Cathy Lyttle - VP, Corporate Communications and IR John McConnell - Chairman and Chief Executive Officer Mark Russell - President and Chief Operating Officer Andy Rose - EVP and Chief Financial Officer.

Martin Englert - Jefferies Phil Gibbs - KeyBanc Capital Markets.

Ladies and gentlemen, good afternoon and welcome to the Worthington Industries First Quarter Fiscal 2018 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 like to introduce Ms. Cathy Lyttle, Vice President of Corporate Communications and Investor Relations. Ms. Lyttle, you may begin..

Good afternoon and welcome to our first quarter 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 news release was issued this morning with more detail 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.

Joining me today on the call are Chairman and CEO, John McConnell; President and COO, Mark Russell; and Executive Vice President and CFO, Andy Rose. John will start this off..

Well, thank you, Cathy and good afternoon and thank all of you for joining us today. We had a very good first quarter when all the one-time charges that Andy will review with you are taken into account, but still short of our all-time record quarter at last year’s first quarter.

We are continuing to drive improvement throughout our company through transformation 2.0, which Mark will discuss later. But now, let’s have Andy start off with a review of the quarter financials..

Thank you, John and good afternoon everyone. The company delivered solid earnings per share of $0.73 excluding restructuring in the first quarter at the start of the fiscal year, down $0.30 from last year’s all-time record quarter.

Steel processing drove most of the decline at inventory holding loss of $1.5 million compared to the unusually high $17 million of inventory holding gains in last year’s first quarter. Equity income was also down $7.2 million primarily driven by lower margins at our ClarkDietrich joint venture. Several unique items in Q1 were as follows.

Inventory revaluation and one-time expenses related to the Amtrol acquisition resulted in a reduction of $4.2 million of operating income or $0.04 per share. Restructuring charges of $2.3 million or $0.03 per share were primarily related to severance accruals at pressure cylinders from leadership position elimination at Amtrol.

Our effective annual tax rate remains around 31%. A $6.2 million of favorable impact from two discrete items once again helped lower taxes during the quarter.

Cylinders’ operating income, excluding restructuring, was down $1.9 million or 13% to $12.3 million driven by a decline in alternative fuels, higher corporate allocation, one-time expenses from the Amtrol acquisition. Revenue at our oil and gas business was up 69% from the prior year quarter profitability improving as a result.

Inventory revaluation for purchase accounting and one-time deal expenses totaled $4.2 million during the quarter. These items should be largely through the business and we expect a more normalized earnings stream from the acquisition next quarter. As we mentioned at closing, Amtrol delivered $38 million of EBITDA at calendar year 2016.

The integration is proceeding as expected and we are well on our way to unlocking the $6 million to $8 million of expected annual synergies. Based on our preliminary purchase accounting, we expect depreciation and amortization related to this business of $17 million per year going forward.

Steel processing operating income was down $22.6 million excluding restructuring of prior year quarter to $33.2 million almost $19 million of this decline was due to steel price volatility in the prior year, which generated significant inventory holding gains in the prior year quarter.

This was a difficult comparison quarter as we have not seen a significant rise in steel prices that we saw this time last year.

Steel also had a tough quarter from an operations standpoint with a furnace outage delta of flood in Monroe and continued startup challenges at our Mexico TWB operations resulting in higher manufacturing expenses of $2.5 million.

Revenue in engineered cabs was up 25% to $32 million, excluding restructuring operating losses were $400,000, a $1.3 million improvement over same quarter a year ago. The lower cost structure combined with increased revenue drove the improvement.

Equity income from our joint ventures was down $7.2 million primarily from higher steel costs driving lower margins at our ClarkDietrich joint venture. WAVE and Serviacero were bright spots during the quarter as income improved $1.5 million and $1 million respectively. We received dividends from JVs of $20 million during the quarter.

Cash from operations was $83 million for the quarter, we spent $285 million on acquisitions, [$18] [ph] million on capital projects, distributed to $13 million of dividends and repurchased $45 million of stock during the quarter. Today, the Board declared a $0.21 per share dividend for the second quarter payable in December of 2017.

