GlobeNewswire Inc | Sep 23, 2020 06:45AM EDT

September 23, 2020

COLUMBUS, Ohio, Sept. 23, 2020 (GLOBE NEWSWIRE) -- Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $702.9 million and net earnings of $616.7 million, or $11.22 per diluted share, for its fiscal 2021 first quarter ended August 31, 2020. In the first quarter of fiscal 2020, the Company reported net sales of $855.9 million and a net loss of $4.8 million, or $(0.09) per diluted share. Results in both the current and prior year quarter were impacted by several unique items, as summarized below, including a net pre-tax gain of $746.6 million, or $10.74 per diluted share, in the current quarter related to the Companys investment in Nikola Corporation (Nikola). See Recent Developments below for further information regarding the Companys investment in Nikola.

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

1Q 2021 1Q 2020 Pre-Tax EPS Pre-Tax EPSImpairment andrestructuring $ (11.7 ) $ (0.16 ) $ (45.3 ) $ (0.65 )chargesIncrementalexpenses (49.5 ) (0.72 ) - - related toNikola gainsGains oninvestment in 796.1 11.46 - - NikolaLoss onextinguishment - - (4.0 ) (0.06 )of debtTake-or-paycontract $ - $ - $ 12.8 $ 0.17 cancellation

In addition, the current and prior year quarters included estimated inventory holding losses in Steel Processing of $6.8 million, or $0.09 per diluted share, and $8.4 million, or $0.11 per diluted share, respectively.

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

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

1Q 2021 1Q 2020 Net sales $ 702.9 $ 855.9 Operating loss (30.1 ) (14.6 )Equity income 23.6 24.8 Net earnings (loss) 616.7 (4.8 )Earnings (loss) per diluted share $ 11.22 $ (0.09 )

We are pleased with our first quarter results and with how our teams have continued to operate safely and effectively despite the challenging environment, said Andy Rose, President and CEO. We saw improvement in many of our end markets during the quarter, most notably automotive in Steel Processing, along with consumer products in Pressure Cylinders.

Consolidated Quarterly Results

Net sales for the first quarter of fiscal 2021 were $702.9 million, down 18% from the comparable quarter in the prior year, when net sales were $855.9 million. The decrease was driven by a combination of lower average selling prices and lower direct volume in Steel Processing, lower overall sales in Pressure Cylinders and the divestiture of the engineered cabs business in the prior year.

Gross margin decreased $3.9 million from the prior year quarter to $113.4 million, as higher gross margin in Steel Processing was more than offset by the $12.8 million benefit recognized in the prior year quarter related to the cancellation of a customer take-or-pay contract in Pressure Cylinders.

Operating loss for the current quarter was $30.1 million, $15.5 million higher than the prior year quarter. In addition to the impact of lower gross margin, the higher operating loss in the current quarter was driven by profit sharing, bonus and other expenses in the aggregate amount of $49.5 million related to the Companys investment in Nikola, partially offset by lower impairment and restructuring charges and lower SG&A expense.

Interest expense was $7.6 million for the current quarter, compared to $9.5 million in the prior year quarter. The decrease was due primarily to lower average interest rates resulting from the debt refinancing transactions completed at the end of the first quarter of fiscal 2020.

Equity income from unconsolidated joint ventures decreased $1.1 million from the prior year quarter, which included a $4.2 million impairment charge to write-off the Companys investment in its former steel processing joint venture in China. Excluding the impairment charge, equity income decreased $5.3 million on a lower contribution from WAVE, partially offset by improvements at ClarkDietrich and Serviacero. The Company received cash distributions of $16.9 million from unconsolidated joint ventures during the quarter.

Income tax expense was $163.8 million in the current quarter compared to an income tax benefit of $0.2 million in the prior year quarter. The increase in tax expense was due to higher pre-tax income partially offset by a lower estimated annual effective tax rate driven primarily by the Nikola items mentioned above and described further below under Recent Developments. Tax expense in the current quarter reflects an estimated annual effective rate of 21.6% compared to 25.1% for the prior year quarter.

Balance Sheet

At quarter-end, total debt was $707.5 million, up $7.8 million over May 31, 2020, and the Company had $650.1 million of cash at quarter-end.

Quarterly Segment Results

Steel Processings net sales totaled $431.0 million, down 18%, or $92.4 million, from the comparable prior year quarter driven by lower average selling prices and lower direct volume. Operating income of $13.6 million was $7.4 million higher than the prior year quarter as the impact of lower direct volume was more than offset by improved spreads and lower conversion costs. The mix of direct versus toll tons processed was 49% to 51% in the current quarter, compared to 54% to 46% in the prior year quarter. The change in mix was driven primarily by the consolidation of the toll processing joint venture, Worthington Samuel Coil Processing, in the third quarter of fiscal 2020.

