Earnings Call: Q1 2022

Sep 29, 2021

Good afternoon and welcome to the Worthington Industries First Quarter Fiscal 20 22 Earnings Conference Call. All participants will be able to listen only until the question and answer session of the conference call. Nineteen. This conference is being recorded at the request of Worthington Industries. If anyone objects, you may disconnect at this time. Nineteen. I would now like to introduce Mr. Marcus Rogier, Treasurer and Investor Relations Officer. Mr. Rogier, you may begin. Twenty. Thank you, Lisa. Good afternoon, everyone, and welcome to Worthington Industries' Q1 fiscal 2022 earnings call. Nineteen. On our call today, we have Andy Rose, Worthington's President and Chief Executive Officer and Joe Hayek, Worthington's Chief Financial Officer. 19. Before we get started, I'd like to remind everyone that certain statements made today are forward looking in the meaning of the 1995 Private Securities Litigation Reform Act. Eighteen. These statements are subject to risks and uncertainties that could cause actual results to differ from those suggested. We issued our earnings release earlier this morning before the market opened. Nineteen. 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 18.5 times on our worthingtonindustries.com website. At this point, I will turn the call over to Joe for a discussion of our financial results. Nineteen. Thank you, Marcus, and good afternoon, everyone. Today, we'll be sharing our results consistent with our new reporting segments for the first time. Eighteen. We believe the new structure will provide greater insights into the underlying performance of our businesses. We had a strong start to our fiscal year, nineteen Earnings of $2.55 a share in Q1 versus $11.22 in the prior year quarter. Eighteen. Excluding restructuring and one time items, we generated a record $2.46 per share in earnings in Q1 compared to $0.64 18.2% in the prior year quarter. During the quarter, we recognized a net after tax restructuring gain of $5,000,000 or $0.09 a share, nineteen primarily related to the sale of a shuttered facility owned by our WSP joint venture. That compares to restructuring and impairment charges of $0.16 a share a year ago. Nineteen. In addition, the prior year results included a net benefit of $10.74 per share related to our investment in Nikola Corporation. 18. Consolidated net sales in the quarter of $1,100,000,000 were up significantly compared to $703,000,000 in Q1 of last year. The improvement was primarily due to higher steel prices nineteen. The gross profit for the quarter increased to $219,000,000 from $113,000,000 a year ago, nineteen. Our gross margin increased to 19.7% from 16.1%. Adjusted EBITDA nineteen. And Q1 was a record $196,000,000 up from $75,000,000 in Q1 of last year and our trailing 12 month adjusted EBITDA 18.7 $3,000,000 nearly doubled from $431,000,000 in Q1 of last year due to higher average selling prices and increased volumes. Eighteen. Total ship tons were up 14% from last year's Q1 when demand was just beginning to recover from COVID related shutdowns, particularly at our automotive customers. 18. Direct tons in Q1 were 49% of the mix, which was consistent with the prior year quarter. We continue to see solid demand across nearly all of our major end markets, eighteen. Despite the solid demand and year over year growth, automotive shipments could have been better nineteen, if not for the continuing semiconductor related slowdowns. Everything we see suggests that while consumer and fleet demand for new cars remains strong, nineteen. Chip shortages will persist for the next several quarters and our automotive demand will be subject to some uncertainty as a result. 18. The demand is clearly there. It will likely just take some time for the semiconductor shortage to resolve itself. Our teams continue to do a terrific job nineteen. We're also negotiating unprecedented market conditions while remaining laser focused on the needs of our customers. In the current quarter, steel generated adjusted eighteen. $108,000,000 and adjusted EBIT margin of 13% compared to $14,000,000 3% in Q1 of last year. 18. The large year over year increase was primarily driven by increased demand, higher spreads and arbitrage gains. In the quarter, we nineteen. We expect to be $47,000,000 or $0.68 per share compared to holding losses of $7,000,000 or $0.09 a share in Q1 of last nineteen. Based on current steel prices, we expect inventory holding gains again in Q2, but we will also continue to see the impact of the widening scrap gap. Nineteen. In consumer products, net sales in Q1 were $148,000,000 up 10.6% from the prior year quarter. Nineteen. Legacy consumer products revenues were up slightly and the inclusion of sales from GTI, which was acquired in January, drove the balance of the drove. 