In addition, the Board also authorized the repurchase of an additional 6.8 million shares increasing the total number of shares available for repurchase to 10 million shares. Debt was up just over $200 million from the prior quarter to $781 million as we completed a 15-year public bond offering in July at a rate of 4.3%.

Interest expense was up $1 million to $9 million from the prior year quarter. Our current annual run-rate of interest is $38 million. We have consolidated cash of $196 million and almost $600 million available under our revolving credit facilities. Our net debt to trailing EBITDA leverage ratio is now roughly 1.5x.

Overall, we are quite pleased with the start to our fiscal year despite the decline in earnings related to steel prices. The company generated $95 million of EBITDA and continued to deliver strong free cash flow, which we are investing to grow our business and reward shareholders. Trailing 12-month adjusted EBITDA is now $380 million.

We will continue our balanced approach to investing in our business, acquiring new businesses and returning capital to shareholders as the opportunities present themselves.

During the quarter, we continued the rollout of transformation 2.0, completed the largest acquisition in the company’s history and saw further progress in our effort to become a more innovative new product development company.

The combined benefit of these three strategic pillars will continue to provide opportunities for us to leverage our strong golden rule corporate culture and drive value for our shareholders, customers and suppliers. We are off to a solid start towards another successful year. Mark will now discuss operations..

Thanks, Andy. Steel processing, our direct shipments were up 1% compared to last year’s quarter. Comparable Metal Service Center Institute data shows very slight decline. Our toll processing volume decreased 14%. Combined our direct and toll volume decreased by 6%, while the mix was 56% direct versus 44% toll.

Shipments to our Detroit Three customers were down 7%, while our other automotive shipments fell by 4%. Direct shipments were up overall due to a 23% increase in our shipments to the heavy truck market and a 20% growth in our agricultural shipment.

Our total shipment decrease reflects the slight softening of automotive demand from last year’s record high, but it was primarily driven by significantly lower volume by our Spartan galvanizing joint venture. Our steel processing joint ventures are beginning to see the benefit of recent capital investment.

Tailor Welded Blanks, our joint venture with [Indiscernible], has opened 4 new facilities over the past 24 months. During the past quarter, TWB also began production on our first full scale aluminum friction stir welding recently installed in our Monroe, Michigan facility.

Serviacero had another strong quarter with direct shipments up 8%, toll shipments up 20%. We continue to invest in Serviacero with an expansion with Monterrey that includes a new heavy gauge blanker that’s scheduled to begin production in early calendar 2018. No TWB or Serviacero facilities in Mexico were disrupted by the recent earthquakes there.

In our pressure cylinders business, oil and gas equipment revenue was up 69% compared to last year. Volume in this business has increased now for the fourth straight quarter. Alternative fuels revenue was down 20% primarily due to lower European automotive volume. Our Industrial Products business now includes a portion of our new Amtrol business.

Revenue in the legacy industrial products business was up 6% compared to last year primarily on higher LPG volume. But if you include industrial products portion of the Amtrol business in the numbers, our revenue was up 43%. Our consumer products business now includes the other portion of our new Amtrol business.

Revenue in the legacy consumer products business was down 2% on lower sales of torch. But if you include the consumer products portion of the Amtrol business to the numbers, revenue was up 33%. In engineered cabs, shipments were up significantly.

The off-highway equipment market continued to see growth driven by consistent increases in demand from both construction and mining customers. WAVE’s volume increased by a mid single-digit percent in the Americas, though last year’s quarter was negatively impacted by customers buying ahead of a price increase in the previous quarter.

Europe volume decreased versus last year due to customers there are buying ahead of August and September price increases this year. Asia volume increased slightly due to the stronger sales in China market.

Our other joint ventures performed as expected and the only Worthington facilities that were affected by recent hurricane were ClarkDietrich joint venture operations in Texas, Florida and Georgia and in each of those cases, operations returned to near normal in a matter of days. Our transformation 2.0 work continues across our business.

