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Saturday, July 2, 2011

Worthington Reports Fourth Quarter and Fiscal Year Results

COLUMBUS, Ohio--(BUSINESS WIRE)--Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $675.7 million and net earnings of $51.9 million, or $0.70 per share, for the fiscal 2011 fourth quarter ended May 31, 2011. In last year’s fourth quarter, the Company reported net earnings of $33.1 million, or $0.42 per share.

“We believe we will continue to see a slowly improving yet uneven economy for the rest of this calendar year and on into 2012”

.For the fiscal year ended May 31, 2011, the Company posted net earnings of $115.1 million, or $1.53 per share, driven by a strong fourth quarter. Sales were up 26% from the prior year to $2,442.6 million, primarily due to the increase in sales volumes in the Steel Processing and Pressure Cylinders segments and a 24% increase in the average market price of steel. Current year earnings included a net gain of $3.4 million, or $0.03 per share, driven largely by the Joint Venture Transactions which are explained in more detail below and partially offset by current year impairment and restructuring charges. Prior year earnings were reduced by goodwill impairment, restructuring and certain legal charges totaling $31.0 million, or $0.39 per share.
The results for the three- and twelve-month periods ended May 31, 2011 were as follows:
(U.S. dollars in millions, except per share data)

Quarterly Results – Consolidated
As described more fully below under Fiscal 2011 Highlights, the Company closed on two significant transactions during the fourth quarter. These transactions resulted in the contribution of the majority of the net assets and all the operations of the Metal Framing and Automotive Body Panels segments into two separate joint ventures (“the Joint Venture Transactions”) effective March 1, 2011 and May 9, 2011, respectively. From the effective date of these transactions the results of these segments are no longer included in consolidated operating income. Instead, the percentage of ownership in the results of the newly formed joint ventures is included in the equity in net income of unconsolidated affiliates in the consolidated statement of earnings.

Net sales for the fourth quarter ended May 31, 2011, were $675.7 million, an 8% increase from the comparable quarter last year. Excluding the impact of the Joint Venture Transactions, net sales actually increased 17% with the Pressure Cylinders and Steel Processing segments reporting a 27% and 10% increase in sales, respectively. The Worthington Global Group also reported an increase of $15.0 million in net sales over the prior year quarter, primarily due to its activity in Mozambique.

Gross margin for the current quarter was $119.2 million, or 18% of net sales. This represents a $13.4 million increase over the prior year quarter’s gross margin of $105.8 million, or 17% of net sales. Excluding the impact of the Joint Venture Transactions, the gross margin increased $21.9 million versus last year’s quarter. An improved spread, primarily in Steel Processing, between the average selling price and the cost of steel, improved the margin by $22.6 million. While volumes were up substantially in both the Steel Processing and Pressure Cylinders segments, the favorable impact was more than offset by the impact of the Joint Venture Transactions. SG&A expenses were $1.0 million lower than the prior year quarter primarily due to a $6.4 million reduction in expenses due to the Joint Venture Transactions partially offset by higher profit sharing and bonus expenses, associated with improved earnings, and increased wages.

Operating income for the quarter was $62.3 million, up $19.7 million or 46% versus last year. Better spreads between average selling prices and the cost of steel were the main drivers for the increase in operating income.

Interest expense was $4.7 million in the quarter, up from $3.1 million in the prior year mainly due to the higher interest rate on the $150.0 million, 6.5% unsecured notes, issued in April 2010 to lock in long-term financing.
Equity in net income from unconsolidated joint ventures was $24.9 million, an increase of $6.1 million from the comparable year-ago quarter, on sales of $408.9 million. Worthington Armstrong Venture (WAVE) contributed $16.1 million of earnings, a 7% increase from last year's fourth quarter, and paid dividends of $12.3 million. Four other joint ventures, TWB Company, Worthington Specialty Processing, Serviacero Worthington and Samuel Steel Pickling all were profitable and showed a combined improvement of $3.0 million over the prior year quarter. In addition, the new ClarkWestern Dietrich Building Systems joint venture contributed $2.1 million of earnings.

For the quarter, income tax expense was $28.9 million compared to $22.8 million a year ago. The current quarter expense reflected an effective income tax rate of 35.8%, excluding earnings from the non-controlling interests in the two consolidated joint ventures. The effective income tax rate for the year was 33.7%, while the prior year rate was 37.1%. The change in effective income tax rate was primarily driven by changes in the mix of income among the jurisdictions in which we do business and tax law changes.
Balance Sheet

At quarter end, total debt was $383.2 million, up $52.2 million from the third quarter, as an increase in working capital raised short-term borrowing needs. As of May 31, 2011, the Company had utilized $90.0 million of its $100.0 million trade accounts receivable securitization facility, and $41.6 million had been drawn on the $400.0 million revolving credit facility.

Cash provided by operating activities for the quarter was $10.4 million, compared to cash used by operations of $9.6 million in the year-ago quarter. During the current quarter, the Company invested $6.1 million in property, plant and equipment.

Quarterly Segment Results
 
Metal Framing’s net sales of $6.6 million were down 92%, or $80.5 million, as a result of the contribution of its operations into the new ClarkDietrich Building Systems joint venture effective March 1, 2011. Worthington retained a 25% interest in this unconsolidated joint venture, with its results reported as equity in net income of unconsolidated affiliates. Net sales in the current quarter relate to assets that were not contributed. These retained facilities continued to produce product to assist the new joint venture during the transition period. These facilities will be shut-down by the end of the next fiscal quarter. The joint venture purchased this product from Worthington at standard cost.

Outlook
“We believe we will continue to see a slowly improving yet uneven economy for the rest of this calendar year and on into 2012,” McConnell said. “We intend to continue to capitalize on opportunities to grow and deliver sustainable earnings. We have made significant improvements in our businesses over the past years in how we respond, deliver and perform. While we stay focused on those areas, we also plan to integrate new businesses into our platform for growth.”
Fiscal 2011 Highlights/Activities

•On March 1, 2011, the Company closed an agreement with Marubeni-Itochu Steel America Inc. (MISA) which combined certain assets of Dietrich Metal Framing and ClarkWestern Building Systems in a newly-formed joint venture. In the transaction, Worthington received a 25% interest in the new joint venture, ClarkWestern Dietrich Building Systems LLC, as well as the assets of three MISA Metals Inc. steel processing locations. The joint venture is unconsolidated and the steel processing assets and locations are reported under the Steel Processing segment.

•On December 28, 2010, Worthington acquired 60% of the net assets of Nitin Cylinders Limited, which is now Worthington Nitin Cylinders Limited. This consolidated joint venture manufactures high pressure, seamless steel cylinders for compressed natural gas storage in motor vehicles and cylinders for compressed industrial gases

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