18% in the prior year quarter. Nineteen. The decrease in EBIT was due to higher labor and input costs. Our consumer business has some longer fixed price contracts with customers, nineteen, which can create a short term drag on margins when input prices rise as rapidly as they have. Nineteen. These dynamics are typically short term and we do expect margins to improve moving forward. Building products generated net sales of 100 and $18,000,000 in Q1, which was up 30% from $88,000,000 in the prior year quarter. The increase was due primarily to higher volumes as nineteen. The prior year quarter was impacted by COVID related disruptions. Building Products EBIT was $49,000,000 and EBIT margin was 42%, nineteen, up significantly from $23,400,000 27 percent in Q1 of last year. We saw significant growth year over year in our wholly owned building products businesses, nineteen. But the majority of the upside was driven by strong results at Wave and Clark Detrick, who contributed $26,000,000 $17,000,000 respectively in equity earnings. Eighteen. Wade and Clark Dietrich both had better demand environments than in Q1 of last year and all of our teams in building products are doing an excellent job nineteen. In Sustainable Energy Solutions, nineteen. Net sales in Q1 were $25,000,000 down from $28,000,000 in the prior year quarter. Largest end market for this business is transportation eighteen and the semiconductor chip shortage created a headwind for them with respect to demand. In addition, the economy in Europe is recovering but very slowly. Nineteen. The business reported a negative EBIT of $3,000,000 in the current period as volumes were too low to absorb fixed costs. We remain very excited about this business nineteen and its prospects over the long term as its innovative products and solutions are poised to grow quickly serving hydrogen ecosystem and adjacent sustainable energies like compressed eighteen. With respect to cash flows and our balance sheet, operations used cash of $50,000,000 in the quarter, nineteen, which was driven by $149,000,000 increase in working capital, primarily associated with higher steel prices, 18 months, along with annual accrued compensation being paid out during the quarter. Absent further increases in steel prices, nineteen. We would expect these significant working capital increases to subside in the next quarter or 2. During the quarter, we received $20,000,000 in dividends from unconsolidated JVs. Eighteen. We received $27,000,000 in proceeds from asset sales, completed one acquisition for $105,000,000 invested $24,000,000 in capital projects, 18,000,000 in dividends and spent $61,000,000 to repurchase 1,000,000 shares of our common stock. 1st quarter fiscal 20. Following the Q1 purchases, we have 8,300,000 shares remaining under our share repurchase authorization. Looking at our balance sheet and our liquidity position, 20. Funded debt at quarter end of $706,000,000 was relatively flat sequentially and interest expense of $8,000,000 was in line with the prior year quarter. Eighteen. We ended Q1 with $399,000,000 in cash and we continue to take a balanced approach to capital allocation, nineteen focused on growth and on returning capital to shareholders. Earlier today, the Board declared a $0.28 per share dividend for the quarter, 2019, which is payable in December 2021. At this point, I will turn it over to Andy. Thank you, Joe. Good afternoon, everyone. 2. It's great to start fiscal 'twenty two with another record performance. However, the operating environment remains quite challenging with the continued rise in steel prices, nineteen. Our people continue to showcase their commitment eighteen by going the extra mile to ensure that we are working safe and doing the best to meet our customers' needs. Demand levels are good across almost all of our end markets nineteen and backlogs remain at elevated levels. We continue to raise prices in many of our product lines to offset rising input costs, particularly steel. Eighteen. Higher working capital needs had a meaningful impact on free cash flow this quarter, but this will reverse if steel prices begin to decline as we expect in coming quarters. Nineteen. This is the Q1 reporting our 3 new operating segments, consumer products, building products and sustainable energy solutions. 18. Hopefully, you will find as we believe that each of these segments is an attractive business with unique advantages and compelling strategies to grow for years 18 months. We will continue to leverage our transformation playbook, new product development and innovation and M and A to drive nineteen. While our innovation and M and A growth initiatives continue across the portfolio, eighteen. The M and A environment is proving challenging with elevated purchase multiples and difficult earnings analyses due to the unpredictability of the COVID environment. Nineteen. To the extent we do find compelling targets, our balance sheet remains strong with significant cash and borrowing capacity. Nineteen. Finally, we just published our 2nd corporate citizenship and sustainability report. Since our inception, we have worked hard nineteen. We are confident to be a good corporate citizen for all of our constituencies