Worthington Industries, Inc. (NYSE:WOR) Q4 2019 Results Earnings Conference Call June 27, 2019 10:30 AM ET
Marcus Rogier - Treasurer, IR
John McConnell - Chairman & CEO
Andy Rose - President
Joseph Hayek - VP and CFO
- Marcus Rogier - 财务主管，IR
- John McConnell - 董事长兼首席执行官
- 安迪罗斯 - 总统
- Joseph Hayek - 副总裁兼首席财务官
Martin Englert - Jefferies
John Tumazos - John Tumazos Independent
Phil Gibbs - KeyBanc Capital Markets
- Martin Englert - Jefferies
- John Tumazos - John Tumazos独立
- Phil Gibbs - KeyBanc Capital Markets
Good morning and welcome to the Worthington Industries Fourth Quarter Fiscal 2019 Earnings Conference Call. All participants will be able to listen only until the question-and-answer secession 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 Marcus Rogier. Mr. Rogier, you may begin.
早上好，欢迎来到Worthington Industries第四季度2019财年盈利电话会议。 所有参与者只能听到电话的问答分离。 本次会议是应Worthington Industries的要求录制的。 如果有人反对，您可以在此时断开连接。
我想介绍一下Marcus Rogier。 罗吉尔先生，你可以开始吧。
Thank you, Justin. Good morning and welcome to our fourth quarter and fiscal year-end earnings call. Before we begin, 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 yesterday after the market close. Please refer to it for more detail on those factors that could cause the actual results to differ materially. This call is being recorded and will be made available later on our worthingtonindustries.com website.
On our call today are Chairman and CEO, John McConnell; President, Andy Rose; and Vice President and CFO, Joe Hayek. John has some opening comments.
谢谢你，贾斯汀。 早上好，欢迎来到我们的第四季度和财政年终财报电话会议。 在我们开始之前，我想提醒大家，今天发表的某些陈述具有1995年“私人证券诉讼改革法案”意义上的前瞻性陈述。 这些陈述受风险和不确定因素的影响，可能导致实际结果与建议的结果不同。 我们昨天收市后公布了我们的财报。 有关那些可能导致实际结果出现重大差异的因素，请参阅它。 此电话正在录制，稍后将在我们的worthingtonindustries.com网站上公布。
我们今天致电主席兼首席执行官John McConnell; 总统，安迪罗斯; 副总裁兼首席财务官Joe Hayek。 约翰有一些开场白评论。
Thank you, Marcus and thank all of you for joining us today. Our fourth quarter was strong, capping off the year of resetting the table, both in terms of our assets and our management team. We’re excited about our position and our ability to drive future results.
I’ll turn the call over to Joe now.
谢谢Marcus，感谢大家今天加入我们。 我们的第四季度表现强劲，无论是在我们的资产还是管理团队方面，都重置了重置表。 我们对我们的地位和推动未来成果的能力感到兴奋。
Thank you John, good morning everybody. In Q4, we generated earnings of $0.66 per share versus $0.50 in the prior year period. There were a couple of unique items this quarter that included estimated inventory holding losses of $8.4 million or $0.11 per share in the current quarter compared to a gain of $18.3 million or $0.19 per share in Q4 of last year, and roughly $8.5 million or $0.11 per share of impariments and restructuring charges related to our exiting the fuel systems business and writing down the value of our Chinese steel joint venture and certain laser welding assets in our majority owned WSP joint venture.
This compares to impairment charges of $52.9 million or $0.45 a share in Q4 of last year. In addition, earlier this week we reached an agreement subject to closing conditions to sell our cryogenics operations in Turkey. The closing of that transaction will not have a material impact on our financials, but our assets from these lines of business reflect a continuation of our strategy to exit these businesses and value streams that we deem non-core or focusing our efforts on investing in and profitably growing our business overall.
