UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 20212022

or

☐TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐

TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-08399

WORTHINGTON INDUSTRIES, INC.INC.

(Exact name of registrant as specified in its charter)

Ohio

 

31-1189815

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

200 Old Wilson Bridge Road, Columbus, Ohio

 

43085

(Address of principal executive offices)

 

(Zip Code)

 

(614) (614) 438-3210

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, Without Par Value

WOR

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☒

 

Accelerated filer

☐

Non-accelerated filer

☐

 

Smaller reporting company

☐

 

 

 

Emerging growth company

☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. On December 31, 2021,30, 2022, the number of Common Shares, without par value, issued and outstanding was 50,934,413.49,707,649.

 

 

TABLE OF CONTENTS

 

Safe Harbor Statement

 

ii

 

 

 

Part I. Financial Information

 

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets – November 30, 20212022 and May 31, 20212022

 

1

 

 

 

 

 

 

 

Consolidated Statements of Earnings (Loss) – Three Months and Six Months Ended November 30, 20212022 and 20202021

 

2

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) – Three Months and Six Months Ended November 30, 20212022 and 20202021

 

3

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows – Three Months and Six Months Ended November 30, 20212022 and 20202021

 

4

 

 

Condensed Notes to Consolidated Financial Statements

 

5

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

2322

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

3734

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

3734

 

 

 

Part II. Other Information

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

3835

 

 

 

 

 

 

Item 1A.

Risk Factors

 

   3835

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

3835

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities (Not applicable)

 

3935

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures (Not applicable)

 

3935

 

 

 

 

 

 

Item 5.

Other Information (Not applicable)

 

3935

 

 

 

 

 

 

Item 6.

Exhibits

 

4036

 

 

 

Signatures

 

4138

 

 

i

Table of Contents

 

Safe Harbor Statement

Selected statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”), including, without limitation, in “PART I – Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995 (the “Act”“PSLRA”). Forward-looking statements reflect our current expectations, estimates or projections concerning future results or events. These statements are often identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “should,” “would,” “intend,” “plan,” “will,” “likely,” “estimate,” “plan,“project,” “positioned,” “strategy,” “targets,” “aims,” “seek,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. These forward-looking statements include, without limitation, statements relating to:

 

•
the ever-changing effects of the novel coronavirus (“COVID-19”) pandemic and the various responses of governmental and nongovernmental authorities thereto (such as fiscal stimulus packages, quarantines, shut downs and other restrictions on travel and commercial, social or other activities) on economies (local, national and international) and markets, and on our customers, counterparties, employees and third-party service providers;
•
future or expected cash positions, liquidity and ability to access financial markets and capital;
•
outlook, strategy or business plans;
•
the intended separation of the Company’s Steel Processing business (the “Separation”), see Note A – Basis of Presentation for additional information related to the Separation;
•
the timing and method of the Separation;
•
the anticipated benefits of the Separation;
•
the expected financial and operational performance of, and future opportunities for, each of the two independent, publicly-traded companies following the Separation;
•
the tax treatment of the Separation transaction;
•
the leadership of each of the two independent, publicly-traded companies following the Separation;
•
future or expected growth, growth potential, forward momentum, performance, competitive position, sales, volumes, cash flows, earnings, margins, balance sheet strengths, debt, financial condition or other financial measures;
•
pricing trends for raw materials and finished goods and the impact of pricing changes;
•
the ability to improve or maintain margins;
•
expected demand or demand trends for the Company or its markets;
•
additions to product lines and opportunities to participate in new markets;
•
expected benefits from transformation and innovation efforts;
•
the ability to improve performance and competitive position at the Company’s operations;
•
anticipated working capital needs, capital expenditures and asset sales;
•
anticipated improvements and efficiencies in costs, operations, sales, inventory management, sourcing and the supply chain and the results thereof;
•
projected profitability potential;
•
the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations;
•
projected capacity and the alignment of operations with demand;
•
the ability to operate profitably and generate cash in down markets;
•
the ability to capture and maintain market share and to develop or take advantage of future opportunities, customer initiatives, new businesses, new products and new markets;
•
expectations for Company and customer inventories, jobs and orders;
•
expectations for the economy and markets or improvements therein;
•
expectations for generating improving and sustainable earnings, earnings potential, margins or shareholder value;
•
effects of judicial rulings; and
•
other non-historical matters.

 

•

the ever-changing effects of the novel coronavirus (“COVID-19”) pandemic and the various responses of governmental and nongovernmental authorities thereto (such as fiscal stimulus packages, quarantines, shut downs and other restrictions on travel and commercial, social or other activities) on economies (local, national and international) and markets, and on our customers, counterparties, employees and third-party service providers;

•

future or expected cash positions, liquidity and ability to access financial markets and capital;

•

outlook, strategy or business plans;

•

future or expected growth, growth potential, forward momentum, performance, competitive position, sales, volumes, cash flows, earnings, margins, balance sheet strengths, debt, financial condition or other financial measures;

•

pricing trends for raw materials and finished goods and the impact of pricing changes;

•

the ability to improve or maintain margins;

•

expected demand or demand trends for us or our markets;

•

additions to product lines and opportunities to participate in new markets;

•

expected benefits from Transformation and innovation efforts;

•

the ability to improve performance and competitive position at our operations;

•

anticipated working capital needs, capital expenditures and asset sales;

•

anticipated improvements and efficiencies in costs, operations, sales, inventory management, sourcing and the supply chain and the results thereof;

•

projected profitability potential;

•

the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations;

•

projected capacity and the alignment of operations with demand;

•

the ability to operate profitably and generate cash in down markets;

•

the ability to capture and maintain market share and to develop or take advantage of future opportunities, customer initiatives, new businesses, new products and new markets;

•

expectations for Company and customer inventories, jobs and orders;

•

expectations for the economy and markets or improvements therein;

•

expectations for generating improving and sustainable earnings, earnings potential, margins or shareholder value;

•

effects of judicial rulings; and

•

other non-historical matters.

Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, those that follow:

•

the risks, uncertainties and impacts related to the COVID-19 pandemic – the duration, extent and severity of which is impossible to predict, including the further resurgence in the spread of COVID-19 or variants thereof – and the availability, effectiveness and acceptance of vaccines, and other actual or potential public health emergencies and actions taken by governmental authorities or others in connection therewith;

•

the effect of national, regional and global economic conditions generally and within major product markets, including significant economic disruptions from COVID-19, the actions taken in connection therewith and the implementation of related fiscal stimulus packages;

•

the effect of conditions in national and worldwide financial markets and with respect to the ability of financial institutions to provide capital;

•

the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships;

•

changing oil prices;

ii

•
obtaining final approval of the Separation by the Worthington Industries, Inc. Board of Directors;
•
the uncertainty of obtaining regulatory approvals in connection with the Separation, including rulings from the Internal Revenue Service;
•
the ability to satisfy the necessary closing conditions to complete the Separation on a timely basis, or at all;

ii

Table of Contents

 

•
the Company’s ability to successfully separate the two independent companies and realize the anticipated benefits of the Separation;
•
the risks, uncertainties and impacts related to the COVID-19 pandemic – the duration, extent and severity of which are impossible to predict, including the possibility of future resurgence in the spread of COVID-19 or variants thereof – and the availability, effectiveness and acceptance of vaccines, and other actual or potential public health emergencies and actions taken by governmental authorities or others in connection therewith;
•
the effect of national, regional and global economic conditions generally and within major product markets, including significant economic disruptions from COVID-19, the actions taken in connection therewith and the implementation of related fiscal stimulus packages;
•
the effect of conditions in national and worldwide financial markets, including inflation, increases in interest rates and economic recession, and with respect to the ability of financial institutions to provide capital;
•
the impact of tariffs, the adoption of trade restrictions affecting the Company’s products or suppliers, a United States (“U.S.”) withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships;
•
changing oil prices and/or supply;
•
product demand and pricing;
•
changes in product mix, product substitution and market acceptance of the Company’s products;
•
volatility or fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities, labor and other items required by operations (especially in light of the COVID-19 pandemic and Russia’s invasion of Ukraine);
•
effects of sourcing and supply chain constraints;
•
the outcome of adverse claims experience with respect to workers’ compensation, product recalls or product liability, casualty events or other matters;
•
effects of facility closures and the consolidation of operations;
•
the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction and other industries in which the Company participates;
•
failure to maintain appropriate levels of inventories;
•
financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom the Company does business;
•
the ability to realize targeted expense reductions from headcount reductions, facility closures and other cost reduction efforts;
•
the ability to realize cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from transformation initiatives, on a timely basis;
•
the overall success of, and the ability to integrate, newly-acquired businesses and joint ventures, maintain and develop their customers, and achieve synergies and other expected benefits and cost savings therefrom;
•
capacity levels and efficiencies, within facilities, within major product markets and within the industries in which the Company participates as a whole;
•
the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, labor shortages (especially in light of the COVID-19 pandemic), interruption in utility services, civil unrest, international conflicts (especially in light of Russia’s invasion of Ukraine), terrorist activities, or other causes;
•
changes in customer demand, inventories, spending patterns, product choices, and supplier choices;
•
risks associated with doing business internationally, including economic, political and social instability (especially in light of Russia’s invasion of Ukraine), foreign currency exchange rate exposure and the acceptance of the Company’s products in global markets;
•
the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment;
•
the effect of inflation, interest rate increases and economic recession, which may negatively impact the Company’s operations and financial results;
•
deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies;
•
the level of imports and import prices in the Company’s markets;
•
the impact of environmental laws and regulations or the actions of the U.S. Environmental Protection Agency or similar regulators which increase costs or limit the Company’s ability to use or sell certain products;
•
the impact of increasing environmental, greenhouse gas emission and sustainability considerations or regulations;

iii

Table of Contents

 

•
the impact of judicial rulings and governmental regulations, both in the U.S. and abroad, including those adopted by the U.S. Securities and Exchange Commission (the “SEC”) and other governmental agencies as contemplated by the Coronavirus Aid, Relief and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021, the American Rescue Act of 2021, and the Dodd-Frank Wall Street Reform and the Consumer Protection Act of 2010;
•
the effect of healthcare laws in the U.S. and potential changes for such laws, especially in light of the COVID-19 pandemic, which may increase the Company’s healthcare and other costs and negatively impact the Company’s operations and financial results;
•
the effects of tax laws in the U.S. and potential changes for such laws, which may increase the Company’s costs and negatively impact the Company’s operations and financial results;
•
cyber security risks;
•
the effects of privacy and information security laws and standards; and
•
other risks described from time to time in the filings of Worthington Industries, Inc. with the SEC, including those described in “PART I – Item 1A. — Risk Factors” of the Annual Report on Form 10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2022.

•

product demand and pricing;

•

changes in product mix, product substitution and market acceptance of our products;

•

fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities and other items required by operations, especially in light of the COVID-19 pandemic;

•

the outcome of adverse claims experience with respect to workers’ compensation, product recalls or product liability, casualty events or other matters;

•

effects of facility closures and the consolidation of operations;

•

the effect of financial difficulties, consolidation and other changes within the steel, automotive (especially in light of the semi-conductor shortages), construction and other industries in which we participate;

•

failure to maintain appropriate levels of inventories;

•

financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom we do business;

•

the ability to realize targeted expense reductions from headcount reductions, facility closures and other cost reduction efforts;

•

the ability to realize cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from Transformation initiatives, on a timely basis;

•

the overall success of, and the ability to integrate, newly-acquired businesses and joint ventures, maintain and develop their customers, and achieve synergies and other expected benefits and cost savings therefrom;

•

capacity levels and efficiencies, within facilities, within major product markets and within the industries in which we participate as a whole;

•

the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, labor shortages (especially in light of the COVID-19 pandemic), interruption in utility services, civil unrest, international conflicts, terrorist activities, pandemics or other causes;

•

changes in customer demand, inventories, spending patterns, product choices, and supplier choices;

•

risks associated with doing business internationally, including economic, political and social instability, foreign currency exchange rate exposure and the acceptance of our products in global markets;

•

the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment;

•

deviation of actual results from estimates and/or assumptions used by us in the application of our significant accounting policies;

•

the level of imports and import prices in our markets;

•

the impact of environmental laws and regulations or other actions of the United States Environmental Protection Agency or similar regulators which increase costs or limit our ability to use or sell certain products;

•

the impact of judicial rulings and governmental regulations, both in the United States and abroad, including those adopted by the United States Securities and Exchange Commission and other governmental agencies as contemplated by the Coronavirus Aid, Relief and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010;

•

the effect of healthcare laws in the United States and potential changes for such laws, especially in light of the COVID-19 pandemic, which may increase our healthcare and other costs and negatively impact our operations and financial results;

•

the effect of tax laws in the United States and potential changes for such laws, which may increase our costs and negatively impact our operations and financial results;

•

cyber security risks;

•

the effects of privacy and information security laws and standards; and

•

other risks described from time to time in the filings of Worthington Industries, Inc. with the United States Securities and Exchange Commission, including those described in “PART I – Item 1A. — Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended May 31, 2021.

We note these factors for investors as contemplated by the Act.PSLRA. It is impossible to predict or identify all potential risk factors. Consequently, you should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Any forward-looking statements in this Quarterly Report on Form 10-Q are based on current information as of the date of this Quarterly Report on Form 10-Q, and we assume no obligation to correct or update any such statements in the future, except as required by applicable law.

iii

iv

Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. – Financial Statements

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

(Unaudited)

 

 

 

 

 

(Unaudited)

 

 

 

 

November 30,

 

 

May 31,

 

November 30,

 

May 31,

 

2021

 

 

2021

 

2022

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

225,194

 

 

$

640,311

 

$

129,596

 

 

$

34,485

 

Receivables, less allowances of $790 and $608 at November 30, 2021

 

 

 

 

 

 

 

and May 31, 2021, respectively

 

736,738

 

 

 

639,964

 

Receivables, less allowances of $2,679 and $1,292 at November 30, 2022

 

 

 

 

and May 31, 2022, respectively

 

694,668

 

 

 

857,493

 

Inventories:

 

 

 

 

 

 

 

 

 

 

 

Raw materials

 

420,511

 

 

 

266,208

 

 

304,692

 

 

 

323,609

 

Work in process

 

247,772

 

 

 

183,413

 

 

159,772

 

 

 

255,019

 

Finished products

 

171,305

 

 

 

115,133

 

 

190,160

 

 

 

180,512

 

Total inventories

 

839,588

 

 

 

564,754

 

 

654,624

 

 

 

759,140

 

Income taxes receivable

 

1,574

 

 

 

1,958

 

 

19,834

 

 

 

20,556

 

Assets held for sale

 

34,721

 

 

 

51,956

 

 

5,191

 

 

 

20,318

 

Prepaid expenses and other current assets

 

72,952

 

 

 

69,049

 

 

98,873

 

 

 

93,661

 

Total current assets

 

1,910,767

 

 

 

1,967,992

 

 

1,602,786

 

 

 

1,785,653

 

Investments in unconsolidated affiliates

 

291,397

 

 

 

233,126

 

 

240,859

 

 

 

327,381

 

Operating lease assets

 

93,628

 

 

 

35,101

 

 

103,488

 

 

 

98,769

 

Goodwill

 

370,191

 

 

 

351,056

 

 

412,971

 

 

 

401,469

 

Other intangible assets, net of accumulated amortization of $86,459 and

 

 

 

 

 

 

 

$80,513 at November 30, 2021 and May 31, 2021, respectively

 

267,564

 

 

 

240,387

 

Other intangible assets, net of accumulated amortization of $102,561 and

 

 

 

 

$93,973 at November 30, 2022 and May 31, 2022, respectively

 

322,934

 

 

 

299,017

 

Other assets

 

32,451

 

 

 

30,566

 

 

25,439

 

 

 

34,394

 

Property, plant and equipment:

 

 

 

 

 

 

 

 

 

 

 

Land

 

21,319

 

 

 

21,744

 

 

49,644

 

 

 

51,483

 

Buildings and improvements

 

273,483

 

 

 

271,196

 

 

302,999

 

 

 

303,269

 

Machinery and equipment

 

1,086,453

 

 

 

1,046,065

 

 

1,223,841

 

 

 

1,196,806

 

Construction in progress

 

68,423

 

 

 

53,903

 

 

60,673

 

 

 

59,363

 

Total property, plant and equipment

 

1,449,678

 

 

 

1,392,908

 

 

1,637,157

 

 

 

1,610,921

 

Less: accumulated depreciation

 

898,044

 

 

 

877,891

 

 

954,974

 

 

 

914,581

 

Total property, plant and equipment, net

 

551,634

 

 

 

515,017

 

 

682,183

 

 

 

696,340

 

Total assets

$

3,517,632

 

 

$

3,373,245

 

$

3,390,660

 

 

$

3,643,023

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

610,278

 

 

$

567,392

 

$

481,273

 

 

$

668,438

 

Accrued compensation, contributions to employee benefit plans and

 

 

 

 

 

 

 

related taxes

 

105,879

 

 

 

137,698

 

Short-term borrowings

 

4,935

 

 

 

47,997

 

Accrued compensation, contributions to employee benefit plans and related taxes

 

86,998

 

 

 

117,530

 

Dividends payable

 

15,794

 

 

 

16,536

 

 

17,663

 

 

 

15,988

 

Other accrued items

 

60,484

 

 

 

52,250

 

 

58,046

 

 

 

70,125

 

Current operating lease liabilities

 

10,888

 

 

 

9,947

 

 

11,719

 

 

 

11,618

 

Income taxes payable

 

16,555

 

 

 

3,620

 

 

-

 

 

 

300

 

Current maturities of long-term debt

 

280

 

 

 

458

 

 

257

 

 

 

265

 

Total current liabilities

 

820,158

 

 

 

787,901

 

 

660,891

 

 

 

932,261

 

Other liabilities

 

81,786

 

 

 

82,824

 

 

115,688

 

 

 

115,991

 

Distributions in excess of investment in unconsolidated affiliate

 

94,836

 

 

 

99,669

 

 

91,643

 

 

 

81,149

 

Long-term debt

 

701,892

 

 

 

710,031

 

 

693,453

 

 

 

696,345

 

Noncurrent operating lease liabilities

 

83,887

 

 

 

27,374

 

 

93,513

 

 

 

88,183

 

Deferred income taxes, net

 

101,982

 

 

 

113,751

 

 

96,180

 

 

 

115,132

 

Total liabilities

 

1,884,541

 

 

 

1,821,550

 

 

1,751,368

 

 

 

2,029,061

 

Shareholders' equity - controlling interest

 

1,479,797

 

 

 

1,398,193

 

 

1,513,393

 

 

 

1,480,752

 

Noncontrolling interests

 

153,294

 

 

 

153,502

 

 

125,899

 

 

 

133,210

 

Total equity

 

1,633,091

 

 

 

1,551,695

 

 

1,639,292

 

 

 

1,613,962

 

Total liabilities and equity

$

3,517,632

 

 

$

3,373,245

 

$

3,390,660

 

 

$

3,643,023

 

 

See condensed notes to consolidated financial statements.