and in our communities as well as to minimize our environmental footprint. Eighteen. While we are a relatively clean manufacturing operation overall, in 2012, we started our successful Green Star initiative 18. We are pleased to recognize our manufacturing facilities for environmental conservation and stewardship. In fiscal 2021, 64% of our nineteen. We are working towards an even more robust approach to reducing our environmental footprint eighteen and expect to have more details in the future regarding our goals. It is often difficult to follow a record year, but we are off to a fast start and our teams remain nineteen focused on continuing to deliver for our customers and creating value for our shareholders. Thanks again to all of our employees for their hard work and dedication to operating nineteen safely and effectively. We'll now take any questions. Nineteen. Your first question comes from the line of Martin Englert with Seaport Research Partners. Hi, good afternoon everyone. Good afternoon, Mark. I just wanted to come back and touch on inventory holding gains that were 18. We're about $47,000,000 within steel processing for the quarter. Could you discuss maybe the magnitude or some goal eighteen. We think they'll be significant again, nineteen. But not as high as they were in Q1. Okay. And anything as far as the partial offset from the scrap gap? Nineteen. Yes, the scrap cash has historically run plus or minus $300 and it's 18. Four times that now or more. And so significant, we do everything we can to offset that in terms of trying to nineteen. And so in different buckets, but we'll continue to see that. It's we don't call it out, but we know it's there. Nineteen. Okay. Thanks for that. And then just shifting and looking at the automotive supply chain, can you provide a little more nineteen. Regarding what you're seeing there today in the current market, if that environment is improving or deteriorating and maybe more nineteen. Specifically, what's your read on the downstream channel inventories there within autos? Do you get a sense that there is building inventories or do you think that they're still managing pretty tight twenty. I would say, Martin, this is Andy. The supply chains are still eighteen. Pretty backed up. It's hit or miss depending on the models that are being manufactured. I'm sure you're tracking it and eighteen. We're doing our best to stay on top of it, but it changes kind of daily depending on the facility that we're shipping to and who the customers are. Eighteen. My sense, we don't track sort of cars on lots, if that's what you're asking, but my sense in my little eighteen. World of Columbus, Ohio and other places is that inventories dealer inventories are still very, very light. There is way more demand than there are available cars 16. And it's likely to be that way for the foreseeable future assuming the demand the end market demand stays the same. Nineteen. Martin, our automotive tons our direct tons in the automotive were actually up 14% 18,000,000 year over year, including our TWB joint venture, which had a eighteen. They're the and the most impacted of our groups based on the platforms that they're on. But Andy said it, I don't think it's getting worse, but it's not getting materially better yet either in terms of the supply chains generally. Nineteen. Okay. And how about and you may not have a read here, but more so the intermediate, inventories at the OEMs or the tampers. Nineteen. Can you get a sense of the cadence of steel that you're shipping is matching what the production is out there? Or do you think that they're building 18. We clearly don't have a vehicle, whether it be steel sitting there or stamped pieces and parts or partially nineteen. We clearly don't have a global view there, Martin, but I certainly don't think that there are eighteen. Fair to say that it still seems like a lot of eighteen. Just in time inventory for a lot of folks in the supply chain. I mean, that's traditionally how they've been. And again, we don't think that there are nineteen. Okay. That's helpful. I appreciate that. If I could, just one quick last one. Nineteen. On the blanking facility acquired, any goalpost as far as the volume contribution that we should expect there for steel processing? Nineteen. Yes, so part of Shiloh obviously and that's one facility. The other nineteen. Facilities went into the TWB joint venture. It's not going to be massive in that regard, but nineteen. We're real happy with it. Shiloh's assets were impacted during the quarter by the 17. Subconductor shutdowns kind of in a similar way that TWB was, but so far so good there and we're excited about what that does. They were profitable eighteen. I feel pretty close to an adjusted plan assuming the semiconductor shortages. So feel good about that one thus far. Nineteen. Your next question comes from the line of Philip Gibbs with KeyBanc Capital Markets. Yes, thanks. Good afternoon. Hi, guys. Eighteen. So in terms of the scrap gap, I know Martin asked about it, but