Worthington Industries reported net sales of $804.8 million and a net loss of $25.7 million, or a loss of $0.39 per diluted share, for its fiscal 2015 third quarter ended February 28, 2015.
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Net sales for the third quarter ended February 28, 2015, were $804.8 million, a 4% increase over the comparable quarter in the prior year, when net sales were $773.2 million. The $31.6 million increase was primarily driven by acquisitions in the Steel Processing and Pressure Cylinders segments.
Gross margin declined $24 million from the prior year quarter to $98.5 million. The positive impact from the recent acquisitions was more than offset by higher inventory holding losses fueled by rapidly falling steel prices in Steel Processing and lower volumes in Consumer and Industrial Products in Pressure Cylinders.
The company announced its decision to close its Engineered Cabs facility in Florence, S.C., which resulted in the $81.6 million impairment of goodwill and long-lived assets in the current quarter. As a result, operating income decreased $97.3 million from the prior year.
Excluding the impairment charge, operating income was down $15.7 million, driven largely by inventory holding losses, lower Pressure Cylinders volumes and increased manufacturing expenses. SG&A expenses were down $8.9 million from the prior year quarter as lower earnings resulted in lower profit sharing and bonus expenses.
Interest expense of $8.4 million in the current quarter was $2.2 million higher than the $6.2 million reported in the comparable period of the prior year. The increase was due to the impact of higher average debt levels resulting from the issuance of $250 million of 4.55% unsecured senior notes in April 2014. However, interest in the current quarter was down $1.3 million from the second quarter of the current year as $100 million of 2004 notes matured and were repaid in December 2014.
Equity in net income from unconsolidated joint ventures of $18.8 million was $2.4 million lower than the $21.2 million from the prior year quarter on combined net sales of $356.6 million versus $340.6 million in the prior year quarter. The overall decrease in earnings was led by a $3.3 million decrease at Serviacero, which was negatively impacted by the falling price of steel, and a $0.8 million decrease from ClarkDietrich on lower volumes. The equity income from ArtiFlex was $2.3 million higher than the prior year quarter.
Income tax showed a benefit of $18.2 million as a result of the impairment charge. Excluding the charge, income tax expense would have been $10.9 million in the current quarter compared to $16.6 million in the comparable quarter of the prior year. The lower earnings in the current quarter more than offset the impact of a higher effective tax rate. Tax expense in the current quarter reflects an estimated annual effective rate of 30.9% compared to 27.3% for the prior year quarter.
At quarter end, total debt was $699.9 million, up $14.2 million from November 30, 2014, as a result of borrowings against a long-term credit facility entered into by the consolidated joint venture in Turkey. The company had $42.5 million of cash at quarter end. ■