WOR - Earnings call transcript Q1 2020 | Worthington Industries, Inc.

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Operator

Good afternoon and welcome to the Worthington Industries First Quarter Fiscal 2020 Earnings Conference Call. All participants will be in 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 Sonya Higginbotham, Vice President, Corporate Communications. Ms. begin. may you Higginbotham,

Sonya Higginbotham

Good welcome John. quarter our earnings call. afternoon you, to and first Thank

I'd remind cause factors of like statements open. begin, and that suggested. release and this These we later cause is Before detail to morning Please market We to refer website. subject to are Securities worthingtonindustries Reform earnings risks within differ the more statements Private those are made and everyone forward-looking call the to results XXXX on our today to issued on will meaning results to could the those could actual uncertainties, Litigation This Act. available differ for actual today it prior certain our be materially. that made recorded from being

call CFO, Joe Rose; and McConnell; CEO, On are Hayek. Chairman and John and President our President, today Vice Andy

the turn now McConnell. John I’ll over call to

John McConnell

Thank you, Sonya.

joining call. our you thank for first us and earnings quarter all Welcome for

This in quarter certainly had noise it. a lot of

get right reviewing the So start the to to to over turn let's Hayek numbers. Mr. it. I'll call

Joseph Hayek

afternoon, John. Thanks everybody. Good

share QX, share. China. per decision per a share. loss charges impairment $X.XX reduced $X.XX engineered quarter, several million the related and in the the items of prior XX% in quarter $X.X write-down joint impairment the reported earnings of to last charges a by venture These or There cabs business our earnings our investment quarter we of steel to unique million in $X.XX a have charges were restructuring current pre-tax included in of we and following; including year. $X.XX $XX In our share primarily versus The

morning, alternatives the the our including not cab for our actively to majority in exploring are mentioned we we limited press of business, but release sales interest. possible this As strategic

$X.X year of in were $X.XX $X.XX quarter to the compared million holding share or $XX quarter. share the a Our estimated prior gain per in losses or million inventory per

$X.XX cash August per debt longer-term early of share XXXX, $X an bonds, in of million and of with a hand our public charge pre-tax or X.X% average using extinguishment the on related denominated an X.XX%. refinanced interest rate incurred We of Euro issuance to we which

In we the pre-tax $X.XX profit effectively take-or-pay related pulled contract, to or termination share per $XX.X business, early of million our the recognized quarter. customer into current earnings some a cylinder of which the future

to Consolidated average $XXX lower due processing. from XX% million prior QX steel in net selling the decreased sales year lower in by direct shipments prices to quarter, and

little our and economic uncertainty declining U.S. wars, which the our seeing are In very no Europe. steel in markets many addition prices or we impact growth, both impacted behaviors of tariffs, to and in believe have and revenues demand, and trade conditions,

$XX gross million by primarily by cancelled holding by swing pre-tax profit to $XX related declined the QX inventory $XXX steel offset dollars from in improvements Our the quarter and million partially to cylinders take-or-pay driven direct pull of in that million, forward margin and year losses, contract. the lower in last of of the unfavorable volumes

XX% down quarter. tons last year quarter. prior total compared X.X%, from year's and the direct of were in record driven tons primarily selling the steel down sales direct and million ship of due direct lower average from processing of net steel were QX by Premium Total volumes XXXX X% XX.X% XX% with declining Direct down prices $XXX first lower to were shipments prices. mix XX% declining

year, believe were rising customers we to inventories on July. calls, due peaked prices, which previous that As last building discussed we steel in

recent levels customers with this maintain and in the low occurring destocking of July While inventory have reduce year in steel point low prices been XXXX. to

volumes softness and due QX last continue builds gains North did weakness by or markets. lower from of we agricultural processing in automotive believe to volumes. steel Now, beginning is to year-over-year, in QX saw American destocking approximately the end we million some year-over-year reduced We for inventory to moderate. swing of negative see income with Operating year, million direct combined $XX holding $XX driven million losses $X down in was auto

we into we expect also holding steel in managing growth QX difficult do losses inventory remaining That profitability. Due maintaining our on team will is said, that increasing the continue very and XXXX. to well continuing of believe processing long-term markets and while in steel share, business environment certain in decline focused a prices, is that and market

the Turning to pressure million sales prior year cylinders, over $XXX up quarter. net were X%

of oil up within and cylinder and $XX.X contract to improvements excluding the $XX was was and business the business. the gas X% our last impairment in year, $XX products year, million products in charges the million industrial from in income QX year-over-year due business up industrial to benefit Operating take-or-pay prior Income million the of related operating primarily

