Worthington Industries WOR
Q1 2012 Earnings Call Transcript

Operator: Luke Folta, Jefferies.

Luke Folta - Jefferies: The first question I had relates to your Pressure Cylinders business and if I look at the margin of that business stripping out the Burn settlement, it looks like margins fell pretty notably sequentially. I just was trying to get a sense – I know there's a number of factors in there, there are some price/cost issues and corporate allocation, and it's a mix issue there. I want to see if you can give us a sense of what – maybe some quantification around which are those factors. What's the biggest as far as what would cause the quarterly decline?

John P. McConnell - Chairman and CEO: I think you'll hear that mix is part of the largest of those issues. I'll let George expand on that for you, but we sell so many different types of cylinders and we're driving increased volumes and are very successful in some of our lower priced units as we continue to improve and roll out products, for instance, 14 ounce torch. So those volumes are way up and some others where we make significant money, maybe off a little in North America. George?

George P. Stoe - President and COO: Well, that explains it absolutely correctly John. I think, Luke as you know, the 14 and 16 ounce cylinders that we sell from our facility in Wisconsin are lower priced and lower margined items and those were reasonably strong during the quarter and some of the other product lines, some of the heating tank business that we have was down somewhat from the previous quarter and I think that's certainly the case for most of what you're seeing.

Luke Folta - Jefferies: Are you able to quantify for us what the raw material cost impact was, just so I can get a sense on how the margins are looking on a more normal basis?

John P. McConnell - Chairman and CEO: It is a much lower component in the cylinders than in steel obviously and I don't think we're going to be able to follow-up on that for you. But it's not significant in and of itself. When people look at our volumes being up and look for margins down, again this is really a mix issue. North America has driven increases, I think for five consecutive quarters, all records, a little bit of pause here, nothing, no sharp declines, just a little softness in North America that we see already recovering and we don't have any concerns about this business.

Luke Folta - Jefferies: Any thoughts on the European industrial business?

John P. McConnell - Chairman and CEO: It was fairly flat. George, do you have anything to add to that, but it was fairly flat as I recall.

George P. Stoe - President and COO: I think if you recall that during the quarter in Europe we were always hit a bit with the European vacation period during that July-August timeframe. We've seen a good rebound of the business going into September and the biggest volume obviously is our industrial gas plant in Austria and September looks very strong there.

Luke Folta - Jefferies: Just on WAVE, WAVE continues to be a pretty strong contributor and your comments over the last year or so have been that it's been decent pricing and then also pretty good remodel work that's been driving that. I just wanted to get a sense of, how long do you think the continued remodel work can carry that businesses if commercial construction doesn't show any signs of recovery anytime soon?