What led to Worthington Industries, Inc. (NYSE: WOR) stock pressure

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Worthington Industries, Inc. (NYSE: WOR) stock fell over 3.2% on March 27th, 2020 (as of 11:29 am GMT-4 ; Source: Google finance) after the company posted lower than expected results for the third quarter of FY 20. In the third quarter, the company had incurred restructuring and impairment charges of $36 million, compared to a restructuring gain in the prior year quarter of $0.14. The current quarter charges included the planned consolidation in the oil and gas business, where the company are consolidating from three facilities to two to optimize efficiency and capacity utilization. In Q3, the company recognized a gain of $6.1 million related to the acquisition of a majority ownership and consolidation of the Worthington Samuel Coil Processing JV. This was a cashless transaction that involved the company to get the contribution from recently acquired Heidtman Steel Cleveland facility to the JV, which increased the total ownership to 63%. WOR ended Q3 with over $100 million in cash and working capital of nearly $500 million.

Moreover, the estimated inventory holding losses in Q3 were $0.08 per share compared to losses of $0.14 per share last year and the current quarter got the advantage by $0.03 a share as the company had lowered a reserve associated with the tank replacement program within Pressure Cylinders. With respect to the JVs, equity income during the quarter was $25 million, up $5 million from the prior year quarter. The increase was primarily due to strong demand in the construction JV, ClarkDietrich, which increased $3 million year-over-year. The company has received $21 million in dividends from our unconsolidated JVs during the quarter.

WOR in the third quarter of FY 20 has reported the adjusted earnings per share of 64 cents, missing the analysts’ estimates for the adjusted earnings per share of 68 cents, according to the Zacks Consensus Estimate. The company had reported 12.62 percent fall in the adjusted revenue to $764 million in the third quarter of FY 20, missing the analysts’ estimates for revenue by 1.5%. The decrease in revenue was driven mainly due to lower average selling prices in Steel Processing and lower volume in Pressure Cylinders, partially offset by higher volumes in Steel Processing. Despite the decline in revenue, the gross profit in the quarter rose by $26 million from Q3 of last year to $116 million and the gross margin expanded significantly from 10.3% to 15.1%. The adjusted EBITDA has increased to $79 million in the third quarter, compared to $57 million in the prior year and the trailing 12-month adjusted EBITDA is now $322 million.

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