Worthington Industries, Inc. (WOR)
F4Q09 Earnings Call
July 15, 2009 1:30 pm ET
John P. McConnell – Chairman of the Board & Chief Executive Officer
George P. Stoe – President & Chief Operating Officer
B. Andrew Rose – Chief Financial Officer
Robert McMaster – Senior Financial Advisor
Richard G. Welch - Controller
Luke Folta – Longbow Research
Sal Tharani – Goldman Sachs
John Tumazos – John Tumazos Very Independent Research
Charles Bradford – Affiliated Research Group
[David Taylor – David P. Taylor & Company]
Mark Parr – Keybanc Capital Markets
Lavon Von Redden – Hockey Capital
Previous Statements by WOR
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» Worthington Industries F1Q09 (Qtr End 8/31/08) Earnings Call Transcript
A replay of this call will be available on the home page of our website at www.WorthingtonIndustries.com. I’d like to introduce your first speaker, Chairman and CEO John McConnell.
John P. McConnell
Joining me for the call today are George Stoe, our President and Chief Operating Officer; Andy Rose, our Chief Financial Officer; Bob McMaster, Senior Financial Advisor; and Richard Welch, our Controller. We thank all of you for joining us this afternoon. We’ll get right to it today by asking Andy and George to review the fourth quarter and the year. Andy, would you please begin with the financial review.
B. Andrew Rose
For the fiscal year ended May 31, 2009 we reported net sales of $2.6 billion, 14% lower than last year and a net loss of $108 million or -$1.37 per diluted share. Excluding restructuring and non-recurring activity the loss per diluted share was $0.03 for the year. This activity included a $97 million goodwill impairment charge related to [inaudible] Metal Framing, $43 million of retirement, severance, professional fees and plant closure expenses and an $8.3 million gain on the sale of Aegis.
Gross profit margin for the year was 6.6%, down from 11.6% last year due to significantly lower volumes and the lower spread between selling prices and material costs. For the fourth quarter of fiscal 2009 which ended May 31st, we reported a net loss of $13.7 million or $0.17 per share, a decline of 126% from the $54 million in earnings for the same period last year. Our fourth quarter results included a $6.3 million pretax lower of cost or market inventory write down and $6 million of pretax restructuring charges negatively impacting earnings by $0.09 and $0.06 respectively.
The deterioration in our results for the fourth quarter and fiscal year of 2009 were principally driven by the unprecedented economic weakness facing the global economy and the resulting impact on our business particularly steel processing and metal framing. SG&A expense was down $19 million compared to the prior year quarter and $22 million compared to the prior year. SG&A expenses represented 10.7% and 8% of sales respectively for the quarter and year.
The lower expense was driven by reduced compensation as no profit sharing or bonuses were paid at the corporate level and in many of our business units during the past six months. In addition, there were a number of cost cutting initiatives including work force reductions that further reduced SG&A. Another component of SG&A is bad debt expense, while our bad debt reserve increased $7.6 million from last year, it actually declined modestly from last quarter due to the unwinding of reserves related to Chrysler and GM.
Thus far, we have been very effective at managing our credit risk in automotive and commercial construction. We do not expect any material losses from the two OEM auto bankruptcies and have had minimal losses from tier I and tier II suppliers at this point. Our credit team who regularly refers to this environment as the World Series of Credit has done a terrific job to date unfortunately, there’s more work to be done on this front.
Operating loss for the quarter was $19 million but does not include equity income from our unconsolidated joint ventures. Equity income from joint ventures fell 60% to $9 million from $22 million in last year’s fourth quarter as earnings declined in all of our unconsolidated joint ventures. As a group, they generated $49 million in equity income for the year and paid us $81 million in dividends. WAVE is the strongest contributor to equity income and dividends received.
Miscellaneous expense was lower than a year ago quarter and the year ago quarter due to a lower minority interest deduction for our Spartan Steel Coating consolidated joint venture. Interest expense for the fourth quarter declined $1.4 million due to significant reductions in debt and lower interest rates compared to last year. Our current run rate of interest expense is approximately $2.5 million per quarter or $10 million annually based on recent changes to our capitalization that will be discussed shortly.
Due to the pretax loss, we recorded an income tax benefit of $3 million for the quarter and $38 million for the year. In 2008 income tax expense was $17 million for the quarter and $39 million for the year. There are not many benefits to losing money but this is one. Our effective tax rate for fiscal 2009 was 25.9% compared to 26.5% for fiscal 2008.