| ||3Q 2022|| || ||3Q 2021|| || ||9M 2022|| || ||9M 2021|| |
|Net sales||$||1,378.2|| || ||$||759.1|| || ||$||3,721.9|| || ||$||2,193.1|| |
|Operating income|| ||37.6|| || || ||49.8|| || || ||263.9|| || || ||57.0|| |
|Equity income|| ||47.5|| || || ||31.7|| || || ||160.6|| || || ||80.9|| |
|Net earnings|| ||56.3|| || || ||67.6|| || || ||299.1|| || || ||610.2|| |
|Earnings per diluted share||$||1.11|| || ||$||1.27|| || ||$||5.83|| || ||$||11.28|| |
“We delivered solid earnings in the quarter,” said Andy Rose, President and CEO. “Steel Processing faced headwinds due to continued steel pricing volatility and choppy but improving automotive demand. Building Products improved across the board with increased contributions from ClarkDietrich and our wholly owned businesses, while Consumer Products benefitted from robust demand and improved margins.” Consolidated Quarterly Results
Net sales for the third quarter of fiscal 2022 were $1.4 billion compared to $759.1 million, an increase of $619.1 million, or 82%, over the comparable quarter in the prior year. The increase was driven by higher average selling prices across all of our businesses and contributions from the acquisitions of Tempel Steel Company (“Tempel”) and Shiloh Industries’ U.S. BlankLight® business in the current fiscal year.
Gross margin decreased $21.0 million from the prior year quarter to $143.1 million, as improvements in both the Consumer and Building Products businesses were more than offset by the $56.0 million unfavorable variance caused by inventory holding gains in the prior year quarter versus inventory holding losses in the current quarter.
Operating income for the current quarter was $37.6 million, a decrease of $12.2 million from the prior year quarter. Excluding impairment, restructuring, and the Nikola-related expense adjustment from both periods, adjusted operating income was down $37.0 million from the prior year quarter. The decrease was driven by lower gross margin and higher SG&A expense, which was up $16.0 million primarily due to the impact of acquisitions.
Interest expense was $8.1 million in the current quarter, up $0.5 million from the prior year quarter due to the impact of higher average debt levels resulting from borrowings under the Company’s revolving credit facility.
Equity income from unconsolidated joint ventures increased $15.8 million over the prior year quarter to $47.5 million, due to higher contributions from ClarkDietrich, where results benefited from significantly higher average selling prices. The Company received cash distributions of $28.9 million from unconsolidated joint ventures during the current quarter.
Income tax expense was $18.7 million in the current quarter compared to $4.5 million in the prior year quarter. The change was driven by the impact of a $19.7 million discrete tax benefit realized in connection with the sale of the oil and gas equipment business in the prior year quarter and lower core pre-tax earnings in the current quarter. Tax expense in the current quarter reflected an estimated annual effective rate of 23.2% compared to 20.1% for the prior year quarter. Balance Sheet
At quarter-end, total debt was $812.9 million, up $102.4 from May 31, 2021, due to borrowings under the Company’s revolving credit facility to fund the Tempel acquisition. The Company had $44.3 million of cash at quarter end, a decrease of $596.0 million from May 31, 2021, primarily due to acquisitions and an increase in working capital associated with higher average steel prices. Quarterly Segment Results
Steel Processing’s net sales totaled $1.1 billion, up $548.1 million over the comparable prior year quarter. The increase in net sales was driven by higher average selling prices and, to a lesser extent, the impact of acquisitions completed in fiscal 2022. Adjusted EBIT was down $54.7 million from the prior year quarter to $7.1 million due to inventory holding losses, estimated to be $24.9 million, in the current quarter compared to inventory holding gains of $31.1 million in the prior year quarter. Current quarter inventory holding losses included a pre-tax charge of $15.7 million to write inventory down to net realizable value. Equity earnings at Serviacero of $4.7 million were up slightly over the prior year quarter on improved spreads. The mix of direct versus toll tons processed was 51% to 49% in the current quarter, compared to 48% to 52% in the prior year quarter.
