Worthington Enterprises, Inc.

Good afternoon and welcome to the Worthington Industries second quarter fiscal 2022 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 Worthington Industries. If anyone objects, you may disconnect at this time. I'd now like to introduce Marcus Raji, Treasurer and Investor Relations Officer. Mr. Raji, you may begin.

Thank you, Rachel. Good afternoon, everyone, and welcome to Worthington Industry's second quarter fiscal 2022 earnings call. On our call today, 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 uncertainties that could cause actual results to differ from those suggested. We issued our earnings release earlier this morning before the market opened. 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 available later today on our WorthingtonIndustries.com website. At this point, I will turn the call over to Joe for discussion of the financial results.

Thank you, Marcus, and good afternoon, everyone. We had another strong quarter in Q2 with reported earnings of $2.15 per share compared to a loss of $1.40 in Q2 a year ago. Excluding a small one-time restructuring gain, we generated a second quarter record $2.12 per share in Q2. In the prior year period, excluding restructuring and the unrealized loss in one-time charges associated with our investment in Nikola, we generated earnings of $0.95 per share. Consolidated net sales in the quarter of $1.2 billion were up significantly compared to $731 million in Q2 of last year. Increase in sales is primarily due to higher steel prices, along with increased volumes across our businesses and our recent acquisitions. Our gross profit for the quarter increased to $185 million from $135 million in the prior year quarter, and gross margin was 15% versus 18.5%. Our adjusted EBITDA in Q2 was $168 million, up from $96 million in Q2 of last year, and our trailing 12-month adjusted EBITDA is now $677 million. I'll now spend a few minutes on each of the businesses. In steel processing, net sales of $938 million doubled from $469 million in Q2 of last year, primarily due to higher average selling prices and a slight increase in volumes. Total shipped tons were up 4% from last year's second quarter through the inclusion of Shiloh's blank light business and were flat excluding that acquisition. Direct tons in Q2 were 47% in the mix compared to 48% in the prior year quarter. Automotive demand is still difficult to predict, but late in the quarter, production forecasts began to improve, and we're optimistic that trend will continue. Production levels in automotive are not approaching historic averages, and a myriad of risks and challenges will persist for several quarters, but we are seeing indications that the worst of the semiconductor-related production interruptions may have passed. Demand across our other major end markets remains robust. And while supply chains and steel availability remains tight, our teams continue to navigate those challenges exceptionally well. In Q2, steel generated adjusted EBIT of $72 million compared to $34 million last year. The large year-over-year increase was primarily driven by higher spreads combined with slightly higher volumes. In the quarter, the scrap gap remained wider than historic averages. In Q2, we had pre-tax inventory holding gains estimated to be 42 million or 61 cents per share compared to negligible gains in Q2 of last year. Based on recent declines in steel prices, we believe we will have meaningful inventory holding losses in Q3 and will also face continued headwinds from the scrap gap. In consumer products, net sales in Q2 were 141 million, up 20% from 118 million in the prior year quarter. The increase was driven by the inclusion of sales from GTI, which we acquired in January, combined with higher average selling prices. Adjusted EBIT for the consumer business was $18 million, and adjusted EBIT margin was 13% during Q2, compared to $17 million and 15% in the prior year quarter. The consumer team continues to do an excellent job managing through a fluid environment. Demand remains robust, and we have invested in new equipment and headcount to increase our production capacity. Margins have been under some pressure. We have higher input costs and we're limited in our ability to pass those costs along because of fixed price contracts with customers. Late in Q2, we were able to start recapturing some of that margin. As a result, we expect margins will improve moving forward. Building products generated net sales of 121 million in Q2, which was up 29% from 94 million in the prior year quarter. The increase was primarily due to higher volumes as construction markets continue to grow and higher average selling prices. Building products adjusted EBIT was $55 million and adjusted EBIT margin was 45%, up significantly from $26 million and 28% in Q2 of last year. The large year-over-year increase was driven by record results at Clark Dietrich, who contributed $27 million in equity earnings, combined with solid results from Wave, who contributed $22 million. Those teams have done a great job continuing to deliver value for their customers in a rising price environment. Our wholly owned building products business generated 47% year-over-year EBIT growth in the quarter due to an improved demand environment and higher average selling prices. The markets for our products and solutions, which are driven by commercial and residential construction, continue to show strength as the economy recovers and and we were maintaining and growing our share through new product development and our ability to add value to our customers' efforts. In sustainable energy solutions, net sales in Q2 were $33 million, down slightly from $34 million in the prior year. Despite continued demand headwinds related to semiconductor chip shortages at their customers, the business was profitable and reported adjusted EBIT of $1 million in the current period compared to $2 million in the prior year. This business is in the early stages of repositioning itself to serve the global hydrogen ecosystem and adjacent sustainable energies like compressed natural gas. We're very pleased with our progress and some early wins. The markets we serve will take time to develop, but we're very excited about our growth prospects over the long term. With respect to cash flows and our balance sheet, operations used cash of $119 million in the quarter driven by a $235 million increase in operating working capital, primarily associated with higher steel prices. For context, we've added $568 million in working capital over the last 12 months, and our free cash flow in that same period is an outflow of $201 million. As steel prices decline, these increases in working capital should subside and ultimately reverse as they are converted back into cash. During the quarter, we received $29 million in dividends from our unconsolidated JVs, invested $24 million in capital projects, paid $15 million in dividends, and spent $13 million to repurchase 235,000 shares of our common stock. Following our Q2 purchases, we have slightly over 8 million shares remaining under our repurchase authorizations. Looking at our balance sheet and liquidity position, funded debt at quarter end of $702 million and interest expense of $7 million were both down slightly compared to the prior year, primarily due to favorable exchange rates for our Euro-denominated debt. We ended Q2 with $225 million in cash, which we used to fund our December 1st acquisition of Temple Steel. Earlier today, the Board declared a $0.28 per share dividend for the quarter, which is payable in March of 2022. At this point, I will turn it over to Andy.