Good morning and welcome to the Worthington Industries Fourth Quarter Fiscal 2017 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 Ms. Cathy Lyttle, President of Corporate Communications and Investor Relations. Ms. Lyttle, you may begin.

Thank you, Terri. Good morning and welcome to our fourth quarter and fiscal yearend earnings call. Certain statements we make today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties and could cause actual results to differ from those suggested. Our earnings release was issued late yesterday afternoon. Please review it for more details on those factors that could cause actual results to differ materially. We are recording this call and it will be made available later on our website. Here today to discuss our 2017 fiscal yearend and fourth quarter are Chairman and CEO, John McConnell; President and COO, Mark Russell and Executive Vice President and CFO, Andy Rose. John will begin.

Well thank you, Cathy and thanks to each of you on the phone for joining us today. This quarter and the fiscal year speak for themselves. I am very proud of our employees for producing another record year and appreciate all of their hard work. It's not easy to continually find ways to improve on what you do, either individually or collectively. To all those who work here and to all those we work with, thank you. I am also very excited about the addition of Amtrol to the Worthington family and welcome their employees. Amtrol's products pulled nicely into our cylinder operations and perfectly match our criteria for increasing our operating margins while decreasing our earnings volatility. I'll turn the call over to Andy and Mark now for more details on the quarter and the year.

Thank you, John and good morning, everyone. The company finished the fiscal year strong with quarterly earnings adjusted for restructuring and nonrecurring gains at $0.87 per share, up a $0.01 a share from the prior-year quarter. For the fiscal year, we achieved record earnings per share of $3.22 adjusted for restructuring and nonrecurring items, an increase of $0.74 or 30%. Rising steel prices throughout the year added $25 million of inventory holding gains in steel processing as compared to $15 million of inventory holding losses in the prior-year. Pressure cylinders was relatively flat for the year, but demand in oil and gas has picked up recently, benefiting fourth quarter margins and earnings. Engineered cabs also saw significant opportunity -- significant improvement year-over-year. Equity income from joint ventures was $5 million lower than the previous year, driven by higher steel cost in our WAVE joint venture, lower offload business and ArtiFlex and the consolidation of WSP. EBITDA for the year was $407 million, another record for the company. Several unique items in Q4 were as follows, inventory holding gains during the quarter were estimated at $10.5 million or $0.10 per share as compared to gains of $3 million or $0.03 per share in the prior year quarter. Restructuring charges were negligible at $400,000 during the quarter. Pressure cylinders had almost $3 million of one-time SG&A expenses for severance and deal expenses from the Amtrol acquisition. Our effective annual tax rate came in at 27.9% in the fourth quarter. For fiscal 2018, we're assuming 31% for the year. Cylinder's operating income excluding restructuring was up $5.3 million or 39% to $18.9 million, driven primarily by improved sales in oil and gas equipment up 40%. Operating margins for the quarter were once again below normal due to the impact of losses in oil…

Thanks Andy. In steel processing, our direct customer shipments increased by 9% compared to the prior year quarter. We finished the year strong and likely gained market share as comparable Metal Service Center Institute data shows only a 4% increase in direct industry shipments. Our toll processing volume also showed slight growth and combined direct and toll volume increased by 5%, but the mix was 54% direct versus 46% toll. Steel processing shipments strength was across most of our major markets led by significant gains in agricultural volume, which was up 56% compared to a relatively weak quarter last year. Automotive shipments to the Detroit Three increased 4% and our other automotive shipments were up another 4%. Our construction volume was down 11%, but that appears to reflect the timing of large customer orders rather than any general construction market weakness. Our steel processing joint ventures performed well and we're starting to see the benefit of our recent capacity expansions that Tailor Welded Blanks and Serviacero. TWB is nearing completion of their 10th North American facility, which is located in the same industrial campus and will share supply chain benefits with our Serviacero facilities in Monterrey, Mexico. Serviacero had another strong quarter with direct shipments up 7% and total shipments up 2% and our BMW venture in China continues to ramp up as trial orders are being produced for customers there. Turning now to pressure cylinders, within pressure cylinders, our oil and gas equipment revenue was up 40% compared to last year as volume and bookings in this business have increased now for the third straight quarter. In our Industrial Products Group, which now includes our cryogenics business, revenue was up 4%, mostly related to refrigerant volume. In Alternative fuels, revenue was up 6%, primarily due to European sales. In…

We'll thank you both. We'll as always, be happy to take any questions you have.

[Operator Instructions] And we'll go to the line of Martin Engler with Jefferies. Please go ahead.

Good morning, everyone. Beyond WAVE, I believe you noted that some of the other JVs were also adversely impacted from higher steel cost year-on-year. Do you have any estimates as to maybe what that headwind was on the income?

I would just say, you saw the decline in the joint venture income. It's sort of consistent, it's $2 million across each of the businesses that I mentioned. If you remember Martin a year ago the steel prices in the first calendar quarter were very low and you could put in the 400s a ton for hotrolled and then you started to see a significant rise and so all those businesses benefited because they had low-cost inventory on their balance sheet and we were able to sell it at higher prices and so this year you didn't have that tailwind.

Okay. That's helpful. And then sales to automotive as a portion of overall declined to about 40% I think versus 43 a quarter ago. Can you just talk about what you're seeing there regarding the automotive demand in recent quarters and kind of what you're expecting near-term with the seasonal shutdowns?

Hi Martin, this is Mark. The experience in the quarter that ended in May was we were up, we were up 4% year-on-year both for Detroit Three as well as domestic shipments. So, within the quarter -- for the quarter, we were up. However, we see the same thing everybody sees, which is activity is slowing slightly at this point. People are starting to adjust their schedules. We expect that that will begin to show in the quarters that we're in. So, a slight softening.