Cylinder a $XXX,XXX over by prior stable, end year QX in economic mix. year last the was Cabs restructuring conditions conditions headwinds of than X% quarter. were the million, reported market before U.S. In operations to driven the our Europe Cabs, favorable Engineered continued operating $X.X in worse sales net loss were to due up in face product geographies. of those

As strategic with in we restructuring quarter. $XX we mentioned pre-tax of alternatives and impairment earlier, business, we the and recognize million are actively this charges exploring our

feel has to we cabs right future, alternatives of the make well undertaking itself the Our but for thing shareholders. business evaluation continued very both positioned has and for business that to and the this our do is improvements for

in JVs, $X quarter, to XX% Turning a the during to steel $X quarter in down that $XX equity associated joint was due million charge decrease China. income prior down with decision million, to our our year from investment the our venture of our million write was

million, WAVE due JVs from losses. unconsolidated dividends down received primarily million, inventory quarter. Serviacero holding the We from $X.X $X.X million $XX was in by increased to during income equity Our

capital was in and of $XX We cash million asset balance $XX Cash million the $XX on flow $X Turning to primarily operations the $XX projects, the XXX,XXX from We repurchase million statement to the our million to invested stock. of in reduced debt shares divestiture sheet. and quarter. related paid million our flow $XX cryogenics our dividends received business proceeds from million sales and of by in we Turkey.

a declared the million. Today, with at $XXX for debt XXXX. Funded dividend I'll in payable the quarter quarter-end sheet. million December of down was the sequentially $X.XX share to balance close board $XX per

$X Our down interest expense quarter. the million slightly from of was prior year

quarter. bond. As $X refinance we pleased mentioned of we X.X% our $XXX were earlier, million to to that in called coupon due interest pre-tax with long-term be interest this in current maturing $X call roughly of issuing rate of incurred denominated XXXX, an during notes Based on able levels, a rate should XXXX. X.XX%. reduce the very run cash them expense $XXX average were quarter, Euro our We million charge bonds and using million on refinancing debt hand the approximately and to We XXXX, million April XXXX by per future

$XXX revolving We of with under $XX million and facilities. ended million our available consolidated cash credit quarter the

months, was turn Our million $XXX trailing and over last is the charge million, Andy. EBITDA $XX adjusted it debt EBITDA leverage tank this our which ratio to replacement over XX includes net roughly program point, I'll to At for the Xx.

Andy Rose

afternoon, everyone. Joe. Good you, Thank

balance quarter the by tariffs. some and We Well, quarter and the of continued primarily the a year. well volatility price for driven during lot are accomplished challenges our positioning ourselves had steel first

Our up assets. has on been cleaning recent underperforming non-core and focus

fuels in steel strip the value During business of joint Turkey and the our wrote-off last our several in extended alternative months, China. venture we

a business, engaged strategic information have months regarding been and path our review to of also in forward. in coming hope our We've additional alternatives engineered the cabs regarding

is of growth cost EBITDA And capital. investment. Our goal manage achieve and raise to we cash return businesses our into our year-over-year overall remains goal that return in our our our portfolio all future, of as on the

the using other some will We cash cash to save of that long-term $X per at debt debt current in flow In using meantime, we're interest that remained cash our shareholders refinanced almost million reward in costs year ways. solid, and levels.

the shares our we in And is seen repurchased while value any and our complete quarter. around during see encouraging. activity to that continue some we've XXX,XXX not acquisitions, increased did core shares We

dangler has past changed at and lot year new a many in to of the our Worthington, in renewed businesses with A commitment leadership

right industry, is analytics, America This all are forces us. is accelerating robotics, these different, not around whether not change value. industry shareholder data manner it's no an an or vehicles, And is being not is some of now. electric riving that disrupted cloud-based in there in ours

us Change we expect And creates pass be opportunity. by. to it leading change not watching this

a to talented group workforce excellent our of have leaders success. delivering continued course support We ingredient your and an key charting is for the of Thanks that

Worthington. John?