nineteen. Can you help us in terms of just some level of magnitude in the Q1 or the 18. Way to think about it, why in terms of it impacts you all, I don't understand it, I guess, completely. Sure. It probably won't be a perfect explanation, but effectively, we have scrapped in the nineteen. We do ranging from 2% or 3%, whether it's the beginning of a coil or the end of a coil up to upwards of 12%, 13%, 14%, 15% in our cold rolled business, where there just happens to be more and that's more of a stamping operation. And so historically, $1,000,000 That scrap gap has averaged around $300 right? The delta between what we buy eighteen. The Steel 4 and what we can ultimately sell the scrap 4, it's not a lot, ends up being roughly 8% of the total across the steel facilities. 18. And then as that scrap gap widens, there are curves and charts you can plot on different services, 18. But we actually ultimately have an impact there. And so we think it will be a greater impact on us in Q2 than it was in Q1. But nothing that is going to kind of by itself create nineteen. Giant issues for us. I mean, I think it could be based on the lag in steel prices, it could be nineteen. Kind of an order of magnitude bigger in Q2 than it was in Q1. But again, we can try and offset that with nineteen. Some things that we can do on the hedging side or going into different buckets. And so it's there and we pay attention to it. We try and manage around it, but it will create a headwind for us. I can't really quantify it for you because it depends on a lot of things, but that's directionally nineteen. Okay. And then I saw you made an acquisition in the quarter. Nineteen. Can you kind of talk about what that may have contributed to the bottom line in the quarter and nineteen. Maybe strategic fit and then how it's how we should be thinking about it moving forward. Yes, you were talking about the Shiloh acquisition? Yes, nineteen. Yes, sure. So, fantastic laser welding and blanking operation 18. Very well with our TWB business. Anything having to do with light weighting, anything having to do with nineteen. All those ongoing efforts within automotive really kind of lend themselves towards businesses like that. Nineteen. That business that was did a nice reasonable slug of EBITDA during the quarter. Nineteen. It was impacted by the semi chip shortage, because its customers are similar to TVB's in that regard. But nineteen. Really happy that it takes us even further in a direction around lightweighting, around hybrids, around really the future nineteen that we see in automotive and so far so good there. And we it was accretive in the quarter. We expect it to be accretive in the quarters to come. Nineteen. Okay. And then just on the non processed steel businesses, I think you said consumer products, nineteen. You saw a little bit of a pinch relative to last year. You expect margins to normalize, but then you've got some businesses and probably building products that benefited from the timing on the front end of getting pricing versus your raw materials. So is there kind of a 2 quarter nineteen. Kind of a 2 quarter thought process prospectively where you've got margins creeping back up in the consumer products and then you've got margins nineteen. Probably normalizing at some point as the steel catches up to the selling price in the downstream businesses on the building product side. Eighteen. Yes, I mean it's a tough question to just make a blanket statement on Phil because each business is a little bit different. Nineteen. And just as an example and for our joint ventures Wave and Clark Detrick, most of their business is eighteen. Spot oriented, they have the ability to raise price when they need to as long as the market is receptive to that and it has been. Eighteen. And then you contrast that with some of our consumer products businesses where we're selling to big box retailers and there's nineteen. Sort of brackets around when and how price increases are implemented. And so there is a lag effect when that occurs and that's nineteen. Really what we're talking about where margins can be compressed on a short term basis, but we'll ultimately catch up and nineteen. That's usually a quarter, maybe 2 of lag. It's not a substantial delay, but it does take some time. Nineteen. Okay. And then lastly, and I'll jump off. Just remind us, I guess, of your liquidity position, Cash available credit that sort of thing. And then if you're I know you're typically acquisitive what may be eighteen. Some things that you'd be interested in a general sense. Thanks so much. Nineteen. Sure. So you ended the quarter with just under $400,000,000 of cash, dollars 500,000,000 on our revolver that is undrawn. Nineteen. So feel pretty good about that. We've in the last three quarters, filled just simple using simple working capital metrics, just inventories, receivables eighteen. In the last three quarters, we've added $330,000,000 to working capital. So we feel like as eighteen. Steel prices moderate or in the eventuality that they decline and some of that cash will come back to us as well. Nineteen. Really happy with our balanced approach to capital allocation, still paying a dividend. We bought back 1,000,000 shares in Q1. Nineteen. We're looking at M and A opportunities. I mean, we've made 3 thus far in calendar 2021. Nineteen. We continue to look for attractive targets that meet our cash return on investment thresholds and our good strategic fits eighteen or additions for us. So we're going to continue to pursue all of those strategies simultaneously without overly stressing the balance sheet certainly. Thank you. Thank you. Your next question comes from the line of John Tumazos with Tumazos Very Independent Research. Thank you for the great results. 