1

Table of Contents


 

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(In thousands, except per share amounts)

(Unaudited)

 

Three Months Ended

 

 

Six Months Ended

 

Three Months Ended

 

 

Six Months Ended

 

November 30,

 

 

November 30,

 

November 30,

 

 

November 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

$

1,232,861

 

 

$

731,092

 

 

$

2,343,679

 

 

$

1,434,001

 

$

1,175,541

 

 

$

1,232,861

 

 

$

2,584,206

 

 

$

2,343,679

 

Cost of goods sold

 

1,048,270

 

 

 

595,618

 

 

 

1,939,714

 

 

 

1,185,169

 

 

1,069,778

 

 

 

1,048,270

 

 

 

2,309,069

 

 

 

1,939,714

 

Gross margin

 

184,591

 

 

 

135,474

 

 

 

403,965

 

 

 

248,832

 

 

105,763

 

 

 

184,591

 

 

 

275,137

 

 

 

403,965

 

Selling, general and administrative expense

 

96,130

 

 

 

82,129

 

 

 

191,981

 

 

 

164,325

 

 

107,813

 

 

 

96,130

 

 

 

211,261

 

 

 

191,981

 

Impairment of long-lived assets

 

0

 

 

 

3,815

 

 

 

0

 

 

 

13,739

 

 

-

 

 

 

-

 

 

 

312

 

 

 

-

 

Restructuring and other (income) expense, net

 

(2,004

)

 

 

7,596

 

 

 

(14,278

)

 

 

9,444

 

Incremental expenses related to Nikola gains

 

0

 

 

 

4,570

 

 

 

0

 

 

 

54,081

 

Operating income

 

90,465

 

 

 

37,364

 

 

 

226,262

 

 

 

7,243

 

Restructuring and other income, net

 

(4,282

)

 

 

(2,004

)

 

 

(5,382

)

 

 

(14,278

)

Separation costs

 

9,246

 

 

 

-

 

 

 

9,246

 

 

 

-

 

Operating income (loss)

 

(7,014

)

 

 

90,465

 

 

 

59,700

 

 

 

226,262

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miscellaneous income, net

 

1,040

 

 

 

376

 

 

 

1,670

 

 

 

827

 

Miscellaneous income (expense), net

 

1,405

 

 

 

1,040

 

 

 

(3,681

)

 

 

1,670

 

Interest expense

 

(7,312

)

 

 

(7,548

)

 

 

(15,030

)

 

 

(15,138

)

 

(7,612

)

 

 

(7,312

)

 

 

(16,210

)

 

 

(15,030

)

Equity in net income of unconsolidated affiliates

 

60,218

 

 

 

25,631

 

 

 

113,134

 

 

 

49,265

 

 

36,857

 

 

 

60,218

 

 

 

68,569

 

 

 

113,134

 

Gains (loss) on investment in Nikola

 

0

 

 

 

(143,780

)

 

 

0

 

 

 

652,362

 

Earnings (loss) before income taxes

 

144,411

 

 

 

(87,957

)

 

 

326,036

 

 

 

694,559

 

Income tax expense (benefit)

 

31,226

 

 

 

(19,445

)

 

 

71,376

 

 

 

144,333

 

Net earnings (loss)

 

113,185

 

 

 

(68,512

)

 

 

254,660

 

 

 

550,226

 

Earnings before income taxes

 

23,636

 

 

 

144,411

 

 

 

108,378

 

 

 

326,036

 

Income tax expense

 

4,131

 

 

 

31,226

 

 

 

23,629

 

 

 

71,376

 

Net earnings

 

19,505

 

 

 

113,185

 

 

 

84,749

 

 

 

254,660

 

Net earnings attributable to noncontrolling interests

 

2,884

 

 

 

5,532

 

 

 

11,868

 

 

 

7,595

 

 

3,287

 

 

 

2,884

 

 

 

4,449

 

 

 

11,868

 

Net earnings (loss) attributable to controlling interest

$

110,301

 

 

$

(74,044

)

 

$

242,792

 

 

$

542,631

 

Net earnings attributable to controlling interest

$

16,218

 

 

$

110,301

 

 

$

80,300

 

 

$

242,792

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

50,381

 

 

 

52,988

 

 

 

50,618

 

 

 

53,532

 

 

48,558

 

 

 

50,381

 

 

 

48,518

 

 

 

50,618

 

Earnings (loss) per share attributable to controlling interest

$

2.19

 

 

$

(1.40

)

 

$

4.80

 

 

$

10.14

 

Earnings per share attributable to controlling interest

$

0.33

 

 

$

2.19

 

 

$

1.66

 

 

$

4.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

51,214

 

 

 

52,988

 

 

 

51,532

 

 

 

54,439

 

 

49,330

 

 

 

51,214

 

 

 

49,293

 

 

 

51,532

 

Earnings (loss) per share attributable to controlling interest

$

2.15

 

 

$

(1.40

)

 

$

4.71

 

 

$

9.97

 

Earnings per share attributable to controlling interest

$

0.33

 

 

$

2.15

 

 

$

1.63

 

 

$

4.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding at end of period

 

50,334

 

 

 

52,754

 

 

 

50,334

 

 

 

52,754

 

 

48,572

 

 

 

50,334

 

 

 

48,572

 

 

 

50,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

$

0.28

 

 

$

0.25

 

 

$

0.56

 

 

$

0.50

 

$

0.31

 

 

$

0.28

 

 

$

0.62

 

 

$

0.56

 

 

See condensed notes to consolidated financial statements.

2

Table of Contents


 

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

November 30,

 

 

November 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net earnings (loss)

$

113,185

 

 

$

(68,512

)

 

$

254,660

 

 

$

550,226

 

Other comprehensive (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation, net of tax

 

(4,872

)

 

 

(1,051

)

 

 

(8,847

)

 

 

7,257

 

Pension liability adjustment, net of tax

 

-

 

 

 

(4

)

 

 

-

 

 

 

368

 

Cash flow hedges, net of tax

 

(52,986

)

 

 

15,218

 

 

 

(53,285

)

 

 

17,781

 

Other comprehensive (loss) income

 

(57,858

)

 

 

14,163

 

 

 

(62,132

)

 

 

25,406

 

Comprehensive income (loss)

 

55,327

 

 

 

(54,349

)

 

 

192,528

 

 

 

575,632

 

Comprehensive income attributable to noncontrolling interests

 

2,884

 

 

 

5,532

 

 

 

11,868

 

 

 

7,595

 

Comprehensive income (loss) attributable to controlling interest

$

52,443

 

 

$

(59,881

)

 

$

180,660

 

 

$

568,037

 

 

Three Months Ended

 

 

Six Months Ended

 

 

November 30,

 

 

November 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net earnings

$

19,505

 

 

$

113,185

 

 

$

84,749

 

 

$

254,660

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation, net of tax

 

858

 

 

 

(4,872

)

 

 

(9,243

)

 

 

(8,847

)

Pension liability adjustment, net of tax

 

(82

)

 

 

-

 

 

 

2,857

 

 

 

-

 

Cash flow hedges, net of tax

 

(4,000

)

 

 

(52,986

)

 

 

(17,300

)

 

 

(53,285

)

Other comprehensive loss

 

(3,224

)

 

 

(57,858

)

 

 

(23,686

)

 

 

(62,132

)

Comprehensive income

 

16,281

 

 

 

55,327

 

 

 

61,063

 

 

 

192,528

 

Comprehensive income attributable to noncontrolling interests

 

3,287

 

 

 

2,884

 

 

 

4,449

 

 

 

11,868

 

Comprehensive income attributable to controlling interest

$

12,994

 

 

$

52,443

 

 

$

56,614

 

 

$

180,660

 

 

See condensed notes to consolidated financial statements.

3

Table of Contents


 

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

Three Months Ended

 

 

Six Months Ended

 

Three Months Ended

 

Six Months Ended

 

November 30,

 

 

November 30,

 

November 30,

 

 

November 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss)

$

113,185

 

 

$

(68,512

)

 

$

254,660

 

 

$

550,226

 

Adjustments to reconcile net earnings (loss) to net cash (used) provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

19,505

 

 

$

113,185

 

 

$

84,749

 

 

$

254,660

 

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

21,090

 

 

 

21,560

 

 

 

43,154

 

 

 

43,771

 

 

28,354

 

 

 

21,090

 

 

 

56,355

 

 

 

43,154

 

Impairment of long-lived assets

 

0

 

 

 

3,815

 

 

 

0

 

 

 

13,739

 

 

-

 

 

 

-

 

 

 

312

 

 

 

-

 

Provision for (benefit from) deferred income taxes

 

1,309

 

 

 

(31,776

)

 

 

2,675

 

 

 

39,255

 

 

(3,617

)

 

 

1,309

 

 

 

(14,673

)

 

 

2,675

 

Bad debt expense (income)

 

335

 

 

 

(159

)

 

 

514

 

 

 

(65

)

Bad debt expense

 

1,098

 

 

 

335

 

 

 

1,440

 

 

 

514

 

Equity in net income of unconsolidated affiliates, net of distributions

 

(31,274

)

 

 

4,608

 

 

 

(64,492

)

 

 

(2,149

)

 

18,352

 

 

 

(31,274

)

 

 

61,197

 

 

 

(64,492

)

Net (gain) loss on sale of assets

 

(496

)

 

 

7,271

 

 

 

(13,202

)

 

 

7,673

 

Net gain on sale of assets

 

(4,265

)

 

 

(496

)

 

 

(5,034

)

 

 

(13,202

)

Stock-based compensation

 

4,248

 

 

 

4,854

 

 

 

7,551

 

 

 

9,710

 

 

4,547

 

 

 

4,248

 

 

 

8,783

 

 

 

7,551

 

(Gains) loss on investment in Nikola

 

0

 

 

 

143,780

 

 

 

0

 

 

 

(652,362

)

Charitable contribution of Nikola shares

 

0

 

 

 

0

 

 

 

0

 

 

 

20,653

 

Changes in assets and liabilities, net of impact of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Receivables

 

(89,817

)

 

 

3,580

 

 

 

(121,685

)

 

 

(78,614

)

 

119,674

 

 

 

(89,817

)

 

 

157,093

 

 

 

(121,685

)

Inventories

 

(97,182

)

 

 

4,623

 

 

 

(260,864

)

 

 

90,245

 

 

72,293

 

 

 

(97,182

)

 

 

113,460

 

 

 

(260,864

)

Accounts payable

 

(47,594

)

 

 

48,176

 

 

 

(926

)

 

 

95,330

 

 

(100,535

)

 

 

(47,594

)

 

 

(202,116

)

 

 

(926

)

Accrued compensation and employee benefits

 

14,358

 

 

 

13,960

 

 

 

(31,819

)

 

 

37,812

 

 

3,336

 

 

 

14,358

 

 

 

(30,532

)

 

 

(31,819

)

Income taxes payable

 

(22,922

)

 

 

(44,623

)

 

 

12,935

 

 

 

39,041

 

 

(7,629

)

 

 

(22,922

)

 

 

(300

)

 

 

12,935

 

Other operating items, net

 

15,656

 

 

 

(3,729

)

 

 

2,583

 

 

 

10,551

 

 

(18,172

)

 

 

15,656

 

 

 

(16,755

)

 

 

2,583

 

Net cash (used) provided by operating activities

 

(119,104

)

 

 

107,428

 

 

 

(168,916

)

 

 

224,816

 

Net cash provided (used) by operating activities

 

132,941

 

 

 

(119,104

)

 

 

213,979

 

 

 

(168,916

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in property, plant and equipment

 

(24,234

)

 

 

(16,073

)

 

 

(48,159

)

 

 

(48,944

)

 

(24,490

)

 

 

(24,234

)

 

 

(45,967

)

 

 

(48,159

)

Investment in non-marketable equity securities

 

(140

)

 

 

-

 

 

 

(250

)

 

 

-

 

Acquisitions, net of cash acquired

 

(3,000

)

 

 

(75

)

 

 

(107,750

)

 

 

(75

)

 

-

 

 

 

(3,000

)

 

 

(56,088

)

 

 

(107,750

)

Proceeds from sale of assets, net

 

5,136

 

 

 

21,580

 

 

 

31,821

 

 

 

21,580

 

Proceeds from sale of Nikola shares

 

0

 

 

 

0

 

 

 

0

 

 

 

487,859

 

Net cash (used) provided by investing activities

 

(22,098

)

 

 

5,432

 

 

 

(124,088

)

 

 

460,420

 

Proceeds from sale of investment in ArtiFlex

 

-

 

 

 

-

 

 

 

36,095

 

 

 

-

 

Proceeds from sale of assets, net of selling costs

 

23,739

 

 

 

5,136

 

 

 

35,494

 

 

 

31,821

 

Net cash used by investing activities

 

(891

)

 

 

(22,098

)

 

 

(30,716

)

 

 

(124,088

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments on long-term obligations and debt redemption costs

 

(10

)

 

 

(96

)

 

 

(402

)

 

 

(193

)

Proceeds from issuance of common shares, net of tax withholdings

 

(2,694

)

 

 

2,294

 

 

 

(6,785

)

 

 

1,144

 

Net repayments of short-term borrowings

 

(10,619

)

 

 

-

 

 

 

(43,062

)

 

 

-

 

Principal payments on long-term obligations

 

(13

)

 

 

(10

)

 

 

(150

)

 

 

(402

)

Payments for issuance of common shares, net of tax withholdings

 

(649

)

 

 

(2,694

)

 

 

(4,115

)

 

 

(6,785

)

Payments to noncontrolling interests

 

(2,879

)

 

 

0

 

 

 

(12,076

)

 

 

(560

)

 

(11,760

)

 

 

(2,879

)

 

 

(11,760

)

 

 

(12,076

)

Repurchase of common shares

 

(12,702

)

 

 

(38,563

)

 

 

(73,587

)

 

 

(92,883

)

 

-

 

 

 

(12,702

)

 

 

-

 

 

 

(73,587

)

Dividends paid

 

(14,565

)

 

 

(13,433

)

 

 

(29,263

)

 

 

(26,812

)

 

(15,181

)

 

 

(14,565

)

 

 

(29,065

)

 

 

(29,263

)

Net cash used by financing activities

 

(32,850

)

 

 

(49,798

)

 

 

(122,113

)

 

 

(119,304

)

 

(38,222

)

 

 

(32,850

)

 

 

(88,152

)

 

 

(122,113

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Decrease) increase in cash and cash equivalents

 

(174,052

)

 

 

63,062

 

 

 

(415,117

)

 

 

565,932

 

Increase (decrease) in cash and cash equivalents

 

93,828

 

 

 

(174,052

)

 

 

95,111

 

 

 

(415,117

)

Cash and cash equivalents at beginning of period

 

399,246

 

 

 

650,068

 

 

 

640,311

 

 

 

147,198

 

 

35,768

 

 

 

399,246

 

 

 

34,485

 

 

 

640,311

 

Cash and cash equivalents at end of period

$

225,194

 

 

$

713,130

 

 

$

225,194

 

 

$

713,130

 

$

129,596

 

 

$

225,194

 

 

$

129,596

 

 

$

225,194

 

 

See condensed notes to consolidated financial statements.

4

Table of Contents


 

WORTHINGTON INDUSTRIES, INC.

CONDENSED Notes to Consolidated Financial Statements

(Unaudited)

 

NOTENote A – Basis of Presentation

Basis of Presentation

The consolidated financial statements include the accounts of Worthington Industries, Inc. and consolidated subsidiaries (collectively, “we,” “our,” “Worthington,” or the “Company”). Investments in unconsolidated affiliates are accounted for using the equity method. Significant intercompany accounts and transactions have been eliminated.

The Company owns

We own controlling interests in the following 4three operating joint ventures: Spartan Steel Coating, L.L.C. (“Spartan”) (52%(52%),; TWB Company, L.L.C. (“TWB”) (55%(55%),; and Worthington Samuel Coil Processing LLC (“Samuel” or “Samuel joint venture”) (63%(63%), and. The last remaining manufacturing facility of our Worthington Specialty Processing (“WSP”) (51%).joint venture was sold in the second quarter of fiscal 2022. See “Note F – Restructuring and Other Income, Net” for additional information. These joint ventures are consolidated with the equity owned by the other joint venture members shown as noncontrolling interests“Noncontrolling interests” in our consolidated balance sheets, and the other joint venture members’ portions of net earnings and other comprehensive income (loss) (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings (loss) and consolidated statements of comprehensive income, (loss), respectively. Investments in unconsolidated affiliates are accounted for using the equity method. See further discussion of our unconsolidated affiliates in “NOTE“Note D – Investments in Unconsolidated Affiliates”.Affiliates.”

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”).SEC. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the U.S. GAAP(“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments, which are of a normal and recurring nature except those which have been disclosed elsewhere in this Quarterly Report on Form 10-Q, necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included.included. Operating results for the three months and the six months ended November 30, 20212022 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 20222023 (“fiscal 2022”2023”). For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended May 31, 20212022 (“fiscal 2021”2022”) of Worthington Industries, Inc. (the “2021“2022 Form 10-K”).

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Segment Reporting: The Company’s operations are managed principally on a products and services basis.  Segment information is prepared on

Steel Processing Separation

On September 29, 2022, the same basisCompany announced that the Chief Operating Decision Maker (“CODM”) reviews financial information for operational decision-making purposes.  See further discussion in “NOTE OBoard of Directors of Worthington Industries, Inc. approved a plan to pursue a separation into two independent, publicly-traded companies – Segment Operations”.

Recently Adopted Accounting Standards

On June 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within Topic 740 and clarifies certain aspectsone company is expected to be comprised of the current guidanceCompany’s Steel Processing operating segment, and the other company is expected to promote consistency among reporting entities. The adoptionbe comprised of the accounting standard did not haveCompany’s Consumer Products, Building Products and Sustainable Energy Solutions operating segments. The Company plans to effect the separation via a material impact ondistribution of stock of the Company’sSteel Processing business, which is expected to be tax-free to shareholders for U.S. federal income tax purposes. The Separation transaction is expected to be completed by early 2024, but is subject to certain conditions, including, among other things, general market conditions, finalization of the capital structure of the two companies, completion of steps necessary to qualify the Separation as a tax-free transaction, receipt of regulatory approvals and final approval from the Board of Directors of Worthington Industries, Inc. Direct and incremental costs incurred in connection with the anticipated Separation, including audit, advisory, and legal costs, are presented separately in our consolidated financial position, resultsstatements of operations, or cash flows.earnings as “Separation costs”. Separation costs totaled $9,246,000 during the three and six months ended November 30, 2022.


Note B – Inventory

 

NOTE BDue to a decline in steel pricing during the first quarter of fiscal 2023, the net realizable value of our inventory was lower than the cost reflected in our records at August 31, 2022. Accordingly, we recorded a lower of cost or net realizable value adjustment during the first quarter of fiscal 2023 totaling $4,488,000 to reflect this lower value. The entire amount of the adjustment was attributed to our Steel Processing operating segment and was recorded in cost of goods sold in the consolidated statement of earnings for the three months ended August 31, 2022. There was no lower of cost or net realizable value adjustment to inventory during the three months ended November 30, 2022.

5

Table of Contents

Note C – Revenue Recognition

The following table summarizes net sales by reportableoperating segment and product class for the periods presented:

 

Three Months Ended

 

 

Six Months Ended

 

 

November 30,

 

 

November 30,

 

(in thousands)

2022

 

 

2021

 

 

2022

 

 

2021

 

Steel Processing

 

 

 

 

 

 

 

 

 

 

 

Direct

$

807,259

 

 

$

900,666

 

 

$

1,809,394

 

 

$

1,688,694

 

Toll

 

34,688

 

 

 

37,176

 

 

 

71,433

 

 

 

71,958

 

Total

 

841,947

 

 

 

937,842

 

 

 

1,880,827

 

 

 

1,760,652

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products (1)

 

153,795

 

 

 

140,793

 

 

 

342,497

 

 

 

288,576

 

Building Products (1)

 

141,671

 

 

 

121,125

 

 

 

291,994

 

 

 

235,868

 

Sustainable Energy Solutions (1)

 

38,128

 

 

 

33,101

 

 

 

68,888

 

 

 

58,583

 

Total

$

1,175,541

 

 

$

1,232,861

 

 

$

2,584,206

 

 

$

2,343,679

 

 

Three Months Ended

 

 

Six Months Ended

 

 

November 30,

 

 

November 30,

 

(in thousands)

2021

 

 

2020

 

 

2021

 

 

2020

 

Steel Processing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

$

900,666

 

 

$

433,556

 

 

$

1,688,694

 

 

$

838,364

 

Toll

 

37,176

 

 

 

35,167

 

 

 

71,958

 

 

 

61,379

 

Total

 

937,842

 

 

 

468,723

 

 

 

1,760,652

 

 

 

899,743

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Products (1)

 

140,793

 

 

 

117,513

 

 

 

288,576

 

 

 

251,135

 

Building Products (1)

 

121,125

 

 

 

93,989

 

 

 

235,868

 

 

 

182,092

 

Sustainable Energy Solutions (1)

 

33,101

 

 

 

34,023

 

 

 

58,583

 

 

 

61,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil & Gas Equipment

 

-

 

 

 

6,646

 

 

 

-

 

 

 

16,542

 

Engineered Cabs

 

-

 

 

 

84

 

 

 

-

 

 

 

1,070

 

Other

 

-

 

 

 

10,114

 

 

 

-

 

 

 

21,539

 

Total

 

-

 

 

 

16,844

 

 

 

-

 

 

 

39,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

1,232,861

 

 

$

731,092

 

 

$

2,343,679

 

 

$

1,434,001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The products contained within each of these reportable segments have similar production processes, require substantially the same raw materials, use similar equipment and serve similar purposes. Therefore, we believe the products within each of these segments are appropriately combined for purposes of the disclosure requirements prescribed by ASC 280 and ASC 606.  See NOTE O - Segment Operations for information regarding the reorganization of our pressure cylinders business and the resulting new reportable segments, effective June 1, 2021.

 

We recognize revenue at a point in time, with(1)

The products contained within each of these operating segments have similar production processes, require substantially the exceptionsame raw materials, use similar equipment, and serve similar purposes. Therefore, we believe the products within each of these segments are appropriately combined for purposes of the toll processing revenue streamdisclosure requirements prescribed by Accounting Standards Codification (“ASC”) Topic 280 and on a historical basis, certain contracts within the oil & gas equipment revenue stream, which were recognized over time. Topic 606.

The following table summarizes the over time revenue for the periods presented:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

November 30,

 

 

November 30,

 

(in thousands)

2022

 

 

2021

 

 

2022

 

 

2021

 

Steel Processing - toll

$

34,688

 

 

$

37,176

 

 

$

71,433

 

 

$

71,958

 

 

Three Months Ended

 

 

Six Months Ended

 

 

November 30,

 

 

November 30,

 

(in thousands)

2021

 

 

2020

 

 

2021

 

 

2020

 

Steel Processing - toll

$

37,176

 

 

$

35,167

 

 

$

71,958

 

 

$

61,379

 

Certain oil & gas equipment contracts

 

-

 

 

 

4,367

 

 

 

-

 

 

 

12,066

 

Total over time revenue

$

37,176

 

 

$

39,534

 

 

$

71,958

 

 

$

73,445

 

The following table summarizes the unbilled receivables forat the periods presented:dates indicated:

 

 

 

November 30,

 

 

May 31,

 

 

November 30,

 

 

May 31,

 

(in thousands)

Balance Sheet Classification

 

2021

 

 

2021

 

Balance Sheet Classification

 

2022

 

 

2022

 

Unbilled receivables

Receivables

 

$

5,636

 

 

$

5,317

 

Receivables

 

$

3,192

 

 

$

5,001

 

 

 

 

 

 

 

 

 

 

There were 0 contract assets at either of the dates indicated above.

