Metal processor Worthington Industries, Inc.’s (WOR) earnings of 45 cents a share for second-quarter fiscal 2013 (ended November 30) exceeded the year-ago earnings of 17 cents. The prior-year quarter’s earnings included a charge of $9.7 million associated with the voluntary recall of propylene cylinders. Excluding inventory holding losses and the impact of product recall, earnings were 49 cents a share for the reported quarter, topping the Zacks Consensus Estimate of 41 cents.
Profit, as reported, shot up more than two-and-a-half fold year over year in the second quarter to $31.8 million riding on a strong performance of the company's pressure cylinder business.
Revenue climbed 10% year over year to $622.6 million but missed the Zacks Consensus Estimate of $638 million. Higher volumes aided by acquisitions boosted the top line in the quarter. However, this was partly offset by lower average selling prices due to falling market price of steel.
Gross margin increased to 15.2% from 10% a year ago. Acquisitions and better product mix contributed to the improvement.
Segment Highlights
Revenues in the core Steel Processing segment clipped 9% year over year to $339.3 million on lower volumes and pricing. Volumes fell 8% to 626 units on account of the wind down of unprofitable customer accounts from the MISA Metals buyout.
The company’s Pressure Cylinders division had a healthy quarter with revenues jumping 17% year over year to $207.5 million, thanks to acquisitions. Volumes surged roughly 34% to 19,496 units. Worthington acquired leading atmospheric tanks and pressure vessels maker Westerman Companies in September 2012. It is now a part of the Pressure Cylinders unit.
The Engineered Cabs segment, which consists the operations of Angus Industries Inc. (acquired in late 2011), posted revenues of $57.8 million in the quarter. The division was hurt by lower volumes due to production delays.
Financial Position
The company exited the quarter with cash and cash equivalents of $32.9 million, down 39% year over year. Long-term debt increased 63% year over year to $408 million. Operating cash flows increased 37% year over year to $88.4 million.
Outlook
Moving ahead, the company expects normal seasonality in its traditional markets in the third quarter and envisions continued strong performance in its cylinder operations. It will continue to explore additional opportunities for growth both organically and through new businesses.
Worthington is engaged in processing steel for application in the automotive, construction, hardware, agricultural, aerospace and other industries. The company makes a range of processed steel items, pressure cylinders (including oxygen and helium tanks and hand torches), metal framing products, racks, shipping pallets, airbrake tanks and consumer products. The company operates 80 facilities throughout 12 nations.
Worthington, which competes with AK Steel Holding Corporation (AKS) among others, currently retains a short-term Zacks #2 Rank (Buy).
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