Good morning and welcome to the Worthington Industries Fourth Quarter and Fiscal Year End 2020 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 would now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer. Mr. Rogier, you may begin.

Thank you, Christine. Good morning, everyone and welcome to Worthington Industries fourth quarter fiscal 2020 earnings call. On our call this morning, we have John McConnell, Worthington’s Chairman and Chief Executive Officer; Andy Rose, Worthington’s President; and our Chief Financial Officer, Joe Hayek. 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 risks and uncertainties and could cause actual results to differ from those suggested. We issued our earnings release earlier this morning. 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 John for some opening comments.

Thank you, Marcus. As you read in our announcement last night, I have decided to transition out of the position of Chief Executive Officer effective September 1, I’ll remain the Executive Chairman. Andy Rose has been appointed by the board to become our next CEO commencing on the same effective date and retaining the position of President. These actions are the culmination of a well-thought through succession plan. It has been by privilege to lead this company as CEO for the past 27 years. I am proud of our employees who come and work hard every day to make a difference, especially in these challenging times. Our company is in a great position to grow and I believe that the next decade will bring exciting opportunities. I’m confident that Andy and the entire leadership, perhaps the strongest in our history will deliver on those opportunities. I’ll now turn the call over to our CFO, Joe Hayek to review the fourth quarter in detail. Joe?

Good morning everyone. John, I know, I speak on behalf of all of us at Worthington when I say, how grateful we are for how you lead this company, and for the impact that you've had on us collectively, and on so many of us as individuals. We're looking forward to your continued leadership as our Executive Chairman. I'll now spend a few minutes reviewing the quarter and then we'll turn the call over to Andy. This quarter presented us and companies everywhere with unprecedented challenges. We continue to face significant uncertainty related to the coronavirus and associated shutdowns. These dynamics had a significant impact on demand and on our results. While the negative impacts of COVID-19 are easy to see, it has also brought out the best in our people. Across Worthington we're very proud of the way our teams have supported each other, their communities, our customers, and our business by keeping each other safe and finding innovative ways to navigate the evolving new normal. While this crisis has forced difficult decisions, we believe that our people first culture has been on full display, and we will emerge stronger as a result. In Q4, we reported earnings of $0.29 per share versus $0.66 in the prior year quarter. In addition to lower demand in several key end markets due to COVID-19, there were a few unique items in the quarter that includes the following. We incurred restructuring and impairment charges of $15.7 million or $0.20 per share in Q4 related to severance charges, the write-down of trade name associated with Armstrong European operations and our exiting the two remaining Engineered Cabs facilities that were not included in that sale. This compares to impairment charges of $8.5 million or $0.11 per share in Q4 of last year. Estimated inventory…

Thank you, Joe. Good morning everyone. This quarter had a lot of moving parts, but fortunately business conditions are improved. [Technical Difficulty] mentioned, we had some positive developments around our investment in Nikola. Most of our businesses operated under the essential business rules although demand levels fluctuated significantly depending on the end market and products. March was relatively normal from an earnings standpoint. April was essentially breakeven and May saw most of our businesses make money, albeit at lower levels, with the exception of those tied to automotive. Our employees are to be commended for adapting quickly to these volatile business conditions, all while following strict safety guidelines and evolving protocols to protect those in and around our facilities. It's June and that means a new fiscal year. This year is particularly special because we're celebrating our 65th Anniversary. We have our philosophy and our people, who live it every day to thank for reaching this milestone. We began the year with a strong balance sheet, low interest expense and significant cash and revolver availability. Assuming the economy continues to open back up here and abroad, we expect to see improvements in our businesses, particularly those that were hardest hit last quarter. As this occurs, we believe there will be opportunistic ways to allocate capital and drive value for shareholders. However, with the economic outlook still unclear, we will remain guarded on our approach until there's evidence of a broad-based recovery. I would like to say thank you again to all of our employees for their hard work and dedication to Worthington Industries over the past several months. As an organization, we have adapted well to our new normal, and while we are hopeful the worst is behind us, we are prepared for whatever challenges lie ahead. Finally, I'd like to thank our Chairman, John McConnell and the Board of Directors for giving me the opportunity to lead this great company. I am humbled by the selection and highly motivated to continue the legacy started by John H. McConnell in 1955 and successfully expanded upon by John P. McConnell. My goals are simple, to protect our unique culture guided by our philosophy and continue delivering solid returns to our shareholders. We have a talented leadership team and great employees all across the company, which gives me high confidence that together we will deliver on these goals and more. We will now take any questions.

Thank you. [Operator Instructions] Your first question comes from line of Seth Rosenfeld from Exane BNP. Your line is open.