 

There were no contract assets at November 30, 2022 or May 31, 2022.

We have elected the optional exemption, which allows for the exclusion of the amounts for remaining performance obligations that are a part of contracts with an expected duration of one year or less. As of November 30, 2021,2022, there were 0no unsatisfied or partially satisfied performance obligations related to contracts with an expected duration greater than one year.


NOTE C – Investment in Nikola

On June 3, 2020 (the “Effective Date”), Nikola Corporation (“Nikola”) became a public company through a reverse merger with a subsidiary of VectoIQ Acquisition Corporation, a NASDAQ listed publicly traded company.  Prior to the Effective Date, the Company held an equity interest in the predecessor company, which was converted to 19,048,020 shares of Nikola common stock.  During fiscal 2021, the Company sold or contributed all of these shares.

During the first quarter of fiscal 2021, the Company recognized a $796,141,000 pre-tax gain consisting of $508,511,000 of realized gains from the sale or contribution of 12,000,000 of its Nikola shares, and an unrealized mark-to-market gain of $287,630,000 related to the 7,048,000 Nikola shares the Company continued to own at August 31, 2020.  The Company also recognized in operating income $49,511,000 of incremental expenses related to the Nikola gains, comprised of $28,858,000 for discretionary profit sharing and bonus expenses and $20,653,000 for the contribution of 500,000 shares of Nikola common stock to the Worthington Industries Foundation to establish a charitable endowment focused on the communities in which the Company operates.

During the second quarter of fiscal 2021, the market price of the Nikola shares dropped from $40.81 per share at August 31, 2020 to $20.41 per share at November 30, 2020, resulting in an unrealized mark-to-market loss of $143,780,000 for the 7,048,000 shares we held at quarter end, and reducing the pre-tax year-to-date realized and unrealized gain on the investment in Nikola to $652,362,000.  In addition, during the second quarter, we recorded incremental expenses of $4,570,000 for discretionary bonuses related to the Nikola investment gain.

NOTENote D – Investments in Unconsolidated Affiliates

Investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity method. At November 30, 2021, the Company2022, we held non-controllingnoncontrolling investments in the following affiliated companies:  ArtiFlex Manufacturing, LLC (“ArtiFlex”) (50%), Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”) (25%(25%),; Serviacero Planos, S. de R. L. de C.V. (“Serviacero Worthington”) (50%(50%),; Taxi Workhorse Holdings, LLC (“Cabs”Workhorse”) (20%(20%),; and Worthington Armstrong Venture (“WAVE”) (50%(50%).

 

On August 3, 2022, the Company sold its 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (“ArtiFlex”) to the unaffiliated joint venture member for approximately $42,086,000, after adjustments for closing debt and final net working capital. Approximately $6,000,000 of the total cash proceeds were attributed to real property in Wooster, Ohio, with a net book value of approximately $6,300,000. This real property was owned by Worthington and leased to ArtiFlex prior to closing of the transaction. The Company recognized a pre-tax loss of approximately $15,759,000 in equity income related to the sale of its 50% noncontrolling equity interest portion of the transaction.

6

Table of Contents

We received distributions from unconsolidated affiliates totaling $48,642,000$129,766,000 during the six months ended November 30, 2021.  2022. We have received cumulative distributions from WAVE in excess of our investment balance amounting to $94,836,00091,643,000, which is shown as a separate liability on our consolidated balance sheet at November 30, 2021.2022. In accordance with the applicable accounting guidance, we have reclassified the negative investment balance to the liabilities section of our consolidated balance sheet.sheets. We will continue to record our equity in the net income of WAVE as a debit to the investment account, and if the investment balance becomes positive, it will again be shown as an asset on our consolidated balance sheet.sheets. If it becomes probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any negative investment balance classified as a liability as income immediately.

We use the “cumulative earnings” approach for determining cash flow presentation of distributions from our unconsolidated joint ventures. Distributions received are included in our consolidated statements of cash flows as operating activities, unless the cumulative distributions received, less distributions received in prior periods that were determined to be returns of investment, exceed our portion of the cumulative equity in the net earnings of the joint venture, in which case the excess distributions are deemed to be returns of the investment and are classified as investing activities in our consolidated statements of cash flows.


 

The following tables summarize combined financial information for our unconsolidated affiliates as of the dates, and for the periods presented:

 

November 30,

 

 

May 31,

 

(in thousands)

2022

 

 

2022

 

Cash and cash equivalents

$

41,768

 

 

$

68,563

 

Other current assets

 

911,881

 

 

 

1,148,029

 

Noncurrent assets

 

301,027

 

 

 

369,608

 

Total assets

$

1,254,676

 

 

$

1,586,200

 

 

 

 

 

 

 

Current liabilities

 

292,303

 

 

 

345,097

 

Short-term borrowings

 

10,000

 

 

 

5,943

 

Current maturities of long-term debt

 

36,110

 

 

 

33,054

 

Long-term debt

 

304,108

 

 

 

306,814

 

Other noncurrent liabilities

 

69,667

 

 

 

76,437

 

Equity

 

542,488

 

 

 

818,855

 

Total liabilities and equity

$

1,254,676

 

 

$

1,586,200

 

 

Three Months Ended

 

Six Months Ended

 

 

November 30,

 

November 30,

 

(in thousands)

2022

 

 

2021

 

2022

 

 

2021

 

Net sales

$

711,665

 

 

$

858,165

 

$

1,535,607

 

 

$

1,603,160

 

Gross margin

 

147,299

 

 

 

226,502

 

 

328,704

 

 

 

416,176

 

Operating income

 

107,356

 

 

 

184,779

 

 

245,183

 

 

 

330,767

 

Depreciation and amortization

 

6,864

 

 

 

7,848

 

 

15,052

 

 

 

16,075

 

Interest expense

 

3,910

 

 

 

2,711

 

 

6,590

 

 

 

5,172

 

Income tax expense

 

1,262

 

 

 

8,565

 

 

3,372

 

 

 

16,461

 

Net earnings

 

105,183

 

 

 

173,915

 

 

238,421

 

 

 

312,803

 

7

Table of Contents

 

 

November 30,

 

 

May 31,

 

(in thousands)

2021

 

 

2021

 

Cash

$

34,797

 

 

$

11,651

 

Other current assets

 

1,140,126

 

 

 

733,834

 

Noncurrent assets

 

365,845

 

 

 

382,585

 

Total assets

$

1,540,768

 

 

$

1,128,070

 

 

 

 

 

 

 

 

 

Current liabilities

$

403,512

 

 

$

232,626

 

Short-term borrowings

 

2,879

 

 

 

1,155

 

Current maturities of long-term debt

 

58,753

 

 

 

30,209

 

Long-term debt

 

298,945

 

 

 

311,871

 

Other noncurrent liabilities

 

104,418

 

 

 

92,209

 

Equity

 

672,261

 

 

 

460,000

 

Total liabilities and equity

$

1,540,768

 

 

$

1,128,070

 

 

Three Months Ended

 

 

Six Months Ended

 

 

November 30,

 

 

November 30,

 

(in thousands)

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

$

858,165

 

 

$

451,198

 

 

$

1,603,160

 

 

$

856,518

 

Gross margin

 

226,502

 

 

 

96,561

 

 

 

416,176

 

 

 

189,610

 

Operating income

 

184,779

 

 

 

64,890

 

 

 

330,767

 

 

 

122,843

 

Depreciation and amortization

 

7,848

 

 

 

8,672

 

 

 

16,075

 

 

 

16,402

 

Interest expense (income)

 

(2,711

)

 

 

2,832

 

 

 

(5,172

)

 

 

5,777

 

Income tax expense

 

8,565

 

 

 

2,322

 

 

 

16,461

 

 

 

4,052

 

Net earnings

 

173,915

 

 

 

60,943

 

 

 

312,803

 

 

 

117,516

 

NOTENote E – Goodwill and Long-Lived Assets

Goodwill

(in thousands)

 

Steel Processing

 

 

Consumer Products (1)

 

 

Building Products (1)

 

 

Sustainable Energy Solutions (1)

 

 

Total

 

Balance at May 31, 2021

 

$

20,218

 

 

$

240,940

 

 

$

72,273

 

 

$

17,625

 

 

$

351,056

 

Acquisitions and purchase accounting adjustments

 

 

24,859

 

 

 

237

 

 

 

-

 

 

 

-

 

 

 

25,096

 

Translation adjustments

 

 

-

 

 

 

-

 

 

 

(4,073

)

 

 

(1,888

)

 

 

(5,961

)

Balance at November 30, 2021

 

$

45,077

 

 

$

241,177

 

 

$

68,200

 

 

$

15,737

 

 

$

370,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) In connection with the reorganization of the Company's pressure cylinders business, effective June 1, 2021, the goodwill of our former Pressure Cylinders reporting unit was allocated to the new reporting units on a relative fair value basis.  Refer to Note O – Segment Operations for additional information.

 

There was 0 goodwill associated with the Other segment at November 30, 2021, or May 31, 2021.  Accumulated goodwill impairment charges within the Other segment totaled $198,290,000 as of November 30, 2021 and May 31, 2021.

Impairment of Long-Lived Assets

Fiscal 2022: NaN.

Fiscal 2021:  During the second quarter of fiscal 2021, we identified an impairment indicator related to the oil & gas equipment operations in Tulsa, Oklahoma due to the economic impact of the COVID-19 pandemic and related market softness.   As a result, we tested the long-lived assets consisting of fixed assets and customer list intangible assets with net book values of $7,375,000 and


 

$2,374,000, respectively, for impairment.  The fair valueImpairment of the fixed assets was determined to be $5,934,000 (using observable Level 2 inputs) resulting in an impairment charge of $1,441,000.  Additionally, the customer list intangible assets were deemed to be fully impaired (using unobservable Level 3 inputs) and written off.  Long-Lived Assets

Fiscal 2023: During the first quarter of fiscal 2021, management determined indicators2023, we committed to plans to liquidate certain fixed assets at our Samuel joint venture’s toll processing facility in Cleveland, Ohio. As all of impairmentthe criteria for classification as assets held for sale continue to be met during the quarter ended November 30, 2022, the net assets have been presented separately as assets held for sale in our consolidated balance sheet as of November 30, 2022. In accordance with the applicable accounting guidance, the net assets were present with regardrecorded at the lower of net book value or fair market value less costs to the cryogenics business primarily operated out of Theodore, Alabama with European distribution in Austria.sell. As a result, property, plant and equipment with a carrying value of $13,526,000 were written down to their estimated fair value of $9,193,000 (determined using Level 2 inputs), resulting in anpre-tax impairment charge of $4,333,000.  Additionally, the customer list intangible assets with a carrying value of $3,662,000 were deemed to be fully impaired and written off.  The fair value of the customer list intangible assets$312,000 was determined using unobservable Level 3 inputs.  

Duringrecognized during the first quarter of fiscal 2021,2023 to write the Company decided to discontinue its operationbook value of the manufacturing line for alternative fuel cylinders atland and building of the Jefferson, Ohio facility.  As a result, long-lived assets with a carrying value of $1,823,000 were written downasset group to theirits estimated fair market value of $400,000 (determined using Level 2 inputs), resulting in an impairment charge of $1,423,000.

Duringless cost to sell. The land and building were subsequently sold during the firstsecond quarter of fiscal 2021,2023 for net cash proceeds of $3,298,000. Machinery and equipment with a net book value of $1,562,000 continues to be classified as held for sale. No impairment charges were recorded during the Company recognized a $506,000 impairment charge related to the Superior Tools business that was acquired as partsecond quarter of Magna Industries, Inc. in fiscal 2019 and subsequently sold.2023.

NOTE

Fiscal 2022: None

Note F – Restructuring and Other Income, Net

We consider restructuring activities to be programs whereby we fundamentally change our operations, such as closing and consolidating manufacturing facilities or moving manufacturing of a product to another location. Restructuring activities may also involve substantial realignment of the management structure of a business unit in response to changing market conditions.

A progression of the liabilities associated with our restructuring activities, combined with a reconciliation to the restructuring and other income, net financial statement caption, in our consolidated statement of earnings for the six months ended November 30, 20212022 is summarized below:

 

 

Balance, as of

 

 

Expense

 

 

 

 

 

 

 

 

 

 

Balance, as of

 

(in thousands)

 

May 31, 2021

 

 

(Income)

 

 

Payments

 

 

Adjustments

 

 

November 30, 2021

 

 

Balance, as of
May 31, 2022

 

 

Expense
(Income)

 

 

Payments

 

 

Adjustments

 

 

Balance, as of
November 30, 2022

 

Early retirement and severance

 

$

771

 

 

$

(350

)

 

$

(172

)

 

$

(55

)

 

$

194

 

 

$

541

 

 

$

85

 

 

$

(605

)

 

$

-

 

 

$

21

 

Facility exit and other costs

 

 

449

 

 

 

(449

)

 

 

0

 

 

 

0

 

 

 

0

 

 

$

1,220

 

 

$

(799

)

 

$

(172

)

 

$

(55

)

 

$

194

 

Net gain on sale of assets (1)

 

 

 

 

 

 

(12,637

)

 

 

 

 

 

 

 

 

 

 

 

 

Gain on lease buyout (2)

 

 

 

 

 

 

(842

)

 

 

 

 

 

 

 

 

 

 

 

 

Net gain on sale of assets (1)(2)

 

 

 

 

(5,467

)

 

 

 

 

 

 

 

Restructuring and other income, net

 

 

 

 

 

$

(14,278

)

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and other income, net

 

 

$

(5,382

)

 

 

 

 

 

 

 

________________________

(1)
The net gain on sale of assets during the six months ended November 30, 2021, resulted primarily from theOn June 8, 2021, sale of our WSP joint venture’s facility14, 2022, we sold real property in Canton, Michigan.  In connection with the sale, the Company realizedTulsa, Oklahoma, for net cash proceeds of $19,850,000$5,775,000, resulting in a pre-tax gain of $12,244,000.

(2)On September 10, 2021,$1,177,000. These assets had been excluded from the Company executed an agreementsale of our former oil & gas equipment business in January 2021. The assets were classified in assets held for sale on the consolidated balance sheets immediately prior to buyout the remaining termclosing of the operating lease atsale.

(2)
On October 31, 2022, the Company’s consolidated steel processing joint venture, WSP, sold its fabricated products businessremaining manufacturing facility, located in Stow, Ohio,Jackson, Michigan. Net proceeds of $21,277,000 were realized in connection with the transaction, of which $2,000,000 is being held in escrow for $1,100,000, resultinggeneral representations and warranties. The transaction resulted in a pre-tax gain of $842,000.  This facility was retained$3,926,000. The assets were classified in connection withassets held for sale on the divestitureconsolidated balance sheets immediately prior to the closing of the Company’s former engineered cabs business and has not been operational since June of calendar 2020.sale.

The total liability associated with our restructuring activities as of November 30, 20212022 is expected to be paid in the next twelve months.

 

NOTE8

Table of Contents

Note G – Contingent Liabilities and Commitments

Legal Proceedings

We are defendants in certain legal actions. In the opinion of management, the outcome of these actions, which is not clearly determinable at the present time, would not significantly affect our consolidated financial position or future results of operations. We also believe that environmental issues will not have a material effect on our capital expenditures, consolidated financial position or future results of operations.


Note H – Guarantees

 

Voluntary Tank Replacement Program

In February 2019, our former Structural Composites Industries, LLC subsidiary (“SCI”) agreed to participate in a tank replacement program for specific design sizes of SCI’s composite hydrogen fuel tanks, which are integrated into a customer’s hydrogen fuel cells used to fuel material handling equipment, primarily rider pallet jacks in warehouses.  As of November 30, 2021, the Company has a reserve of $4,864,000 for the estimated remaining direct costs related to the replacement program, which are expected to be paid in the next twelve months.  The actual cost incurred by the Company related to this matter may vary from the initial estimate.

NOTE H – Guarantees

We do not have guarantees that we believe are reasonably likely to have a material current or future effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. WeHowever, we had in place $16,837,000$14,137,000 of outstanding stand-by letters of credit issued to third-party service providers at November 30, 2021.  NaN2022. No amounts were drawn against these stand-by letters of credit at November 30, 2021.2022. We are also party to an operating lease for an aircraft in which we have guaranteed a residual value at lease termination. The maximum obligation under the terms of this guarantee was approximately $18,881,000$17,524,000 at November 30, 2021.2022.

 

NOTENote I – Debt

We maintain a $500,000,000$500,000,000 multi-year revolving credit facility (the “Credit Facility”) with a group of lenders. On August 20, 2021, the Companywe amended and restated the Credit Facility, extending the final maturity from February 16, 2023 to August 20, 2026 while keeping in place the $500,000,000 aggregate commitments under the Credit Facility. Borrowings under the Credit Facility have maturities of up to one year.year. We have the option to borrow at rates equal to an applicable margin over the Daily LIBOR Rate, the Prime Rate of PNC Bank, National Association or the Overnight Bank Funding Rate. The Credit Facility contains customary LIBOR benchmark replacement language. The applicable margin is determined by our credit rating. There were 0no borrowings or letters of credit outstanding under the Credit Facility at November 30, 2021.2022, leaving $500,000,000 available for future use.

NOTE

We also maintain a revolving trade accounts receivable securitization facility (the “AR Facility”). Pursuant to the terms of the AR Facility, certain of our subsidiaries sell or contribute all of their eligible accounts receivable and other related assets without recourse, on a revolving basis, to Worthington Receivables Company, LLC (“WRC”), a wholly-owned, consolidated, bankruptcy-remote indirect subsidiary. In turn, WRC sells, on a revolving basis, up to $175,000,000 of undivided ownership interests in this pool of accounts receivable to a third-party bank. We retain an undivided interest in this pool and are subject to risk of loss based on the collectability of the receivables from this retained interest. Because the amount eligible to be sold excludes receivables more than 120 days past due, receivables offset by an allowance for doubtful accounts due to bankruptcy or other cause, concentrations over certain limits with specific customers and certain reserve amounts, we believe additional risk of loss is minimal. As of November 30, 2022, there were no borrowings outstanding under the AR Facility, leaving $175,000,000 available for future use.

Tempel China has short-term loan facilities that result in the equivalent of $4,935,000 U.S. dollars outstanding at November 30, 2022. These loans, which are used to finance steel purchases, are collateralized by Tempel China property and equipment and mature in 2023. New loans may be entered into as these loans mature. The effective interest rate on these loans is 3.5% at November 30, 2022.

