By
Keki Fatakia
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October 12, 2011
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Worthington Industries (NYSE: WOR ) recently reported a minor 2.3% fall in revenues to $602.3 million for its first quarter. But the company's flat revenues aren't what they seem. Let's take a closer Foolish look at the details.
The numbers
The metal-processing company, whose customers include Ford and Armstrong World Industries, saw its net income surge 15% to $25.6 million on the back of a series of business deals.
While Worthington's steel-processing business showed a 15% jump in sales, its pressure-cylinder segment's sales rose by an even greater 24%. These figures, however, were partially magnified by the company's acquisition of MISA Metals and BernzOmatic, a maker of handheld torches, solder products, and related accessories.
However, these increases were offset by deconsolidation in its metal-framing and automotive body panels segment. If you exclude the negative impact of the deconsolidation activities, net sales show an 18% increase.
In March, Worthington formed ClarkDietrich, a joint venture for the company's metal-framing business and for its acquisition of MISA Metal's non-automotive steel-processing business. The company's 25% share in the joint venture has contributed to Worthington's quarterly earnings by $1.1 million.
The Foolish bottom line
Worthington's downbeat revenues are just a temporary blip mainly resulting from winding down parts of its business verticals and moving others into joint-venture companies. Nevertheless, in the days ahead, I think the company will face broader challenges related to the demand for its steel products, largely because of uncertain economic conditions. It'll be interesting to see what impact the deals that it's recently struck will have in the coming quarters. But for now, I'd remain cautious.
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