Good morning. Thanks for taking my questions today and congrats on a very strong quarter. If I may, I just wanted to follow up with regards to Nikola and I understand you've already commented that you might be limited for all you can say given the lock-up, but if we can try – if you can give us a little bit of color, please, with how you think about this business from a strategic perspective. Worthington does have a number of stakes in businesses that have been long-standing. Would you do Nikola as something of a strategic long term holding or a business that would be a potential disposal opportunity? And then the follow-up, you did make a comment in your prepared remarks about kind of capital allocation, recognizing ways to drive value for shareholders, given where we are in the cycle. Were Worthington to dispose that stake in Nikola, how would you envision the potential capital allocation options, please, whether that'd be either shareholder returns or further investments in the business? Thank you.

Yes. Seth, with respect to any decisions around Nikola, we have not made any and we're not going to comment further at this point. I will tell you that from a capital allocation standpoint, Worthington historically has followed a balanced approach. We've been a dividend paying company for – since the first year we went public, and over the past 10 years, we've allocated capital to share repurchases to benefit our shareholders. We've also continued to pursue CapEx investments to reinvest in the company. And as you would well know, we're a profit-sharing company, so we share some of our profits with employees. So, I would expect that, over time, regardless of what we do with Nikola, that we'll kind of follow a similar approach.

Thank you. It's very clear. And just one follow-up, please, with regards to the timeframe of lock-ups. I think there has been some confusion [with investors] with regards to the timeline. Can you just walk us through this kind of staggered approach of this lock-up system, please? Thank you.

Sure. Seth it's Joe. You know, rather than doing that on this call, it is filed with the SEC, and we would just direct people to that document.

Okay, thank you very much.

Your next question comes from the line of Phil Gibbs from KeyBanc Capital Markets. Your line is open.

Congratulations to John and Andy, I know the transition will be seamless and congratulate you both on this.

Thanks Phil.

First question just is on the Cylinder side. I think, Joe, you mentioned in your prepared remarks and clearly, I guess, in hindsight, not a huge surprise based on the stay-at-home orders, but what are you seeing now, I guess, in the consumer business? Is that strength in the camping and DIY and – growing, is that all staying solid for you all?

So the quarter and the new fiscal year is all of three weeks old, Phil, and yeah you're right, the mix in Cylinders shifted. It was very difficult for the contractors to enter people's homes. It was very difficult for anything to happen on commercial construction sites over in Europe, automotive and things like that were soft, but the product lines of ours that were – are consumer-facing, we saw a benefit. And so that continued into May and into the first couple of weeks of June. The watchword for all of us right now is still, unfortunately, uncertainty because we can't predict whether those things will continue unabated for the next 12 months or not, but you are at a seasonally strong time for outdoor activities, which we think drove some of that strength in Q4. And moving forward, we would expect, after knowing anything else, for the trends to be seasonally normal.

Phil, that business, as you would have had a sense is – has proven in the past to be counter cyclical. This is obviously a different situation with a virus sort of driving the economic decline, but it's behaving similar to in the past and potentially even a little bit stronger.

Okay. When we look at WAVE in that business, from what I understand has a high repair remodel component to the commercial construction aspect of it. So, probably still more resilient through cycle, but I'm sure it impacted because of the – just the non-essential businesses etcetera and people shutting on office complexes, any changes you're seeing to that business right now, or things, kind of where they have been?

Yeah, I think as it relates to WAVE and to a certain extent ClarkDietrich as well, I mean, commercial construction was obviously impacted, probably more so in some of the bigger cities that were hotspots like New York City, but you know their demand was off during the quarter. There’s longer-term implications here. Some are probably positive and there is certainly some that are negative. The work-from-home trend, obviously for the long run, has some negative implications that they're not building as many commercial office buildings. But as you said, WAVE is a high percentage, sometimes as high as 60% or 70% repair and remodel business. And so what that means for existing office buildings, probably a lot of reconfiguration, workstations and the way people work and if social distancing continues, so there could be some positive impacts there too. So, these are the – it's really hard to predict, kind of where this thing goes, but in the short run, though, their volumes were off just because activity is down.

Thanks, Andy. And looking at the Steel Processing business, clearly a big automotive component. I would think March was still okay, April was the biggest impact and May you started to come out of this or thought of it as you pre-positioned for the restarts. And I know you've got some new businesses sprinkled in there as well sort of trying to consolidate. So, is there going to be a big change in your mind in just aggregate volumes in that figures in the first quarter or given the fact that March was still good and now we're recovering some, that things could be reasonably stable? Just trying to understand, a lot of moving pieces with all the toll business that's being thrown in there now.