Note J – Other Comprehensive Income (Loss) Income

The following table summarizes the tax effects on each component of OCI for the periods presented:

 

Three Months Ended

 

 

November 30, 2021

 

 

November 30, 2020

 

 

Before-Tax

 

 

Tax

 

 

Net-of-Tax

 

 

Before-Tax

 

 

Tax

 

 

Net-of-Tax

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

$

(4,507

)

 

 

(365

)

 

$

(4,872

)

 

$

(1,027

)

 

 

(24

)

 

$

(1,051

)

Pension liability adjustment

 

0

 

 

 

0

 

 

 

0

 

 

 

(4

)

 

 

0

 

 

 

(4

)

Cash flow hedges

 

(68,677

)

 

 

15,691

 

 

 

(52,986

)

 

 

19,540

 

 

 

(4,322

)

 

 

15,218

 

Other comprehensive income (loss)

$

(73,184

)

 

$

15,326

 

 

$

(57,858

)

 

$

18,509

 

 

$

(4,346

)

 

$

14,163

 

 

Six Months Ended

 

 

November 30, 2021

 

 

November 30, 2020

 

 

Before-Tax

 

 

Tax

 

 

Net-of-Tax

 

 

Before-Tax

 

 

Tax

 

 

Net-of-Tax

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

$

(8,124

)

 

 

(723

)

 

$

(8,847

)

 

$

6,581

 

 

 

676

 

 

$

7,257

 

Pension liability adjustment

 

0

 

 

 

0

 

 

 

0

 

 

 

484

 

 

 

(116

)

 

 

368

 

Cash flow hedges

 

(68,876

)

 

 

15,591

 

 

 

(53,285

)

 

 

22,793

 

 

 

(5,012

)

 

 

17,781

 

Other comprehensive income (loss)

$

(77,000

)

 

$

14,868

 

 

$

(62,132

)

 

$

29,858

 

 

$

(4,452

)

 

$

25,406

 


 

Three Months Ended

 

 

November 30, 2022

 

 

November 30, 2021

 

 

Before-Tax

 

 

Tax

 

 

Net-of-Tax

 

 

Before-Tax

 

 

Tax

 

 

Net-of-Tax

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

$

550

 

 

$

308

 

 

$

858

 

 

$

(4,507

)

 

$

(365

)

 

$

(4,872

)

Pension liability adjustment

 

15

 

 

 

(97

)

 

 

(82

)

 

 

-

 

 

 

-

 

 

 

-

 

Cash flow hedges

 

(5,665

)

 

 

1,665

 

 

 

(4,000

)

 

 

(68,677

)

 

 

15,691

 

 

 

(52,986

)

Other comprehensive loss

$

(5,100

)

 

$

1,876

 

 

$

(3,224

)

 

$

(73,184

)

 

$

15,326

 

 

$

(57,858

)

 

9

Table of Contents

 

NOTE

 

Six Months Ended

 

 

November 30, 2022

 

 

November 30, 2021

 

 

Before-Tax

 

 

Tax

 

 

Net-of-Tax

 

 

Before-Tax

 

 

Tax

 

 

Net-of-Tax

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

$

(8,970

)

 

$

(273

)

 

$

(9,243

)

 

$

(8,124

)

 

$

(723

)

 

$

(8,847

)

Pension liability adjustment

 

3,740

 

 

 

(883

)

 

 

2,857

 

 

 

-

 

 

 

-

 

 

 

-

 

Cash flow hedges

 

(22,762

)

 

 

5,462

 

 

 

(17,300

)

 

 

(68,876

)

 

 

15,591

 

 

 

(53,285

)

Other comprehensive loss

$

(27,992

)

 

$

4,306

 

 

$

(23,686

)

 

$

(77,000

)

 

$

14,868

 

 

$

(62,132

)

Note K – Changes in Equity

The following tables summarize the changes in equity by component and in total for the periods presented:

 

 

Controlling Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

Paid-in

 

 

Income (Loss),

 

 

Retained

 

 

 

 

 

 

controlling

 

 

 

 

 

(in thousands)

 

Capital

 

 

Net of Tax

 

 

Earnings

 

 

Total

 

 

Interests

 

 

Total

 

Balance at May 31, 2021

 

$

282,790

 

 

$

45,387

 

 

$

1,070,016

 

 

$

1,398,193

 

 

$

153,502

 

 

$

1,551,695

 

Net earnings

 

 

0

 

 

 

0

 

 

 

132,491

 

 

 

132,491

 

 

 

8,984

 

 

 

141,475

 

Other comprehensive loss

 

 

0

 

 

 

(4,274

)

 

 

0

 

 

 

(4,274

)

 

 

0

 

 

 

(4,274

)

Common shares issued, net of withholding tax

 

 

(4,091

)

 

 

0

 

 

 

0

 

 

 

(4,091

)

 

 

0

 

 

 

(4,091

)

Common shares in non-qualified plans

 

 

89

 

 

 

0

 

 

 

0

 

 

 

89

 

 

 

0

 

 

 

89

 

Stock-based compensation

 

 

6,324

 

 

 

0

 

 

 

0

 

 

 

6,324

 

 

 

0

 

 

 

6,324

 

Purchases and retirement of common shares

 

 

(5,477

)

 

 

0

 

 

 

(55,408

)

 

 

(60,885

)

 

 

0

 

 

 

(60,885

)

Cash dividends declared

 

 

0

 

 

 

0

 

 

 

(14,504

)

 

 

(14,504

)

 

 

0

 

 

 

(14,504

)

Dividends to noncontrolling interests

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(9,197

)

 

 

(9,197

)

Balance at August 31, 2021

 

$

279,635

 

 

$

41,113

 

 

$

1,132,595

 

 

$

1,453,343

 

 

$

153,289

 

 

$

1,606,632

 

Net earnings

 

 

0

 

 

 

0

 

 

 

110,301

 

 

 

110,301

 

 

 

2,884

 

 

 

113,185

 

Other comprehensive loss

 

 

0

 

 

 

(57,858

)

 

 

0

 

 

 

(57,858

)

 

 

0

 

 

 

(57,858

)

Common shares issued, net of withholding tax

 

 

(2,694

)

 

 

0

 

 

 

0

 

 

 

(2,694

)

 

 

0

 

 

 

(2,694

)

Common shares in NQ plans

 

 

257

 

 

 

0

 

 

 

0

 

 

 

257

 

 

 

0

 

 

 

257

 

Stock-based compensation

 

 

3,304

 

 

 

0

 

 

 

0

 

 

 

3,304

 

 

 

0

 

 

 

3,304

 

Purchases and retirement of common shares

 

 

(1,297

)

 

 

0

 

 

 

(11,405

)

 

 

(12,702

)

 

 

0

 

 

 

(12,702

)

Cash dividends declared

 

 

0

 

 

 

0

 

 

 

(14,154

)

 

 

(14,154

)

 

 

0

 

 

 

(14,154

)

Dividends to noncontrolling interest

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(2,879

)

 

 

(2,879

)

Balance at November 30, 2021

 

$

279,205

 

 

$

(16,745

)

 

$

1,217,337

 

 

$

1,479,797

 

 

$

153,294

 

 

$

1,633,091

 


 

 

Controlling Interest

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Paid-in

 

 

Loss,

 

 

Retained

 

 

 

 

 

controlling

 

 

 

 

(in thousands)

 

Capital

 

 

Net of Tax

 

 

Earnings

 

 

Total

 

 

Interests

 

 

Total

 

Balance at May 31, 2022

 

$

273,439

 

 

$

(22,850

)

 

$

1,230,163

 

 

$

1,480,752

 

 

$

133,210

 

 

$

1,613,962

 

Net earnings

 

 

-

 

 

 

-

 

 

 

64,082

 

 

 

64,082

 

 

 

1,162

 

 

 

65,244

 

Other comprehensive loss

 

 

-

 

 

 

(20,462

)

 

 

-

 

 

 

(20,462

)

 

 

-

 

 

 

(20,462

)

Common shares issued, net of withholding tax

 

 

(3,466

)

 

 

-

 

 

 

-

 

 

 

(3,466

)

 

 

-

 

 

 

(3,466

)

Common shares in non-qualified plans

 

 

136

 

 

 

-

 

 

 

-

 

 

 

136

 

 

 

-

 

 

 

136

 

Stock-based compensation

 

 

6,976

 

 

 

-

 

 

 

-

 

 

 

6,976

 

 

 

-

 

 

 

6,976

 

Cash dividends declared

 

 

-

 

 

 

-

 

 

 

(15,418

)

 

 

(15,418

)

 

 

-

 

 

 

(15,418

)

Balance at August 31, 2022

 

$

277,085

 

 

$

(43,312

)

 

$

1,278,827

 

 

$

1,512,600

 

 

$

134,372

 

 

$

1,646,972

 

Net earnings

 

 

-

 

 

 

-

 

 

 

16,218

 

 

 

16,218

 

 

 

3,287

 

 

 

19,505

 

Other comprehensive loss

 

 

-

 

 

 

(3,224

)

 

 

-

 

 

 

(3,224

)

 

 

-

 

 

 

(3,224

)

Common shares issued, net of withholding tax

 

 

(649

)

 

 

-

 

 

 

-

 

 

 

(649

)

 

 

-

 

 

 

(649

)

Common shares in non-qualified plans

 

 

298

 

 

 

-

 

 

 

-

 

 

 

298

 

 

 

-

 

 

 

298

 

Stock-based compensation

 

 

3,620

 

 

 

-

 

 

 

-

 

 

 

3,620

 

 

 

-

 

 

 

3,620

 

Cash dividends declared

 

 

-

 

 

 

-

 

 

 

(15,470

)

 

 

(15,470

)

 

 

-

 

 

 

(15,470

)

Dividends to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11,760

)

 

 

(11,760

)

Balance at November 30, 2022

 

$

280,354

 

 

$

(46,536

)

 

$

1,279,575

 

 

$

1,513,393

 

 

$

125,899

 

 

$

1,639,292

 

 

10

 

 

Controlling Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

 

Paid-in

 

 

Loss,

 

 

Retained

 

 

 

 

 

 

controlling

 

 

 

 

 

(in thousands)

 

Capital

 

 

Net of Tax

 

 

Earnings

 

 

Total

 

 

Interests

 

 

Total

 

Balance at May 31, 2020

 

$

283,776

 

 

$

(35,217

)

 

$

572,262

 

 

$

820,821

 

 

$

145,612

 

 

$

966,433

 

Net earnings

 

 

0

 

 

 

0

 

 

 

616,675

 

 

 

616,675

 

 

 

2,063

 

 

 

618,738

 

Other comprehensive income

 

 

0

 

 

 

11,242

 

 

 

0

 

 

 

11,242

 

 

 

0

 

 

 

11,242

 

Common shares issued, net of withholding tax

 

 

(1,150

)

 

 

0

 

 

 

0

 

 

 

(1,150

)

 

 

0

 

 

 

(1,150

)

Common shares in non-qualified plans

 

 

90

 

 

 

0

 

 

 

0

 

 

 

90

 

 

 

0

 

 

 

90

 

Stock-based compensation

 

 

3,022

 

 

 

0

 

 

 

0

 

 

 

3,022

 

 

 

0

 

 

 

3,022

 

Purchases and retirement of common shares

 

 

(7,536

)

 

 

0

 

 

 

(46,784

)

 

 

(54,320

)

 

 

0

 

 

 

(54,320

)

Cash dividends declared

 

 

0

 

 

 

0

 

 

 

(13,595

)

 

 

(13,595

)

 

 

0

 

 

 

(13,595

)

Dividends to noncontrolling interests

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(560

)

 

 

(560

)

Balance at August 31, 2020

 

$

278,202

 

 

$

(23,975

)

 

$

1,128,558

 

 

$

1,382,785

 

 

$

147,115

 

 

$

1,529,900

 

Net earnings (loss)

 

 

0

 

 

 

0

 

 

 

(74,044

)

 

 

(74,044

)

 

 

5,532

 

 

 

(68,512

)

Other comprehensive income

 

 

0

 

 

 

14,163

 

 

 

0

 

 

 

14,163

 

 

 

0

 

 

 

14,163

 

Common shares issued, net of withholding tax

 

 

2,294

 

 

 

0

 

 

 

0

 

 

 

2,294

 

 

 

0

 

 

 

2,294

 

Common shares in NQ plans

 

 

292

 

 

 

0

 

 

 

0

 

 

 

292

 

 

 

0

 

 

 

292

 

Stock-based compensation

 

 

3,499

 

 

 

0

 

 

 

0

 

 

 

3,499

 

 

 

0

 

 

 

3,499

 

Purchases and retirement of common shares

 

 

(4,486

)

 

 

0

 

 

 

(34,077

)

 

 

(38,563

)

 

 

0

 

 

 

(38,563

)

Contribution to Samuel joint venture

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

925

 

 

 

925

 

Cash dividends declared

 

 

0

 

 

 

0

 

 

 

(13,527

)

 

 

(13,527

)

 

 

0

 

 

 

(13,527

)

Balance at November 30, 2020

 

$

279,801

 

 

$

(9,812

)

 

$

1,006,910

 

 

$

1,276,899

 

 

$

153,572

 

 

$

1,430,471

 

Table of Contents


 

 

Controlling Interest

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Paid-in

 

 

Income (Loss),

 

 

Retained

 

 

 

 

 

controlling

 

 

 

 

(in thousands)

 

Capital

 

 

Net of Tax

 

 

Earnings

 

 

Total

 

 

Interests

 

 

Total

 

Balance at May 31, 2021

 

$

282,790

 

 

$

45,387

 

 

$

1,070,016

 

 

$

1,398,193

 

 

$

153,502

 

 

$

1,551,695

 

Net earnings

 

 

-

 

 

 

-

 

 

 

132,491

 

 

 

132,491

 

 

 

8,984

 

 

 

141,475

 

Other comprehensive loss

 

 

-

 

 

 

(4,274

)

 

 

-

 

 

 

(4,274

)

 

 

-

 

 

 

(4,274

)

Common shares issued, net of withholding tax

 

 

(4,091

)

 

 

-

 

 

 

-

 

 

 

(4,091

)

 

 

-

 

 

 

(4,091

)

Common shares in non-qualified plans

 

 

89

 

 

 

-

 

 

 

-

 

 

 

89

 

 

 

-

 

 

 

89

 

Stock-based compensation

 

 

6,324

 

 

 

-

 

 

 

-

 

 

 

6,324

 

 

 

-

 

 

 

6,324

 

Purchases and retirement of common shares

 

 

(5,477

)

 

 

-

 

 

 

(55,408

)

 

 

(60,885

)

 

 

-

 

 

 

(60,885

)

Cash dividends declared

 

 

-

 

 

 

-

 

 

 

(14,504

)

 

 

(14,504

)

 

 

-

 

 

 

(14,504

)

Dividends to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,197

)

 

 

(9,197

)

Balance at August 31, 2021

 

$

279,635

 

 

$

41,113

 

 

$

1,132,595

 

 

$

1,453,343

 

 

$

153,289

 

 

$

1,606,632

 

Net earnings

 

 

-

 

 

 

-

 

 

 

110,301

 

 

 

110,301

 

 

 

2,884

 

 

 

113,185

 

Other comprehensive loss

 

 

-

 

 

 

(57,858

)

 

 

-

 

 

 

(57,858

)

 

 

-

 

 

 

(57,858

)

Common shares issued, net of withholding tax

 

 

(2,694

)

 

 

-

 

 

 

-

 

 

 

(2,694

)

 

 

-

 

 

 

(2,694

)

Common shares in non-qualified plans

 

 

257

 

 

 

-

 

 

 

-

 

 

 

257

 

 

 

-

 

 

 

257

 

Stock-based compensation

 

 

3,304

 

 

 

-

 

 

 

-

 

 

 

3,304

 

 

 

-

 

 

 

3,304

 

Purchases and retirement of common shares

 

 

(1,297

)

 

 

-

 

 

 

(11,405

)

 

 

(12,702

)

 

 

-

 

 

 

(12,702

)

Cash dividends declared

 

 

-

 

 

 

-

 

 

 

(14,154

)

 

 

(14,154

)

 

 

-

 

 

 

(14,154

)

Dividends to noncontrolling interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,879

)

 

 

(2,879

)

Balance at November 30, 2021

 

$

279,205

 

 

$

(16,745

)

 

$

1,217,337

 

 

$

1,479,797

 

 

$

153,294

 

 

$

1,633,091

 

The following tables summarizetable summarizes the changes in accumulated other comprehensive income (loss) for the periods presented:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Foreign

 

 

Pension

 

 

 

 

 

 

Other

 

 

 

Currency

 

 

Liability

 

 

Cash Flow

 

 

Comprehensive

 

(in thousands)

 

Translation

 

 

Adjustment

 

 

Hedges

 

 

Income (Loss)

 

Balance as of May 31, 2021

 

$

1,779

 

 

$

(15,955

)

 

$

59,563

 

 

$

45,387

 

Other comprehensive income (loss) before reclassifications

 

 

(8,124

)

 

 

0

 

 

 

14,279

 

 

 

6,155

 

Reclassification adjustments to net earnings (a)

 

 

0

 

 

 

0

 

 

 

(83,155

)

 

 

(83,155

)

Income tax effect

 

 

(723

)

 

 

0

 

 

 

15,591

 

 

 

14,868

 

Balance as of November 30, 2021

 

$

(7,068

)

 

$

(15,955

)

 

$

6,278

 

 

$

(16,745

)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Foreign

 

 

Pension

 

 

 

 

 

Other

 

 

 

Currency

 

 

Liability

 

 

Cash Flow

 

 

Comprehensive

 

(in thousands)

 

Translation

 

 

Adjustment

 

 

Hedges

 

 

Loss

 

Balance as of May 31, 2022

 

$

(15,310

)

 

$

(6,244

)

 

$

(1,296

)

 

$

(22,850

)

Other comprehensive loss before reclassifications

 

 

(8,970

)

 

 

(1,034

)

 

 

(36,041

)

 

 

(46,045

)

Reclassification adjustments to net earnings (a)

 

 

-

 

 

 

4,774

 

 

 

13,279

 

 

 

18,053

 

Income tax effect

 

 

(273

)

 

 

(883

)

 

 

5,462

 

 

 

4,306

 

Balance as of November 30, 2022

 

$

(24,553

)

 

$

(3,387

)

 

$

(18,596

)

 

$

(46,536

)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Foreign

 

 

Pension

 

 

 

 

 

Other

 

 

 

Currency

 

 

Liability

 

 

Cash Flow

 

 

Comprehensive

 

(in thousands)

 

Translation

 

 

Adjustment

 

 

Hedges

 

 

Income (Loss)

 

Balance as of May 31, 2021

 

$

1,779

 

 

$

(15,955

)

 

$

59,563

 

 

$

45,387

 

Other comprehensive income (loss) before reclassifications

 

 

(8,124

)

 

 

-

 

 

 

14,279

 

 

 

6,155

 

Reclassification adjustments to net earnings (a)

 

 

-

 

 

 

-

 

 

 

(83,155

)

 

 

(83,155

)

Income tax effect

 

 

(723

)

 

 

-

 

 

 

15,591

 

 

 

14,868

 

Balance as of November 30, 2021

 

$

(7,068

)

 

$

(15,955

)

 

$

6,278

 

 

$

(16,745

)

11

Table of Contents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Foreign

 

 

Pension

 

 

 

 

 

 

Other

 

 

 

Currency

 

 

Liability

 

 

Cash Flow

 

 

Comprehensive

 

(in thousands)

 

Translation

 

 

Adjustment

 

 

Hedges

 

 

Loss

 

Balance as of May 31, 2020

 

$

(9,142

)

 

$

(21,886

)

 

$

(4,189

)

 

$

(35,217

)

Other comprehensive income before reclassifications

 

 

6,581

 

 

 

484

 

 

 

16,765

 

 

 

23,830

 

Reclassification adjustments to net earnings (a)

 

 

0

 

 

 

0

 

 

 

6,028

 

 

 

6,028

 

Income tax effect

 

 

676

 

 

 

(116

)

 

 

(5,013

)

 

 

(4,453

)

Balance as of November 30, 2020

 

$

(1,885

)

 

$

(21,518

)

 

$

13,591

 

 

$

(9,812

)

(a)
The statement of earnings classification of amounts reclassified to net earnings include:
1.
Pension liability adjustment – During August 2022, we purchased (using pension plan assets) an annuity contract from a third-party insurance company to transfer approximately 31% of the total projected benefit obligation of The Gerstenslager Company Bargaining Unit Employees’ Pension Plan as of the purchase date. As a result of this transaction: 1) we incurred a non-cash settlement charge of $4,774,000 within “Miscellaneous income (expense), net”; 2) we were relieved of all responsibility for these pension obligations; and 3) the insurance company is now required to pay and administer the retirement benefits owed to 220 beneficiaries; and
2.
Cash flow hedges – disclosed in “Note Q – Derivative Financial Instruments and Hedging Activities”.

(a)

The statement of earnings classification of amounts reclassified to net earnings for cash flow hedges is disclosed in “Note Q – Derivative Instruments and Hedging Activities.”

NOTENote L – Stock-Based Compensation

Non-Qualified Stock Options

During the six months ended November 30, 2021,2022, we granted non-qualified stock options covering a total of 54,50084,400 common shares under our stock-based compensation plans. The weighted average exercise price of $60.19 $46.39per share was equal to the market price of the underlying common shares at the grant date. The fair value of these stock options, based on the Black-Scholes option-pricing model, calculated at the grant date, was $19.73$16.36 per share. The calculated pre-tax stock-based compensation expense for these stock options is $1,075,080$1,381,000 and will be recognized on a straight-line basis over the three-year vesting period, net of any forfeitures. The following assumptions were used to value these stock options:

 

Dividend yield

 

 

2.102.33

%

Expected volatility

 

 

41.6241.63

%

Risk-free interest rate

 

 

1.113.19

%

Expected term (years)

6.0

 

 

Expected volatility is based on the historical volatility of Worthington Industries, Inc.’s common shares and the risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the stock options. The expected term was developed using historical exercise experience.

Service-Based Restricted Common Shares

During the six months ended November 30, 2021,2022, we granted an aggregate of 154,050308,000 service-based restricted common shares under our stock-based compensation plans, which generally vest three years after their grant date. The fair value of these restricted common shares was equal to the weighted average closing market price of the underlying common shares on the date of grant, or $58.11$51.09 per share. The calculated pre-tax stock-based compensation expense for these restricted common shares is $9,048,253$15,216,000 and will be recognized on a straight-line basis over the three-year service-based vesting period.

Market-Based Restricted Common Shares

On June 24, 2022, we granted 10,000 market-based restricted common shares to one key employee under one of our stock-based compensation plans. Vesting of these restricted common shares is contingent upon the average closing price of the common shares reaching $65.00 during any 90 consecutive day period during the five-year period following the date of grant and completion of a three-year service vesting period. The grant date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $35.49 per share. The calculated pre-tax stock-based compensation expense for these market-based restricted common shares is $355,000 and will be recognized on a straight-line basis over the three-year service-based vesting period. The following assumptions were used to determine the grant-date fair value and the derived service period for these restricted common shares:

Dividend yield

2.67

%

Expected volatility

43.00

%

Risk-free interest rate

3.18

%

12

Table of Contents

Performance Share Awards

We have awarded performance shares to certain key employees under our stock-based compensation plans. These performance shares are earned based on the level of achievement with respect to corporate targets for cumulative corporate economic value added, earnings per share growth and, in the case of business unit executives, a business unit adjusted earnings before interest and taxes


target, in each case for the three-year periods ending May 31, 2022, 2023, 2024 and 2024.2025. These performance share awards will be paid, to the extent earned, in common shares of Worthington Industries, Inc. in the fiscal quarter following the end of the applicable three-year performance period. The fair values of our performance shares are determined by the closing market prices of the underlying common shares at the respective grant dates of the performance shares and the pre-tax stock-based compensation expense is based on our periodic assessment of the probability of the targets being achieved and our estimate of the number of common shares that will ultimately be issued. During the six months ended November 30, 2021,2022, we granted performance share awards covering an aggregate of 36,40058,100 common shares (at target levels). The calculated pre-tax stock-based compensation expense for these performance shares is $2,191,000.$2,695,000. The ultimate pre-tax stock-based compensation expense to be recognized over the three-year performance period on all tranches will vary based on our periodic assessment of the probability of the targettargets being achieved.