Okay. And I guess alternatively there you also saw some gains within agriculture. Can you just remind us the types of market that you're selling to their that the product mix works and how the margins compare to the aggregate segment overall in steel processing.

The strength we have there was in the quoted products. So that's our galvanizing lines in Michigan and Ohio and the big market there that was driving the increase is grain storage. So, we had one of the strongest springs for grain storage that we've seen in several years as people are obviously anticipating larger crops of the base grains and legumes; soybeans, corn etcetera.

Okay. Thanks for the color.

We'll go to the line of Tyler Kenyon with KeyBanc Capital Markets. Please go ahead.

Good morning. Just Andy, with respect to the pressure cylinders, it looks like there may have just been maybe some reclassification of just some of the -- some of the volumes just among the consumer and industrial business segments. Just wanted a little bit more color on that. And I know you mentioned that there was -- there was a bit of an SG&A impact, just associated with the Amtrol acquisition in the quarter. I just wondered if you could provide any color as to what that actually was?

Yes so, I was trying to figure out how you saw that. I saw it in your note Tyler, the re-class, but basically, we have a small business here in Ohio actually that we acquired a few years back that makes brazing rod and it's essentially sold through the wholesale plumbing channel, but we reclassified that. It's not a big business probably $7 million or $8 million of revenue, but that's what's going on there. There's actually probably more of that to come. With the change in leadership in cylinders a year ago, we have been realigning some of those businesses and then with the acquisition of Amtrol, we've got two major parts to that business. One is industrial gas related, one is consumer products related. So, you're going to have more noise there. It's good noise, but it will probably make it a little difficult to comp over the next year or so. And then as it relates to SG&A, I think I called out $3 million of costs in the quarter. A lot of deal fees obviously flowing through. We closed the acquisition on June 2, but we spent a fair amount of money on what you expect around diligence and executing legal docs that kind of stuff and then there are some severance in there as well.

Okay. That's helpful and that was all within pressure cylinders SG&A?

Yes.

Okay. And I know you gave some good color as to what the FIFO inventory gains were in the quarter within steel processing. Any sense for where you might shake out the first quarter of '18 based on where we are today?

Yes, it'll normalize a little bit. We had the big run up there a quarter or so ago and that flowed through mostly in this quarter. So, we were probably expecting a little bit of a reversal in the first quarter.

To the same magnitude as the gains you realized in the fourth quarter or just…

Yes, I would say it's hard to tell right now because the quarter is not complete and we're still pretty early, but I would say not nearly as dramatic as what we saw in the first or the fourth quarter.

Perfect and then Mark just -- could you just comment on what you're seeing in oil and gas? Clearly starting to see more of a pronounced step function in terms of the improvement in that business. Just what you're seeing there and how you're expecting that market to progress as we move through the next couple of quarters?

Well, our highest margin products Tyler are the separation units that we make or gas processing units that we make and the driver for demand of that is the price of natural gas. So, the price of natural gas is relatively stronger than the price for oil and you're $3 plus MMBTU for gas or oil is still languishing in the mid-lower 40s. At that level, then you see the oil-driven plays in Texas and the plains in the Dakotas, they don't have as much strength as the gas-driven plays, which in the Northeast to Marcellus and Utica are more gas-driven. So, the strength is concentrated in the Northeast and its driven by the price of natural gas rather than oil and it skews to our higher margin products the tanks and storage products that we manufacture, those are for storing the liquids and the separation units are for separating the gas-driven plays. The other factor that's going on in the Northeast is the completion of gathering infrastructure. There were a lot of the wells that did not get drilled that would've been drilled that they could have been hooked up and the gathering pipelines have now caught up to the drilling activity. So that's no longer a constrain and that's why you're starting to see some more strength in terms of demand. Our forward order book looks stronger than it has in a couple of years in that business.

Okay. Great. I appreciate all that and then just higher-level question, made just recently -- made a big deal one which was neutral from a leverage perspective and just curious with credit markets being pretty wide open and pretty accommodating at this point, whether you'll look to aggressively pursue M&A and if we should be thinking about the level of priority between capital allocation within all the buckets that you previously mentioned that if that's changed at all after this?

I would say our strategy continues to be intact with respect to growing through M&A. We did put our head in the sand a little bit a year and a half or so ago, two years ago, just because we've done so many deals in cylinders and we wanted to digest what we've done and get those businesses integrated and get them in good shape and so we were through that. Amtrol is a bigger acquisition, but it's also a very sophisticated company. The integration is proceeding very well. We're actually learning a lot from their business and obviously we're going to share some of our practices with their business. So, I would say if we can find good companies and get them at what we think are good prices, we'll continue to be active on the M&A front. As you know, it's a hot market, continues to be a lot of capital out there and so it's competitive. But for the time being, I would say it's steady as she goes. If you think about capital allocation, it should reflect what we've done historically, the only difference being we just spent close to $300 million on the second day of our fiscal year. So, we're obviously off to a strong start on the M&A piece.

Great. That's all for me. Thank you.

[Operator Instructions] We'll go the line of Martin Engler with Jefferies. Please go ahead.

Thank you. Just one quick follow-up. What's the CapEx budget for the year?

Yeah, I would say probably in the $80 million to $85 million range. We actually came in a little under where I thought we would this year, but that's probably a pretty good proxy for next year.

Okay. Thank you.

[Operator Instructions]

It seems like we're kind of running out of steam on the questions. So again, I want to thank you for joining us today. Fiscal 2018 is going to be a fun year, full of challenges and opportunities. I am confident that our team will navigate the coming year better than anyone else sailing in similar waters. Thanks again. Talk to you next quarter.

And ladies and gentlemen, that does conclude your conference for today. Thank you for using AT&T Executive Teleconference Service. You may now disconnect.