John McConnell

that can Andy, good you may Chris, job. thank questions have. any take you, you

Operator

we ahead. [Operator with Please will to go go Jefferies. Englert Martin first Instructions] of line And

Martin Englert

may there might of seem something also you something Exactly about be losses for per even processing, steel touch loss, to inventory what's low. profits within operating holding So, fiscal the that? when quite the magnitude the that inventory and else is that ton XQ with in on Can anticipating? do you mix, talk holding driving then adjusting be

John McConnell

I XX respect steel down - direct generally one two-thirds contributor volume inventory Sure, we - tons take were, a it's had little there. we processing of losses quarter. they they'll first. what were were will We the We to tons, in QX. is but do be for early, what And second outside FIFO in is with in of significant this getting QX, year-over-year, like that think the holding they two-thirds expect a

challenges. like have but And there actually volumes pretty our margins some well, have that, year-over-year, so, you hung have especially in But you when lower

build you environment ultimately steel have know had two were bit or to one maintenance and well. that inventory couple that, to of P&L that our some in like planned, as the things the some that, do that's hurt of a had, declining three like we as that also us on you a facilities beneficial side were outages an planned ahead that We outage do for that like necessary a price very week but when and

Martin Englert

of that implications FIFO The would out that well build inventory losses included or called holding you quarter, be exclusive the the inventory there? the for as that

John McConnell

That that from separate is number.

Martin Englert

on anything build, estimates is else associated from with any the what rough have and outage? inventory also the then That on been losses the headwinds maybe holding the separate, would

John McConnell

because way million. of dynamics that terms steel that place prices have took Yes, in - would was of the outages $X the north declined, just would the that of

Martin Englert

the above Okay, the million inventory holding that so called amount from with then $X also associated million in outage $X and and some expense, losses beyond other out outage? you of

John McConnell

number. outages - that is no, No, the no really,

Martin Englert

Okay.

John McConnell

that. top on were of losses the But

Martin Englert

Okay, [indiscernible] outage.

and more that and on Okay, trending more are that, trends seeing are quarter you things with can regarding there then at you some was products today? what provide was detail the and to where take-or-pay you're also, happened, here, consumer on demand cancelled, where what current cylinders, relative what a recent within with going contract industrial

John McConnell

Sure.

because to those spool business significant the were for reserved fuel very nature we the of next some Japanese large and tanks, to some case, fair dollars, amount for our amount respect with work on do programs. working some up that in factory So, a work, did of we're of engineering contract that the with had XX margin of capacity forward we bringing months long-extended OEM, of a tooling platform. hydrogen cell of set work, shifts they this oriented In is

to terminated And they demand, has in contract. not move that essentially forward and decided

of As over of a performing we us of over perspective to QX. see spread cash consequence fact have five out will with next flows to a the all receive six would that or accounting you that, that we six the that the over quarters amount from requirement been the that, that were quarters. recognize would agreed and because that That's compelled cash we've flow contract in or five been that have an there, associated

cash So would or in, bringing $X where in comes next forward this that for is we $X, those gotten have dollars, we effectively, the we are the what doing recognize quarter. margin

things, our think growing respect maintaining pretty I we think job share. With We that a cylinder growth markets, to generally, we're reasonable. moderate. is think domestically doing And things good are or

We have Europe. in softness some seen

over there We have in businesses there, our job a a we terrific facilities are challenging those environment. in teams doing and have geographies, pretty

Martin Englert

NAFTA your anything is between and Euro that there? regional split for Can you market business us remind and the else what

John McConnell

cylinders about of spliced XX% little total. that’s usually and the bit piece XX% the but is business of between European Sure,

Andy Rose

industrial it's products. primarily And

Martin Englert

end industrial specific Any is towards? weighted more Okay. markets that heavily

John McConnell

pressure In Europe, it's primarily. and still LPG, high

Martin Englert

Do one. the thanks the budgeted one have number and CapEx for for Okay, detail. tax if a rate? last all And I could year anticipated you

John McConnell

like be $XXX $XX million million $XX quarter. to We that a probably to good first the get in Yes, would something million estimate.

