Worthington Enterprises, Inc.

Good afternoon and welcome to the Worthington Industries third quarter fiscal 2021 earnings conference call. All participants will be able to listen only until the question and answer session of the call. This conference is being recorded at the request of the Worthington Industries. If anyone objects, you may disconnect at this time. I'd now like to introduce Marcus Rogi, Treasurer and Investor Relations Officer. Mr. Rogi, you may begin.

Thank you, Tamiya. Good afternoon, everyone, and welcome to Worthington Industries' third quarter fiscal 2021 earnings call. On our call this afternoon, we have Andy Rose, Worthington's president and chief executive officer, and Joe Hayek, Worthington's chief financial officer. Before we get started, I'd like to remind everyone that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risk and uncertainty, that could cause actual results to differ from those suggested. We issued our earnings release earlier this morning. Please refer to it for more detail on those factors that could cause actual results to differ materially. Today's call is being recorded, and a replay will be made available later on our WorthingtonIndustries.com website. At this point, I will turn the call over to Joe, who will discuss our financial results. Thank you, Marcus.

Good afternoon, everyone. In Q3, we reported earnings of $1.27 per share versus $0.27 in the prior year quarter. There were a few unique items in the current and prior year quarters to call out that include the following. We incurred pre-tax restructuring and impairment charges of $28 million or $0.16 per share in Q3, primarily related to the exit of our unprofitable oil and gas business, which we divested at the end of January. This compares to charges of $0.48 per share in the prior year quarter. We recognized a net pre-tax benefit of $4 million or $0.07 per share on our investment in Nikola Corporation during the quarter. This benefit was primarily due to us selling our remaining shares of Nikola for $147 million. In total, we realized cumulative pre-tax cash proceeds of $634 million from our investment in Nikola and contributed $20 million in shares to the Worthington Industries Foundation establishing a charitable endowment supporting worthwhile community causes. The prior year quarter included an 11 cent per share benefit related to a gain on the consolidation of our Worthington Samuel Coil Processing JV, combined with the lowering of a reserve associated with the tank replacement program within pressure cylinders. Excluding these items, we generated a record $1.36 per share in earnings in Q3, compared to 64 cents in Q3 a year ago. Consolidated net sales in the quarter of $759 million were relatively flat, compared to $764 million in the prior year quarter. Our reported gross profit for the quarter increased by $49 million from Q3 last year to $164 million, and our gross margin increased to 21.6% from 15.1%, as we had inventory holding gains this quarter and losses in the prior year quarter. Our adjusted EBITDA was $126 million, up from $79 million in the prior year quarter, and our trailing 12-month adjusted EBITDA is now $364 million. Our adjusted EBITDA through the nine months ended February is $297 million. We had a very strong quarter with solid demand across most of our end markets, and our teams continue to execute very well and are focused on delivering value to our customers. Taking a look at the business units, in steel processing, net sales of $504 million were up 3% from Q3 of 2020 due to higher average selling prices, which were partially offset by lower toll volumes. Direct tons were flat year over year against the tough comp, while total shipped tons were down 11% from last year's third quarter, driven by a decrease in total tons caused by furnace and mill outages. Direct tons made up 48% of the mix compared to 44% in the prior year quarter. The U.S. steel market remains extremely tight as demand has recovered more rapidly than supply. We believe that we have gained share in key markets and in Q3 continue to see solid demand across our major end markets. The automotive, construction, and agriculture markets all continue to show strength, and we are starting to see improvement in heavy truck. Steel generated record operating income of $63 million in the quarter, which is up $44 million from $19 million in Q3 last year. Operating margins increased significantly from 3.9% to 12.5%. The large year-over-year increase was primarily driven by increased direct spreads, which benefited from inventory holding gains estimated at $31 million or $0.44 per share in the quarter, compared to losses of $6 million or $0.08 per share in Q3 of last year. The current quarter also benefited from arbitrage gains we were able to generate given the rise in steel prices. Based on current steel prices, we expect that we will have significant inventory holding gains in Q4 of this year as well. In our pressure cylinders business, net sales were $255 million, down 6% from the prior year quarter, primarily due to lower sales in our recently divested oil and gas business, where sales declined year over year by $24 million. Sales were up in both industrial products and in consumer, as we continue to see strong demand for our consumer-facing products and our European business, while still facing headwinds, is starting to show signs of recovery. Silver's operating income, excluding impairment and restructuring charges, and the benefit we had last year from the reserve adjustment I mentioned earlier was $13 million, up $1 million from the prior year quarter, while operating margins increased to 5% from 4.4%. The current quarter results include losses on the oil and gas business through January and losses in structural composite industries, or SCI, for the entire quarter, as well as one-time charges related to our acquisition of General Tools and Instruments, or GTI, in January. Collectively, these headwinds totaled roughly $4 million. As you may have seen, in addition to the divestiture of the oil and gas business, we sold our SCI business earlier this month. Including the divestiture of our cryoscience operations in Alabama, which we completed in Q2, we've now divested three untroffable businesses in the last six months and made two strategic acquisitions, GTI and P-TECH pressure technology. GTI significantly expands our presence in specialty tools and gives us new sourcing and supply chain expertise. The P-TECH acquisition complements our recent investments in sustainable mobility enabled by hydrogen and CNG. These investments include the expansion of our composite cylinder facility in Poland, and the construction of a new Type 3 and Type 4 hydrogen cylinder production facility in Austria. We believe these strategic transactions and investments position cylinders very well for future growth and will be additive to our profitability. With respect to our JVs, equity income during the current quarter was $32 million compared to $25 million last year. We saw year-over-year improvements from all of our JVs with the exception of WAVE. WAVES results were down slightly because of increased partner allocations, but improved on a sequential basis as the commercial construction market continues to recover. During the quarter, we received $18 million in dividends from our unconsolidated JVs. Turning to the cash flow statement and the balance sheet, cash flow from operations was $9 million in the quarter and $234 million for the first nine months of our fiscal year. free cash flow totaling $169 million in the same period. Free cash flow for the quarter was actually negative by $7 million due primarily to increasing steel prices that caused our working capital levels to increase by $71 million. During the quarter, we generated $147 million in pre-tax proceeds from the sale of Nikola stock. We completed two acquisitions totaling $130 million invested $16 million on capital projects, paid $13 million in dividends, and spent $52 million to repurchase one million of our common stock, one million shares of our common stock, at an average price of $52.37. Looking at our balance sheet and liquidity position, funded debt at quarter end of $709 million was relatively flat sequentially, and interest expense of $8 million was in line with the prior year quarter. We ended Q3 with $650 million in cash and are well positioned to continue our balanced approach to capital allocation that's focused on growth and on rewarding shareholders. Earlier today, the Board increased the authorization on our stock repurchase program to an aggregate of 10 million shares and declared a dividend of $0.28 per share for the quarter, a 12% increase over last quarter, which is payable in June of 2021. This marks the 11th consecutive year we have increased our dividend, and we are very pleased to be able to reward our shareholders with this increase. I will now turn it over to Andy.