For the fiscal year, we generated earnings of $2.61 per share versus $3.09 last year. There were also two unique items in the full year to call out as follows; we estimated inventory holding losses for $4.4 million or $0.06 per share in the current year compared to a gain of $17.8 million or $0.18 per share in the prior year.
And that earnings in the current year were adversely affected by $13 million or $0.17 per share due to a composite tank replacement program we initiated in Q3 with pressure cylinders.
Turning back to quarterly results. Consolidated net sales decreased by 8% to $939 million in Q4 from the prior year quarter to the lower direct shipments and steel processing and lower overall volumes in pressure cylinders partially offset by higher average selling prices.
Gross profit declined in the quarter by $37 million from Q4 last year to $126 million, driven primarily by lower direct volumes and the unfavorable impact of the current quarter inventory holding losses versus prior year holding gains.
Our effective annual tax rate came in at 22% for the current year versus 4% in the prior year. In pressure cylinders net sales were down 5%, however, excluding the impact of divestitures sales were up slightly over Q4 of last year as higher average selling prices across our businesses coupled with improved volume and mix in the oil and gas business more than offset lower volumes in the consumer industrial products businesses.
Excluding impairment and restructuring activity, cylinders operating income was up from last year and the operating margins increased quarter-over-quarter. We're pleased with our progress related to margin improvements in cylinders as those initiatives were impactful during the quarter.
In steel processing, net sales of $584 million were down 10% from Q4 of 2018 due primarily to lower direct volumes. Total ship tons were down 9.5% with direct shipments declining 15.1% and toll declining 1.5%.
Direct tons were 55% of the mix compared to 59% in the prior year quarter. Volumes for the quarter were down significantly over the prior year, due to unique market conditions in both periods. Last year in Q4, Section 232 steel tariffs had recently been announced, and steel prices were rising rapidly, which we believe led customers to build inventories.
Conversely, in the last few quarters, steel prices have been falling. We believe many of our customers have been destocking and holding low levels of inventory. In addition, in the current quarter we did experience softness in automotive volumes due to the reduced North American Auto builds year-over-year.
Operating income for steel processing of $15 million was down $33 million from Q4 last year, driven by the negative swing of almost $27 million and inventory holding gains and losses, $3 million of impairment charges and lower direct volumes.
While we currently estimate that due to further decline in steel prices, we will have inventory holding losses in Q1 of 2020 we believe that our competitive position in the steel processing market has never been stronger. We are investing for growth and are focused on improving margins, while we partner with and deliver innovative solutions to our customers.
In Engineered Cabs, net sales were up 18% over Q4 of 2018 driven by higher volumes and average selling prices. Cabs reported operating loss of $3.2 million was a $2.1 million sequential improvement -- $2.1 million improvement over the prior year and a $600,000 improvement sequentially.
Equity Income from our joint ventures during the quarter was down $14.5 million driven by lower contributions across the portfolio. ClarkDietrich was down $3 million primarily due to decreased spreads as a result of declining steel prices. Equity Income from WAVE was also down $2 million due to lower volumes. The WAVE’s margins did increase year-over-year.
In addition, our equity income was negatively impacted by $4 million charge we took to write down the value of our $8 million investment in our Chinese steel strip joint venture. We received $29 million in dividends from our unconsolidated JVs during the quarter, and we believe those business are executing on solid strategies that will lead to improved performance moving forward.
Turning to the cash flow statement and the balance sheet. Cash flow from operations was $71 million in the quarter. We spent $10 million on an acquisition, $24 million on capital projects, paid $13 million in dividends and paid $39 million to repurchase one million shares of our common stock.
Yesterday, the board declared a $0.24 per share dividend for the quarter, which is a $0.01 per quarter increase just payable in September of 2019. This marks the ninth consecutive year we have increased our dividend.
Funding debt at quarter end was flat sequentially at $749 million. Interest expense of $9 million was down slightly from the prior year quarter and we ended the quarter with consolidated cash of $92 million and $548 million available under our revolving credit facilities.