We intend to drive significant improvement in everything we do. Our approach is based on data-driven rapid experimentation and where we fully implemented transformation 2.0 and is measurably part of our culture. The results are very impressive.

We continue to roll the process out across the company and we will keep you updated on our progress in future quarters. John, back to you..

Thank you, Mark and Andy. At this point, we are happy to take any questions that you have..

Thank you very much. [Operator Instructions] And we will take our first question from Martin Englert with Jefferies. Please go ahead..

Hi, good afternoon everyone..

Hello..

Could you repeat what the adverse operating income impact was within steel processing from the disruptions?.

Around $2.5 million..

Okay.

And then are you seeing any margin relief since the quarter ended within ClarkDietrich?.

I am not sure I understand the question, margin relief?.

Well, you called out headwinds from steel prices year-on-year - the earnings contribution had deteriorated quite a bit?.

Yes. I mean, I think they are working hard to push price. I think it’s to be determined how successful they can be..

Okay.

And then one last one there, any time horizon on the execution for the remaining share repurchases there?.

Not really. I mean, we are opportunistic. We look for opportunities. We were out of the market the entire last fiscal year principally because of the Amtrol acquisition. You can see, we bought – we sent $45 million in the last quarter, but obviously the reauthorization is a sign of confidence that we feel good about the company and where we are headed..

Excellent. Thank you..

Thank you..

Thank you. [Operator Instructions] Next in queue is Phil Gibbs, KeyBanc Capital Markets. Please go ahead..

Hi, good afternoon.

Just a question on Amtrol, the $4.2 million item that you outlined, Andy, is that – does that account for both the deal-related cost and the purchase price accounting or is there something else on the deal costs that was additional to that?.

Yes, Phil, it accounts for both of those. The one thing that’s not in that number is the additional depreciation and amortization related to Amtrol, which we called out is kind of $17 million annually.

Does that make sense?.

Yes. So, you had a step up of a little under I think $4 million relative to your last quarter, so there is a little bit more D&A to come next quarter is how I see that unless this is the end of that.

But on the side of Amtrol then and essentially that $4.2 million, the biggest portion of that comes out of cost of goods sold?.

Yes..

Okay..

Yes. Deal fees were I mean, I don’t know if I have the exact breakdown, but probably two-thirds of it was purchase accounting, one third roughly – one-third being deal fees..

One-third SG&A, okay.

On the side of the oil and gas business, can you talk a little about what you are seeing there in terms of the momentum in the backlog and if any of those sort of the recent flat-lining in the rig count has impacted orders or just as the backlog has continued to move up?.

The increase has been pretty steady and continues. One of the benefits still at the moment is a number of our customers are deciding that capital budgets for calendar ‘18 at the moment and they are pretty bullish.

So, the forward look there looks as good as it has in several years and that doesn’t show any sign of getting weaker even though the rig count growth has flattened as you say..

And Andy, did I hear you right that you had some disruption related to the hurricane in the volumes in the steel business in the quarter?.

Yes, that’s the only disruption we had, that was material was at ClarkDietrich, where they have a facility in Texas and they have a couple of facilities in Florida and one in Georgia actually where they lost power and weren’t unable to produce for anywhere from a couple of days to I think almost a week..

Okay.

I thought I had just heard you call out $2.5 million related to steel and so I was curious what that was?.

It was, but just not related to the hurricane. We had a furnace outage at a galvanizing facility. So, they were down for I think a couple of weeks, if not longer and then we had a kind of a minor flood issue at our Monroe, Ohio facility..

They were far from the hurricane..

Got it.

Just more unusual operational items than we normally see I guess is the way to put it?.

Yes..

Okay, thanks very much..

Thank you..

Thank you. [Operator Instructions] I am showing no additional questions. Please continue..

Alright. Well, thank you again for your participation today. We look forward to talking to you next quarter..

Thank you. Ladies and gentlemen, that does conclude your conference call for today. We do thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect..