Good morning. And welcome to the Worthington Industries Third Quarter Fiscal 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’d now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer. Mr. Rogier, you may begin.

Thank you, Michelle. Good morning, everyone. And welcome to Worthington Industries third 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.

Well, thank you, Marcus. And thanks to those who have joined us today for our third quarter earnings conference call. Our performance in the third quarter was very good and we’ll of course, review our financial performance. But we expect that much of your interest will be on the effects of the coronavirus and its immediate and longer-term impacts on our business and our employees. And we’re prepared to discuss its effects to the best of our knowledge as of today. Let’s get started with our CFO, Joe Hayek, as he reviews our performance in the third quarter. Joe?

Thank you, John. And good morning, everyone. When our Q3 ended, which was just four weeks ago, the world was a different place. So to start, we want to recognize that while earnings calls are an important aspect of our responsibility as a public company, a lot of what we talk about in the past tense today has less relevance than normally would. The COVID-19 virus and the steps being taken to mitigate its spread are having significant negative impacts on our society and our economy. We are grateful for and humbled by the work being done by countless individuals working to stem the spread of the virus. We are doing whatever we can to help contribute and we are now as ever mindful of our philosophy and our belief that people are our most important asset. Spirit, ingenuity, and dedication of our people is remarkable, and it has been on full display over the last few weeks. It is a source of pride for all of us in this trying time for the U.S. and across the globe. I’ll now go through a summary of the quarter. Andy will provide some additional comments and then we’d be happy to take questions. In Q3, we reported earnings of $0.27 per share versus $0.46 in the prior year quarter. There were several unique items in the quarter, including the following. We incurred restructuring and impairment charges of $36 million or $0.48 per share in Q3, compared to a restructuring gain in the prior year quarter of $0.14. Current quarter charges primarily relate to a plant consolidation in our oil and gas business, where we are consolidating from three facilities to two to optimize efficiency and capacity utilization. In Q3, we recognized a gain of $6.1 million or $0.08 per share related…

Thank you, Joe. And good morning, everyone. As Joe mentioned, the COVID-19 virus has led to unprecedented protectionary measures and is derailing a well-performing economy. Many states, including Ohio and Michigan, are implementing stay-at-home measures to control the spread of the virus. Because we manufacture or are a part of a supply chain that makes products for use in healthcare, home and portable heating, construction, and critical transportation infrastructure, many of our businesses are considered essential businesses under these rules. Therefore, we will continue to operate in those locations based on customer demand levels and with our top priority continuing to be the safety of our people. We are working hard to serve our customers and our country by continuing to produce these important products as needed. As I mentioned, at Worthington, we’ve been very focused on the safety of our employees and business partners. We are also developing and executing contingency plans for our businesses as they are impacted. The good news is that we have a template from 2008, 2009 and we are well prepared to move quickly and effectively as needed. We have a strong balance sheet with low leverage and interest expense and significant cash on hand and revolver availability to weather demand declines as they might occur. Another benefit for Worthington is that we have historically generated significant free cash flow in declining markets from liquidation of working capital, providing a natural hedge against the risk of lower earnings. As for now, we have not experienced a big drop in demand, but we are anticipating more in the coming days and weeks. Most of you know of the temporary closing of many of the automakers in several major construction projects. We are hopeful that many of these measures have their intended effect of minimizing the…

[Operator Instructions] Your first question comes from Phil Gibbs from KeyBanc. Your line is open.

Hey, good morning.

Good morning, Phil.

Question firstly was on automotive. Clearly a lot of exposure as we all know in Steel Processing business. Based on what you’re seeing now and I know it’s a fluid situation with the big three and others, I think our - just want to know if this squares up with what you’re thinking, I think our auto analyst is looking for 30% to 40% year-over-year potential decline in auto production. Is that something that could be feasible based on what you’re seeing right now? And are any of your customers telling you when they may be back in action?

So the answer to your second question, Phil, is no. We’re in communication with the Detroit Three, obviously, as a big important supplier to those guys. Don’t know their initial shutdown estimates were through Monday of next week and not having heard anything to date. I wouldn’t want to speculate. The numbers for 20%, 30% down, again, you’re right, it’s fluid, everything is possible. The latest IHS estimates were down sort of 13% to 17%, I think, as of yesterday for the year, which would put us $14 million to $14.5 million. But again, that’s an estimate, and it will all depend on how quickly two things happen. One, the production restarts, and two, probably more importantly, how soon and quickly people will in numbers return to dealerships and buy parts, and that’s a big unknown.

Do you have - I mean, I was going to say, can you provide us some sense in terms of how this may or may not impact the alternative fuels business as well? I mean, low oil prices, but I know that there has been a push into some emerging technologies. Trying to think about what we may see there as well, because I think you mentioned the ancillary oil and equipment business certainly going to be hit, but thinking about alternative fuels, as well.

Yeah, we - interestingly, Phil, we don’t have nearly as much exposure to that market as we used to. We’ve exited a couple of businesses and product lines related to that. So, while we are watching it and it will have some modest impact I don’t think you’re going to see - that business should tail off, obviously, because the spread is no longer there with the big decline in oil prices. But it’s not going to have a significant financial impact on us, because we just don’t have a lot of products that we’re selling into that market anymore.

Okay. And your comments - your comments on CapEx in terms of cutting that, I mean, certainly that’s emerging for most of anybody in the industrial landscape right now. But any sense in terms of where that can go? I know the company is a little bit different in terms of its composition in the last crisis, but where can we expect to see those levels versus the [$80] [ph] million and plus that we’ve been seeing in the last few years?

Yeah, I mean, I would suggest that we can probably squeeze that - maintenance CapEx is probably $25 million, maybe $30 million. It’s a little fuzzy just because defined maintenance CapEx. But I think in the last downturn, we got down to those levels and I would suggest we could probably do something similar.

Okay.

And Phil, that - notwithstanding, that’s not our plan right this minute, right? We’re - it will come down to the level that it needs to have us think about things and we have focused and prioritized our CapEx accordingly. But we also see opportunities as Andy mentioned, because as things are happening and as things are in good place, when we get - when the economy gets its feet underneath that we feel like people on a position like ours will have some pretty good opportunities to grow and to do things that were probably a bit more difficult with - throughout the M&A environments and things like that.

Let me just ask one more before I jump off. I know there’s been a lot of gloom and doom and seriously in - and that’s a serious concern, given where we are in the era now. But what’s - is there - are you modeling any scenarios where there could be a sharp bounce back in three months or four months similar to some extent with what we’re seeing in China, because I think while not likely, it’s certainly a possibility. So, I’m wondering how you’re thinking about the potential for that not wanting to cut too deep. Thanks.

Yeah. And to be honest, Phil, I mean, we haven’t really started scaling down the business. We’re keeping people around and we’re actually hoping for that V-shaped recovery day-by-day as a little bit of our model right now and we get new information every day. But we’re - we absolutely want to be prepared for a bunch of different scenarios, one of which would be this thing bounces back pretty hard and we’re ready for that. We want to be able to serve our customers. We also have mitigation plans for different scenarios where it’s not as good. But we’re going to take a measured and slow approach to anything in terms of scaling down our business.

Thank you.

[Operator Instructions] Your next question comes from John Tumazos [Very Independent Research] From John Tumazos, your line is open.

Thank you for taking my question and thank you for your service to the company and the team. It’s been tough times. Clearly, the traditional May seasonality is out the window. Is a reasonable guess for May revenues about 20% less than what you reported this morning?

That’s a good question, John. I think the answer to that question probably depends on what happens in terms of timing of reopening the economy. I think the hope is mid-April. If that happens, I think, May - we could see some bounce back in May, but I don’t - until we know when the states start opening things back up, it’s very difficult to say what May would look like.

Yeah, and John, I would encourage you to - you know this, but in our Steel Processing business, if you included our majority JVs, that’s almost 60% automotive. March was - has for the first three and a half weeks been okay, but the declines and the demand drop-offs are here. And so, as Andy said, when we can pinpoint with better certainty, when things open back up, we’ll have a better idea of what revenue impacts are likely to be, not just in the May quarter, but beyond.

Second question, are share back - buybacks off the table because of the macro business uncertainty? And I’m sure you have intimate - not intimate, but very close relations with many of your customers, some of whom are not public well - as well capitalized as Worthington. Do you see yourselves making bridge loans or taking equity stakes or even buying out some of your good customers that might fit to Worthington model?

I would suggest that we are in the manufacturing business, not in the financing business. So I do not anticipate there will be situations where we want to take ownership of customers or vendors. In the last financial crisis, there were a lot of - there was a lot of stress in the supply chain and we had very low default rates across our portfolio. I think less than 1% in terms of customers paying us, et cetera. So, we’re watching it very closely right now. But I don’t think you’re going to see us loaning money to folks, certainly not on purpose, and taking equity stakes. In terms of your other comment, I would tell you where we’re prioritizing capital right now is first and foremost to protect our balance sheet. You heard us talk a little bit more about maintenance CapEx. We want to keep our equipment market ready and in good shape. And we’re also focused on preserving our dividend, assuming that continues to make sense. Beyond that, I would tell you we will look for stability in the economy and our business. And once we feel that we have that, there will be a lot of capital allocation decisions, where we can think about deploying capital to create value for our shareholders. We know that will be there, but we want to make sure that we do that at the right time. And that’s - it’s hard to say when that time might be.

Thank you.

[Operator Instructions] I have no further questions in queue. I turn the call back over to the presenters for closing remarks.

Again, we thank you all for joining us for this conference call. We all need to stick together to work our way through this coronavirus epidemic and we’ll have to continue to watch jobless claims fall and all those things that will signal the economy is starting to return to normal. Hopefully, it will not be too long and hopefully we all get through as well. Thank you, again.

Thank you, everyone. This will conclude today’s conference call. You may now disconnect.