在工程驾驶室中，由于销量和平均销售价格上涨，净销量比2018年第四季度增长了18％。出租车公司报告的运营亏损为320万美元，连续改善210万美元 - 比去年增加210万美元，顺序增加60万美元。
本季度我们合资企业的股权收入下降了1450万美元，这主要得益于整个投资组合的贡献减少。 ClarkDietrich下跌300万美元主要是由于钢价下跌导致利差下降。由于销量下降，WAVE的股本收入也下降了200万美元。 WAVE的利润确实同比增长。
Adjusted EBITDA over the last 12 months, which includes the $13 million charge for the tank replacement program, was $330 million and our net debt to trailing EBITDA leverage ratio is roughly two times.
This point I will turn it over to Andy.
Thanks Joe. Good morning everyone. Fiscal 2019 was a challenging year for us, primarily driven by the steel tariffs enacted in early 2018. Rather than dwell on things we cannot control, we use the time to position ourselves for the future on a number of fronts.
As a result of these efforts, we finished the fiscal year with a solid quarter, and a lot of enthusiasm for where we are headed. We have a lot to be excited about at Worthington. Our strategic planning process has been completed, and there are a number of initiatives that are delivering value today and will continue to do so for years to come.
First, our transformation playbook has been refocused into a business system that combines standard metrics and performance management, lean tools for optimizing value streams and agile teams to attack big opportunities. We have multiple innovation teams that have developed meaningful pipelines of new products that are beginning to launch in the marketplace. We believe that our ability to differentiate with new products and new services will create meaningful separation for us from our competitors, and deliver results to the bottom line.
And while the M&A market remains expensive, we have increased the size and experience level of our team here so that we are ready when the right opportunities arise. We continue to generate strong cash flow and used a portion to purchase another million shares of our stock this quarter at attractive levels. We are also taking the opportunity to clean up our underperforming assets.
Several of those moves resulted in small impairments this quarter and we will continue this effort until all of our businesses meet our goals for EBITDA growth and return on capital. We have used this year well to reposition Worthington Industries for growth. We have a number of talented leaders in new roles adding fresh ideas to our business strategies and the best workforce enabling our success.
We are on the right path to achieving new levels of performance. Thank you for your continued support of Worthington.
At this point, we'll turn it back over to the operator to open the line for questions.
[Operator instructions] In first up in queue, looks like we have the line of Martin Englert of Jefferies. Your line is open.
[操作员说明]在第一个队列中，看起来我们有Jefferies的Martin Englert。 你的线是开放的。
Hi, good morning everyone.
In the Fiscal 1Q, can you discuss the possible magnitude of the inventory holding losses that you'd expect in steel processing?
Yes, other than to say that we do expect them and we don't think it will be materially different than it was in Q4. The swing is really going to be the challenge in that we had roughly $14 million of gain in Q1 of fiscal 2019. Prices went down another $40 yesterday. We're not steel price prognosticators, but folks have suggested that that 500 may be near the bottom we'll see.
是的，除了说我们确实期望它们，我们认为它不会与第四季度有实质性的不同。 摆动实际上将是挑战，因为我们在2019财年第一季度获得了大约1400万美元的收益。昨天价格又下跌了40美元。 我们不是钢铁价格预测者，但人们已经建议500可能接近我们将看到的底部。
Okay, thanks for the color there. And then just looking at cylinders volumes, specifically consumer products, is a little bit weaker than maybe I had anticipated here looking at sequential move, can you just discuss some of the demand trends that you're seeing maybe into fiscal 1Q here and the cadence of activity?
好的，谢谢那里的颜色。 然后只看气缸容量，特别是消费产品，比我预期的顺序移动稍微弱一点，你能不能讨论一下你可能会看到的第一季度的一些需求趋势和节奏 活动？
Yes, I mean cylinders there's obviously a lot going on in those volume numbers. The biggest driver there of the swings is typically the consumer product side, the 16 ounce camping cylinder etcetera. And so, I think when you get a little bit of softness in that marketplace, you know that that drops the volumes.