Andy Rose

but XX% And, be we we rate it'd guess say to terms of of I Martin, in bit XX%. know, a mean, a tax would

Operator

Markets. will Gibbs KeyBanc we to Next go ahead. Phil with Please Capital go

Phi Gibbs

quarters, been related was corporate there loss The that last of that that the more to some quarter, or anything of thinking over $X a about in had of several here? or is million the the persistence one-time doing I item that things terms we other zeroed be in think you're out around should

Joseph Hayek

large one-time. is slight Yes, combination in costs, it's charge and then Primarily, say increase I a the that and healthcare other sort would costs, legal that an so are lesser and flows there of probably some the to one-time healthcare through more event. also uptick costs it's And in We're then related line of self-insured in item. -- some there's our there. lesser there's extent, a to that a overall

Phil Gibbs

So, modest being should pretty I something model much? or

Joseph Hayek

For the future?

Phil Gibbs

Yes.

Joseph Hayek

item like be get but the we one forward, going should these line here. flat that signal mean upticks we relatively I of do had Yes, sort

Phil Gibbs

allocation And in I sale moving change the your international I one business. know around call them a was partner XX them months. one to and it with of lot in things WAVE was XX of think an a of last you've had of

I $XX million $XX of do have JV Are to year. me all that Europe were year. comps looking at variation what last million relative clean? some they in we is terms look when that to of we're you correct wrong, Or at last those but may profit And WAVE, I'm not they So because accretive I have the all. now, numbers been know if not in

trying just the to I'm So comparison. understand

Joseph Hayek

been one, I very close was can would is actually that. the answer Phil you but profit. week, percentage that it's next if there regulatory Europe because a is clean WAVE’s some expected way a pretty of issues believe sale small The Europe of is number, to ongoing It's

more So much it or $X.XX quarter million than really million every like that. affect our to number shouldn't $X.X something

John McConnell

but that Yes, change. we've allocation backed also

Phil Gibbs

realized on those When those? the you proceeds you Are relative comp? still to the have that sale,

Joseph Hayek

in paid two-thirds being About closes. but we held actually the deal full escrow amount, have of the them, till realized We've the proceeds. been it's

Phil Gibbs

statements has realized your that so on so Okay, that's this on been your, point? financial at

Joseph Hayek

$XX Except not, million. it's not, is for than less the proceeds, which last portion of

Phil Gibbs

Okay. And demand environment? gauge to saw trying volume that profit the the in growth is or year-over-year, WAVE that just mix to in more related you the spread the and

Joseph Hayek

It’s were in as spreads up volumes the here up and actually their their well. were both quarter-over-quarter U.S.,

Phil Gibbs

WAVE, mean to yes? up were you volumes Their year-over-year relative

Joseph Hayek

Yes.

Phil Gibbs

that tied And how the we then take out last question me the for just any terms business? Engineered of assuming much simplicity is D&A of in for forward moving numbers, just is to Cabs out, estimate

Joseph Hayek

that to get We'll quickly. number rather

Phil Gibbs

you. Thank

John McConnell

Engineered about the talking you’re Phil, within depreciation and amortization Cabs?

Phil Gibbs

it Yes, with were down, sell to much of if is you or, mean, I wind so depreciation it how that? associated

Joseph Hayek

work will We on that number.

Phil Gibbs

Okay, thank you.

John McConnell

forward. written trying Obviously, now, any the off I But you're so majority going there of it's do. what be to know won't

trying You're not to how out. is much figure coming out

Operator

will Very Tumazos, go we John ahead. Independent go Research. to Next Please

John Tumazos

good rate that you more financing and I down went in Euro think Euro pay? housecleaning, to and Thank going all interest last the the for denominated you're month the the

John McConnell

Interesting times for sure.