18. It's just incredible how much money you're making. Last week, the wood company 18. We're having an Investor Day and they predicted 25% 5 year growth in lumber 19. With the slug of it coming from displacing steel and what they call tall buildings. A couple of days ago, I was taking the Jersey Coast nineteen. And I saw a 6 storey apartment building entirely wood framed up to the roof. Nineteen. Do you think that the high steel prices are hurting nineteen. Clark Dietrich Badley, I know the earnings were a record, but there could be some substitution visible. Nineteen. And are there other businesses where you see your customers looking for some substitution? Nineteen. Yes, John, we explored that on the surface anyway, and I don't 18. I mean look, there's a lot of dislocation right now in terms of price volatility with wood and with steel, nineteen. As you well know, and historically there's always been a little bit of substitution here or there. 18. Look, for the most part, the markets are kind of pre established in terms of whether their buildings are built out nineteen. Wood or out of steel. Now if steel were to stay at $2,000 a ton and wood were to continue declining and the spread really increased, maybe that would change, but I don't 18. At least our guys don't foresee kind of a systemic change going forward in that. I don't know who is building the building on the Jersey eighteen. Sure, but I would encourage them to understand that hurricane codes are much more difficult for wood to meet with wood than they are with nineteen. So there's a separate issue related to that, but I understand the thought process. I think a lot of it sort of depends on where this thing settles out nineteen. Thank you. Adding up the units of the 3 18.5% to the old cylinder segment, the units were about 3 1,000,000 more in the volume category. Do you include eighteen. Yes, you can. Wave and Clark Detrick's volumes are not in there. You do have nineteen. The acquisitions that took place, specifically the P TECH acquisition and then 2019. The GTI acquisition, the tools company, that's going to be a large percentage of that increase, John. 18. Although volumes were up across the board, in the legacy businesses as well with the exception of sustainable energy solutions, which we talked nineteen. Are the revenues of Wave and Clark Dietrich there or just the incomes? Just the equity income in the reported numbers. In terms of the sustainable energy loss and the 600 nineteen. Dollars loss in the other parts of the equity affiliates. Could you sort of explain that? Eighteen. Are there margin squeezes from inputs that could go away in a quarter or 2 or? Those are little details, but every penny adds up. Nineteen. Sure. So specifically to sustainable energy solutions, a year ago they lost $600,000 And so nineteen. That business, we expect over the course of time will be profitable. And 18. Some pretty specific things hitting them in this quarter. Seasonal slowdowns in our Q1 just because it's Europe and nineteen. It's July August and it's kind of the vacation slower season. But on top of that, the largest market being 20. Transportation, automotive and the semiconductor shortage hitting a couple of its very large customers, 18. Just some headwinds there, but ultimately we think that resolves itself and that business will be profitable and ultimately has 18. A lot of runway relative to the next several years in terms of hydrogen and the alternative fuels economies. On the other line, eighteen. John, those are really just some odds and ends, nothing really dire. I mean, it's the legacy engineered cash business, the pieces that are left. 18. Nothing that we would point to as being real material there. Nineteen. What are the sustainable energy solutions products in sort of a simple way on still learning the new segments? Nineteen. Sure. So I certainly invite you to bounce on to the website or one of the presentations, but 18. They make vessels that kind of house and make mobile, if you will, gases like hydrogen and CNG nineteen and others through the P TECH acquisition, which is a German company that we acquired in January. Eighteen. Transportation vehicles, actually the CNG or hydrogen systems that enable those vehicles to use fuel other nineteen. So it's