But I would say overall, most of the end markets there are doing reasonably well with a few exceptions. So we don't have a whole lot of concern there.
是的，我的意思是气缸，这些数量显然很多。 秋千的最大驱动力通常是消费品方面，16盎司露营汽缸等。 所以，我认为当你在那个市场中获得一点点柔软时，你知道这会减少数量。
Okay. And would you be able to highlight the markets that were maybe lagging or contracting a little bit within consumer?
A few of our industrial gas markets, a little bit soft. The other thing that Joe touched on is when, when you have declining steel prices, folks that are buying on the spot market will delay their purchases hoping to obviously get lower prices as a result of that. So we get a little bit of that in cylinders as well.
我们的一些工业气体市场，有点软。 乔谈到的另一件事是，当钢铁价格下跌时，那些在现货市场上购买的人会推迟购买，希望显然可以通过这种方式降低价格。 所以我们在圆柱体中也得到了一些。
And you had some successful price initiatives if I recall from the prior quarter that were flowing through in this quarter. Can you talk about the sustainability there?
Yes. I -- you know there's pretty good momentum there. The transformation effort overall in cylinders is really starting to mature and gain momentum and one of the big components of that is we put pricing desks in place and we've become much more sophisticated in terms of our strategy there. So I think what we're doing there is sustainable. And hopefully good things to come in the future there.
是。 我 - 你知道那里有很好的动力。 圆柱形的整体转型工作真正开始成熟并获得动力，其中一个重要组成部分就是我们将定价办公室放到位，而且我们的策略在那里变得更加复杂。 所以我认为我们在那里做的是可持续的。 希望未来有好的东西可以来。
Okay. Thanks for all that detail. If I could, one last one on some modeling items CapEx budget for the year and tax rate.
好的。 感谢所有细节。 如果可以的话，最后一个关于一些建模项目的年度资本预算和税率。
I'm not really comfortable disclosing that. I don't think CapEx will be materially different than it's been historically. I don't anticipate significant changes in the tax rate either. But nothing more specific than that. I apologize.
我不太愿意透露这一点。 我不认为资本支出与历史上存在重大差异。 我预计税率也不会发生重大变化。 但没有比这更具体的了。 我道歉。
Okay. No worries. Thanks for all the detail there and congratulations on results similar to the fundamental headwinds.
好的。 别担心。 感谢那里的所有细节，并祝贺结果类似于基本的逆风。
Thanks very much.
Next in queue is the line of John Tumazos of John Tumazos Independent. Thank you. Your line is open.
队列中的下一个是John Tumazos Independent的John Tumazos。 谢谢。 你的线是开放的。
Sorry, it’s John Tumazos or something like that. How are you doing today?
对不起，这是John Tumazos或类似的东西。 今天过得好吗？
Good John. How are you?
Good, good. Tell me a little bit about the cryogenic sale. Are you selling the plant to somebody that’s going to compete with your other cryogenics tank operations?
好好。 告诉我一些关于低温销售的信息。 您是否将该工厂出售给那些与您的其他低温罐操作竞争的人？
We are not. Fundamentally when we invested in that business a number of years ago, things were different. We were at $100 and $110 a barrel of oil and I think the outlook for that business was different. I also think Turkey obviously what’s going on there has made it difficult to operate. So, we will continue our operations here in the U.S. And what they did there in Turkey to be honest John, some niche markets and products that really aren’t directly competing with what we're doing here in the U.S.
我们不是。 从根本上说，当我们几年前投资该业务时，情况就不同了。 我们每桶100美元和110美元的石油，我认为该业务的前景不同。 我也认为土耳其显然正在发生的事情使其难以运作。 所以，我们将继续在美国开展业务。他们在土耳其做的事情是诚实的约翰，一些利基市场和产品真的没有直接与我们在美国所做的事情竞争。
But you’re still selling cryogenic cylinders -- tanks.
