Worthington Industries,Inc reported net sales of USD 622.6 million and net earnings of USD 31.8 million,or USD 0.45 per share,for its fiscal 2013 second quarter ended November 30,2012.In the second quarter of the prior year,the Company reported net sales of USD 565.7 million and net earnings of USD 12.0 million,or USD 0.17 per share.The prior year period included USD 9.7 million or USD 0.10 per share of charges related to the voluntary recall of propylene cylinders,which is now essentially complete.The current quarter included an additional USD 1.0 million of expense related to the recall.
Net sales for the second quarter were USD 622.6 million,up 10%from the comparable quarter in the prior year,when net sales were USD 565.7 million.An increase in volume was partially offset by lower average selling prices,primarily in Steel Processing,which were affected by the declining market price of steel.Most of the volume increase resulted from the acquisition of Angus Industries,reported under the Engineered Cabs segment,and two acquisitions in Pressure Cylinders.
Gross margin for the current quarter was USD 94.9 million,compared to USD 56.6 million in the prior year quarter.The USD 38.3 million increase was the result of acquisitions,a more favorable product mix,lower inventory holding losses for Steel Processing,and the impact of the voluntary product recall in Pressure Cylinders.The gross margin for the current quarter included USD 1.0 million of product recall charges compared to USD 9.7 million in the comparable quarter in the prior year.
SG&A expense increased USD 12.2 million over the prior year quarter driven by the impact of acquisitions and higher profit sharing and bonus expense resulting from higher net earnings.
Operating income for the current quarter was USD 28.8 million,compared to USD 2.8 million in the prior year quarter.The USD 26.0 million increase was mostly due to the impact of the voluntary product recall in the prior year quarter,lower inventory holding losses in Steel Processing and acquisitions.The combined impact of impairments,restructuring charges and joint venture transactions was essentially flat from the prior year quarter.In the current quarter,USD 1.3 million of restructuring charges were incurred in connection with the wind-down of the commercial stairs business and a net gain of USD 0.3 million related to the joint venture transactions,which consisted primarily of gains on asset disposals.
Interest expense was USD 6.3 million in the quarter,compared to USD 4.8 million in the comparable period in the prior year primarily due to the impact of higher average debt levels.
Mr John McConnell chairman and CEO said that"We had strong performances from most of our businesses in the second quarter,with volume increases in Pressure Cylinders,and a steady performance from Steel Processing,offset by softness in Engineered Cabs.Our year-over-year performance improved despite declining steel prices,thanks to contributions from recent acquisitions.We are very pleased with the results of our latest acquisition,Westerman,whose products include tanks for use in on-site production in shale drilling activity."
Outlook
Mr McConnell said that"We expect to see the normal seasonality in our traditional markets in the third quarter.We do think that the delay by lawmakers in addressing the country's fiscal crisis has resulted in a pullback in some areas of the economy.While this may impact some of our cyclical businesses,we continue to anticipate good performance in our higher growth cylinder operations serving retail,alternative fuels and energy markets."McConnell added,"Our strategy to optimize our businesses continues across the Company as the Transformation takes hold in Pressure Cylinders and is moving into the Engineered Cabs facilities.We anticipate improvements in both of these businesses over the next several quarters.We will also continue to look for other opportunities to grow the Company organically and through new businesses."
