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Metal processor Worthington Industries (WOR - Snapshot Report) saw its profit fall in second-quarter fiscal 2014 (ended Nov 30, 2013) on sizable impairment charges. The company posted a profit of $23 million or 32 cents per share in the quarter, down 28% from $31.8 million or 45 cents a year ago.
 
Barring one-time items, including pre-tax impairment charges of $30.7 million related to the write-off of certain assets and tax-related gains, earnings came in at 57 cents a share, just beating the Zacks Consensus Estimate of 56 cents.

Revenues and Margins
 
Revenues rose 24% year over year to $769.9 million in the quarter, exceeding the Zacks Consensus Estimate of $685 million. The top line was driven by higher volumes stemming from acquisitions. The company saw strength across its Steel Processing and Pressure Cylinders divisions in the quarter.
 
Gross margin rose to 16.7% from 15.2% a year ago. The improvement mainly resulted from increased volumes and the impact of inventory holding gains in Steel Processing in the quarter.

Segment Performance

Revenues from the core Steel Processing division rose 43% year over year to $492.1 million in the reported quarter. The increase can be attributed to higher volumes resulting from the consolidation of TWB and increased sales in automotive, construction and agriculture markets. Volumes rose 30.5% year over year to 817 tons in the quarter.

Worthington’s Pressure Cylinders segment sales went up 3% year over year to $214 million, buoyed by recent acquisitions of leading atmospheric tanks and pressure vessels maker Westerman Companies and steel and fiberglass tanks maker Palmer. Volumes, however, fell 9% to 17,694 units.
 
The Engineered Cabs segment struggled in the quarter, hit by weak volumes. The division posted revenues of $47.9 million, down 17% year over year. Lower selling prices also affected the unit's results.

Financial Position
 
Worthington ended the quarter with cash and cash equivalents of $109 million, a nearly three-fold year-over-year rise. Long-term debt fell marginally year over year to $405.7 million. Operating cash flows for the quarter declined 69% year over year to roughly $29.3 million.
 
Joint Venture

On Oct 18, 2013, Worthington entered into an agreement with Nisshin Steel Co., Ltd. and Marubeni-Itochu Steel Inc to form a joint venture Zhejiang Nisshin Worthington Precision Specialty Steel Co., Ltd. to produce cold rolled strip steel mainly for the automotive industry. The joint venture will build a facility in Zhejiang Province in China. Initially, Worthington will hold a 10% stake in the joint venture; however, it has an option to increase its ownership interest to 34%. The joint venture is currently waiting for regulatory approval.

Outlook
 
Worthington remains positive about fiscal 2014 and continues to expect growth both organically and from acquisitions. The company is witnessing strength in the automotive space and improvements in commercial construction and agriculture markets. Worthington will remain committed to explore fresh opportunities so as to invest in new and growing markets, develop new products for customers and drive improvement and optimization across its businesses.
 
Worthington currently carries a Zacks Rank #2 (Buy).
 
Other companies in the metal processing and fabrication industry having a favorable Zacks Rank include Dynamic Materials Corp. (BOOM - Snapshot Report), CIRCOR International, Inc. (CIR - Snapshot Report) and NN Inc. (NNBR - Snapshot Report). All of these hold a Zacks Rank #1 (Strong Buy).

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