但是你仍然在销售低温气瓶 - 坦克。
That is correct, yes.
And the new owner is going to do it.
The new owner. I’m not sure I’m following...
Yes, John. It’s Joe. That business is very unique relative to other businesses as other geographies. So there won’t be any competitive pressure.
是的，约翰。 这是乔。 与其他地区相比，该业务与其他业务相比非常独特。 所以不会有任何竞争压力。
Since you’ve got is much money just dismantling the plant and selling, specialty steel it’s high value scrap?
We believe this is the best outcome for us and everybody involved.
I hope that your discount rate in non-U.S. transactions is at least 5 times as much as your discount rate, in U.S. transactions?
We certainly appreciate that and I would...
Let me continue. They play a game called jerk around the foreigner where, just as an example, Normandy had a gold mine near Izmir and the Australian company couldn’t use cyanide, but the Turk could buy for chump change, could use cyanide. And you’re also riding down your deal in China. Whenever like Freeport has trouble in Indonesia, I route for them to dynamite the plant. And then they earn more in Arizona. But it’s just – it’s just you could jerk around a lot less in Columbus, Ohio than you do overseas. I’m a shareholder and I love you.
让我继续 他们在外国人周围玩一个叫做混蛋的游戏，例如，诺曼底在伊兹密尔附近有一个金矿，澳大利亚公司不能使用氰化物，但土耳其人可以购买更换笨蛋，可以使用氰化物。 而且你也在中国买下你的交易。 每当Freeport在印度尼西亚遇到麻烦时，我都会让他们为这家工厂做好准备。 然后他们在亚利桑那州赚得更多。 但它只是 - 只是你可以在俄亥俄州哥伦布市比在海外少得多。 我是股东，我爱你。
Thank you, John.
[Operator Instructions] Next, we have the line of Phil Gibbs of KeyBanc Capital Markets. Your line is open.
[操作员说明]接下来，我们有KeyBanc Capital Markets的Phil Gibbs系列。 你的线是开放的。
That was super interesting, that last five minutes. My question is really on WAVE. To start, I think you said that volumes were a bit weak in the quarter versus last year. Just any visibility you guys have to order trends or seasonality. How do we think that that business bridges into the next quarter?
这非常有趣，持续五分钟。 我的问题是关于WAVE。 首先，我想你说本季度的销量与去年相比略有下降。 只要你们有任何可见性，你就必须订购趋势或季节性。 我们如何认为该业务进入下一季度？
Sure, Phil, it’s Joe. Last year during Q4, WAVE had announced a price increase that took effect in June, and so we would believe that people bought ahead of that price increase. And so we had a little bit of lumpiness and probably some of Q1 last year got brought into Q4, that market is in growing by default very rapidly. They have a number of initiatives on the new product front that are smaller pieces of their base today, but growing much more rapidly than the core grid market, but we don’t worry about WAVE’s volumes moving forward.
当然，菲尔，这是乔。 去年第四季度，WAVE宣布将在6月份实施价格上涨，因此我们相信人们会在价格上涨之前买入。 因此，我们有一点点笨拙，可能去年第一季度的一些进入第四季度，市场正在迅速增长。 他们在新产品方面有许多举措，这些举措目前是其基础的较小部分，但增长速度远远超过核心电网市场，但我们并不担心WAVE的产量向前发展。
Okay, nice. Andy, I think you commented on M&A multiples. Any signs that were moving more toward -- a little bit toward normalcy? Or is this recent move higher in the -- on the stock market given everybody pumped out just again in holding their ground?
很好太棒了。 安迪，我想你评论了并购倍数。 任何迹象都朝着更加朝向正常的方向发展？ 或者最近这一举措在股票市场走高了，因为每个人都在坚持不懈的基础上再次出局？
Yes. I would say it’s steady as she goes, Phil. I mean the market is pretty good. The financing markets are readily available and so I think there is plenty of buyers out there. So I think that’s supporting a pretty strong multiple environment. It doesn’t mean, we’re not looking and we aren’t seeing things we like. It’s just we spent last year really refocusing ourselves, cleaning up our core operations, and I think now where Joe has done a nice job of really building some more expertise on his team and I would say we’re kind of ready to go now.