Pressure Cylinders net sales totaled $270.9 million, down 11%, or $33.5 million, from the comparable prior year quarter. A total of $17.2 million of the decrease was due to the early termination of a customer take-or-pay contract within the industrial products business in the prior year quarter. The remaining decline was due to lower volumes in the oil and gas equipment business combined with an unfavorable shift in product mix in the industrial products business, partially offset by higher volume in the consumer products business. Operating income of $8.6 million was $21.0 million less than the prior year quarter, when the take-or-pay cancellation contributed $12.8 million of gross margin. The remaining decline was due primarily to current quarter impairment and restructuring charges, which totaled $10.2 million.

Recent Developments

-- During the first quarter of fiscal 2021, the Company recognized a net pre-tax gain of $746.6 million, or $10.74 per diluted share, related to its investment in Nikola consisting of realized gains of $508.5 million and an unrealized mark-to-market gain of $287.6 million. These gains were partially offset by $49.5 million of expenses within operating income, of which $28.9 million was due to profit sharing and bonus expenses related to the Nikola gains and $20.6 million was due to the contribution of 500,000 shares of Nikola common stock to the Worthington Industries Foundation to establish a charitable endowment. At quarter end, the Company owned 7,048,020 shares of Nikola common stock. -- During the first quarter of fiscal 2021, the Company repurchased a total of 1,460,484 of its common shares for $54.3 million, at an average purchase price of $37.18.

Outlook

Demand remains solid across many of our markets with the exception of oil & gas and a few industrial markets. However, the current economy makes it difficult to predict with confidence how the balance of our fiscal year will play out, Rose said. We are well capitalized and have significant cash on our balance sheet making us well positioned to take advantage of opportunities as they arise and drive long term value for our shareholders.

Conference Call

Worthington will review fiscal 2021 first quarter results during its quarterly conference call on September 23, 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 Americas 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 Companys brands, primarily sold in retail stores, include Coleman, Bernzomatic, Balloon Time, Mag Torch and Well-X-Trol. Worthingtons WAVE joint venture with Armstrong is the North American leader in innovative ceiling solutions.

Headquartered in Columbus, Ohio, Worthington operates 52 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, to cut variable costs, or to eventually recall furloughed workers; 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys healthcare and other costs and negatively impact the Companys 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 Companys filings with the United States Securities and Exchange Commission, including those described in Part I Item 1A. Risk Factors of the Companys Annual Report on Form 10-K for the fiscal year ended May 31, 2020.

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

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

Three Months Ended August 31, 2020 2019 Net sales $ 702,909 $ 855,859 Cost of goods sold 589,551 738,568 Gross margin 113,358 117,291 Selling, general and administrative expense 82,196 90,823 Impairment of long-lived assets 9,924 40,601 Restructuring and other expense, net 1,848 455 Incremental expenses related to Nikola gains 49,511 - Operating loss (30,121 ) (14,588 )Other income (expense): Miscellaneous income, net 452 695 Interest expense (7,590 ) (9,480 )Equity in net income of unconsolidated affiliates 23,634 24,767 Gains on investment in Nikola 796,141 - Loss on extinguishment of debt - (4,034 )Earnings (loss) before income taxes 782,516 (2,640 )Income tax expense (benefit) 163,778 (185 )Net earnings (loss) 618,738 (2,455 )Net earnings attributable to noncontrolling 2,063 2,321 interestsNet earnings (loss) attributable to controlling $ 616,675 $ (4,776 )interest Basic Average common shares outstanding 54,070 55,241 Earnings (loss) per share attributable to $ 11.41 $ (0.09 )controlling interest Diluted Average common shares outstanding 54,942 55,241 Earnings (loss) per share attributable to $ 11.22 $ (0.09 )controlling interest Common shares outstanding at end of period 53,362 54,871 Cash dividends declared per share $ 0.25 $ 0.24

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

August 31, May 31, 2020 2020 Assets Current assets: Cash and cash equivalents $ 650,068 $ 147,198 Receivables, less allowances of $1,646 and $1,521 at August 31, 2020and May 31, 2020, respectively 423,138 341,038 Inventories: Raw materials 163,762 234,629 Work in process 82,154 76,497 Finished products 73,562 93,975 Total inventories 319,478 405,101 Income taxes receivable 2,287 8,376 Assets held for sale 12,857 12,928 Investment in Nikola 287,630 - Prepaid expenses and other current assets 70,999 68,538 Total current assets 1,766,457 983,179 Investments in unconsolidated affiliates 208,395 203,329 Operating lease assets 29,251 31,557 Goodwill 326,798 321,434 Other intangible assets, net of accumulated amortization of $94,877 and$92,774 at August 31, 2020 and May 31, 2020, 179,665 184,416 respectivelyOther assets 34,541 34,956 Property, plant and equipment: Land 24,572 24,197 Buildings and improvements 300,265 302,796 Machinery and equipment 1,079,899 1,055,139 Construction in progress 54,991 52,231 Total property, plant and equipment 1,459,727 1,434,363 Less: accumulated depreciation 873,781 861,719 Total property, plant and equipment, net 585,946 572,644 Total assets $ 3,131,053 $ 2,331,515 Liabilities and equity Current liabilities: Accounts payable $ 294,172 $ 247,017 Accrued compensation, contributions to employee benefit plans andrelated taxes 88,145 64,650 Dividends payable 14,808 14,648 Other accrued items 50,036 49,974 Current operating lease liabilities 10,251 10,851 Income taxes payable 84,612 949 Current maturities of long-term debt 160 149 Total current liabilities 542,184 388,238 Other liabilities 82,814 75,786 Distributions in excess of investment in 101,865 103,837 unconsolidated affiliateLong-term debt 707,331 699,516 Noncurrent operating lease liabilities 23,880 25,763 Deferred income taxes, net 143,079 71,942 Total liabilities 1,601,153 1,365,082 Shareholders' equity - controlling interest 1,382,785 820,821 Noncontrolling interests 147,115 145,612 Total equity 1,529,900 966,433 Total liabilities and equity $ 3,131,053 $ 2,331,515