John Tumazos

that I and Greece Euros was in some be had I leftover got valued. to

the steel on XX,XXX what quarter, took was total with of you rate processing the that fall to, volume tons title ton of the tons? that's the So in change

John McConnell

ton tons. is XX,XXX actually direct The

sure I'll toll little wrong the X%. don't tons give tons declined is one. over And Direct that number, was XX%, the I just make so direct you

John Tumazos

direct So was toll? basically to it a from switch

John McConnell

shifted. it, got You mix the

John Tumazos

So do today it really top the class? decline think What business se? exist wasn't cylinder natural business, they you of as volume the processing growth for and per of a WAVE the rate the steel is

John McConnell

through think And overall, will be that businesses that GDP. pretty to slower than we're lots our environment think as that very some over with way that markets But opportunities we're selected term we longer like through markets manufacturing, them grow of some them more mid-term. we do. take comfortable and there that our rapidly around We to GDP grow than the think about end-markets, our of and be that like and than And allow through as lean from lots business there rapidly that. our because the will will grow share those go within M&A have operating more an us innovation, we in ultimately to of

John Tumazos

the the consumer X% Was The double-digit, explain particular in cylinders might volumes there a that and around anything industrial lot in that? fell in cylinders.

John McConnell

have great XX% that earlier, question, should mentioned a we because of the decline Yes, is divestitures. of that’s

the That's year, and volume. soldering recall in If calendar end last that brazing divested of the you decline the of we operations. share lion's year at of our

John Tumazos

you much. Thank very

John McConnell

you. thank Certainly,

Joseph Hayek

answer of $X.X the about To it's and Cabs, Phil's Engineered million for amount year. on depreciation question amortization per

Operator

[Operator Instructions] And Gibbs. do from we ahead. then have Please Phil a follow-up go

Philip Gibbs

Thank you.

thought profit the contract this if the would into going plus quarter, have that future that or $XX you gross imagine been. I'm last been have over revenue of from So to that given a you what take contract? take-or-pay, hydrogen I would the multiple would pulled of the life million

you business running, and that pretty big give How do those you because forward? how that on, equipment us materials you're know chunk it's I a that's lost moving So lost, specialized replace replace for do just that pretty a flavor market?

Joseph Hayek

that It's question us. a good is business a very for

which - and our the go and the directions aware course teams places to So moving you And talking feel good use. in replace months. you illustrate have that. ability terms to that We tomorrow next of thing with to are in the engineering market of the the we've but pretty of to get a where customers, in our teams there. good products fuels different that have fully over several our that we're point, the about that commercial of capacity And sometimes lots world are we not out got in desirable different a is

Philip Gibbs

Europe? the making largely is U.S. of you're in this stuff this And or out

Joseph Hayek

a it the might up in geography end other U.S. the It’s than first produced in U.S.,

Operator

And John go from Tumazos. have follow-up a Please we do ahead.

John Tumazos

XXX year system your is that Can and we roughly when to having hot eroding a up With that this fallen then is through washed steady XXX assume year rolled, and about $XXX it’s bit. November bouncing state? over last benchmarks June little June for she's

John McConnell

Yes, assuming the stay I yes. are, stable prices where is mean they answer

John Tumazos

close business think August. cash million you'll you cash, When lower money the at your put to into how you Further, much up, picks goes tubes, $XX.X generate balances the receivables of a values. do lower end bit inventory working business of and at When little back capital?

John McConnell

That's goes question we to do actual what on of price of but the because affect expect of XX%, equation a prices significantly obviously, much, an then John if how But depends terms business there. a complex tons change inventory lot don't in that. the up steel it can certainly relatively there's

John Tumazos

thought mine. better you. guess than Thank Thank your would you. be I

John McConnell

an to one it’s easy not answer. Perfect,

Operator

And questions back the company further with it closing if will I no comments. in queue, turn have to you any

John McConnell

Thank again with for reviewing to the all We you you us end first us talking Thank you. look at joining of the second. the to forward quarter.

Operator

Ladies your and does gentlemen, conclude for you participation. that Thank your conference.

now disconnect. You may

Worthington Industries (WOR) 25 Sep 192020 Q1 Earnings call transcript