And that being said, we’re going to continue to be price sensitive to a certain degree. We’re not going to go crazy, because a lot of companies are at or near peak earnings, and we’re at or near peak multiples. So when you do that, you better be the best buyer and you better have a lot of synergies, and if not, then you might be better served to saving your dollars for a little bit better environment.
是。 菲尔，我会说她很稳定。 我的意思是市场非常好。 融资市场很容易获得，所以我认为有很多买家。 所以我认为这支持了一个非常强大的多元环境。 这并不意味着，我们不看，我们没有看到我们喜欢的东西。 这只是我们去年真正重新调整自己，清理我们的核心业务，我认为现在Joe在他的团队中真正建立了更多专业知识的工作做得很好，我想我们现在已经准备好了。
话虽如此，我们将继续在某种程度上对价格敏感。 我们不会发疯，因为许多公司处于或接近收益高峰，而且我们处于或接近峰值倍数。 因此，当你这样做时，你最好成为最好的买家，你最好有很多协同效应，如果没有，那么你可能会更好地节省你的钱以获得更好的环境。
That makes sense. I think, I had one more question. One was on the oil and gas side for cylinders. Volumes picked up a bit, I think relative to what we were expecting, which is a good sign. Any color in terms of how that business looks moving forward? And whether or not you all were EBIT -- EBIT positive in the quarter?
那讲得通。 我想，我还有一个问题。 其中一个是石油和天然气方面的汽缸。 我认为相对于我们的期望，这是一个好兆头。 关于该业务如何向前发展的任何颜色？ 您是否都在本季度的息税前利润 - 息税前利润为正？
Yes. Run rate at the end of the quarter was very good and trending in that direction, Phil, and they have -- it's a smaller business as you know, $100 million or so for us, but in their markets a fair amount of momentum still going to be subject to fluctuations in oil prices but lots of good momentum in some innovation that they have brought to the market. So we feel reasonably good about certainly the next few quarters for them on a year-over-year basis.
是。 本季度结束时的运行率非常好并且朝着这个方向发展，菲尔，他们已经 - 这是一个规模较小的企业，如你所知，对我们来说是1亿美元左右，但在他们的市场中仍然有相当大的动力 受到油价波动的影响，但他们带来了一些创新的良好势头。 所以我们在接下来的几个季度中肯定会感觉相当不错。
And when were you all profitable in the quarter, on an...
I mean, it depends on allocations everything else, but the last couple of months.
Okay. Thanks so much.
[Operator Instructions] At this time, we have no one queuing by phone for us.
Okay. Thank you very much again for joining us today. Again, we’re very pleased with the team we have in place and our look at our future results coming forward. So, we look forward to seeing you at the end of the first quarter. Thanks.
好的。 再次感谢您今天加入我们。 同样，我们对现有的团队非常满意，并对未来的未来结果进行了展望。 所以，我们期待在第一季度结束时见到你。 谢谢。
Well ladies and gentlemen, that does conclude the presentation for this morning. We thank you very much for all of your participation and using our Executive Teleconference Service. You may now disconnect.
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- 富途牛牛证券开户教程 开户即可领取1股汇丰，入金达到2万港币即可领取1股腾讯；新股一键认购，最高支持10倍杠杆融资，免新股认购手续费，暗盘交易免佣；
- 华盛通开证券户教程 开通美股或者港股， 享受现金200元,美股8折奖励。
- 必贝证券开户教程 开通后 享有280元现金奖励
- 玖富证券开户教程 开通后 最低入金1W港币可以领218元红包
- e投睿开户教程 开通后 可获得25美金奖励
- 友信证券开户教程 注册随机领3股，注册后可随机抽取苹果、腾讯、阿里、京东等热门股票