Motley Fool  Apr 2  Comment 
WOR earnings call for the period ending February 28, 2018.
Motley Fool  Dec 19  Comment 
WOR earnings call for the period ending November 30, 2017.
SeekingAlpha  Dec 19  Comment 
Benzinga  Dec 18  Comment 
Don't be caught off-guard: Worthington Industries (NYSE: WOR) releases its next round of earnings Dec. 18. Want to skip the homework and get all the facts in one place? We thought so. Here is your everything-that-matters guide for Monday's Quarter...


Worthington Industries (NYSE: WOR) processes sheets of steel for the construction and automotive industries. Worthington sells the largest number of metal frames and trusses for wall and floor support in the U.S.[1] The company also makes gas cylinders and recycles used metal to make pallets and storage structures.[2] Worthington Industries is involved in 10 different joint ventures and expects to gain specialization and save $38.5 million from lower labor costs from the agreements.[3]

High steel prices, which have nearly tripled from 2007 to 2008, have pushed the construction industry, which makes up 40% of the company's revenue, towards cement and wood.[4] The company also is dependent on the continued growth of the US housing market and the construction of new homes. The shift away from aluminum and the general decline in the housing market both have hurt Worthington.[5] High jet fuel costs and oil prices have also encouraged airlines and car manufacturers to use aluminum and titanium - which are lighter than steel.[6]

Business Overview

Worthington does not sell any of its products directly to consumers. Instead, its products are purchased by other companies which use the steel goods as part of their final products. WOR sells most of its products to the Construction and Automotive Industries. The construction industry is the company's largest consumer. 10% of the company's total sales go to construction of residential homes, while 30% go to the construction of commercial buildings and infrastructure.[7] The automotive industry purchases mostly flat rolled steel to be used for body panels. Chrysler, Ford, and General Motors (GM), "the big three", consist of most of Worthington's sales to the automotive industry.[7]

 2007 Revenue Breakdown by Industry
2007 Revenue Breakdown by Industry [8]
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2007 Revenue Breakdown by Segment [9]

Worthington Industries processes sheet metal through 4 different segments.

  • Steel Processing (49% of revenue, 41% of income):[10] Steel Processing buys coils of steel and processes them into sheets or tubes to be used in the automotive, construction, aerospace and other such sectors. The sector can process the sheets of steel into a variety of lengths, thicknesses, and surfaces depending on the final use of the product.[11]
  • Metal Framing (26% of revenue, 16% of income):[12] The Metal Framing segment makes tracks, trusses, metal corners, and trim for wall and floor support. With 35% of all US framing sales, the segment is the largest metal framing manufacturer in the United States.[1] Worthington Armstrong Venture (WAVE) is the largest and most profitable joint venture in which the company is involved, and it has bee a large contributor to the segments revenue.[7]
  • Pressure Cylinders (18% of revenue, 37% of income):[13] The Pressure Cylinders segment makes tanks for low and high pressure gas used in barbecue grills, propane tanks, and heating systems. The cylinders range in capacity from 15 to 1,000 pounds.[2] The segment makes up a unproportionately large percentage of the company's income by maintaining low costs. The segment has on site production facilities in Europe and in North America and so avoids shipping the bulky cylinders. High safety requirements also keep out cheap foreign imports from cutting in on the segments margins.[14]
  • Other (7% of revenue, 6% of income):[15] The Other segment stamps, packages, and assembles parts for the automotive industry, designs and builds steel structures for storage, and makes platforms and pallets from recyclable steel.[16]

In 2007, Worthington purchased 3 million tons of steel. Because all of its segments use steel as their main input, the company is able to purchase the raw material in bulk. Steel is a commodity and so its price is generally determined by the market value. Worthington purchases its steel from over 15 different suppliers to prevent shortages and price hikes.[17]

(in thousands except Profit Margin) 2004 2005 2006 2007
Net Income$107,077$113,905$179,412$86,752
Profit Margin3.6%5.8%5.0%3.8%

Worthington's sales are largely based in the US. In 2008, foreign sales constituted only 9% of the company's total revenue. Although Worthington has joint ventures and production facilities in places like China, France, Mexico, Slovakia, Spain and the United Kingdom, it uses these sites only to take advantage of lower labor prices or specific technology.[19] Worthington also purchases a large amount of its raw material abroad; nearly all of its zinc purchases are from foreign nations.[20]

Approximately 14% of the company's labor force is part of a collective labor union. This is relatively low for a steel company, and in August 2008, the workers at Worthington Steel filed a petition to decertify from the United Steel Workers. The lack of a strong labor movement amongst the Worthington laborers has helped allow the company to maintain high profit margins.[21] world war3 2012

Trends and Forces

Aluminum, wood, composites, and other substitutes threaten to replace steel

High oil prices and environmental regulation has pressured automakers to lower the weight of their vehicles. Since the mid 70s, the use of aluminum in cars has risen by 300% and the use of plastic has risen by 60%.[22] Because it weighs less, Titanium has replaced steel for large sections of airplanes.[6] Rising steel prices, which have nearly tripled from 2007 to 2008,[5] has also pushed developers away from steel towards wood and cement.[23]