NOTENote M – Income Taxes

Income tax expense for the six months ended November 30, 20212022 and 20202021 reflected estimated annual effective income tax rates of 22.8%23.7% and 21.5%22.8%, respectively. The annual effective income tax ratesrespectively, and exclude any impact from the inclusion of net earnings attributable to noncontrolling interests in our consolidated statements of earnings. Net earnings attributable to noncontrolling interests are primarily a result of our Samuel, Spartan, TWB and WSP (through October 31, 2022) consolidated joint ventures. The net earnings attributable to the noncontrolling interests in Samuel, Spartan, TWB and WSP’s U.S. operations do not generate tax expense to Worthington since the investors in Samuel, Spartan, TWB and WSP’s U.S. operations are taxed directly based on the earnings attributable to them. The tax expense of TWB’s wholly-owned foreign corporations is reported in our consolidated income tax expense. Management is required to estimate the annual effective income tax rate based upon its forecast of annual pre-tax income for domestic and foreign operations. Our actual effective income tax rate for fiscal 20222023 could be materially different from the forecasted rate as of November 30, 2021.    2022.

NOTENote N – Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share attributable to controlling interest for the periods presented:

 

Three Months Ended

 

 

Six Months Ended

 

Three Months Ended

 

Six Months Ended

 

November 30,

 

 

November 30,

 

November 30,

 

 

November 30,

 

(in thousands, except per share amounts)

2021

 

 

2020

 

 

2021

 

 

2020

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Numerator (basic & diluted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) attributable to controlling interest -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income (loss) available to common shareholders

$

110,301

 

 

$

(74,044

)

 

$

242,792

 

 

$

542,631

 

Net earnings attributable to controlling interest -

 

 

 

 

 

 

 

 

 

 

 

income available to common shareholders

$

16,218

 

 

$

110,301

 

 

$

80,300

 

 

$

242,792

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic earnings (loss) per share attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per share attributable to

 

 

 

 

 

 

 

 

 

 

controlling interest - weighted average common shares

 

50,381

 

 

 

52,988

 

 

 

50,618

 

 

 

53,532

 

 

48,558

 

 

 

50,381

 

 

 

48,518

 

 

 

50,618

 

Effect of dilutive securities

 

833

 

 

 

-

 

 

 

914

 

 

 

907

 

 

772

 

 

 

833

 

 

 

775

 

 

 

914

 

Denominator for diluted earnings (loss) per share attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for diluted earnings per share attributable to

 

 

 

 

 

 

 

 

 

 

controlling interest - adjusted weighted average common shares

 

51,214

 

 

 

52,988

 

 

 

51,532

 

 

 

54,439

 

 

49,330

 

 

 

51,214

 

 

 

49,293

 

 

 

51,532

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share attributable to controlling interest

$

2.19

 

 

$

(1.40

)

 

$

4.80

 

 

$

10.14

 

Diluted earnings (loss) per share attributable to controlling interest

$

2.15

 

 

$

(1.40

)

 

$

4.71

 

 

$

9.97

 

Basic earnings per share attributable to controlling interest

$

0.33

 

 

$

2.19

 

 

$

1.66

 

 

$

4.80

 

Diluted earnings per share attributable to controlling interest

$

0.33

 

 

$

2.15

 

 

$

1.63

 

 

$

4.71

 

 

Stock options covering an aggregate of 138,100 and 54,500 common shares for the three months ended November 30, 2022 and 2021, have been excluded from the computation of diluted earnings per share because the effect would have been anti-dilutive for the period.  All potential diluted shares (stock optionsrespectively, and restricted common shares covering an aggregate of 1,030,835 common shares) have been excluded from the computation of diluted loss per share for the three months ended November 30, 2020, because the effect would have been anti-dilutive due to the overall net loss for the period.  Stock options covering an aggregate of 47,352127,492 and 492,01147,352 common shares for the six months ended November 30,20, 2022 and 2021, and 2020, respectively have been excluded from the computation of diluted earnings per share because the effect would have been anti-dilutive for the period.those periods.


 

13

Table of Contents

NOTE

Note O – Segment Operations

Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes. Factors used to identify reportable operating segments include the nature of the products and services provided by each business, the management reporting structure, similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance.  

Effective June 1, 2021, we reorganized the management structure of our Pressure Cylinders business to better align around the end markets which it served, resulting in 3 new reportable operating segments: Consumer Products, Building Products and Sustainable Energy Solutions.  Our Steel Processing operating segment was not impacted by these changes.  A discussion of each of these new reportable segments is included below.

Consumer Products: This reportable segment is comprised of brands that offer market-leading products in the tools, outdoor living and celebrations end markets with brands that include Coleman®, Bernzomatic®, Balloon Time®, Mag Torch®, General®, Garden-Weasel®, Pactool International®, Hawkeye™ and Worthington Pro-Grade™.  This market sector includes propane-filled cylinders for torches, camping stoves and other applications, certain propane gas (LPG) cylinders, hand-held torches, Balloon Time® helium-filled balloon kits, and specialized hand tools and instruments.  These products are sold primarily to mass merchandisers, retailers and distributors. LPG cylinders, which hold fuel for barbeque grills and recreational vehicle equipment, are also sold through cylinder exchangers.

Building Products: This reportable segment includes refrigerant and LPG cylinders, well water and expansion tanks, and other specialty products. Cylinders are generally sold to gas producers and distributors. Refrigerant gas cylinders are used to hold refrigerant gases for commercial, residential, and automotive air conditioning and refrigeration systems. LPG cylinders hold fuel for residential and light commercial heating systems, industrial forklifts and commercial/residential cooking (the latter, generally outside North America).Well water tanks and expansion tanks are used in the residential market with the latter also sold into commercial markets.  Specialty products include a variety of fire suppression and chemical tanks.

Sustainable Energy Solutions: This reportable segment, which is primarily based in Europe, includes on-board fueling systems and services, as well as gas containment solutions and services for storage, transport and distribution of industrial gases.  It includes high pressure and acetylene cylinders for life support cylinders and alternative fuel cylinders used to hold compressed natural gas (CNG) and hydrogen for automobiles, buses, and light-duty trucks.

Other:  Divested businesses historically reported within Pressure Cylinders but no longer included in the Company’s management structure are presented within the “Other” category, on a historical basis, through the date of disposal.  For the periods presented, these include the following:  Structural Composites Industries, LLC (until March 2021); Oil & Gas Equipment (until January 2021); and Cryogenic Storage and Cryo-Science (until October 2020). The Other category also includes the results of our former Engineered Cabs operating segment, on a historical basis, through the date of disposition (November 1, 2019) as well as certain income and expense items not allocated to our operating segments.

Prior period financial information has been revised to reflect the operating results and financial position of the new reportable operating segments. Historical financial information presented herein reflects this change.

Concurrent with the change in management structure described above, the profit measure that the Company’s CODMChief Operating Decision Maker ("CODM") uses to assess segment performance and allocate resources was changed from operating income tois adjusted earnings (loss) before interest and taxes (“adjusted EBIT”). In general, adjustedEBIT is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest. Adjusted EBIT excludes impairment and restructuring charges (gains), but may also exclude other items that management believes are not reflective of, and thus should not be included when evaluating the performance of the Company’s ongoing operations.operations, including direct and incremental costs incurred in connection with the planned Separation of the Company’s Steel Processing business. Adjusted EBIT is a non-GAAP financial measure and is used by management to evaluate segment performance, engage in financial and operational planning and determine incentive compensation because we believe that this financial measure provides additional perspective and, in some circumstances is more closely correlated to, the performance of the Company’s ongoing operations.

For the periods presented, equity income from our unconsolidated joint ventures is included in the measurement of segment profit as shown in the table below.  The related investment balances are included in segment net assets in the same manner.

Unconsolidated Joint Ventures Included in Segment Profit

Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Serviacero Worthington

N/A

WAVE

N/A

Cabs

ClarkDietrich

ArtiFlex


 

The following table presents summarized financial information for our reportable operating segments for the periods indicated.

 

 

Three Months Ended November 30, 2021

 

(in thousands)

Steel Processing

 

 

Consumer Products

 

 

Building Products

 

 

Sustainable Energy Solutions

 

 

Other

 

 

Consolidated

 

Net sales

$

937,842

 

 

$

140,793

 

 

$

121,125

 

 

$

33,101

 

 

$

-

 

 

$

1,232,861

 

Restructuring and other income, net (1)

 

(182

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,822

)

 

 

(2,004

)

Miscellaneous income, net

 

17

 

 

 

159

 

 

 

218

 

 

 

82

 

 

 

564

 

 

 

1,040

 

Equity in net income of unconsolidated affiliates

 

8,823

 

 

 

-

 

 

 

49,894

 

 

 

-

 

 

 

1,501

 

 

 

60,218

 

Adjusted earnings before interest and taxes

 

71,925

 

 

 

17,584

 

 

 

54,718

 

 

 

796

 

 

 

1,893

 

 

 

146,916

 

 

Three Months Ended November 30, 2022

 

(in thousands)

Steel Processing

 

 

Consumer Products

 

 

Building Products

 

Sustainable Energy Solutions

 

 

Other

 

 

Consolidated

 

Net sales

$

841,947

 

 

$

153,795

 

 

$

141,671

 

$

38,128

 

 

$

-

 

 

$

1,175,541

 

Restructuring and other income, net

 

(4,282

)

 

 

-

 

 

 

-

 

 

-

 

 

 

-

 

 

 

(4,282

)

Separation costs

 

-

 

 

 

-

 

 

 

-

 

 

-

 

 

 

9,246

 

 

 

9,246

 

Miscellaneous income (expense), net

 

850

 

 

 

(47

)

 

 

76

 

 

142

 

 

 

384

 

 

 

1,405

 

Equity in net income (loss) of unconsolidated affiliates

 

1,906

 

 

 

-

 

 

 

35,107

 

 

-

 

 

 

(156

)

 

 

36,857

 

Adjusted EBIT (1)(2)

 

(17,249

)

 

 

13,473

 

 

 

41,224

 

 

1,143

 

 

 

(3,291

)

 

 

35,300

 

 

 

Three Months Ended November 30, 2020

 

(in thousands)

Steel Processing

 

 

Consumer Products

 

 

Building Products

 

 

Sustainable Energy Solutions

 

 

Other

 

 

Consolidated

 

Net sales

$

468,723

 

 

$

117,513

 

 

$

93,989

 

 

$

34,023

 

 

$

16,844

 

 

$

731,092

 

Impairment of long-lived assets

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,815

 

 

 

3,815

 

Restructuring and other expense, net (1)

 

375

 

 

 

120

 

 

 

-

 

 

 

-

 

 

 

7,101

 

 

 

7,596

 

Incremental expenses related to Nikola gains

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,570

 

 

 

4,570

 

Miscellaneous income (loss), net

 

(5

)

 

 

(96

)

 

 

70

 

 

 

69

 

 

 

338

 

 

 

376

 

Equity in net income of unconsolidated affiliates

 

1,861

 

 

 

-

 

 

 

22,692

 

 

 

-

 

 

 

1,078

 

 

 

25,631

 

Adjusted earnings (loss) before interest and taxes

 

34,381

 

 

 

17,432

 

 

 

25,964

 

 

 

1,534

 

 

 

(5,633

)

 

 

73,678

 

(1)Includes

Excludes the noncontrolling interest portion of the restructuring (charges) gains within Steel Processing of $81$1,850.
(2)
Excludes $525 in selling, general and $(142) foradministrative expense in Consumer Products related to incremental expense attributable to the three months ended November 30, 2021Level5 earnout; excludes $9,246 of Separation costs in Other related to direct and 2020, respectively

 

Six Months Ended November 30, 2021

 

(in thousands)

Steel Processing

 

 

Consumer Products

 

 

Building Products

 

 

Sustainable Energy Solutions

 

 

Other

 

 

Consolidated

 

Net sales

$

1,760,652

 

 

$

288,576

 

 

$

235,868

 

 

$

58,583

 

 

$

-

 

 

$

2,343,679

 

Restructuring and other income, net (2)

 

(12,313

)

 

 

-

 

 

 

-

 

 

 

(143

)

 

 

(1,822

)

 

 

(14,278

)

Miscellaneous income, net

 

47

 

 

 

209

 

 

 

144

 

 

 

22

 

 

 

1,248

 

 

 

1,670

 

Equity in net income of unconsolidated affiliates

 

18,172

 

 

 

-

 

 

 

92,887

 

 

 

-

 

 

 

2,075

 

 

 

113,134

 

Adjusted earnings (loss) before interest and taxes

 

179,617

 

 

 

38,140

 

 

 

103,471

 

 

 

(1,760

)

 

 

1,479

 

 

 

320,947

 

incremental costs incurred in connection with the anticipated Separation, including audit, advisory, and legal costs.

 

Six Months Ended November 30, 2020

 

(in thousands)

Steel Processing

 

 

Consumer Products

 

 

Building Products

 

 

Sustainable Energy Solutions

 

 

Other

 

 

Consolidated

 

Net sales

$

899,743

 

 

$

251,135

 

 

$

182,092

 

 

$

61,880

 

 

$

39,151

 

 

$

1,434,001

 

Impairment of long-lived assets

 

-

 

 

 

506

 

 

 

1,423

 

 

 

-

 

 

 

11,810

 

 

 

13,739

 

Restructuring and other expense, net (2)

 

1,846

 

 

 

120

 

 

 

-

 

 

 

-

 

 

 

7,478

 

 

 

9,444

 

Incremental expenses related to Nikola gains

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

54,081

 

 

 

54,081

 

Miscellaneous income (loss), net

 

(48

)

 

 

(117

)

 

 

(92

)

 

 

151

 

 

 

933

 

 

 

827

 

Equity in net income of unconsolidated affiliates

 

3,170

 

 

 

-

 

 

 

45,243

 

 

 

-

 

 

 

852

 

 

 

49,265

 

Adjusted earnings (loss) before interest and taxes

 

48,557

 

 

 

41,341

 

 

 

49,337

 

 

 

973

 

 

 

(13,461

)

 

 

126,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Includes the noncontrolling interest portion of restructuring (charges) gains of $6,027 and $(257) for the six months ended November 30, 2021 and 2020, respectively

 


 

Three Months Ended November 30, 2021

 

(in thousands)

Steel Processing

 

 

Consumer Products

 

 

Building Products

 

Sustainable Energy Solutions

 

 

Other

 

 

Consolidated

 

Net sales

$

937,842

 

 

$

140,793

 

 

$

121,125

 

$

33,101

 

 

$

-

 

 

$

1,232,861

 

Restructuring and other income, net

 

(182

)

 

 

-

 

 

 

-

 

 

-

 

 

 

(1,822

)

 

 

(2,004

)

Miscellaneous income, net

 

17

 

 

 

159

 

 

 

218

 

 

82

 

 

 

564

 

 

 

1,040

 

Equity in net income of unconsolidated affiliates

 

8,823

 

 

 

-

 

 

 

49,894

 

 

-

 

 

 

1,501

 

 

 

60,218

 

Adjusted EBIT (3)

 

71,925

 

 

 

17,584

 

 

 

54,718

 

 

796

 

 

 

1,893

 

 

 

146,916

 

(3)
Excludes the noncontrolling interest portion of the restructuring gains within Steel Processing of $81.

 

Six Months Ended November 30, 2022

 

(in thousands)

Steel Processing

 

 

Consumer Products

 

 

Building Products

 

Sustainable Energy Solutions

 

 

Other

 

 

Consolidated

 

Net sales

$

1,880,827

 

 

$

342,497

 

 

$

291,994

 

$

68,888

 

 

$

-

 

 

$

2,584,206

 

Impairment of long-lived assets

 

312

 

 

 

-

 

 

 

-

 

 

-

 

 

 

-

 

 

 

312

 

Restructuring and other income, net

 

(4,205

)

 

 

-

 

 

 

-

 

 

-

 

 

 

(1,177

)

 

 

(5,382

)

Separation costs

 

-

 

 

 

-

 

 

 

-

 

 

-

 

 

 

9,246

 

 

 

9,246

 

Miscellaneous income (expense), net

 

1,035

 

 

 

(82

)

 

 

299

 

 

56

 

 

 

(4,989

)

 

 

(3,681

)

Equity in net income (loss) of unconsolidated affiliates

 

3,676

 

 

 

-

 

 

 

78,973

 

 

-

 

 

 

(14,080

)

 

 

68,569

 

Adjusted EBIT (4)(5)

 

17,663

 

 

 

34,406

 

 

 

93,959

 

 

(250

)

 

 

1,854

 

 

 

147,632

 

(4)
Excludes a non-cash settlement charge of $4,774 in miscellaneous income (expense), net within Other to accelerate a portion of deferred pension cost as a result of a pension lift-out transaction executed with a third-party insurance company to transfer a portion of the total projected benefit obligation of The Gerstenslager Company Bargaining Unit Employees’ Pension Plan to the third-party insurance company; excludes a loss of $15,759 in equity in net income (loss) of unconsolidated affiliates within Other related to the sale of the Company’s 50% noncontrolling equity investment in ArtiFlex effective August 3, 2022; excludes $1,050 in selling, general and administrative expense in Consumer Products related to incremental compensation expense attributable to the Level5 earnout; and excludes $9,246 of Separation costs in Other related to direct and incremental costs incurred in connection with the anticipated Separation, including audit, advisory, and legal costs.

14

Table of Contents

(5)
Excludes the noncontrolling interest portion of the impairment charge and restructuring gains within Steel Processing of $1,734.

 

Six Months Ended November 30, 2021

 

(in thousands)

Steel Processing

 

 

Consumer Products

 

 

Building Products

 

Sustainable Energy Solutions

 

 

Other

 

 

Consolidated

 

Net sales

$

1,760,652

 

 

$

288,576

 

 

$

235,868

 

$

58,583

 

 

$

-

 

 

$

2,343,679

 

Restructuring and other income, net

 

(12,313

)

 

 

-

 

 

 

-

 

 

(143

)

 

 

(1,822

)

 

 

(14,278

)

Miscellaneous income, net

 

47

 

 

 

209

 

 

 

144

 

 

22

 

 

 

1,248

 

 

 

1,670

 

Equity in net income of unconsolidated affiliates

 

18,172

 

 

 

-

 

 

 

92,887

 

 

-

 

 

 

2,075

 

 

 

113,134

 

Adjusted EBIT (6)

 

179,617

 

 

 

38,140

 

 

 

103,471

 

 

(1,760

)

 

 

1,479

 

 

 

320,947

 

(6)
Excludes the noncontrolling interest portion of the restructuring gains within Steel Processing of $6,027.

 

Total assets for each of our reportableoperating segments as of the dates indicated were as follows:

 

November 30,

 

 

May 31,

 

2021

 

 

2021

 

November 30,

 

May 31,

 

(in thousands)

2022

 

 

2022

 

Total assets

 

 

 

 

 

 

 

 

 

 

 

Steel Processing

$

1,858,313

 

 

$

1,359,598

 

$

1,796,136

 

 

$

2,082,522

 

Consumer Products

 

547,132

 

 

 

541,028

 

 

627,474

 

 

 

577,026

 

Building Products

 

615,755

 

 

 

664,113

 

 

645,566

 

 

 

681,188

 

Sustainable Energy Solutions

 

118,834

 

 

 

169,550

 

 

120,978

 

 

 

114,084

 

Other

 

377,598

 

 

 

638,956

 

 

200,506

 

 

 

188,203

 

Total assets

$

3,517,632

 

 

$

3,373,245

 

$

3,390,660

 

 

$

3,643,023

 

 

NOTENote P – Acquisitions

 

Shiloh Industries’ U.S. BlankLight®

Level5® Tools, LLC

On June 8, 2021, the Company’s Steel Processing reportable operating segment, along2, 2022, we acquired Level5® Tools, LLC ("Level5"), a leading provider of drywall tools and related accessories. The total purchase price was $59,321,000, including $2,000,000 attributed to an earnout agreement with the Company’s 55% consolidated joint venture TWB Company, L.L.C. (“TWB”), acquiredselling shareholders, that provides for up to an additional $25,000,000 of cash consideration should certain assetsearnings targets be met annually through calendar 2024. The earnout agreement also requires continued employment of a selling shareholder during the duration of the Shiloh Industries’ U.S. BlankLight® business (“Shiloh”)earnout period. Accordingly, payments to this key employee, to the extent earned, will be accounted for as post-combination compensation expense. During the three months and six months ended November 30, 2022, compensation expense of $525,000 and $1,050,000, a providerrespectively, has been accrued within selling, general, and administrative expense in the consolidated statements of laser welded solutions. The purchase price forearnings related to the acquisition was cash consideration of approximately $104,750,000, subject to closing adjustments.  The Shiloh businessearnout.

