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WOR News Worthington Reports First Quarter Results

COLUMBUS, Ohio--(BUSINESS WIRE)--Worthington Industries, Inc. (NYSE:WOR) today reported results for the three months ended August 31, 2006.

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

Net sales of $778.7 million were a first quarter record, increasing 12% from first quarter 2006 net sales of $694.1 million. First quarter 2007 net earnings of $43.2 million, or $0.48 per diluted share, were up 52% from first quarter 2006 net earnings of $28.4 million, or $0.32 per diluted share.

“This first quarter reflects good results -- in some cases, great results -- at all three business segments and our joint ventures. As key segments of the economy began to slow during the quarter, our management team performed well in balancing volumes and margins,” said John P. McConnell, Chairman and CEO.

First Quarter Highlights

• Quarterly net sales of $778.7 million were the best first quarter sales in the company’s history.
• Operating income doubled compared to the year ago first quarter.

• Quarterly net sales and operating income in the Pressure Cylinders segment represented a first quarter record of $121.5 million and $16.7 million, respectively.
• Quarterly equity income, from six unconsolidated joint ventures, totaled $18.3 million due to record performance at Worthington Armstrong Venture (WAVE) and record first quarter performance at TWB and Aegis.
• Volumes were up in Steel Processing compared to the year ago first quarter.
• Unit selling prices were up in all three business segments -- Steel Processing, Metal Framing and Pressure Cylinders -- compared to the year ago first quarter, and in Steel Processing and Metal Framing compared to last quarter.
• Spreads between selling prices and material costs widened in all three business segments compared to the year ago first quarter, and in Steel Processing and Metal Framing compared to last quarter.
• The August 16, 2006, acquisition of Precision Specialty Metals (PSM), a processor of stainless steel located in Los Angeles, California, contributed $2.5 million in sales to the Steel Processing segment for the time it was owned during the quarter.
• The ratio of total debt to capitalization was 27.9% at quarter end compared to 31.6% a year ago.
• Annualized return on equity was 18.0% in the first quarter of fiscal 2007 compared to 13.7% in the first quarter of fiscal 2006.

Quarterly Segment Results

In the Steel Processing segment, quarterly net sales rose 14%, or $49.4 million, to $401.0 million from $351.6 million in the comparable quarter of fiscal 2006. The increase in net sales was due to higher pricing (up 6%) and higher volumes (up 7%) relative to the prior year. Operating income more than doubled due to the combination of higher volumes and a wider spread between selling prices and material costs compared to depressed spreads in the first quarter of fiscal 2006.

In the Metal Framing segment, net sales increased 3% or $7.0 million, to $212.3 million from $205.3 million in the comparable quarter of fiscal 2006. Average selling prices improved 15%, more than offsetting an overall volume decline of 10%, as measured in tons. A portion of the tonnage decline was attributable to increased sales of the new Ultrasteel product which is lighter than traditional framing products per linear foot. Operating income for the quarter rose 71% compared to the prior year as a result of a better spread between selling prices and material costs.

In the Pressure Cylinders segment, net sales increased 13%, or $14.4 million, to $121.5 million from $107.1 million in the comparable quarter of fiscal 2006. Average selling prices improved significantly due to product mix and price increases in certain product lines, to cover increased material costs. Strong results in Europe, improved volumes in several North American product lines, and plant consolidation savings led to a doubling in operating income from the prior year.

Worthington’s joint ventures added significantly to first quarter results. Equity in the net income of six unconsolidated affiliates totaled $18.3 million for the quarter, compared to $13.2 million in the year ago quarter, a 38% increase. The improvement was due to record first quarter earnings at WAVE, TWB and Aegis.

Outlook

Demand in two of Worthington’s key end markets, commercial construction (especially office buildings) and automotive, may continue to soften. Recent announcements of production cuts by General Motors, Ford and Chrysler will create a more challenging environment for the Steel Processing segment. Uncertainty regarding the economy and interest rates, coupled with relatively high material prices, has contributed to delays in planned commercial construction starts by customers of the Metal Framing segment. Other end markets served by the Pressure Cylinders segment and certain of the company’s joint ventures continue to be strong and stable.

Other

Dividend Declared

On August 23, 2006, the board of directors declared a quarterly cash dividend of $0.17 per share payable September 29, 2006, to shareholders of record on September 15, 2006.

Conference Call

Worthington will review first quarter results during its quarterly conference call tomorrow, September 27, 2006, at 8:30 a.m. Eastern Daylight Time. Details on the conference call can be found on the company web site at www.WorthingtonIndustries.com

Corporate Profile

Worthington Industries is a leading diversified metal processing company with annual sales of approximately $3 billion. The Columbus, Ohio, based company is North America’s premier value-added steel processor and a leader in manufactured metal products such as metal framing, pressure cylinders, automotive past model service stampings, metal ceiling grid systems and laser welded blanks. Worthington employs more than 8,000 people and operates 62 facilities in 10 countries.

Founded in 1955, the company operates under a long-standing corporate philosophy rooted in the golden rule, with earning money for its shareholders as the first corporate goal. This philosophy, an unwavering commitment to the customer, and one of the strongest employee/employer partnerships in American industry serve as the company’s foundation. Worthington Industries is listed as one of America’s Most Admired Companies and one of the 100 Best Companies to Work For in America by Fortune magazine.

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 to future or expected performance, sales, operating results and earnings per share; projected capacity and working capital needs; pricing trends for raw materials and finished goods; anticipated capital expenditures and asset sales; projected timing, results, costs, charges and expenditures related to acquisitions or to facility dispositions, shutdowns and consolidations; new products and markets; expectations for customer inventories, jobs and orders; expectations for the economy and markets; expected benefits from new initiatives; 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, product demand and pricing; changes in product mix and market acceptance of the company’s products; fluctuations in pricing, quality or availability of raw materials (particularly steel), supplies, utilities and other items required by operations; effects of facility closures and the consolidation of operations; the effect of consolidation and other changes within the steel, automotive, construction and related industries; failure to maintain appropriate levels of inventories; the ability to realize cost savings and operational efficiencies on a timely basis; the overall success of, and the ability to integrate, newly-acquired businesses and achieve synergies therefrom; capacity levels and efficiencies within facilities and within the industry as a whole; financial difficulties (including bankruptcy filings) of customers, suppliers, joint venture partners and others with whom the company does business; the effect of national, regional and worldwide economic conditions generally and within major product markets, including a prolonged or substantial economic downturn; the effect of disruption in business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, acts of war or terrorist activities or other causes; changes in customer inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability, and foreign currency exposure; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; adverse claims experience with respect to workers compensation, product recalls or liability, casualty events or other matters; deviation of actual results from estimates and/or assumptions used by the company in the application of its significant accounting policies; level of imports and import prices in the company’s markets; the impact of judicial rulings and governmental regulations, both in the United States and abroad; and other risks described from time to time in the company’s filings with the United States Securities and Exchange Commission.