Worthington Industries(WOR) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Earnings per share (EPS) for Q3 was $0.27, down from $0.46 in the prior year quarter [7] - Consolidated net sales decreased by 13% to $764 million compared to the previous year [9] - Gross profit increased by $26 million to $116 million, with gross margin rising from 10.3% to 15.1% [10] - Adjusted EBITDA was $79 million, up from $57 million in the prior year [10] - Restructuring and impairment charges amounted to $36 million, or $0.48 per share, compared to a gain of $0.14 per share in the prior year [8] Business Line Data and Key Metrics Changes - Steel Processing net sales were $491 million, down 12% from Q3 2019, but total shipped tons increased by 36% [10] - Pressure Cylinders net sales were $271 million, down 7% from the prior year, with operating income down $9 million [11][12] - Equity income from joint ventures was $25 million, up $5 million from the prior year, primarily due to strong demand in the construction JV [12] Market Data and Key Metrics Changes - The automotive sector is expected to see a year-over-year decline in production of 30% to 40% due to COVID-19 impacts [21] - The company has not experienced a significant drop in demand yet but anticipates declines in the coming weeks [17] - The industrial products business is facing softness, particularly in European operations [12] Company Strategy and Development Direction - The company is focused on maintaining a strong balance sheet and prioritizing capital expenditures related to continuity of operations [14][16] - There is an emphasis on innovation and potential opportunistic M&A once market stability returns [20] - The company is prepared to navigate various scenarios, including a potential V-shaped recovery [29] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the significant negative impacts of COVID-19 on the economy and is committed to employee safety [6][15] - The company is optimistic about its ability to generate free cash flow even in declining markets [16] - Future demand is uncertain, particularly in the automotive sector, but management is hopeful for a rebound [17][33] Other Important Information - The company declared a $0.24 per share dividend for the quarter, payable in June 2020 [14] - Cash flow from operations was $87 million for the quarter, with free cash flow totaling $184 million for the first nine months [13] Q&A Session Summary Question: What is the expected impact on automotive production? - Management acknowledges the fluid situation and estimates a potential decline of 20% to 30% in automotive production, depending on when production restarts [22] Question: How will low oil prices affect the alternative fuels business? - Management indicates limited exposure to the alternative fuels market, suggesting minimal financial impact from low oil prices [24] Question: What are the expectations for capital expenditures? - Maintenance CapEx is expected to be around $25 million to $30 million, with a focus on preserving equipment [26] Question: Is there a possibility of a sharp economic recovery? - Management is preparing for various scenarios, including a potential V-shaped recovery, while maintaining operational readiness [29] Question: Will share buybacks be considered amidst uncertainty? - Management prioritizes protecting the balance sheet and maintaining dividends, with no plans for share buybacks at this time [36]