Level5 is being primarily operated by TWB and as part of the Steel ProcessingConsumer Products operating segment and its operating results have been included in the Company’sour consolidated statementstatements of earnings since the date of acquisition. Proforma results, including the acquired business since the beginning of fiscal 2021,2022, would not be materially different thanfrom the reported results.

The acquisition consisted of 3 laser welding facilities that are being operated as part of our TWB joint venture and 1 blanking facility that is operated as part of our core Steel Processing operations. Approximately $20,000,000 of the total goodwill relates to TWB, which will be treated as a separate reporting unit for purposes of goodwill impairment testing going forward.

 

The information included herein has been based on the preliminary allocation of the purchase price using estimates of the fair value and useful lives of the assets acquired. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets acquired is fully evaluated by the Company,us, including but not limited to, the fair value accounting.

 

The assets acquired and liabilities assumed were recognized at their estimated acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of Shiloh, the CompanyLevel5, we identified and valued the following intangible assets:

(in thousands)

 

 

 

 

 

Category

 

Amount

 

 

Useful Life (Years)

 

Customer relationships

 

$

34,500

 

 

15-20

 

Non-compete agreement

 

 

290

 

 

 

3

 

In-process research & development

 

 

1,300

 

 

Indefinite

 

Total acquired identifiable intangible assets

 

$

36,090

 

 

 

 

 


(in thousands)

 

 

 

 

 

Category

 

Amount

 

 

Useful Life (Years)

Trade name

 

$

13,500

 

 

Indefinite

Customer relationships

 

 

13,300

 

 

10

Technological know-how

 

 

6,500

 

 

20

Non-compete agreement

 

 

280

 

 

3

Total acquired identifiable intangible assets

 

$

33,580

 

 

 

 

15

Table of Contents

 

The purchase price includes the fair values of other assets that were not identifiable, not separately recognizable under applicable accounting rules (e.g., assembled workforce) or of immaterial value. The purchase price also includes strategic and synergistic benefits (investment value) specific to us, which resulted in a purchase price in excess of the fair value of the identifiable net assets. This additional investment value resulted in goodwill which will be deductible by the Companyus for income tax purposes.

 

The following table summarizes the consideration transferred and the estimated fair value assigned to the assets acquired and liabilities assumed at the acquisition date. These amounts reflect various preliminary fair value estimates and assumptions, including preliminary work performed by a third-party valuation specialist, and are subject to change within the measurement period as the valuation ifis finalized. The primary areas of preliminary purchase price allocation subject to change relate to the valuation of acquired tangible assets and liabilities, identification and valuation of residual goodwill and tax effects of acquired assets and assumed liabilities.

 

(in thousands)

 

Preliminary

Valuation

 

 

Measurement

Period

Adjustments

 

 

Revised

Valuation

 

 

Preliminary
Valuation

 

 

Measurement
Period
Adjustments

 

 

Revised
Valuation

 

Cash and cash equivalents

 

$

1,515

 

 

$

-

 

 

$

1,515

 

Accounts receivable

 

$

44,191

 

 

$

-

 

 

$

44,191

 

 

 

2,860

 

 

 

-

 

 

 

2,860

 

Inventories

 

 

13,971

 

 

 

-

 

 

 

13,971

 

 

 

9,161

 

 

 

-

 

 

 

9,161

 

Prepaid expenses

 

 

64

 

 

 

-

 

 

 

64

 

Property, plant and equipment

 

 

30,461

 

 

 

-

 

 

 

30,461

 

 

 

273

 

 

 

-

 

 

 

273

 

Intangible assets

 

 

34,280

 

 

 

1,810

 

 

 

36,090

 

 

 

33,580

 

 

 

-

 

 

 

33,580

 

Operating lease assets

 

 

59,905

 

 

 

-

 

 

 

59,905

 

 

 

377

 

 

 

-

 

 

 

377

 

Total identifiable assets

 

 

182,808

 

 

 

1,810

 

 

 

184,618

 

 

 

47,830

 

 

 

-

 

 

 

47,830

 

Accounts payable

 

 

(44,822

)

 

 

-

 

 

 

(44,822

)

 

 

(3,175

)

 

 

-

 

 

 

(3,175

)

Accrued expenses

 

 

(904

)

 

 

151

 

 

 

(753

)

Current operating lease liabilities

 

 

(1,555

)

 

 

-

 

 

 

(1,555

)

 

 

(111

)

 

 

-

 

 

 

(111

)

Noncurrent operating lease liabilities

 

 

(58,350

)

 

 

-

 

 

 

(58,350

)

 

 

(266

)

 

 

-

 

 

 

(266

)

Net identifiable assets

 

 

78,081

 

 

 

1,810

 

 

 

79,891

 

 

 

43,374

 

 

 

151

 

 

 

43,525

 

Goodwill

 

 

26,669

 

 

 

(1,810

)

 

 

24,859

 

 

 

15,947

 

 

 

-

 

 

 

15,947

 

Purchase price

 

$

104,750

 

 

$

-

 

 

$

104,750

 

Total purchase price

 

 

59,321

 

 

 

151

 

 

 

59,472

 

Less: Fair value of earnout

 

 

(2,000

)

 

 

-

 

 

 

(2,000

)

Plus: Net working capital deficit

 

 

282

 

 

 

(151

)

 

 

131

 

Cash purchase price

 

$

57,603

 

 

$

-

 

 

$

57,603

 

 

NOTENote Q – Derivative Financial Instruments and Hedging Activities

We utilize derivative financial instruments to primarily manage exposure to certain risks related to our ongoing operations. The primary risks managed through the use of derivative financial instruments include interest rate risk, foreign currency exchange rate risk and commodity price risk. While certain of our derivative financial instruments are designated as hedging instruments, we also enter into derivative financial instruments that are designed to hedge a risk, but are not designated as hedging instruments and, therefore, do not qualify for hedge accounting. These derivative financial instruments are adjusted to current fair value through earnings (loss) at the end of each period.

Interest Rate Risk Management – We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps and treasury locks to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.

Foreign Currency Exchange Rate Risk Management – We conduct business in several major international currencies and are, therefore, subject to risks associated with changing foreign currency exchange rates. We enter into various contracts that change in value as foreign currency exchange rates change to manage this exposure. Such contracts limit exposure to both favorable and unfavorable currency exchange rate fluctuations. The translation of foreign currencies into U.S. dollars also subjects us to exposure related to fluctuating currency exchange rates; however, derivative financial instruments are not used to manage this risk.

Commodity Price Risk Management – We are exposed to changes in the price of certain commodities, including steel, natural gas, copper, zinc and other raw materials, and our utility requirements. Our objective is to reduce earnings and cash flow volatility associated with forecasted purchases and sales of these commodities to allow management to focus its attention on business operations. Accordingly, we enter into derivative contractsfinancial instruments to manage the associated price risk.

16

Table of Contents

We are exposed to counterparty credit risk on all of our derivative financial instruments. Accordingly, we have established and maintain strict counterparty credit guidelines. We have credit support agreements in place with certain counterparties to limit our credit exposure. These agreements require either party to post cash collateral if its cumulative market position exceeds a predefined liability threshold. Amounts posted to the margin accounts accrue interest at market rates and are required to be refunded in the period in


which the cumulative market position falls below the required threshold. We do not have significant exposure to any one counterparty, and management believes the overall risk of loss is remote and, in any event, would not be material.

Refer to "NOTE“Note R – Fair Value"Value” for additional information regarding the accounting treatment for our derivative financial instruments, as well as how fair value is determined.

The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at November 30, 2021:2022:

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

Balance

 

 

 

 

 

Balance

 

 

 

 

 

Balance

 

 

 

Balance

 

 

 

 

Sheet

 

Fair

 

 

Sheet

 

Fair

 

 

Sheet

 

Fair

 

 

Sheet

 

Fair

 

(in thousands)

 

Location

 

Value

 

 

Location

 

Value

 

 

Location

 

Value

 

 

Location

 

Value

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

Receivables

 

$

660

 

 

Accounts payable

 

$

6,207

 

 

Receivables

 

$

140

 

 

Accounts payable

 

$

16,830

 

 

Other assets

 

 

-

 

 

Other liabilities

 

 

1,068

 

 

Other assets

 

 

-

 

 

Other liabilities

 

 

941

 

 

 

 

 

140

 

 

 

 

 

17,771

 

Foreign currency exchange contracts

 

Other assets

 

 

258

 

 

Accounts payable

 

 

-

 

Total

 

 

 

$

660

 

 

 

 

$

7,275

 

 

 

 

$

398

 

 

 

 

$

17,771

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

Commodity contracts

 

Receivables

 

$

8,555

 

 

Accounts payable

 

$

6,916

 

 

Receivables

 

$

4,622

 

 

Accounts payable

 

$

2,155

 

 

Other assets

 

 

313

 

 

Other liabilities

 

 

545

 

 

Other assets

 

 

18

 

 

Other liabilities

 

 

275

 

 

 

 

 

8,868

 

 

 

 

 

7,461

 

 

 

 

 

4,640

 

 

 

 

 

2,430

 

Foreign currency exchange contracts

 

Other assets

 

 

60

 

 

Accounts payable

 

 

390

 

 

Receivables

 

 

-

 

 

Accounts payable

 

 

94

 

Total

 

 

 

 

8,928

 

 

 

 

 

7,851

 

 

 

 

$

4,640

 

 

 

 

$

2,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivative instruments

 

 

 

$

9,588

 

 

 

 

$

15,126

 

Total derivative financial instruments

 

 

 

$

5,038

 

 

 

 

$

20,295

 

The amounts in the table above reflect the fair value of the Company’sour derivative financial instruments on a net basis where allowable under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been a $15,660,000$6,739,000 increase in “Receivables” with a corresponding increase in “Accounts payable”.payable.”

17

Table of Contents

The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at May 31, 2021:2022:

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

Balance

 

 

 

 

 

Balance

 

 

 

 

 

Balance

 

 

 

Balance

 

 

 

 

Sheet

 

Fair

 

 

Sheet

 

Fair

 

 

Sheet

 

Fair

 

 

Sheet

 

Fair

 

(in thousands)

 

Location

 

Value

 

 

Location

 

Value

 

 

Location

 

Value

 

 

Location

 

Value

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

Receivables

 

$

53,125

 

 

Accounts payable

 

$

-

 

 

Receivables

 

$

1,040

 

 

Accounts payable

 

$

4,517

 

 

Other assets

 

 

-

 

 

Other liabilities

 

 

48

 

 

 

 

 

1,040

 

 

 

 

 

4,565

 

Foreign currency exchange contracts

 

Receivables

 

 

-

 

 

Accounts payable

 

 

-

 

 

Other assets

 

 

-

 

 

Other liabilities

 

 

17

 

 

Other assets

 

 

23

 

 

Other liabilities

 

 

111

 

 

 

 

 

-

 

 

 

 

 

17

 

Total

 

 

 

$

53,148

 

 

 

 

$

111

 

 

 

 

$

1,040

 

 

 

 

$

4,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

Commodity contracts

 

Receivables

 

$

24,621

 

 

Accounts payable

 

$

14,554

 

 

Receivables

 

$

11,555

 

 

Accounts payable

 

$

4,142

 

 

Other assets

 

 

379

 

 

Other liabilities

 

 

-

 

 

Other assets

 

 

48

 

 

Other liabilities

 

 

24

 

 

 

 

 

25,000

 

 

 

 

 

14,554

 

 

 

 

 

11,603

 

 

 

 

 

4,166

 

Foreign currency exchange contracts

 

Receivables

 

 

-

 

 

Accounts payable

 

 

532

 

 

Receivables

 

 

-

 

 

Accounts payable

 

 

255

 

Total

 

 

 

$

25,000

 

 

 

 

$

15,086

 

 

 

 

$

11,603

 

 

 

 

$

4,421

 

Total derivative instruments

 

 

 

$

78,148

 

 

 

 

$

15,197

 

 

 

 

 

 

 

 

 

 

 

Total derivative financial instruments

 

 

 

$

12,643

 

 

 

 

$

9,003

 

The amounts in the table above reflect the fair value of the Company’sour derivative financial instruments on a net basis where allowable under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been a $16,594,000$6,300,000 increase in “Receivables” with a corresponding increase in “Accounts payable”.payable.”


 

Cash Flow Hedges

We enter into derivative financial instruments to hedge our exposure to changes in cash flows attributable to commodity price fluctuations associated with certain forecasted transactions. These derivative financial instruments are designated and qualify as cash flow hedges. The earnings effects of these derivative financial instruments are presented in the same statement of earnings line items as the earnings effects of the hedged items. For derivative financial instruments designated as cash flow hedges, the Company assesseswe assess hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative financial instruments.

The following table summarizes our cash flow hedges outstanding at November 30, 2021:2022:

 

 

Notional

 

 

 

 

Notional

 

 

(in thousands)

 

Amount

 

 

Maturity Date

 

Amount

 

 

Maturity Date

Commodity contracts

 

$

221,292

 

 

December 2021 - December 2022

 

$

114,516

 

 

December 2022 - December 2023

Foreign currency exchange contracts

 

 

6,082

 

 

December 2021 - March 2023

 

$

1,751

 

 

January 2023 - July 2023

18

Table of Contents

 

The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from AOCIAccumulated Other Comprehensive Income (Loss) (“AOCI”) into net earnings (loss) for derivative financial instruments designated as cash flow hedges for the periods presented:

 

(in thousands)

 

Gain (Loss)

Recognized in OCI

 

 

Location of Gain (Loss)

Reclassified from AOCI

into Net Earnings

 

Gain (Loss) Reclassified

from AOCI into

Net Earnings

 

 

Gain (Loss)
Recognized in OCI

 

 

Location of Gain (Loss)
Reclassified from AOCI
into Net Earnings

 

Gain (Loss) Reclassified
from AOCI into
Net Earnings

 

For the three months ended November 30, 2022:

For the three months ended November 30, 2022:

 

Commodity contracts

 

$

(19,641

)

 

Cost of goods sold

 

$

(13,648

)

Interest rate contracts

 

 

-

 

 

Interest expense

 

 

(7

)

Foreign currency exchange contracts

 

 

376

 

 

Net sales/Cost of goods sold

 

 

53

 

Total

 

$

(19,265

)

 

$

(13,602

)

 

 

 

 

 

 

For the three months ended November 30, 2021:

For the three months ended November 30, 2021:

 

For the three months ended November 30, 2021:

 

Commodity contracts

 

$

(21,002

)

 

Cost of goods sold

 

$

47,706

 

 

$

(21,002

)

 

Cost of goods sold

 

$

47,706

 

Interest rate contracts

 

 

-

 

 

Interest expense

 

 

27

 

 

 

-

 

 

Interest expense

 

 

27

 

Foreign currency exchange contracts

 

 

60

 

 

Miscellaneous income, net

 

 

3

 

 

 

60

 

 

Miscellaneous income, net

 

 

3

 

Total

 

$

(20,942

)

 

 

 

$

47,736

 

 

$

(20,942

)

 

$

47,736

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended November 30, 2020:

 

For the six months ended November 30, 2022:

For the six months ended November 30, 2022:

 

Commodity contracts

 

$

16,381

 

 

Cost of goods sold

 

$

(2,690

)

 

$

(36,099

)

 

Cost of goods sold

 

$

(13,192

)

Interest rate contracts

 

 

-

 

 

Interest expense

 

 

(470

)

 

 

-

 

 

Interest expense

 

 

(13

)

Foreign currency exchange contracts

 

 

58

 

 

Net sales/Cost of goods sold

 

 

(74

)

Total

 

$

16,381

 

 

 

 

$

(3,160

)

 

$

(36,041

)

 

$

(13,279

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended November 30, 2021:

For the six months ended November 30, 2021:

 

For the six months ended November 30, 2021:

 

Commodity contracts

 

$

14,218

 

 

Cost of goods sold

 

$

83,165

 

 

$

14,218

 

 

Cost of goods sold

 

$

83,165

 

Interest rate contracts

 

 

-

 

 

Interest expense

 

 

(13

)

 

 

-

 

 

Interest expense

 

 

(13

)

Foreign currency exchange contracts

 

 

61

 

 

Miscellaneous income, net

 

 

3

 

 

 

61

 

 

Miscellaneous income, net

 

 

3

 

Total

 

$

14,279

 

 

 

 

$

83,155

 

 

$

14,279

 

 

$

83,155

 

 

 

 

 

 

 

 

 

 

 

For the six months ended November 30, 2020:

 

Commodity contracts

 

$

16,765

 

 

Cost of goods sold

 

$

(5,331

)

Interest rate contracts

 

-

 

 

Interest expense

 

 

(697

)

Total

 

$

16,765

 

 

 

 

$

(6,028

)

 

The estimated net amount of the gainslosses recognized in AOCI at November 30, 20212022 expected to be reclassified into net earnings within the succeeding twelve months is $6,192,000$18,807,000 (net of tax of $2,798,000)$5,918,000). This amount was computed using the fair value of the cash flow hedges at November 30, 2021,2022, and will change before actual reclassification from OCI to net earnings during the fiscal years ending May 31, 20222023 and May 31, 2023.2024.


 

Economic (Non-designated) Hedges

We enter into foreign currency exchange contracts to manage our foreign currency exchange rate exposure related to inter-company and financing transactions that do not meet the requirements for hedge accounting treatment. We also enter into certain commodity contracts that do not qualify for hedge accounting treatment. Accordingly, these derivative financial instruments are adjusted to current market value at the end of each period through earningsgain (loss). recognized in earnings.

The following table summarizes our economic (non-designated) derivative financial instruments outstanding at November 30, 2021:2022:

 

 

Notional

 

 

 

 

Notional

 

 

(in thousands)

 

Amount

 

 

Maturity Date(s)

 

Amount

 

 

Maturity Date(s)

Commodity contracts

 

$

119,233

 

 

December 2021 - August 2023

 

$

5,100

 

 

December 2022 - December 2023

Foreign currency exchange contracts

 

 

(7,189

)

 

December 2021 - July 2022

 

$

15,096

 

 

December 2022

 

19

Table of Contents

The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments for the periods presented:

 

 

 

 

Gain (Loss) Recognized

 

 

 

 

 

In Earnings for the

 

 

 

Location of Gain (Loss)

 

Three Months Ended November 30,

 

(in thousands)

 

Recognized in Earnings

 

2022

 

 

2021

 

Commodity contracts

 

Cost of goods sold

 

$

3,861

 

 

$

(10,135

)

Foreign currency exchange contracts

 

Miscellaneous income, net

 

 

(47

)

 

 

(588

)

Total

 

 

 

$

3,814

 

 

$

(10,723

)

 

 

 

 

Gain (Loss) Recognized

 

 

 

 

 

in Earnings for the

 

 

 

Location of Gain (Loss)

 

Six Months Ended November 30,

 

(in thousands)

 

Recognized in Earnings

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

Cost of goods sold

 

$

2,284

 

 

$

(19,392

)

Foreign currency exchange contracts

 

Miscellaneous income, net

 

 

(141

)

 

 

(249

)

Total

 

 

 

$

2,143

 

 

$

(19,641

)

 

 

 

 

Gain (Loss) Recognized

 

 

 

 

 

In Earnings for the

 

 

 

Location of Gain (Loss)

 

Three Months Ended November 30,

 

(in thousands)

 

Recognized in Earnings

 

2021

 

 

2020

 

Commodity contracts

 

Cost of goods sold

 

$

(10,135

)

 

$

8,905

 

Foreign currency exchange contracts

 

Miscellaneous income, net

 

 

(588

)

 

 

1

 

Total

 

 

 

$

(10,723

)

 

$

8,906

 

 

 

 

 

Gain (Loss) Recognized

 

 

 

 

 

in Earnings for the

 

 

 

Location of Gain (Loss)

 

Six Months Ended November 30,

 

(in thousands)

 

Recognized in Earnings

 

2021

 

 

2020

 

Commodity contracts

 

Cost of goods sold

 

$

(19,392

)

 

$

12,198

 

Foreign currency exchange contracts

 

Miscellaneous income, net

 

 

(249

)

 

 

(73

)

Total

 

 

 

$

(19,641

)

 

$

12,125

 

NOTENote R – Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willing market participants and is required to be based on assumptions that market participants would use in pricing an asset or a liability. Current accounting guidance establishes a three-tier fair value hierarchy as a basis for considering such assumptions and for classifying the inputs used in the valuation methodologies. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

Level 1 – Observable prices in active markets for identical assets and liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.