all around the transportation market using fuels other than traditional diesel 10. Nineteen. Your next question comes from the line of Martin Englert with Seaport Research Partners. Nineteen. Hi, thanks for taking my follow-up. I wanted to touch on the question about substitution between the lumber and steel for like metal framing on construction. Nineteen. Can you speak to maybe some of the labor aspects to it? If I remember right, I think maybe some of the metal framing and pursuing that path nineteen. Was a bit more labor intensive and offered some efficiency gains on that front and just thinking about that dynamic and kind of nineteen. I'm sorry, Martin, are you saying metal framing is more labor efficient or less efficient? Nineteen. Is more labor efficient on the metal framing side versus lumber. Is that a true statement? Yes, I think that's true. Generally speaking, there's other things you can do and construction companies do as well as they will nineteen. Prefabricate some of that stuff, which they also do in wood by the way. But both Wave and Clark Dietrich with respect 2. The labor shortage are very focused on developing whether it's methods or eighteen. Products that require less labor, easier to install, less on-site cutting, trimming, etcetera, and nineteen. They've both been quite effective at doing that. In fact, some of the acquisitions, Clark Dietrich made a few smaller acquisitions that eighteen. Our nineteen. Industry frankly has been facing it even longer than sort of the COVID impact. So don't think that's going anywhere and the trends toward eighteen. Building efficiency are very important one. So we do think that's an important aspect of what they're trying to accomplish. Nineteen. Okay. Thanks for the color there. And one other kind of along the same lines, if I remember from the past, eighteen. I think a lot of the substrate that's going into metal framing there for buildings, a lot of that's purchased on the secondary market at a So, well, it would see the same inflation versus it would see inflation alongside the other flat rolled products, but it's typically always kind of nineteen. I would tell you that historically, meaning a number of years ago that used to be the case. 18. Today, they still do buy secondary, but they buy their fair share of prime steel as well. So it's not quite as prevalent as it used to be. And eighteen. One of the things that changed and we were instrumental in driving that was the code regulations and enforcement of those code regulations because nineteen. While you can use secondary steel for some of those applications, the nineteen. Code requires that you don't for a number of others. So it's still relevant, but it's not like 80% of their steel 2019. Okay. Yes. No, that's helpful to understand that shift. And then are you sourcing typically the substrate for that nineteen. So away from the North American market or have you been playing in the import market at all and taking advantage of the arbitrage? Nineteen. Yes, both of those companies, both of those joint ventures do import some of their steel and there's really two reasons. One is 20. Price arbitrage, but the other is having secondary and tertiary sources, especially when you get into the really 18.8% light gauge steel here in the U. S, there just isn't a large supply of it. Nineteen. And so from a strategic standpoint, it makes sense to have some alternative sources. But with nineteen. Some of the tariffs and other things, the percentage of imported steel has declined, but both of them still buy in those markets. Nineteen. Did you ever have any appetite for other downstream fabrication in the call in recent history with 18. In terms of products or markets? Yes. Nineteen. If that's anything you ever considered like participating more farther on the downstream? Nineteen. Well, we certainly look at a number of downstream manufacturing operations. Many of them are metals based. 2. They don't have to be necessarily. We have a pretty strict criteria that involves trying to raise our margins and our as Joe said, our eighteen. So it just depends on how attractive the business is. We've been in around and around some of those in the past. You may recall, 19. We had a cold formed steel building company where we actually built mid rise buildings for a while and eighteen. It just wasn't a great market for us. It didn't prove out the way we had hoped and so it wasn't a fit. But nineteen. We continue to look at things like that, but I will tell you part of our focus also around M and A. I think Phil asked the question earlier what's attractive. Nineteen. We're looking at a lot of different M and A opportunities and part of the segmentation of 18. The former Pressure Cylinder segment is to help us focus where we want to go there. The consumer products business, eighteen. We feel like has a tremendous amount of opportunity to continue to leverage the brands and the markets that they're in and enhance our relationships with our customers. Nineteen. The challenge right now is just a lot of those businesses are extremely expensive. Their earnings have exploded with COVID and so it just makes it a tough market nineteen. So, anyway, it's an interesting market for sure. 18. I think we had a person on the inside say it's somewhat of an M and A frenzy, 19. We just have to be careful. Is it a dynamic where people that are sellers are trying to get nineteen. Some more normalized cycle multiple or something more akin to that on the peak ish type earnings and you're not really having conversations where sellers are willing to base the sales multiple more on like a forward 18 months ago. 2 cycle EBITDA opportunity. 