Consumer Products’ net sales totaled $161.7 million, up 41%, or $46.6 million, from the comparable prior year quarter due to higher average selling prices and, to a lesser extent, higher volume. Adjusted EBIT was up $12.1 million over the prior year quarter to $26.7 million on the combined impact of higher average selling prices and higher volume, which were partially offset by higher wages.
Building Products’ net sales totaled $132.9 million, up 38%, or $36.6 million, from the comparable prior year quarter on higher average selling prices. Adjusted EBIT of $49.6 million was $22.3 million more than the prior year quarter, due to higher equity earnings at ClarkDietrich, up $15.5 million, and an increase in operating income, up $7.9 million, on the favorable impact of higher average selling prices, partially offset by higher wages and freight costs.
Sustainable Energy Solutions’ net sales totaled $31.0 million, down 3%, or $1.1 million, from the comparable prior year quarter on lower volume, associated with the May 31, 2021 divestiture of the Liquified Petroleum Gas business in Poland. Adjusted EBIT was a loss of $2.8 million, compared to a profit of $0.1 million in the prior year quarter, on the combined impact of higher production costs and unfavorable mix. Both volume and mix in the current quarter were negatively impacted by the ongoing semi-conductor chip shortage. This business continues to evolve as it transitions to serve the global hydrogen ecosystem and adjacent sustainable energies. Recent Developments
- On Dec. 1, 2021, the Company’s Steel Processing segment completed the acquisition of Tempel for approximately $272.5 million, plus the assumption of certain long-term liabilities. Tempel is a global leader in the electrical steel market, which supplies steel laminations to the manufacturers of transformers, electric motors and electric vehicle motors, employing approximately 1,500 people across five manufacturing facilities located in Chicago, Canada, China, India, and Mexico.
- During the third quarter of fiscal 2022, the Company repurchased a total of 1,000,000 of its common shares for $54.2 million, at an average purchase price of $54.26.
- On March 22, 2022, Worthington’s Board of Directors declared a quarterly dividend of $0.28 per share payable on June 29, 2022 to shareholders of record on June 15, 2022.
“While steel price volatility is expected to remain a headwind for the company, overall, our businesses are performing well, and underlying end market demand remains healthy,” Rose said. “I am not surprised, but continue to be humbled and grateful for the way our teams are performing in today’s dynamic and challenging environment. We remain focused on delivering value added solutions to our customers and investing in innovative products that will benefit all of our stakeholders.” Conference Call
Worthington will review fiscal 2022 third quarter results during its quarterly conference call on March 23, 2022, at 8:30 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 pursuing its vision to be the transformative partner to its customers, a positive force for its communities and earn exceptional returns for its shareholders. For over six decades, the Company has been delivering innovative solutions to customers spanning industries such as automotive, energy, retail and construction. Worthington is North America’s premier value-added steel processor and producer of laser welded solutions and electrical steel laminations that provide lightweighting, safety critical and emission reducing components to the mobility market. Through on-board fueling systems and gas containment solutions, Worthington serves the growing global hydrogen ecosystem. The Company’s focus on innovation and manufacturing expertise extends to market-leading consumer products in tools, outdoor living and celebrations categories, sold under brand names, Coleman®, Bernzomatic®, Balloon Time®, Mag Torch®, Well-X-Trol®, General®, Garden-Weasel®, Pactool International® and Hawkeye™; as well as market leading building products, including water systems, heating & cooling solutions, architectural and acoustical grid ceilings and metal framing and accessories.
Headquartered in Columbus, Ohio, Worthington operates 58 facilities in 16 states and nine countries, sells into over 90 countries and employs approximately 9,500 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 transform, Worthington is committed to providing better solutions for customers and bettering the communities where it operates by reducing waste, supporting community-based non-profits and developing the next generations of makers.