 

Recurring Fair Value Measurements

 

At November 30, 2021,2022, our assets and liabilities measured at fair value on a recurring basis were as follows:

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

Quoted Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

Quoted Prices

 

Other

 

Significant

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

in Active

 

Observable

 

Unobservable

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

 

 

 

Markets

 

Inputs

 

Inputs

 

 

 

(in thousands)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Totals

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Totals

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments (1)

 

$

-

 

 

$

9,588

 

 

$

-

 

 

$

9,588

 

Derivative financial instruments (1)

 

$

-

 

 

$

5,038

 

 

$

-

 

 

$

5,038

 

Total assets

 

$

-

 

 

$

9,588

 

 

$

-

 

 

$

9,588

 

 

$

-

 

 

$

5,038

 

 

$

-

 

 

$

5,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments (1)

 

$

-

 

 

$

15,126

 

 

$

-

 

 

$

15,126

 

Derivative financial instruments (1)

 

$

-

 

 

$

20,295

 

 

$

-

 

 

$

20,295

 

Total liabilities

 

$

-

 

 

$

15,126

 

 

$

-

 

 

$

15,126

 

 

$

-

 

 

$

20,295

 

 

$

-

 

 

$

20,295

 

 

(1)
The fair value of our derivative financial instruments is based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows. Refer to “Note Q – Derivative Financial Instruments and Hedging Activities” for additional information regarding our use of derivative financial instruments.

20

Table of Contents

At May 31, 2021,2022, our assets and liabilities measured at fair value on a recurring basis were as follows:

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

 

(in thousands)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Totals

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments (1)

 

$

-

 

 

$

12,643

 

 

$

-

 

 

$

12,643

 

Total assets

 

$

-

 

 

$

12,643

 

 

$

-

 

 

$

12,643

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments (1)

 

$

-

 

 

$

9,003

 

 

$

-

 

 

$

9,003

 

Total liabilities

 

$

-

 

 

$

9,003

 

 

$

-

 

 

$

9,003

 

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

 

 

(in thousands)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Totals

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments (1)

 

$

-

 

 

$

78,148

 

 

$

-

 

 

$

78,148

 

Total assets

 

$

-

 

 

$

78,148

 

 

$

-

 

 

$

78,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative instruments (1)

 

$

-

 

 

$

15,197

 

 

$

-

 

 

$

15,197

 

Total liabilities

 

$

-

 

 

$

15,197

 

 

$

-

 

 

$

15,197

 

(1)
The fair value of our derivative financial instruments is based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows. Refer to “Note Q – Derivative Financial Instruments and Hedging Activities” for additional information regarding our use of derivative financial instruments.

 

Non-Recurring Fair Value Measurements

At November 30, 2022, there were no assets measured at fair value on a non-recurring basis on the Company’s consolidated balance sheet.

At May 31, 2022, our assets measured at fair value on a non-recurring basis were as follows:

 

 

 

 

 

Significant

 

 

 

 

 

 

 

 

 

Quoted Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

 

(in thousands)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Totals

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets held for sale (1)

 

$

-

 

 

$

700

 

 

$

-

 

 

$

700

 

Total assets

 

$

-

 

 

$

700

 

 

$

-

 

 

$

700

 

(1)
Comprised of production equipment at our Twinsburg, Ohio facility with an estimated fair market value of $700,000.

 

(1)

The fair value of our derivative instruments is based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities.  Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows.  Refer to “NOTE Q – Derivative Instruments and Hedging Activities” for additional information regarding our use of derivative instruments.

The fair value of non-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables, income taxes receivable, other assets, accounts payable, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities approximate carrying value due to their short-term nature. The fair value of long-term debt, including current maturities, based upon models utilizing market observable (Level 2) inputs and credit risk, was $771,923,000$646,856,000 and $792,632,000$684,830,000 at November 30, 20212022 and May 31, 2021,2022, respectively. The carrying amount of long-term debt, including current maturities, was $702,172,000$693,710,000 and $710,489,000$696,610,000 at November 30, 20212022 and May 31, 2021,2022, respectively.

NOTE S – Subsequent Events

On November 1, 2021, the Company signed an agreement to acquire all of the issued and outstanding capital stock of Tempel Steel Company (“Tempel”), effective December 1, 2021. The purchase price, after adjustments for preliminary working capital and closing cash, was $275 million plus the assumption of certain long-term liabilities and was funded primarily with cash on hand and some borrowing from the Company’s lines of credit.  Tempel is a leading manufacturer of precision motor and transformer laminations for the electrical steel market and is headquartered in Chicago, Illinois, with additional manufacturing locations in Burlington, Canada, Changzhou, China, Chennai, India and Monterrey, Mexico. The acquired business will be operated as part of our Steel Processing segment.


 

21

Table of Contents

 

Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Selected statements contained in this “Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” constitute “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Safe Harbor Statement” in the beginning of this Quarterly Report on Form 10-Q (this “Form 10-Q”) and “Part I – Item 1A. – Risk Factors” of the Annual Report on2022 Form 10-K for the fiscal year ended May 31, 2021 (“fiscal 2021”) of Worthington Industries, Inc. (the “Form 10-K”).10-K.

Unless otherwise indicated, all Note references contained in this Part I – Item 2. refer to the Condensed Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q.

Introduction

The following discussion and analysis of market and industry trends, business developments, and the results of operations and financial position of Worthington Industries, Inc., together with its subsidiaries (collectively, “we,” “our,” “us”, “Worthington,” or the “Company”), should be read in conjunction with our consolidated financial statements and notes thereto included in “Part I – Item 1. – Financial Statements” of this Quarterly Report on Form 10-Q. The 2022 Form 10-K includes additional information about Worthington, our operations and our consolidated financial position and should be read in conjunction with this Form 10-Q.

Our operations are managed principally on a products and services basis. Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes. Factors used to identify reportable operating segments include the nature of the products and services provided by each business, the management reporting structure, the similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance.

Effective June 1, 2021, we reorganized the management structure of our Pressure Cylinders business to better align around the end markets which it served.  As a result, these operations have been redefined under three new reportable operating segments: Consumer Products, Building Products and Sustainable Energy Solutions. These new reportable segments are in addition to our Steel Processing operating segment.  Concurrent with the change in reportable operating segments, we revised our prior period financial information to reflect comparable information for the new segment structure.  A discussion of each of these new reportable operating segments is included below:


Reportable Segments

Description

Consumer Products

The Consumer Products reportable segment is comprised of brands that offer market-leading products in the tools, outdoor living and celebrations end markets with brands that include Coleman®, Bernzomatic®, Balloon Time®, Mag Torch®, General®, Garden-Weasel®, Pactool International®, Hawkeye™ and Worthington Pro-Grade™.  This market sector includes propane-filled cylinders for torches, camping stoves and other applications, certain propane gas (LPG) cylinders, hand-held torches, Balloon Time® helium-filled balloon kits, and specialized hand tools and instruments.  These products are sold primarily to mass merchandisers, retailers and distributors. LPG cylinders, which hold fuel for barbeque grills and recreational vehicle equipment, are also sold through cylinder exchangers.

Building Products

The Building Products reportable segment includes refrigerant and LPG cylinders, well water and expansion tanks, and other specialty products. Cylinders in this market sector are generally sold to gas producers, and distributors. Refrigerant gas cylinders are used to hold refrigerant gases for commercial, residential, and automotive air conditioning and refrigeration systems. LPG cylinders hold fuel for residential and light commercial heating systems, industrial forklifts and commercial/residential cooking (the latter, generally outside North America).Well water tanks and expansion tanks are used in the residential market with the latter also sold into commercial markets. Specialty products include a variety of fire suppression and chemical tanks.

Sustainable Energy Solutions

The Sustainable Energy Solutions reportable segment, which is primarily based in Europe, includes on-board fueling systems and services, as well as gas containment solutions and services for storage, transport and distribution of industrial gases.  It includes high pressure and acetylene cylinders for life support cylinders and alternative fuel cylinders used to hold compressed natural gas (CNG) and hydrogen for automobiles, buses, and light-duty trucks.

Other

Divested businesses historically reported within Pressure Cylinders but no longer included in the Company’s management structure are presented within the "Other" category, on a historical basis, through the date of disposal.  For the periods presented, these include the following:  Structural Composites Industries, LLC (until March 2021); Oil & Gas Equipment (until January 2021); and Cryogenic Storage and Cryo-Science (until October 2020). The Other category also includes the results of our former Engineered Cabs operating segment, on a historical basis, through the date of disposition (November 1, 2019) as well as certain income and expense items not allocated to our operating segments.

As of November 30, 2021,2022, we held equity positions in nineseven operating joint ventures. FourThree of these joint ventures are consolidated within the Steel Processing operating segment with the equity owned by the other joint venture member(s) shown as noncontrolling interests in our consolidated balance sheets, and their portions of net earnings and other comprehensive income shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings (loss) and consolidated statements of comprehensive income, (loss), respectively. The remaining fivefour of our joint ventures are accounted for using the equity method.

Recent Business Developments

•

On June 8, 2021, the Company acquired certain assets of the Shiloh Industries U.S. BlankLight® business, a provider of laser welded solutions, for approximately $104.8 million, subject to closing adjustments. The acquisition included three facilities that will expand the capacity and capabilities of TWB’s laser welded products business and an additional blanking facility that will support the Company’s core steel processing operations.

•
On June 2, 2022, the Company acquired Level5® Tools, LLC (“Level5”), a leading provider of drywall tools and related accessories. The net cash purchase price was approximately $56.1 million, with a potential earnout of up to $25.0 million based on performance through 2024.

•

On June 9, 2021, the Company’s consolidated joint venture, WSP, sold the remaining assets of its Canton, Michigan, facility for approximately $20 million, resulting in a pre-tax gain of $12.1 million within restructuring and other (income) expense, net. WSP continues to operate locations in Jackson and Taylor, Michigan.

•

On August 20, 2021, the Company amended and restated its existing multi-year, revolving credit facility, extending the final maturity to August 20, 2026.  The aggregate commitments available under the amended and restated revolving credit facility remain at $500 million.  

•

On December 1, 2021, the Company acquired all of the issued and outstanding capital stock of Tempel Steel Company (“Tempel”), a leading manufacturer of precision motor and transformer laminations for the electrical steel market.  The purchase price consisted of cash consideration of approximately $275 million, after adjustments for estimated excess working capital and closing cash, plus the assumption of certain long-term liabilities.  The purchase price is subject to post-closing


•
On August 3, 2022, the Company sold its 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (“ArtiFlex”) to the unaffiliated joint venture member for approximately $42.1 million after adjustments for closing debt and final net working capital. Approximately $6.0 million of the total cash proceeds were attributed to real property in Wooster, Ohio, with a net book value of $6.3 million. This real property was owned by Worthington and leased to ArtiFlex prior to closing of the transaction. The Company recognized a pre-tax loss of approximately $15.8 million in equity income related to the sale of its 50% noncontrolling equity interest portion of the transaction.
•
On September 29, 2022, the Company announced that the Worthington Industries, Inc. Board of Directors approved a plan to pursue a separation of the Company’s Steel Processing business which it expects to complete by early 2024. In the months ahead, this plan will be referred to as “Worthington 2024.” Worthington 2024 will result in two independent, publicly-traded companies that are more specialized and fit-for-purpose, with enhanced prospects for growth and value creation. Worthington plans to effect the Separation via a distribution of stock of the Steel Processing business, which is expected to be tax-free to shareholders for U.S. federal income tax purposes. Refer to “Note A – Basis of Presentation” for additional information.
•
On October 31, 2022, the Company’s consolidated joint venture, WSP, sold its remaining manufacturing facility, located in Jackson, Michigan, for net proceeds of approximately $21.3 million, resulting in a pre-tax gain of $3.9 million within restructuring and other income, net. Refer to “Note F – Restructuring and Other Income, Net” for additional information.
•
On December 20, 2022, Worthington Industries, Inc’s Board of Directors declared a quarterly dividend of $0.31 per share payable on March 29, 2023, to shareholders of record on March 15, 2023.
•
On January 5, 2023 the Company announced the implementation of a Board of Directors transition plan, pursuant to which John H. McConnell II was appointed as a member of the Board of Directors, effective on January 4, 2023, and John P. McConnell intends to steps down in June 2023.

22

Table of Contents

 

 

adjustments and was funded primarily with existing cash and some borrowing from our lines of credit.  Tempel, which will operate as part of the Company’s Steel Processing business segment, employs approximately 1,500 people and is headquartered in Chicago, Illinois, with additional manufacturing locations in Burlington, Canada, Changzhou, China, Chennai, India and Monterrey, Mexico.  

•

During the first six months of fiscal 2022, the Company repurchased a total of 1,235,000 of its common shares for $73.6 million, at an average purchase price of $59.57.

•

On December 16, 2021, the Worthington Industries Inc. Board of Directors (the “Worthington Industries Board”) declared a quarterly dividend of $0.28 per share payable on March 29, 2022, to shareholders of record on March 15, 2022.

Market & Industry Overview

We sell our products and services to a diverse customer base and a broad range of end markets. The breakdown of net sales by end market for the second quarter of each of fiscal 20222023 and fiscal 20212022 is illustrated in the following chart:

img147394126_0.jpg 

The automotive industry is one of the largest consumers of flat-rolled steel, and thus the largest end market for our Steel Processing operating segment. Approximately 52%54% of Steel Processing’s net sales are to the automotive market. North American vehicle production, primarily by Ford, General Motors and Stellantis North America (the “Detroit Three automakers”), has a considerable impact on the activity within this operating segment. The majority of the net sales of twoone of our unconsolidated joint ventures, Serviacero Worthington, and ArtiFlex, areis also to the automotive market.

Approximately 22%11% of the net sales of our Steel Processing operating segment are to the construction market. The construction market is also the predominant end market for two of our unconsolidated joint ventures:ventures within the Building Products operating segment, WAVE and ClarkDietrich. While the market price of steel significantly impacts these businesses, there are other key indicators that are meaningful in analyzing construction market demand, including U.S. gross domestic product (“GDP”), the Dodge Index of construction contracts and, in the case of ClarkDietrich, trends in the relative priceprices of framing lumber and steel.

Substantially all of the net sales of our Consumer Products, Building Products, and Sustainable Energy Solutions operating segments and approximately 26%35% of the net sales of our Steel Processing operating segment are to other markets such as agricultural, appliance, consumer products, heavy truck,heavy-truck, industrial products, lawn and garden, and sustainable energy.garden. Given the many different products that make up these net sales and the wide variety of end markets, it is very difficult to detail the key market indicators that drive these portions of our business. However, we believe that the trend in U.S. GDP growth is a good economic indicator for analyzing the demand of these end markets.


 

We use the following information to monitor our costs and demand in our major end markets:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

November 30,

 

 

November 30,

 

 

 

2022

 

 

2021

 

 

Inc / (Dec)

 

 

2022

 

 

2021

 

 

Inc / (Dec)

 

U.S. GDP (% growth year-over-year) (1)

 

 

1.8

%

 

 

5.0

%

 

 

(3.2

%)

 

 

2.1

%

 

 

4.9

%

 

 

(2.8

%)

Hot-Rolled Steel ($ per ton) (2)

 

$

742

 

 

$

1,888

 

 

$

(1,146

)

 

$

860

 

 

$

1,825

 

 

$

(965

)

Detroit Three Auto Build (000's vehicles) (3)

 

 

1,711

 

 

 

1,481

 

 

 

230

 

 

 

3,472

 

 

 

2,856

 

 

 

616

 

No. America Auto Build (000's vehicles) (3)

 

 

3,713

 

 

 

3,170

 

 

 

544

 

 

 

7,341

 

 

 

6,413

 

 

 

928

 

Zinc ($ per pound) (4)

 

$

1.36

 

 

$

1.46

 

 

$

(0.10

)

 

$

1.46

 

 

$

1.41

 

 

$

0.05

 

Natural Gas ($ per mcf) (5)

 

$

6.77

 

 

$

5.26

 

 

$

1.51

 

 

$

7.32

 

 

$

4.47

 

 

$

2.85

 

On-Highway Diesel Fuel Prices ($ per gallon) (6)

 

$

4.26

 

 

$

3.57

 

 

$

0.69

 

 

$

4.84

 

 

$

3.45

 

 

$

1.39

 

(1)2021 figures based on revised actuals; (2)CRU Hot-Rolled Index, period average; (3)IHS Global; (4)LME Zinc, period average; (5)NYMEX Henry Hub Natural Gas, period average; (6)Energy Information Administration, period average

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

November 30,

 

 

November 30,

 

 

 

2021

 

 

2020

 

 

Inc / (Dec)

 

 

2021

 

 

2020

 

 

Inc / (Dec)

 

U.S. GDP (% growth (decline) year-over-year) 1

 

 

7.2

%

 

 

(3.0

%)

 

 

10.2

%

 

 

7.7

%

 

 

(3.4

%)

 

 

11.1

%

Hot-Rolled Steel ($ per ton) 2

 

$

1,888

 

 

$

625

 

 

$

1,263

 

 

$

1,825

 

 

$

550

 

 

$

1,275

 

Detroit Three Auto Build (000's vehicles) 3

 

 

1,481

 

 

 

1,868

 

 

 

(387

)

 

 

2,856

 

 

 

3,718

 

 

 

(862

)

No. America Auto Build (000's vehicles) 3

 

 

3,170

 

 

 

4,076

 

 

 

(906

)

 

 

6,413

 

 

 

7,834

 

 

 

(1,421

)

Zinc ($ per pound) 4

 

$

1.46

 

 

$

1.11

 

 

$

0.35

 

 

$

1.41

 

 

$

1.03

 

 

$

0.38

 

Natural Gas ($ per mcf) 5

 

$

5.26

 

 

$

2.64

 

 

$

2.62

 

 

$

4.47

 

 

$

2.28

 

 

$

2.19

 

On-Highway Diesel Fuel Prices ($ per gallon) 6

 

$

3.57

 

 

$

2.41

 

 

$

1.16

 

 

$

3.45

 

 

$

2.42

 

 

$

1.03

 

23

Table of Contents

1

2020 figures based on revised actuals 2CRU Hot-Rolled Index; period average 3IHS Global 4LME Zinc; period average 5NYMEX Henry Hub Natural Gas; period average 6Energy Information Administration; period average

U.S. GDP growth rate trends are generally indicative of the strength in demand and, in many cases, pricing for our products. A year-over-year increase in U.S. GDP growth rates is indicative of a stronger economy, which generally increases demand and pricing for our products. Conversely, decreasingdeclining U.S. GDP growth rates generally indicate a weaker economy. Changes in U.S. GDP growth rates can also signal changes in conversion costs related to production and in selling, general and administrative expense.(“SG&A”) expenses.

The market price of hot-rolled steel is one of the most significant factors impacting our selling prices and operating results. When steel prices fall, we typically have higher-priced material flowing through cost of goods sold, while selling prices compress to what the market will bear, negatively impacting our results. On the other hand, in a rising price environment, our results are generally favorably impacted, as lower-priced material purchased in previous periods flows through cost of goods sold, while our selling prices increase at a faster pace to cover current replacement costs. Based on the recent decline in steel prices,current price levels, we expect to have meaningful inventory holding losses in the third quarter of fiscal 2022.2023.

The following table presents the average quarterly market price per ton of hot-rolled steel during fiscal 20222023 (first and second quarters), fiscal 20212022 and fiscal 2020:2021:

 

 

Fiscal Year

 

(Dollars per ton)(1)

 

2023

 

 

2022

 

 

2021

 

1st Quarter

 

$

978

 

 

$

1,762

 

 

$

475

 

2nd Quarter

 

$

742

 

 

$

1,888

 

 

$

625

 

3rd Quarter

 

N/A

 

 

$

1,421

 

 

$

1,016

 

4th Quarter

 

N/A

 

 

$

1,280

 

 

$

1,358

 

Annual Avg.

 

$

860

 

 

$

1,588

 

 

$

869

 

 

 

Fiscal Year

 

(Dollars per ton 1 )

 

2022

 

 

2021

 

 

2020

 

1st Quarter

 

$

1,762

 

 

$

475

 

 

$

564

 

2nd Quarter

 

$

1,888

 

 

$

625

 

 

$

526

 

3rd Quarter

 

N/A

 

 

$

1,016

 

 

$

571

 

4th Quarter

 

N/A

 

 

$

1,358

 

 

$

527

 

Annual Avg.

 

$

1,825

 

 

$

869

 

 

$

547

 

(1)
CRU Hot-Rolled Index, period average

 

1

CRU Hot-Rolled Index; period average

Sales to one Steel Processing customer in the automotive industry represented 15.6%12.3% and 13.8%15.6% of consolidated net sales during the second quarter of fiscal 20222023 and fiscal 2021,2022, respectively. While our automotive business is largely driven by the production schedules of the Detroit Three automakers, our customer base is much broader and includes other domestic manufacturers and many of their suppliers. During the second quarter of fiscal 2022,2023, vehicle production for the Detroit Three automakers was down 21% fromand the first quarter of fiscal 2021, while North American vehicle production as a whole was down 22%.were up 16% and 17%, respectively, over the prior year quarter.

Certain other commodities, such as zinc, natural gas and diesel fuel, represent a significant portion of our cost of goods sold, both directly through our plant operations and indirectly through transportation and freight expense.


 

Results of Operations

Second Quarter – Fiscal 20222023 Compared to Fiscal 20212022

 

The following discussion provides a review of results for the three months ended November 30, 20212022 and 2020.2021.