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

Three Months Ended August 31, 2020 2019 Operating activities: Net earnings (loss) $ 618,738 $ (2,455 )Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:Depreciation and amortization 22,211 24,177 Impairment of long-lived assets 9,924 40,601 Provision for (benefit from) deferred income 71,031 (3,498 )taxesBad debt expense 94 168 Equity in net income of unconsolidated (6,757 ) 5,082 affiliates, net of distributionsNet loss on sale of assets 402 618 Stock-based compensation 4,856 3,995 Gains on investment in Nikola (796,141 ) - Charitable contribution of Nikola shares 20,653 - Loss on extinguishment of debt - 4,034 Changes in assets and liabilities: Receivables (82,194 ) 14,981 Inventories 85,622 44,282 Accounts payable 47,154 (37,234 )Accrued compensation and employee benefits 23,852 (23,215 )Income taxes payable 83,664 10,556 Other operating items, net 14,279 (7,167 )Net cash provided by operating activities 117,388 64,369 Investing activities: Investment in property, plant and equipment (32,871 ) (22,174 )Proceeds from sale of Nikola shares 487,859 - Proceeds from sale of assets - 9,176 Net cash provided (used) by investing 454,988 (12,998 )activities Financing activities: Proceeds from long-term debt, net of issuance - 101,598 costsPrincipal payments on long-term obligations (97 ) (153,977 )and debt redemption costsPayments for issuance of common shares, net of (1,150 ) (3,213 )tax withholdingsPayments to noncontrolling interests (560 ) - Repurchase of common shares (54,320 ) (29,599 )Dividends paid (13,379 ) (12,960 )Net cash used by financing activities (69,506 ) (98,151 ) Increase (decrease) in cash and cash 502,870 (46,780 )equivalentsCash and cash equivalents at beginning of 147,198 92,363 periodCash and cash equivalents at end of period $ 650,068 $ 45,583

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 August 31, 2020 2019 Volume: Steel Processing (tons) 928,444 891,387 Pressure Cylinders (units) 21,743,065 20,183,688 Net sales: Steel Processing $ 431,020 $ 523,375 Pressure Cylinders 270,904 304,396 Other 985 28,088 Total net sales $ 702,909 $ 855,859 Material cost: Steel Processing $ 305,587 $ 396,442 Pressure Cylinders 115,717 126,870 Selling, general and administrative expense:Steel Processing $ 35,598 $ 35,516 Pressure Cylinders 43,457 46,466 Other 3,141 8,841 Total selling, general and administrative $ 82,196 $ 90,823 expense Operating income (loss): Steel Processing $ 13,617 $ 6,168 Pressure Cylinders 8,642 29,623 Other (759 ) (45,133 )Segment operating income (loss) 21,500 (9,342 ) Unallocated corporate and other (2,110 ) (5,246 )Incremental expenses related to Nikola (49,511 ) - gainsTotal operating loss $ (30,121 ) $ (14,588 ) Equity income (loss) by unconsolidated affiliate:WAVE $ 17,656 $ 23,917 ClarkDietrich 4,896 4,090 Serviacero Worthington 1,309 754 ArtiFlex (108 ) 206 Other (119 ) (4,200 )Total equity income $ 23,634 $ 24,767

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 August 31, 2020 2019 Volume (units): Consumer products 17,857,141 16,898,390 Industrial products 3,885,805 3,284,455 Oil & gas equipment 119 843 Total Pressure Cylinders 21,743,065 20,183,688 Net sales: Consumer products $ 132,782 $ 119,480 Industrial products 128,225 152,618 Oil & gas equipment 9,897 32,298 Total Pressure Cylinders $ 270,904 $ 304,396 The following provides detail of impairment of long-lived assets andrestructuring and other expense, net included in operating income by segment. Three Months Ended August 31, 2020 2019 Impairment of long-lived assets: Steel Processing $ - $ - Pressure Cylinders 9,924 - Other - 40,601 Total impairment of long-lived assets $ 9,924 $ 40,601 Restructuring and other expense (income), net:Steel Processing $ 1,471 $ (26 )Pressure Cylinders 314 - Other 63 481 Total restructuring and other expense, net $ 1,848 $ 455