Good morning, ladies and gentlemen, and welcome to the Worthington Industries First Quarter 2014 Earnings Call. [Operator Instructions] 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, Vice President of Corporate Communications and Investor Relations. Ms. Lyttle, you may begin.

Thank you, John. Good morning, everyone. Thanks for joining us in our first quarter conference call. Certain statements made on this call are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risk and uncertainties and could cause actual results to differ from those suggested. Please refer to our first quarter earnings release, we issued it yesterday afternoon, for more details on those factors that could cause actual results to differ materially. For anyone interested in listening to this call again, a replay will be made available on our company website. On the call today are John McConnell, Chairman and Chief Executive Officer; Mark Russell, President and Chief Operating Officer; and Andy Rose, Vice President and Chief Financial Officer. John will begin.

Thank you, Cathy. We had a strong quarter, and I want to get right to the presentation. So Mark and Andy, so Mr. Rose?

Thank you, John and good morning, everyone. The company's performance in the first quarter of fiscal 2013 was once again solid, driven by strong performances at Steel, Cylinders and several of our joint ventures. Engineered Cabs' earnings improved modestly from the prior quarter, but were off significantly as compared to last year when earnings peaked. Quarterly earnings per share of $0.76 were up $0.27 from the prior year, but benefited from a onetime gain and a onetime tax benefit offset by modest restructuring charges. Adjusted for these 3 items, we earned $0.58 per share. Inventory holding losses were $0.01 per share lost during the quarter, as steel prices remained relatively stable. The unique items during the quarter were as follows. First, miscellaneous income of $11 million related to a noncash gain on the write-off of our investment in Tailor Welded Blanks, our laser welding business that plays an important role in vehicle lightweighting. We acquired an additional 10% in the venture and now control for 55% of the business. Second, the onetime tax benefit of $4.5 million related to acquiring control of TWB and the resulting change in our Mexico operations' tax liability. Third, $2.5 million in SG&A expense accruals for litigation in a Cylinders' case in a fire involving a small isolated facility at our Austrian cylinder operation. And finally, net restructuring charges of 8 -- $0.8 million for the quarter, but contained in there was a $4.8 million gain from the sale of our integrated terminals steel warehouse and a $4.6 million impairment on Precision Specialty Metals, our stainless business. SG&A did increase $12 million this quarter, but half of that was due to acquisitions and another $2.5 million was onetime items outlined above. The balance was compensation and benefits. Cylinders' operating income was up almost 30% from…

Thanks, Andy. Let's look first to the joint ventures. As Andy mentioned, we repurchased a controlling interest in TWB and the remaining 45% interest was sold to our new partner, Wuhan Iron and Steel Company, or WISCO. We're looking forward to working with WISCO to grow this business in North America, as WISCO now takes the leading role formerly held by ThyssenKrupp in the welded blanks market in the rest of the world. TWB has 7 locations in the U.S. and Mexico and we're committed to being a leading provider of welded blanks in the North American market. This is a strong market niche, where we can help reduce the weight of cars and trucks in a very cost-effective way. WAVE continued its string of outstanding profit and operating performance. WAVE continues to find ways to grow both their top and bottom line. One notable example of this is their sales growth in drywall grid, which is up over 30% over last year's quarter. WAVE is finding success in drywall grid with the same focus on quality, installation, ease and expertise and solution selling that has for many years driven an outstanding record of growth in the ceiling grid market. And as we've said, the eventual recovery in commercial construction should also drive a significant increase in WAVE's performance. Our ClarkDietrich's venture with Marubeni-Itochu Steel had a strong quarter and, like WAVE, is also well positioned to capitalize on the eventual recovery in the North American commercial construction market. Our 11 joint ventures are very important part of our earnings engine and represents some of our highest margins, as well as several outstanding growth opportunities. We'll continue to use joint ventures where we find opportunities that may not make sense for us to pursue loan but where with a partner…

Well, thank you, Mark. Thank you, Andy. It was a good quarter and we are proud of all members of the Worthington family for their hard work and the results we produced. Looking forward, we remain confident in our ability to deliver a strong performance. You have consistently heard us speak to the strong contributions from our joint ventures. Because most are not consolidated, we know it could be easy to lose sight of their impact and we want to continue to keep you aware of their significant cash and earnings contributions. Of course, our confidence is derived from much more than the strength of our current joint ventures. It comes from our strategic pillars, which we also speak to on a regular basis. At the center of our strategy is our Centers of Excellence, or COE, which is a direct descendant of our successful transformation. We currently have COE teams embedded in each primary business. The mission of our Centers of Excellence teams is to drive innovation, consistently pushing us to improve. They are critical in driving the internal organic improvement. Our COE teams are central element in another strategic pillar, the acquisition of companies that meet our criteria for improving our margins, while decreasing the volatility of our earnings. We continue to have a strong acquisition pipeline, largely but not exclusively focused on energy within the cylinder company. Our COE teams play a crucial role in due diligence, integration, if an acquisition is completed and by transforming best practices of an acquired company back to our core businesses. Lastly, and stealing a phrase from my father, "Because we have just scratched the surface of what we can accomplish, we remain committed to repurchasing our shares." Combined with our commitment to maintaining an attractive dividend, we believe it's an important element in returning value to our shareholders. At this point, we're happy to take any questions you may have.

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

So I'm trying to think through the impact of TWB now consolidated within Steel, any detail on a go-forward basis for modeling purposes how we should think about the volumes, the EBIT contribution and also D&A for the overall company?

I guess I would point you to the 10-K, Martin, where we list out some of the annual performance measures for the JV. TWB is listed in there, with revenue and operating income. So I would use that as the basis.

