
Common shares outstanding at end of period		52,754				55,094				52,754				55,094
Cash dividends declared per share	$	0.25			$	0.24			$	0.50			$	0.48

WORTHINGTON INDUSTRIES, INC.CONSOLIDATED BALANCE SHEETS(In thousands)

	November 30,				May 31,
	2020				2020
Assets
Current assets:
Cash and cash equivalents	$	713,130			$	147,198
Receivables, less allowances of $1,291 and $1,521 at November 30, 2020
and May 31, 2020, respectively		441,936				341,038
Inventories:
Raw materials		152,824				234,629
Work in process		82,747				76,497
Finished products		68,872				93,975
Total inventories		304,443				405,101
Income taxes receivable		3,247				8,376
Assets held for sale		12,893				12,928
Investment in Nikola		143,850				-
Prepaid expenses and other current assets		68,371				68,538
Total current assets		1,687,870				983,179
Investments in unconsolidated affiliates		209,952				203,329
Operating lease assets		30,007				31,557
Goodwill		320,014				321,434
Other intangible assets, net of accumulated amortization of $86,489 and
$92,774 at November 30, 2020 and May 31, 2020, respectively		174,376				184,416
Other assets		32,842				34,956
Property, plant and equipment:
Land		23,592				24,197
Buildings and improvements		292,544				302,796
Machinery and equipment		1,082,979				1,055,139
Construction in progress		63,526				52,231
Total property, plant and equipment		1,462,641				1,434,363
Less: accumulated depreciation		890,317				861,719
Total property, plant and equipment, net		572,324				572,644
Total assets	$	3,027,385			$	2,331,515
Liabilities and equity
Current liabilities:
Accounts payable	$	337,976			$	247,017
Accrued compensation, contributions to employee benefit plans and
related taxes		101,812				64,650
Dividends payable		14,843				14,648
Other accrued items		51,439				49,974
Current operating lease liabilities		10,954				10,851
Income taxes payable		39,990				949
Current maturities of long-term debt		160				149
Total current liabilities		557,174				388,238
Other liabilities		85,105				75,786
Distributions in excess of investment in unconsolidated affiliate		107,951				103,837
Long-term debt		707,340				699,516
Noncurrent operating lease liabilities		23,695				25,763
Deferred income taxes, net		115,649				71,942
Total liabilities		1,596,914				1,365,082
Shareholders' equity - controlling interest		1,276,899				820,821
Noncontrolling interests		153,572				145,612
Total equity		1,430,471				966,433
Total liabilities and equity	$	3,027,385			$	2,331,515

WORTHINGTON INDUSTRIES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)

	Three Months EndedNovember 30,								Six Months EndedNovember 30,
	2020				2019				2020				2019
Operating activities:
Net earnings (loss)	$	(68,512	)		$	56,922			$	550,226			$	54,467
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		21,560				22,596				43,771				46,773
Impairment of long-lived assets		3,815				-				13,739				40,601
Provision for (benefit from) deferred income taxes		(31,776	)			6,843				39,255				3,345
Bad debt (income) expense		(159	)			143				(65	)			311
Equity in net income of unconsolidated affiliates, net of distributions		4,608				(19,879	)			(2,149	)			(14,797	)
Net (gain) loss on sale of assets		7,271				(17	)			7,673				601
Stock-based compensation		4,854				3,280				9,710				7,275
(Gains) loss on investment in Nikola		143,779				-				(652,362	)			-
Charitable contribution of Nikola shares		-				-				20,653				-
Loss on extinguishment of debt		-				-				-				4,034
Changes in assets and liabilities:
Receivables		3,580				(5,456	)			(78,614	)			9,525
Inventories		4,623				43,601				90,245				87,883
Accounts payable		48,176				(20,743	)			95,330				(57,977	)
Accrued compensation and employee benefits		13,960				9,619				37,812				(13,596	)
Income taxes payable		(44,623	)			(118	)			39,041				(1,132	)
Other operating items, net		(3,728	)			7,369				10,551				1,216
Net cash provided by operating activities		107,428				104,160				224,816				168,529
Investing activities:
Investment in property, plant and equipment		(16,073	)			(28,381	)			(48,944	)			(50,555	)
Proceeds from sale of Nikola shares		-				-				487,859				-
Acquisitions, net of cash acquired		(75	)			(29,283	)			(75	)			(29,283	)
Proceeds from sale of assets		21,580				23				21,580				9,199
Net cash provided (used) by investing activities		5,432				(57,641	)			460,420				(70,639	)
Financing activities:
Proceeds from long-term debt, net of issuance costs		-				(134	)			-				101,464
Principal payments on long-term obligations and debt redemption costs		(96	)			(490	)			(193	)			(154,467	)
Proceeds from issuance of common shares, net of tax withholdings		2,294				(3,811	)			1,144				(7,024	)
Payments to noncontrolling interests		-				(1,453	)			(560	)			(1,453	)
Repurchase of common shares		(38,563	)			-				(92,883	)			(29,599	)
Dividends paid		(13,433	)			(13,954	)			(26,812	)			(26,914	)
Net cash used by financing activities		(49,798	)			(19,842	)			(119,304	)			(117,993	)
Increase (decrease) in cash and cash equivalents		63,062				26,677				565,932				(20,103	)
Cash and cash equivalents at beginning of period		650,068				45,583				147,198				92,363
Cash and cash equivalents at end of period	$	713,130			$	72,260			$	713,130			$	72,260