Sure. And, yeah, Phil, interestingly, the shutdowns in automotive were in mid-March and our shipments were still pretty reasonable for another 10 days post. And so as a consequence, on the back end, our shipments lagged the restart since, I think, there was some inventory on hand. And so as we look into – our big end markets there are automotive construction, ag and heavy truck, and so as we look at IHS forecast and things like that, as the automotive D3 and others ramp back up, we would expect to have our results be impacted and have a reasonable correlation. Those IHS forecast continue to bounce around a little bit and some of those restarts have been a bit bumpy. But any time you do take 58% of your business and have it to be a zero for a couple of months, it's really tough to overcome and certainly that is not going to be zero in June.

Thank you all very much.

Your next question comes from the line of John Tumazos from John Tumazos Very Independent Research. Your line is open.

Thank you very much. I want to thank John McConnell for his service to the company. It's been a pleasure and an honor to work with you for 30 or so years.

Thank you, John. Pleasure to work with you.

I want to congratulate Andy and the others on their promotions and Mark Russell, who's not on the call for leaving Worthington and finding a good gig at Nikola.

I'm sure he'll appreciate that.

With regard to the core businesses, there's been a little bit of upheaval in the economy. Could you tell us if there are impacts from suppliers or customer’s permanent shutdowns? I’m thinking of U.S. Steel idling Great Lakes, e-course, Michigan, Cliff Idling, the hot strip mill in Dearborn, Michigan, some of the auto plants that are permanently closed. Fortunately, you're not exposed to the airline industry or travel and entertainment so much, but are there any changes that you have to make and maybe those are the changes you are making, because your customers and suppliers are changing.

So, John, it's Joe. A couple of thoughts. The first is that we haven't had any material disruptions from a supply chain perspective. We certainly dealt as everybody did with shutdowns and other disruptions. We don't think that any of those will have material impact on our business, that we see it right now. Ultimately, we feel like the steps we've taken and some of the great work that our teams have done, positions us exceptionally well with customers. We've been able to take care of our customers, we're able to offer them stability and solutions that we think are unique to us. And so we love where we're positioned, but we also need to reach as high as we'd like to. We need reasonable demand, and some of that is out of our control. But we are thinking about that both long-term and short-term every day and we like where we are for now.

And John, maybe just to add a few other color or comments here, we, a number of years ago developed secondary and tertiary sources of supply on the steel side for really all of our products because we didn't want to take the risk of, you know, a shutdown of a mill really printing our supplies. So, we're pretty well prepared for that. I'm sure there will be some shifts that happen, but we do have other sources of supply around that deal. The only other thing that comes to mind for me is there has been as it is related to the auto restarts some part suppliers that are supplying the OEMs where they've had to delay production or idle facilities for days or weeks because they don't have all the parts they need. That's not necessarily direct to us, but it does impact, you know our shipments of steel.

Could you give us some color on Serviacero and ArtiFlex being in the red in the quarter? Were there charges to those or was it just no revenue and some steel holding loss in each case?

This is the latter John.

If I could ask one last and thank you for putting up with me, accounting question about Nikola, couple questions. So, in the next quarter if you report a mark-to-market, that's going to be a non-cash pre-tax item, does it have any tax implication? First.

We would only pay a tax on a realized gain.

Will you provide for taxes that are deferred or is it just not in the tax line at all?

Yeah. It wouldn't be in the tax line at all.

It's not – there's no tax, nothing. It's just a paper write-up and write-down every quarter hopefully never write-down. Next question, and this is a hypothetical. If you at a later stage dividend the Nikola shares to the Worthington shareholders, and let all of us decide whether we're excited about the electric or hydrogen trucks. Will that be a taxable event for Worthington or for us, or will it just be a return of capital? And if you can't answer this right now, I apologize for being so specific.

That's quite all right. Hypothetically, the tax consequences for us would be the same as they would be in any given scenario. So, we would pay the corporate tax and the shareholders would pay whatever is appropriate for them.

So, you would pay taxes if you distributed the shares.

That is our understanding from talking to people that are experts in tax. Yes.

Let me just interject. I'm not an auto analyst, but I like what I've read about Nikola. I like that it's focused on one product where I'm uncomfortable that Tesla makes high end cars, economy cars, trucks, much to build charging stations in every state and tries to do too much. I think that Nikola has a more focused model, and Mark is a businessman [whose networks] works on nuts and bolts and if you just held the Nikola for a while and let it grow, I'd be very comfortable as a minor, a happy Worthington shareholder.

Thank you, John.

All the best.

Your next question comes from the line of Edward Collery from SC Fundamental. Your line is open.

Hi, guys, Good morning. Thanks for taking my question. I fitted a fire alarm test launch here, so sorry if anyone in here is hearing that. Two quick questions from me. The first is maybe a longer term question, I’d be interested to get your thoughts on, you know, the 10-K and [indiscernible] other vehicles and cars and the risk, but that is something that have hurt the business much, so just wondered if you can provide maybe some more context around the topic. So, you know, competition and obsolescence, and specifically wondering if you guys are seeing any long-term threats from technological disruptions or maybe new forms of competition, either in your end markets or new legacy competitors in your specific business lines?