18. Yes, I mean everybody wants to pay off whatever the highest number sell off whatever the highest number is, right? And I certainly would 18. Want to do that too if I were selling a business, but what we're having a hard time doing is filtering nineteen. How much of that is sustainable versus how much of that is because there was a temporary change in behavior over the last 18.2 or 2.5 years. And we don't nineteen. It's hard enough to make money and build your capital base and we're trying to be conservative and make sure that we when we do 20. No, I nineteen. I think that's a good prudent approach, so I'm sure that your investor base appreciates that. One last one here, I'm just curious on your thoughts on 18. Flat rolled steel prices and looking ahead over the next structural change in the U. S, North American and or 20. Global market where you have a different through cycle, 5 volt steel price. 18. One of my favorite learnings, I'm not that old, but I've been through 3 sort of major business cycles in my career and when somebody says, oh, it's different this time, nineteen. Okay. So, I'll turn it over to Mike to discuss the details of the market right now with the mills. 18 months ago. You know capacity has been taken out with some of the older 18. Legacy integrated mills and there's continued evolution into the mini mill market and expanded capacity nineteen. It's hard to say really. I mean, nineteen. You also have the tariff impact that has sort of restricted imports into the U. S, but I don't think fundamentally anything has changed with respect to the fact that nineteen. There's too much capacity globally. We want low stable steel prices and so we obviously make a lot of money when steel runs up nineteen. And it's great and so we certainly enjoy it. Our businesses, it's better to have those low 18. We're at all time highs right now in this country and 18. I don't know when it's going to go down, but I would certainly 18. We're willing to predict that at some point, probably in the not too distant future, we're going to start to see some downward pressure. Nineteen. Martin, the only thing I'd add is, we look at the forward term, right? We're not steel price 20. But if you look at the forward curve and you look at how it's evolved, 2023 year end totaled of over $900 a ton. The very first time that 19. I've ever seen something that's 2 years out that's that high. And so again, we think 18 months later than most in any steel environment, but nineteen. There definitely has been a shift in how people spend their time and spend their money over the last couple of years. 18. It's hard for people to remember that it's yes, it has 19. We've had quite a run so far. And look, I 18. I think you're one of the biggest purchasers of flat rolled 18. Hot rolled coil, what, into the U. S. North American market. So I imagine you're not really having too much trouble getting into mill order books, nineteen. Maybe if you could just touch on the dynamic there and broadly the availability and like how lead times are looking. Nineteen. Yes, I mean it's still a challenging market to some degree on supply. Most of the mills are pretty full 18. And supply chains are obviously complicated right now. For us, we do have great relationships with our mill partners eighteen. And the reason we have great relationships is we're a good customer, we're a loyal customer, but also sometimes the mills need help with 20. Filling up order books and other things and we try and work with them to be helpful when they use when we do need to call on a partner for steel supply, eighteen. I think we have people that are willing to listen and that does help us out in the marketplace and enable us to service our customers. But I think eighteen. That's a part of our philosophy and who we are as Worthington. We treat others the way we would like to be treated and I think that pays off in times like these. 18. Okay, excellent. I appreciate all the color there. So very helpful and again congratulations on the results. Nineteen. At this time, there are no further questions. I would like to turn the call back over to Worthington Industries for closing remarks. 18 months ago. We're pleased to announce that our upcoming virtual Investor Day, which is going to happen later this fall. 18. Everyone have a great day. This concludes today's conference. You may now disconnect.