Worthington is involved in many joint-ventures which could cause disruptions and lower profits

As of 2008, Worthington was involved in 10 different joint-ventures. In 2007 and 2008, the company entered 5 different ventures. Worthington is involved in a many different ventures to provide diversification and specialization in different parts of the steel industry.[24] In August 2007 for example, Worthington signed a 50% venture with Serviacero Planos, a Mexican Steel Processing company with annual sales of $125 million. [25] Through its joint ventures, Worthington expects to save $38.5 million by taking advantage of specialization and lower labor. Disruptions or failures in any of these joint-ventures will negatively effect Worthington's expected margin.[3]

Worthington's sales are dependent on the construction and domestic automotive industries

In 2007, 40% of the company's sales were to the construction market.[4] Spending on US construction projects fell by 3% from 2007 to 2008, while construction on private homes fell by 19.7% during the same time period.[26] 26% of Worthington's sales are to the the automotive and truck market which have also experienced slowing sales.[4] In July 2008, US auto sales fell by 13.2% and truck sales fell 25.2%.[27] The great majority of Worthington's sales to the automotive industry are used in domestic cars and trucks. The continued decline of this industry, and the construction industry, will negatively impact Worthington's sales.


Worthington faces competition from many companies which process steel. Unlike Worthington, many of the companies are involved in other metals besides steel such as aluminum and iron ore. However, the majority of its competitors make steel products for the construction and automotive industries.

  • Nucor (NUE): makes steel girders, joists, and framing which compete with Worthington's Steel Processing and Metal Framing segments. Unlike Worthington, Nucor melts and rolls steel from scrap instead of purchasing coils of steel.[28]
  • US Steel (X): produces steel sheets, tubes, and pallets used in the automotive industry which competes with Worthington. US Steel also produces iron ore which is not in direct competition with Worthington.[29]
  • AK Steel Holding (AKS): makes steel products for the construction, trucking, and transportation industries which compete with Worthington. In 2008, AK Steel began taking scrap metal from unused buildings to lower purchasing costs.[30]
  • Universal Stainless & Alloy Products (USAP): produces steel for tools, the aerospace industry, and the chemical industry which competes with Worthington. Universal Stainless & Alloy Products is smaller than Worthington and has not entered the construction or automotive industries.[31]


  1. 1.0 1.1 WOR 10-K 2008 "Metal Framing" p.4
  2. 2.0 2.1 WOR 10-K 2008 "Pressure Cylinders" p.5
  3. 3.0 3.1 WOR 10-K 2008 "Business Strategy" p.25
  4. 4.0 4.1 4.2 WOR 10-K 2008 "Economic or Industry Downturns" p.10
  5. 5.0 5.1 Navellier - Calculated Investing "Rising Steel Prices Show Few Signs of Abating" 5 June 2008
  6. 6.0 6.1 Explain That Stuff! "Titanium" 8 Nov 2007
  7. 7.0 7.1 7.2 WOR 10-K 2008 "Market & Industry Overview" p.23
  8. WOR 10-K 2008 "Market & Industry Overview" p.24
  9. WOR 10-K 2008 "Segment Operations" p.27-29
  10. WOR 10-K 2008 "Steel Processing" p.31
  11. WOR 10-K 2008 "Steel Processing" p.3
  12. WOR 10-K 2008 "Metal Framing" p.32
  13. WOR 10-K 2008 "Pressure Cylinders" p.32
  14. WOR 10K 405 "Pressure Cylinders" p.4
  15. WOR 10-K 2008 "Other" p.33
  16. WOR 10-K 2008 "Other" p.6
  17. WOR 10-K 2008 "Suppliers" p.6-7
  18. WOR 10-K 2008 Item 6 "Selected Financial Data" p.20
  19. WOR 10-K 2008 Item 6 "Foreign" p.12
  20. WOR 10-K 2008 Item 1 "Suppliers" p.7
  21. The Times Online "Worthington Steel Workers to Vote on Decertification" 16 August 2008
  22. Assembly Magazine -- Putting Cars on a Diet "Lightweight materials offer new challenges and opportunities" 24 July 2008
  23. BNet - Daily Journal of Commerce "With Steel Costs Rising, Portland Reconsiders Wood Frames" 19 Dec 2007
  24. WOR 10-K 2008 "Joint Ventures" p.7-8
  25. BNet - Business Services Industry "Worthington to Form Mexican Steel Processing Joint Venture" 20 Aug 2007
  26. Market Watch "U.S. Construction Spending falls 1.7% in January" 3 March 2008
  27. The Detroit News - Auto Insider "U.S. Auto Sales in July Plunge 13 Percent" 2 Aug 2008
  28. Google Finance "Nucor Corporation"
  29. Reuters Business & Finance "United States Steel Corp"
  30. Google Finance "AK Steel Holdings Corporation"
  31. Google Finance "Universal Stainless & Alloy Products"
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