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 EndedNovember 30,								Six Months EndedNovember 30,
	2020				2019				2020				2019
Volume:
Steel Processing (tons)		1,023,979				1,004,847				1,952,423				1,896,234
Pressure Cylinders (units)		19,180,746				21,608,356				40,923,811				41,792,044
Net sales:
Steel Processing	$	468,723			$	516,937			$	899,743			$	1,040,312
Pressure Cylinders		262,284				290,136				533,188				594,532
Other		85				20,564				1,070				48,652
Total net sales	$	731,092			$	827,637			$	1,434,001			$	1,683,496
Material cost:
Steel Processing	$	313,330			$	370,760			$	618,917			$	767,202
Pressure Cylinders		108,930				127,112				224,647				253,982
Selling, general and administrative expense:
Steel Processing	$	38,769			$	37,482			$	74,367			$	72,998
Pressure Cylinders		44,677				48,749				88,134				95,215
Operating income (loss):
Steel Processing	$	37,824			$	17,172			$	51,441			$	23,340
Pressure Cylinders		3,305				15,647				11,947				45,270
Other		(322	)			(1,919	)			(1,081	)			(47,051	)
Segment operating income		40,807				30,900				62,307				21,559
Unallocated corporate and other		1,127				1,218				(983	)			(4,029	)
Incremental expenses related to Nikola gains		(4,570	)			-				(54,081	)			-
Total operating income	$	37,364			$	32,118			$	7,243			$	17,530
Equity income (loss) by unconsolidated affiliate:
WAVE	$	17,280			$	41,738			$	34,936			$	65,655
ClarkDietrich		5,411				4,917				10,307				9,007
Serviacero Worthington		1,861				803				3,170				1,557
ArtiFlex		1,253				1,134				1,145				1,340
Other		(174	)			(1,246	)			(293	)			(5,446	)
Total equity income	$	25,631			$	47,346			$	49,265			$	72,113

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 EndedNovember 30,								Six Months EndedNovember 30,
	2020				2019				2020				2019
Volume (units):
Consumer products		15,915,466				18,675,057				33,772,607				35,573,447
Industrial products		3,265,076				2,932,923				7,150,881				6,217,378
Oil & gas equipment		204				376				323				1,219
Total Pressure Cylinders		19,180,746				21,608,356				40,923,811				41,792,044
Net sales:
Consumer products	$	121,618			$	128,065			$	254,400			$	247,545
Industrial products		134,020				130,334				262,245				282,952
Oil & gas equipment		6,646				31,737				16,543				64,035
Total Pressure Cylinders	$	262,284			$	290,136			$	533,188			$	594,532
The following provides detail of impairment of long-lived assets and restructuring and other expense (income), net included in operating income by segment.
	Three Months EndedNovember 30,								Six Months EndedNovember 30,
	2020				2019				2020				2019
Impairment of long-lived assets:
Steel Processing	$	-			$	-			$	-			$	-
Pressure Cylinders		3,815				-				13,739				-
Other		-				-				-				40,601
Total impairment of long-lived assets	$	3,815			$	-			$	13,739			$	40,601
Restructuring and other expense (income), net:
Steel Processing	$	375			$	-			$	1,846			$	(26	)
Pressure Cylinders		7,257				-				7,571				-
Other		(36	)			(50	)			27				431
Total restructuring and other expense (income), net	$	7,596			$	(50	)		$	9,444			$	405

Contacts:SONYA L. HIGGINBOTHAMVP, CORPORATE COMMUNICATIONS AND BRAND MANAGEMENT614.438.7391 | sonya.higginbotham@worthingtonindustries.com 

MARCUS A. ROGIERTREASURER AND INVESTOR RELATIONS OFFICER614.840.4663 | marcus.rogier@worthingtonindustries.com 

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