“This quarter we faced unprecedented challenges, as we and the entire economy were confronted by the Coronavirus and the related shutdowns and restrictions that were implemented,” said John McConnell, Chairman and CEO. “We have been focused on providing a safe working environment for our employees as they continue to serve our customers. While our people and our results were impacted significantly by the shutdowns, I am proud of our team and how they have navigated through this period.” Consolidated Quarterly Results
Net sales for the fourth quarter of fiscal 2020 were $611.6 million, down 35% from the comparable quarter in the prior year, when net sales were $938.8 million. The decrease was driven by lower direct volume and lower average direct selling prices in Steel Processing combined with an unfavorable shift in product mix in the industrial products business in Pressure Cylinders.
Gross margin decreased $36.1 million from the prior year quarter to $89.9 million. The decrease was driven by the reduced volume in Steel Processing, which was partially offset by the favorable impact of a slight inventory holding gain in the current quarter, compared to significant inventory holding losses in the prior year quarter, combined with the unfavorable shift in product mix in the industrial products business in Pressure Cylinders.
Operating income for the current quarter was $6.3 million, a decrease of $25.7 million from the prior year quarter. The impact of lower gross margin was partially offset by lower SG&A expense, which was down $20.0 million, due primarily to lower profit sharing and bonus and lower overall corporate costs. Operating income was also adversely impacted by current quarter impairment and restructuring charges of $15.7 million, which were $9.6 million higher than the prior year quarter.
Interest expense was $7.5 million for the current quarter, compared to $9.5 million in the prior year quarter. The decrease was due primarily to lower average debt levels and lower average interest rates resulting from the debt refinancing transactions completed earlier in the fiscal year.
Equity income from unconsolidated joint ventures decreased $7.9 million from the prior year quarter to $17.3 on lower contributions from all joint ventures. The Company received cash distributions of $44.6 million from unconsolidated joint ventures during the quarter for a total of $123.0 million for fiscal 2020.
Income tax expense was $5.8 million in the current quarter compared to $9.2 million in the prior year quarter. Tax expense in the current quarter reflects an annual effective rate of 25.1% compared to 22.0% for the prior year quarter. Balance Sheet
At quarter-end, total debt was $699.7 million, up $0.9 million over February 29, 2019, and the Company had $147.2 million of cash on hand. Quarterly Segment Results
Steel Processing’s net sales totaled $328.2 million, down 44%, or $256.2 million, from the comparable prior year quarter on lower direct volume and to a lesser extent lower average selling prices. The operating loss of $1.8 million in the current quarter was $16.7 million unfavorable to the $14.9 million operating income reported in the prior year quarter on lower direct volume, partially offset by the favorable impact of a slight inventory holding gain in the current quarter compared to a significant inventory holding loss in the prior year quarter. The mix of direct versus toll tons processed was 45% to 55% in the current quarter, compared to 55% to 45% 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, earlier in the fiscal year.
Pressure Cylinders’ net sales totaled $282.9 million, down 12%, or $39.4 million, from the comparable prior year quarter. The decline was due to lower volumes in the oil and gas equipment business and a shift in product mix in the industrial products business, partially offset by higher volume in the consumer products business. Operating income of $13.5 million was $7.9 million less than the prior year quarter, $5.5 million of which was driven by higher combined impairment and restructuring charges. The remaining decline was due to weakness in the industrial products business, primarily in Europe, partially offset by lower SG&A expense and a slight improvement in the consumer products business. Recent Developments
- During May 2020, the Company finalized plans to exit the two remaining facilities that were part of the former Engineered Cabs segment in Stow, Ohio and Greensburg, Ind. In connection with these actions, the Company recorded impairment and restructuring charges totaling $4.0 million within the Other segment during the quarter.
- On June 3, 2020, Nikola Corporation (“NKLA”) became a public company through a reverse merger into a subsidiary of VectoIQ Acquisition Corporation, a NASDAQ listed publicly traded company. As previously disclosed, the Company owns 19,048,020 shares of NKLA.
- On June 24, 2020, Worthington’s Board of Directors declared a quarterly dividend of $0.25 per share payable on September 29, 2020 to shareholders of record on September 15, 2020, an increase of $0.01 per share.
- On June 24, 2020, the Company announced that Andy Rose would become President and CEO effective Sept. 1, and that John McConnell will serve as Executive Chairman.
"Yesterday, we announced our leadership succession plan, naming Andy Rose President and CEO effective Sept 1. At that time, I will assume the role of Executive Chairman," McConnell said. "One of my recent priorities was to have a strong set of leaders in place to drive the company forward. As we enter our 65th year in business, I am confident we have the right team, and we are well positioned to emerge from the current crisis as a stronger Company." Conference Call
Worthington will review fiscal 2020 fourth quarter results during its quarterly conference call on June 25, 2020, at 10:30 a.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 56 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.