Is there any kind of base you can give us for the volume contribution, maybe on a trailing 12 months basis or prior year there?

Yes. Off the top of my head. I don't -- we'll work on that one.

Let us check.

Maybe by the end of the call we can give you a number.

Okay. And within WAVE there, what are you seeing regarding the commercial trends? Is there any more of a shift towards new projects and private work as opposed to the refurbishment type work?

The mix of business there is pretty much unchanged and Steel is dominated by a remodel work, remodel and refurbish is a dominant part of our business. That's one of the reasons we are very bullish on commercial construction recovery because we think they'll still have a good book of remodel business and then they'll get the new build as well on top of that.

[Operator Instructions] And we'll go to Chris Olin with Cleveland Research.

This is Curt Siegmeyer, in for Chris. Just -- maybe digging into the commercial construction market a little bit more. There's a lot of mixed signals out there right now, so I'm just wondering if you guys could maybe just give a few more details on what's driving your confidence in that market? Maybe some specific examples of where you've seen some incremental demand pull and kind of what you're expecting as you move forward in the next year?

Well, don't misunderstand us, we're not projecting the recovery at this point. We don't see it yet. Where we see some strength, obviously residential everybody sees the strength there. Where we see some strength on the commercial side, which is encouraging is in some of the prebuild infrastructure. We picked up a lot of culvert business in the Steel business, which -- culverts are usually a leading -- can be a leading indicator for subdivision development, et cetera and things like that. We believe -- I wouldn't say we have any definite signs of a commercial construction recovery in our numbers. But we certainly believe that will happen eventually. And when it does, we think we have several businesses that are very well positioned to take advantage of it.

Okay. And then just maybe as a follow-up, are you able to quantify how much of an impact weather might have had on the quarter, if any, on the Cylinders segment?

We don't see a real big weather impact to what the results are for the quarter. Where we do sometimes see a weather impact in some of the business lines, we didn't see. I think that was fairly consistent for the quarter.

And we'll go to Aldo Mazzaferro with Macquarie.

A couple of questions. On the TWB business, the Tailor Welded Blanks generally, is there a lot Tailor Welded Blanks operated in China? For example, and I'm wondering whether the fact that you're consolidated now with WISCO as your partner, that gives you -- open some doors possibly for new facilities in China.

They definitely have business in China, that's the fastest-growing market for welded blanks in the world right now. And that, of course, is probably one of the reasons that WISCO wanted to pick up the ThyssenKrupp interest in that business. So that is growing very fast in China. We look forward to working with WISCO on the Tailor Welded Blanks business and any other ideas we can come up with them.

So in your agreement with WISCO, would you be able to establish a TWB business in China? Or is WISCO kind of controlling that market themselves?

No. WISCO controls the China market. So we have North America, they have the rest of the world.

Great. Okay. And then in your Dietrich business, I was talking to our building products guy the other day, you've seen a lot better demand trends in drywall, is that what you're seeing in the studs business as well?

No. I wouldn't interpret that as an increase in the drywall market. I would interpret that as us picking up share for drywall grid. Remember, that's an alternative way to hang drywall and they're very successfully selling that product. The same way we've sold ceiling grids for decades. So...

I got it. And then, Mark, can you just briefly tell us in the shale gas sector, what types of products are in the tanks that you're supplying? Is it stuff to be injected or is it stuff that comes out of the well? What exactly goes into the tanks at a site?

Well, we -- all of our products go into well completion. So we -- the well is completely drilled and finished by the time our products come on the site. So we have production tanks, which store liquids that come out of the well. We have separators, which separate the gas from the liquids. And then we have very sophisticated gas processing units, which handle complex streams that come up. That might involve water, gas and oil and might be extremely high pressure and/or considered and be acidic, for example. You need a gas processing unit on the surface to handle that. And those are pretty sophisticated pieces of equipment. They involve a cold pressure vessel and there's a lot of ancillary equipment. And for example, the most expensive version of that we sell is well over $100,000 per piece. So every well that's completed is a business opportunity for us. .

Are there any other people on the call right now?

No further questions.

No further questions. I've got 2 points I'd like to make. One in Mark's response to the drywall. You were talking about Dietrich distributors and he answered with drywall grid and WAVE. But we have seen some pickup in Dietrich's business. I think that's true. So...

Their volumes were up 5%. Another question was about the drywall market.

It was but he was referencing the Dietrich business, I think. So anyway, just to clarify that. And secondly, we saw a number of you speak to a weakness in Cylinders referencing volumes, I'm asking Andy to put together kind of a statement around understanding the volumes a little better.

Yes. We've talked a little bit about this, but I think that a point worth emphasizing from previous quarters is as we've moved into some of the newer cylinder businesses related to alternative fuels and then specifically to energy businesses that we bought last year, the cylinder volume metric becomes much less relevant as an indicator of activity and profit in that business. Part -- just as an example, we sell camping cylinders, $40 million a year, that are sort of $2 to $2.50 a piece versus -- contrast that with the energy business, you just heard Mark mention, we sell very large tanks that range anywhere from $10,000 a piece all the way up to $100,00 and we may sell those number in the 100s in a year. So it's hard to look at a total volume metric in Cylinders as a real true indication of how that business is performing. And one of the things we're continuing to contemplate is how we can give you a better indication of some of the subsectors there. So we'll continue to work on that and, hopefully, come up with something that'll be more relevant.

You were going through the numbers. For instance, retail was up this quarter.

Correct.

Excellent. Well, thank you all for joining us. Good performance and we look forward to talking to you next quarter.