Worthington Enterprises, Inc.

Good afternoon and welcome to the Worthington Industries third quarter fiscal 2023 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. Please go ahead.

Thank you, Audra. Good morning and welcome to Worthington Industries' third quarter fiscal 2023 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. In addition, we also have Tim Adams, who will become the CFO of the steel processing business after we complete the planned business separation. 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 yesterday after the market closed. Please refer to it for more details 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 for a discussion of the financial results.

Thank you, Marcus. Good morning, everyone. I'll go over the consolidated results and provide some additional color on the building products, consumer products, and sustainable energy solutions businesses, and then Tim Adams will go through Steele's results. Tim, as many of you know, is currently the Vice President of Strategy and Corporate Development for our Steele business, Anne will be the chief branch officer for the steel company when we complete the planned separation of our businesses. In Q3, we reported earnings of $0.94 a share versus $1.11 in the prior year quarter. There were a few unique items impacting the quarterly results, including the following. We incurred pre-tax expense of $6 million or $0.10 per share related to the planned separation of our steel processing business into a new public company, which we expect to complete by early calendar 2024. We also incurred modest restructuring and other non-recurring gains and losses, which offset during the quarter. This compares to restructuring and impairment charges of $0.02 per share in the prior year. Excluding these items, We generated earnings of $1.04 per share in the current quarter compared to $1.13 per share in the prior year. In addition, in Q3, we had inventory holding losses estimated to be $27 million or $0.41 per share compared to inventory holding losses of $25 million or $0.37 per share in Q3 2022. Consolidated net sales in the quarter of $1.1 billion decreased 20% from the prior year due to lower average selling prices in steel processing, as steel prices fell significantly compared to the prior year. Our gross profit for the quarter increased slightly to $144 million, and our gross margin increased to 13% from 10% in Q3 of last year, primarily due to improved spreads in steel processing combined with a favorable mix in building products. Our adjusted EBITDA in Q3 was $99 million, down from $112 million in Q3 of last year, and our trailing 12-month adjusted EBITDA is now $443 million. With respect to cash flows in our balance sheet, cash flow from operations was $182 million in the quarter, and free cash flow was $159 million. In the first three quarters of fiscal 2023, we have generated $327 million in free cash flows. During the quarter, we invested $23 million on capital projects, paid $15 million in dividends, and received $60 million in dividends from our unconsolidated JVs. As in the prior two quarters, the dividends we received from unconsolidated JVs exceeded their equity earnings as their working capital levels have normalized, allowing them to pay out earnings that were not distributed in their prior fiscal year. Fiscal year to date, we have received dividends from unconsolidated JVs totaling $190 million. Looking at our balance sheet and liquidity position, Funded debt at quarter end of $693 million decreased by $5 million sequentially. That interest expense of $6 million was down $2 million year over year, primarily due to higher interest income earned on our cash balances and, to a lesser extent, lower average debt levels. We continue to operate with low leverage levels, and our net debt to trailing EBITDA leverage ratio is under one times. We believe we are very well positioned for the future with ample liquidity, ending Q3 with $267 million in cash and $675 million in availability under our revolving credit facilities. Nearly all of that cash is currently held in overnight AAA-rated government money market funds. Yesterday, the Board declared a dividend of $0.31 per share for the quarter, which is payable in June of 2023. I'll now spend a few minutes on each of the businesses. Consumer products, net sales, and Q3 were $163 million, up slightly from $162 million a year ago. The increase was driven by higher average selling prices, which were partially offset by lower volumes. Adjusted EBIT for the consumer business was $18 million, and EBIT margin was 11% compared to $27 million and 16.5% last year. The prior year quarter created a very tough comp, as Price increases were implemented at the beginning of the quarter last year and resulted in record EBIT, whereas the current quarter was negatively impacted by higher input costs and other inflationary cost pressures. As we mentioned on our Q2 earnings call, the destocking at our customers has largely been completed, and we saw strong sequential volume growth of 16% and EBIT growth of $4 million sequentially in consumer. That team continues to do an excellent job serving our customers and delivering value-added products while investing in innovation and new product development. We are optimistic heading into Q4, which is usually a seasonally strong period for the consumer business. Building products generated net sales of $152 million in Q3, up 14% from $133 million in the prior year quarter. The increase was driven by favorable product mix and higher average selling prices, which were partially offset by lower volumes. Building products generated adjusted EBIT of $51 million in the quarter, and EBIT margin was 33.9% compared to 50 million and 37.3% in Q3 of last year. Increase in EBIT was primarily driven by improvements in our wholly owned businesses, which saw operating income increase by $3 million, or 29% year-over-year, due to a favorable product mix and higher average selling prices. This increase was partially offset by slightly lower equity earnings contributions from our building products JVs, which combined contributed $38 million in Q3, or $2 million less than the prior year. Both Clark Dietrich and Wave continued to perform very well, delivering solid results in end markets that have been impacted by interest rates and economic uncertainty. As with the consumer business, in Q2, we mentioned that many of our customers and building products were destocking, and that we expected this trend to gradually improve. We have started to see this improvement in many of our product lines, and volumes increased 5% sequentially from Q2. Our teams in building products continue to do a good job executing and focusing on sustainable long-term growth. We believe that we will see a return to more seasonally normal volume levels in the coming quarters. In sustainable energy solutions, net sales in Q3 of $32 million were up slightly compared to $31 million in the prior year. driven by higher average selling prices. The business reported an adjusted EBIT loss of $1 million in the current quarter compared to a loss of $3 million in the prior year quarter. The operating environment in Europe continues to be challenging, but our team is doing an excellent job leveraging the investments that we have made in capabilities and in facilities, positioning that business very well as hydrogen and alternative fuel solutions are increasingly adopted. At this point, I will turn it over to Tim.