Yeah, we're having a little bit hard time hearing you. I heard parts of your question. With respect to technological obsolescence, I don't think we're experiencing a lot of that right now in our, I'll call it product lines or different businesses. I didn't really catch the first part of your question, though.

That was mostly the question. Can you hear me better now?

Little bit, yes.

All right. Sorry about that. Yeah, I'm just wondering if you're seeing, you know, any new forms of competition, you know, or if, you know, shifts in your end markets are, you know, maybe going to be, you know, are in long-term impacting demand for your products.

Yeah, long-term. This is Joe. Long-term, it’s hard to say we certainly realized that people can enter and things can happen with respect to sort of newer entrants to competition. I mean, we always have several competitors in all of our business. They are different. Whether you're talking about steel or cylinders or our joint ventures, you know, we haven't noticed anybody in the last 90 days that's emerged on the scene, but rest assured, we make it our business to know who those folks are and we try and compete as successful as we can with them.

And I guess, I might add, you know, one of the things that we have experienced is, you know, the current environment, politically is somewhat protectionist for the U.S., which is, I think, helps some of our products, and you know, one of the outcomes of COVID is likely to be, you know, near-shoring or re-shoring of certain critical products and supply chains. And I think we are well-positioned to benefit from that for sure. I think we've seen some of that already, but more to come likely.

Okay, and I'm sort of wondering, you know, the efforts to improve mileage in cars doesn't seem to have hurt the business in any appreciable way yet and I wouldn't think, but just want to confirm with you guys that, you know, a shift towards electric vehicles, you know, probably doesn't hurt the demand for your products, but just want to confirm that.

I mean, we haven't experienced any appreciable demand loss from electric vehicles. You know, as more and more electric vehicles hit the road, know, there – we expect there could be some demand loss there, but I will tell you, you know, the counter to that from our vantage point is, we believe we’re the best and most efficient steel processor in the country. And it's an opportunity for us, frankly, to take market share and we've done that recently. And we have products that benefit from that, right? TWB, our laser welding business is capitalizing on light-weighting and other things that are going on in automotive. So, you know, it's a threat, potentially down the road, but it's a huge opportunity for us right now.

Okay, great. Thank you. And then my second question is regarding the lockup agreement that you guys mentioned. I'm just wondering, you know, how you guys came to the terms of that lockup of agreement? Was it a unique negotiation you guys undertook or all the early investors covered by their seemingly structured agreements, or do they have more typical six-month lockups?

Appreciate the question. Not something that we can – we're planning on talking about. Thank you though.

Okay, got it. Thanks, guys.

Your next question comes from line and Seth Rosenfeld from Exane BNP. Your line is open.

Thank you for taking some follow-up questions. If I may, just with regards to the steel processing business, a few follow ups there, you commented in prepared remarks expectation for some windfall losses in fiscal Q1, are you able to give us any color on potential scale of those windfall losses, perhaps in reference to past periods? And then secondly, with regards to the automotive order book, I was wondering if you're able to give a little bit more color with regards to current order intake and perhaps how that might compare to somewhat normal pre-COVID levels. So, you didn't note that. I think half of your furloughed workers are already coming back to work as of end of June, should we think about that as something of a proxy for volumes? Thank you.

Yeah, I mean, the ramp up has been a little bumpy, you know, partly because of some of the supply chain issues for parts and other things and, you know, different facilities opening up at different times for our customers, but, you know, I guess what I would point you to Seth is the, you know, the IHS data in terms of demand for this year, they're saying [13.3 million, maybe 13.5 million] cars versus original forecasts of 16.5 million and obviously we lost six weeks to eight weeks of production already. So, we do expect that it will be ramping back up to kind of a normalized level, if it hasn't already. It's probably not there quite yet, but certainly by July and you know, the shutdowns are going to be less in July for the automotive changeover. So, I would expect we're getting back to normalized levels here pretty soon. I'm not sure I understood the first part of your question or that we expect shocks to …

No. Sorry, for the inventory holding losses.

Yeah, that one, Seth, I know you've been around us for a while. It's really based on the decline in steel prices. And if you look at hot-rolled per ton over the course of time, and look at what happened sort of starting in March, you could probably get a pretty reasonable proxy for it. You know, the one thing I did actually want to correct, one of John's Tumazos' question was around tax, we would probably, it would be netted, but we would likely record a deferred tax in Q1 on the gain on our investment in Nikola.

Thank you very much.

Sure.

[Operator Instructions] And there are no further questions at this time. I turn the call back over to the company.

Thank you all for joining us for our fourth quarter earnings call. I look forward to continuing to produce good results for you and hope you finish your day well and stay safe.

Thanks, everybody.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.