This summary is based on the third quarter fiscal 2008 earnings call conducted by Worthington Industries (WOR: chart) on March 20, 2008.
Chairman, Chief Executive Officer: John P. McConnell
President, Chief Financial Officer: John S. Christie
Executive Vice President, Chief Operating Officer: George Stoe
Director of Investor Relations: Allison Sanders
Controller: Richard Welch
Key Investors Issues
- The earnings per share rose to 23 cents as against 6 cents in the prior year quarter.
- Quarterly revenue grew 7% over prior year to $725.7 million.
- The firm repurchased 2.3 million shares during the quarter.
Third Quarter Fiscal 2008 Financial Highlights
For the quarter, the firm reported earnings per share of 23 cents, excluding 2 cents per share in restructuring charges, most of which were non-cash.
Earnings per share were 25 cents compared to last year’s 6 cents per share. Third quarter, which spans between December and February, is typically the weakest quarter in all three of business segments and the joint ventures due to holiday and weather-related shutdowns. December is usually the toughest month of the year for the firm and December 2007 was a difficult month, especially for the metal framing segment, which only makes these quarterly results that much better.
The sales of $726 million were up 7% from $677 million in the same period last year.
This was due to stronger volumes in all three business segments.
- The gross profit margin rose from 8.3% to 10.4%, as a result of wider spreads between raw material costs and selling prices in the steel processing and metal framing segments.
SG&A expense was flat despite higher depreciation associated with the firm’s new ERP system.
As a percentage of sales, SG&A was 7.6% during the current quarter compared to 8% for the year-ago quarter. Despite the ongoing impact of higher depreciation, SG&A expense is down $9 million on a year-to-date basis and is expected to drop further in coming quarters, as the firm realizes the benefit of cost reduction initiatives.
As a result of the higher gross margin and controlled SG&A expense, quarterly operating income rose from $2 million to $21 million, excluding the impact of restructuring charges.
Operating income does not include equity income of the nine unconsolidated joint ventures. The most significant of which, WAVE, had record third quarter earnings. Collectively, equity income rose 16% to $16 million from $13 million last year. As a group, the joint ventures generated $183 million in sales during the three months, corresponding with third quarter, and paid $13 million in dividends, favorably impacting cash flow.
Miscellaneous expense was in line with the year-ago period, but was less than the prior quarter.
Miscellaneous expense includes minority interest of the firm’s partner in its consolidated steel processing joint venture, Spartan Steel Coating. Spartan’s results were weaker this quarter, due to the ramifications of an unplanned outage at Severstal, the firm’s partner and supplier to the venture. Coincidentally, a year-ago’s period also reflected reduced volumes at Spartan, as the company was under construction to increase capacity at the facility.
- Interest expense declined $1 million due to lower interest rates and slightly higher borrowings.
Income tax expense rose due to both higher earnings and a mix of earnings that included more domestic and less foreign earnings, which are taxed at lower rates.
The estimated effective tax rate for the balance of fiscal 2008 is 30%, excluding audit resolutions that occur in the normal course of the events.
Net total debt was $354 million, up $55 million from the November quarter and up $28 million from the year-ago time period.
