Worthington Enterprises, Inc.

Hello and welcome to the Worthington Industries fourth 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 Worthington Industries. If anyone objects, you may disconnect at this time. I'd like to introduce Marcus Rogi, treasurer and investor relations officer. Mr. Rogi, you may begin.

Thank you, Chris. Good morning, everyone, and welcome to Worthington Industries' fourth 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 is currently the vice president of strategy and corporate development for our steel processing business, and who will become the CFO of the steel company 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 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 for a discussion of the financial results.

Thank you, Marcus. Good morning, everybody. We finished the fiscal year with a very strong quarter, reporting Q4 earnings of $2.61 a share versus $1.61 a year ago. There were a few unique items that impacted our quarterly results, including the following. We incurred pre-tax expense of $8 million, or 13 cents per share, related to the planned separation of our steel processing business into a new public company, which we expect to complete by early counter 2024. We recognized a modest impairment charge in steel processing related to some equipment we no longer use, which was offset by a one-time non-recurring gain in our cabs JV during the current quarter. This compares to a small restructuring gain of 3 cents per share in the prior year quarter. Excluding these items that were unique, we generated record quarterly earnings of $2.74 per share in the current quarter compared to $1.58 per share in Q4 of last year. In addition, in Q4, we had inventory holding gains estimated to be $33 million or 49 cents a share compared to inventory holding losses of 42 million or 64 cents a share in Q4 of 2022. Solidated net sales in the quarter of $1.2 billion decreased 19% from the prior year due to lower average selling prices in steel processing combined with lower volumes across most of our segments. Gross profit for the quarter increased to $244 million from $168 million in the prior year quarter, and our gross margin increased to 19.9% from 11%, primarily due to improved spreads in steel processing. Our adjusted EBITDA in Q4 was a record $211 million, up from $139 million in Q4 of last year, and our adjusted EBITDA in fiscal 2023 was $515 million. With respect to cash flows in our balance sheet, cash flows from operations was $229 million in the quarter, and free cash flow was $212 million. In fiscal 2023, we generated $539 million in free cash flows. During the quarter, we invested $18 million on capital projects and paid $15 million in dividends. We also received $51 million in dividends from our unconsolidated JVs during the quarter, a 92% cash conversion rate on that equity income. Looking at our balance sheet and liquidity position, Funded debt at quarter end of $693 million was flat sequentially. Net interest expense of $5 million was down by $3 million, primarily due to interest income we earned on our cash balances and to a lesser extent lower average debt levels. We continue to operate with extremely low leverage levels, and our net debt to trailing EBITDA leverage ratio is now under 0.5 times. We believe we are very well positioned for the future with ample liquidity ending Q4 with $455 million in cash and over $500 million in availability on our revolving credit facilities. Yesterday, the Board declared a dividend of 32 cents per share for the quarter, which is payable in September of 2023. This is a 3% increase over last quarter and marks the 13th consecutive year we have increased our dividend. We're very pleased to be able to continue rewarding our shareholders as we deliver strong results. We'll now spend a few minutes on each of the businesses. In consumer products, net sales in Q4 were 181 million, down slightly from 186 million a year ago. The decrease was primarily driven by lower volumes, partially offset by the inclusion of Level 5's results. Adjusted EBIT for the consumer business was 26 million, and adjusted EBIT margin was 14.2% in Q4, compared to 29 million and 15.8% last year. Consumers' earnings and cash flows for the current quarter were strong, and adjusted EBIT increased by 43% on a sequential basis as we saw a return to seasonal patterns. While point-of-sale data suggests that consumers are spending less in stores, our products are typically not considered big-ticket items and are used for home projects or to enjoy celebrations, cookouts, and camping trips. We believe this dynamic positions us well regardless of economic conditions. The consumer team continues to do a great job managing the business while developing new and innovative branded products. In fact, we launched the Balloon Time Mini helium tank last month. An outcome of our voice of customer research, this patent-pending, innovative new product is compact and easier to use, opening up more opportunities for distribution and potential new channels. The Balloon Time Mini is currently available in select Meijer stores and will launch more broadly across the U.S. later this fall. Building products generated net sales of $142 million in Q4, down 18% from $173 million a year ago. Decrease was driven by lower volumes, partially offset by favorable shift in product mix. Building products generated adjusted EBIT of $59 million for the quarter, and adjusted EBIT margin was 41.6%, compared to $64 million and 36.8% in Q4 of last year. The decrease in EBIT was driven by our wholly-owned businesses, which saw operating income decrease by $10 million year-over-year from record results due to lower volumes in residential construction and maintenance end markets, which continue to see some destocking compared to a year ago. The headwinds in our wholly-owned business were partially offset by higher equity earnings contributions from our building products JVs, which collectively contributed $50 million in Q4, $6 million more than they did a year ago. Star Teacher and Wave both continue to perform well, generating year-over-year earnings growth while their end markets are being impacted by interest rates and economic uncertainty. Our building products team continues to do an excellent job executing in the current environment while investing in innovation and long-term profitable growth. In Q4, building products shipped a first-of-its-kind patent-pending cylinder called PowerCore. This disruptive, innovative new containment solution gives contractors the power to increase productivity by spraying water-based adhesives onto a surface with speed and efficiency where previously those adhesives could only be applied manually. In sustainable energy solutions, net sales in Q4 of $45 million were up 10%, or $4 million from the prior year, driven by higher average selling prices. SCS reported the adjusted EBIT of $3 million in the current quarter compared to a loss of $2 million in Q4 of last year. The economy in Europe continues to be challenging, and SCS's results will be impacted as a result. We believe our team continues to do an excellent job executing in the current environment while positioning that business as an important part of the supply chain that will enable the global transition to low and zero emissions mobility. At this point, I will turn it over to Tim to discuss steel processing results.