 

 

Three Months Ended

 

 

November 30,

 

(Dollars in millions)

2021

 

 

2020

 

 

Increase/

(Decrease)

 

Net sales

$

1,232.8

 

 

$

731.1

 

 

$

501.7

 

Operating income

 

90.5

 

 

 

37.4

 

 

 

53.1

 

Equity income

 

60.2

 

 

 

25.6

 

 

 

34.6

 

Net earnings (loss) attributable to controlling interest

 

110.3

 

 

 

(74.0

)

 

 

184.3

 

Earnings (loss) per diluted share attributable to controlling interest

 

2.15

 

 

 

(1.40

)

 

 

3.55

 

 

Three Months Ended

 

 

November 30,

 

(In millions, except per share amounts)

2022

 

 

2021

 

 

Increase/
(Decrease)

 

Net sales

$

1,175.5

 

 

$

1,232.9

 

 

$

(57.4

)

Operating income (loss)

 

(7.0

)

 

 

90.5

 

 

 

(97.5

)

Equity income

 

36.9

 

 

 

60.2

 

 

 

(23.3

)

Net earnings attributable to controlling interest

 

16.2

 

 

 

110.3

 

 

 

(94.1

)

Earnings per diluted share attributable to controlling interest

$

0.33

 

 

$

2.15

 

 

$

(1.82

)

24

Table of Contents

Net Sales and Volume

The following table provides the percentagea breakdown of our consolidated net sales by reportable operating segment, along with the respective percentage of the total consolidated net sales of each, for the three months ended November 30, 2021 and 2020.

 

Three Months Ended

 

 

 

November 30,

 

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

 

(In millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

 

Steel Processing

$

937.8

 

 

 

76.1

%

 

$

468.7

 

 

 

64.1

%

 

$

469.1

 

 

Consumer Products

 

140.8

 

 

 

11.4

%

 

 

117.5

 

 

 

16.1

%

 

 

23.3

 

 

Building Products

 

121.1

 

 

 

9.8

%

 

 

94.0

 

 

 

12.9

%

 

 

27.1

 

 

Sustainable Energy Solutions

 

33.1

 

 

 

2.7

%

 

 

34.0

 

 

 

4.7

%

 

 

(0.9

)

 

Other

 

-

 

 

 

0.0

%

 

 

16.9

 

 

 

2.3

%

 

 

(16.9

)

 

   Consolidated Net Sales

$

1,232.8

 

 

 

100.0

%

 

$

731.1

 

 

 

100.0

%

 

$

501.7

 

 

periods indicated.

 

Three Months Ended

 

 

 

November 30,

 

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

Increase/

 

 

(In millions)

2022

 

 

Net sales

 

 

2021

 

 

Net sales

 

 

(Decrease)

 

 

Steel Processing

$

841.9

 

 

 

71.6

%

 

$

937.8

 

 

 

76.1

%

 

$

(95.9

)

 

Consumer Products

 

153.8

 

 

 

13.1

%

 

 

140.8

 

 

 

11.4

%

 

 

13.0

 

 

Building Products

 

141.7

 

 

 

12.1

%

 

 

121.1

 

 

 

9.8

%

 

 

20.6

 

 

Sustainable Energy Solutions

 

38.1

 

 

 

3.2

%

 

 

33.1

 

 

 

2.7

%

 

 

5.0

 

 

Other

 

-

 

 

 

0.0

%

 

 

-

 

 

 

0.0

%

 

 

-

 

 

Consolidated Net Sales

$

1,175.5

 

 

 

100.0

%

 

$

1,232.8

 

 

 

100.0

%

 

$

(57.3

)

 

The following table provides volume by reportable businessoperating segment for the three months ended November 30, 2021 and 2020.periods presented.

 

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

 

2022

 

 

2021

 

 

(Decrease)

 

Steel Processing (Tons)

 

925,434

 

 

 

1,067,589

 

 

 

(142,155

)

Consumer Products (Units)

 

16,583,326

 

 

 

18,698,589

 

 

 

(2,115,263

)

Building Products (Units)

 

2,367,770

 

 

 

2,565,025

 

 

 

(197,255

)

Sustainable Energy Solutions (Units)

 

155,687

 

 

 

155,001

 

 

 

686

 

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase/

 

 

2021

 

 

2020

 

 

(Decrease)

 

Steel Processing (Tons)

 

1,067,589

 

 

 

1,023,979

 

 

 

43,610

 

Consumer Products (Units)

 

18,698,589

 

 

 

16,657,815

 

 

 

2,040,774

 

Building Products (Units)

 

2,565,025

 

 

 

2,264,576

 

 

 

300,449

 

Sustainable Energy Solutions (Units)

 

155,001

 

 

 

247,289

 

 

 

(92,288

)

Other (Units)

 

-

 

 

 

11,066

 

 

 

(11,066

)

•

•

Steel Processing – Net sales almost doubled over the prior year quarter to $937.8 million.  The increase was driven by higher

Steel Processing – Net sales decreased $95.9 million from the prior year quarter. The decrease was driven primarily by lower average selling prices, and to a lesser extent, lower tolling volume, partially offset by contributions from the acquisition of Tempel on December 1, 2021. The mix of direct versus toll tons processed was 54% to 46% in the Shiloh Industries U.S. BlankLight® business on June 8, 2021.

current quarter, compared to 47% to 53% in the prior year quarter. The shift in mix towards direct tons was driven primarily by lower tolling volume with the steel mills and the exit of our consolidated joint venture, WSP.•

Consumer Products – Net sales increased 19.8%, or $23.3 million, over the prior year quarter.  The increase was driven primarily by the acquisition of General Tools & Instruments Company LLC in the third quarter of fiscal 2021, and to a lesser extent, higher average selling prices.

•

Building Products – Net sales increased 28.8%, or $27.1 million, over the prior year quarter. The increase was driven by higher average selling prices ($21.8 million) and higher volume ($11.9 million), partially offset by an unfavorable shift in product mix. Volume in the prior year quarter was at depressed levels due to the impact of the COVID-19 pandemic.


•
Consumer Products – Net sales increased 9.2%, or $13.0 million, over the prior year quarter as higher average selling prices more than offset the impact of lower overall volumes, which were down 13%, excluding contributions from the Level 5 acquisition. End consumer demand began to slow during the quarter, which when combined with reduced inventory levels at certain retail customers, led to lower overall customer orders.
•
Building Products – Net sales increased 17.0%, or $20.6 million over the prior year quarter. The increase was driven primarily by higher average selling prices, partially offset by lower volumes. Units shipped were down 8% as customers reduced orders due to higher than optimal inventory levels.
•
Sustainable Energy Solutions – Net sales increased $5.0 million, or 15.1%, from the prior year quarter due to the combined impact of increased volume and higher average selling prices.

Gross Margin

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2022

 

 

Net sales

 

 

2021

 

 

Net sales

 

 

(Decrease)

 

Gross Margin

$

105.8

 

 

 

9.0

%

 

$

184.6

 

 

 

15.0

%

 

$

(78.8

)

25

Table of Contents

 

•
Gross margin decreased $78.8 million from the prior year quarter to $105.8 million due primarily to lower contributions from Steel Processing, down $79.7 million, as declining steel prices resulted in an estimated $95.2 million unfavorable swing related to estimated inventory holding losses in the current quarter compared to estimated inventory holding gains in the prior year quarter.

 

•

Sustainable Energy Solutions – Net sales decreased $0.9 million, or 2.7%, from the prior year quarter.  The decrease was driven by lower volume, which was negatively impacted by the May 31, 2021 divestiture of the Liquified Petroleum Gas (“LPG”) business in Poland, as well as the ongoing semi-conductor chip shortage.

Gross Margin

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

Gross Margin

$

184.6

 

 

 

15.0

%

 

$

135.5

 

 

 

18.5

%

 

$

49.1

 

•

Gross margin increased $49.1 million over the prior year quarter to $184.6 million.  The improvement over the prior year quarter was primarily due to improved spreads in Steel Processing and, to a lesser extent, higher overall volume across all operating segments except Sustainable Energy Solutions.

Selling, General and Administrative Expense

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2022

 

 

Net sales

 

 

2021

 

 

Net sales

 

 

(Decrease)

 

Selling, general and administrative expense

$

107.8

 

 

 

9.2

%

 

$

96.1

 

 

 

7.8

%

 

$

11.7

 

 

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

Selling, general and administrative expense

$

96.1

 

 

 

7.8

%

 

$

82.1

 

 

 

11.2

%

 

$

14.0

 

•
SG&A expense increased $11.7 million over the prior year quarter due primarily to the impact of acquisitions, partially offset by lower profit sharing and bonus accruals.

•

SG&A expense increased $14.0 million over the prior year quarter.  The increase was driven primarily by higher profit sharing and bonus expense to correspond with the increase in earnings over the prior year quarter.

Other Operating Costs

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

Impairment of long-lived assets

$

-

 

 

$

3.8

 

 

$

(3.8

)

Restructuring and other (income) expense, net

 

(2.0

)

 

 

7.6

 

 

 

(9.6

)

Incremental expenses related to Nikola gains

 

-

 

 

 

4.6

 

 

 

(4.6

)

•

There were no impairment charges recorded in the second quarter of fiscal 2022. Impairment charges in the prior year quarter related primarily to the Company’s former cryogenics business in Theodore, Alabama, which was sold in October 2020.

•

Restructuring activity during the three months ended November 30, 2021 related primarily to the Company’s exit from the former Cabs facility located in Stow, Ohio which generated a pre-tax gain of $1.8 million within restructuring and other (income) expense, net.  Restructuring activity in the prior year quarter primarily resulted from a $7.6 million pre-tax loss within the historical Pressure Cylinders segment on the sale of the former cryogenics business previously operated out of Theodore, Alabama.

•

Incremental expenses related to Nikola gains of $4.6 million in the prior year quarter consisted of discretionary profit sharing and bonus expenses related to the Company’s investment in Nikola.


 

Other Operating Costs/Income

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

Restructuring and other income, net

$

4.3

 

 

$

2.0

 

 

$

2.3

 

Separation costs

 

9.2

 

 

 

-

 

 

 

9.2

 

•
Restructuring and other income, net in both periods was driven by gains realized from the sale of long-lived assets, including a $3.9 million pre-tax gain in the current year quarter related to the sale of our WSP joint venture’s facility in Jackson, Michigan and a $1.8 million pre-tax gain in the prior year quarter related to our exit from the former Cabs facility located in Stow, Ohio. Refer to “Note F – Restructuring and Other Income, Net” for additional information.
•
Separation costs of $9.2 million reflect direct and incremental costs incurred in connection with the planned Separation of the Company’s Steel Processing business, including audit, advisory, and legal costs. Refer to “Note A - Basis of Presentation” for additional information.

 

Equity Income

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

WAVE

$

19.0

 

 

$

22.4

 

 

$

(3.4

)

ClarkDietrich

 

16.1

 

 

 

27.5

 

 

 

(11.4

)

Serviacero Worthington

 

1.9

 

 

 

8.8

 

 

 

(6.9

)

ArtiFlex (1)

 

-

 

 

 

1.8

 

 

 

(1.8

)

Workhorse

 

(0.2

)

 

 

(0.3

)

 

 

0.1

 

Total Equity Income

$

36.8

 

 

$

60.2

 

 

$

(23.4

)

(1)
On August 3, 2022, the Company sold its 50% equity interest in ArtiFlex.

•
Equity income from unconsolidated joint ventures decreased $23.4 million from the prior year quarter to $36.8 million, driven primarily by lower contributions from ClarkDietrich and Serviacero Worthington.

26

Table of Contents

 

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

  WAVE

$

22.4

 

 

$

17.3

 

 

$

5.1

 

  ClarkDietrich

 

27.5

 

 

 

5.4

 

 

 

22.1

 

  Serviacero Worthington

 

8.8

 

 

 

1.9

 

 

 

6.9

 

  ArtiFlex

 

1.8

 

 

 

1.2

 

 

 

0.6

 

  Other

 

(0.3

)

 

 

(0.2

)

 

 

(0.1

)

   Total Equity Income

$

60.2

 

 

$

25.6

 

 

$

34.6

 

Other income

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

Miscellaneous income, net

$

1.4

 

 

$

1.0

 

 

$

0.4

 

 

•

Equity income increased $34.6 million over the prior year quarter to $60.2 million.  The increase was driven by higher contributions from ClarkDietrich, WAVE, and Serviacero Worthington, up a total of $34.1 million due to the favorable actions taken by management to address higher steel prices combined with strong volume. The Company received cash distributions of $28.9 million from unconsolidated joint ventures during the current quarter.

Other Income

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

Miscellaneous income, net

$

1.0

 

 

$

0.4

 

 

$

0.6

 

Gains (loss) on investment in Nikola

 

-

 

 

 

(143.8

)

 

 

143.8

 

•

During the prior year quarter, the Company recognized a pre-tax loss of $143.8 million comprised of mark-to-market losses, resulting from the $20.40 drop in the share price of Nikola common stock during the three months ended November 30, 2020.

Adjusted EBIT

We evaluate operating segment performance based on adjusted earnings (loss) before interest and taxes (“adjusted EBIT”). In general, adjustedEBIT is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest. Adjusted EBIT excludes impairment and restructuring charges (gains), but may also exclude other items that management believes are not reflective of, and thus should not be included when evaluating, the performance of our ongoing operations, including direct and incremental costs incurred in connection with the planned Separation of the Company’s ongoing operations.Steel Processing business. Adjusted EBIT is a non-GAAP measure and is used by management to evaluate segment performance, engage in financial and operational planning and determine incentive compensation because we believe that this measure provides additional perspective and, in some circumstances is more closely correlated to, the performance of the Company’sour ongoing operations. Refer to “Note O – Segment Operations” for additional information regarding our reportable operating segments.  


 

The following table provides a reconciliation of consolidated net earnings (loss) attributable to controlling interest to adjusted EBIT for the periods presented:

 

 

Three Months Ended

 

 

November 30,

 

(In millions)

2022

 

 

2021

 

Net earnings attributable to controlling interest

$

16.2

 

 

$

110.3

 

Interest expense

 

7.6

 

 

 

7.3

 

Income tax expense

 

4.1

 

 

 

31.2

 

Earnings before interest and taxes

$

27.9

 

 

$

148.8

 

Incremental expense related to Level5 earnout

 

0.5

 

 

 

-

 

Restructuring and other income, net (1)

 

(2.3

)

 

 

(1.9

)

Separation costs

 

9.2

 

 

 

-

 

Adjusted earnings before interest and taxes

$

35.3

 

 

$

146.9

 

 

Three Months Ended

 

 

November 30,

 

(In millions)

2021

 

 

2020

 

Net earnings (loss) attributable to controlling interest

$

110.3

 

 

$

(74.0

)

Interest expense

 

7.3

 

 

 

7.5

 

Income tax expense (benefit)

 

31.2

 

 

 

(19.4

)

Earnings (loss) before interest and taxes

$

148.8

 

 

$

(85.9

)

Impairment of long-lived assets

 

-

 

 

 

3.8

 

Restructuring and other (income) expense, net (1)

 

(1.9

)

 

 

7.4

 

Incremental expenses related to Nikola gains

 

-

 

 

 

4.6

 

Loss on investment in Nikola

 

-

 

 

 

143.8

 

Adjusted earnings before interest and taxes (1)

$

146.9

 

 

$

73.7

 

(1) Excludes the impact of the noncontrolling interests.

 

(1)
Excludes the impact of the noncontrolling interests.

 

The following table provides a summary of adjusted EBIT by segment for the periods presented.

 

Three Months Ended

 

Three Months Ended

 

November 30,

 

November 30,

 

 

 

 

 

 

 

 

 

Increase/

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

2022

 

 

2021

 

 

(Decrease)

 

Steel Processing

 

71.9

 

 

 

34.4

 

 

 

37.5

 

$

(17.2

)

 

$

71.9

 

 

$

(89.1

)

Consumer Products

 

17.6

 

 

 

17.4

 

 

 

0.2

 

 

13.5

 

 

 

17.6

 

 

 

(4.1

)

Building Products

 

54.7

 

 

 

26.0

 

 

 

28.7

 

 

41.2

 

 

 

54.7

 

 

 

(13.5

)

Sustainable Energy Solutions

 

0.8

 

 

 

1.5

 

 

 

(0.7

)

 

1.1

 

 

 

0.8

 

 

 

0.3

 

Other

 

1.9

 

 

 

(5.6

)

 

 

7.5

 

 

(3.3

)

 

 

1.9

 

 

 

(5.2

)

Total Adjusted EBIT

$

146.9

 

 

$

73.7

 

 

 

73.2

 

$

35.3

 

 

$

146.9

 

 

$

(111.6

)

 

•

Steel Processing – Adjusted EBIT was down $89.1 million from the prior year quarter to a loss of $17.2 million on lower contributions of both operating income and equity income. Excluding restructuring, operating income was down $84.5 million from the prior year quarter driven primarily by an estimated $95.2 million unfavorable swing related to estimated inventory holding losses of $53.1 million in the current quarter compared to estimated inventory holding gains of $42.1 in the prior year quarter. Adjusted EBIT was also negatively impacted by lower equity income from Serviacero Worthington, down $6.9 million from the prior year quarter, as lower steel prices reduced spreads.•

Steel Processing – Adjusted EBIT was up $37.5 million over the prior year quarter to $71.9 million on improved operating results and a higher contribution of equity income from Serviacero Worthington, which was up $6.9 million due to the favorable impact of higher steel prices.  Direct spreads in the current quarter benefited from significant inventory holding gains, estimated to be $42.1 million in the current quarter, compared to immaterial inventory holding gains in the prior year quarter, partially offset by a higher gap in the current quarter between the cost of steel and scrap prices.  The mix of direct versus toll tons processed was 47% to 53% in the current quarter, compared to 48% to 52% in the prior year quarter.  

•

Consumer Products – Adjusted EBIT was up $0.2 million over the prior year quarter to $17.6 million, as higher material and conversion costs largely offset the impact of higher net sales.

•

Building Products – Adjusted EBIT of $54.7 million was $28.7 million more than the prior year quarter, due primarily to higher equity earnings at ClarkDietrich and WAVE, up $27.2 million on strong volume and the favorable impact of higher steel prices.  Operating income was up $1.4 million on the combined impact of higher volume and higher average selling prices, partially offset by an increase in labor and material costs.  Volume in the prior year quarter had been at depressed levels due to the COVID-19 pandemic.

•

Sustainable Energy Solutions – Adjusted EBIT was $0.8 million compared to $1.5 million in the prior year quarter, on the combined impact of lower volume and an unfavorable product mix.  Both volume and mix in the current quarter were negatively impacted by the effect the ongoing semi-conductor chip shortage had on this segment’s customers in the transportation business.  Volume in the current quarter was also negatively impacted by the May 31, 2021, divestiture of the Liquified Petroleum Gas business in Poland.  This business continues to evolve as it transitions to serve the global hydrogen ecosystem and adjacent sustainable energies.


27

Table of Contents

•
Consumer Products – Adjusted EBIT was down $4.1 million in the current quarter to $13.5 million, as the favorable impact of higher average selling prices was more than offset by lower volumes and higher input and production costs including $0.7 million of incremental material cost related to the remaining Level5 inventory that was written-up to fair value at acquisition.
•
Building Products – Adjusted EBIT decreased $13.5 million from the prior year quarter to $41.2 million, on lower contributions of equity income, down $14.8 million from the strong results in the prior year quarter, partially offset by a $1.4 million increase in operating income driven by higher average selling prices and a favorable product mix.
•
Sustainable Energy Solutions – Adjusted EBIT increased $0.3 million over the prior year quarter to $1.1 million on the favorable impact of higher average selling prices, partially offset by higher production costs and an unfavorable product mix.

Interest Expense

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

Interest Expense

$

7.6

 

 

$

7.3

 

 

$

0.3

 

•
Interest expense was $7.6 million in the current quarter, up $0.3 million over the prior year quarter due to the impact of higher average debt levels associated with short-term borrowings.

 

Income Taxes

 

Three Months Ended

 

 

November 30,

 

(In millions)

2022

 

 

Effective Tax Rate

 

 

2021

 

 

Effective Tax Rate

 

 

Increase/
(Decrease)

 

Income tax expense

$

4.1

 

 

 

23.7

%

 

$

31.2

 

 

 

22.8

%

 

$

(27.1

)

•
Income tax expense was $4.1 million in the current quarter compared to income tax expense of $31.2 million in the prior year quarter. The decrease was driven by lower pre-tax earnings. Tax expense in the current quarter reflected an estimated annual effective rate of 23.7% compared to 22.8% for the prior year quarter. For additional information regarding our income taxes, refer to “Note M – Income Taxes”.

 

Interest Expense

 

Three Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

Interest Expense

$

7.3

 

 

$

7.5

 

 

$

(0.2

)

•

Interest expense of $7.3 million for the current quarter was down slightly, compared to $7.5 million in the prior year quarter, primarily due to favorable exchange rates on our euro-denominated debt.

Income Taxes

 

Three Months Ended

 

 

November 30,

 

(In millions)

2021

 

 

Effective Tax Rate

 

 

2020

 

 

Effective Tax Rate

 

 

Increase/

(Decrease)

 

Income tax expense (benefit)

$

31.2

 

 

 

22.8

%

 

$

(19.4

)

 

 

21.5

%

 

$

50.6

 

•

Income tax expense was $31.2 million in the current quarter compared to an income tax benefit of $19.4 million in the prior year quarter.  The change was driven by higher pre-tax earnings in the current quarter and the impact of the unrealized mark-to-market loss related to the Company’s investment in Nikola in the prior year quarter.  Tax expense in the current quarter reflected an estimated annual effective rate of 22.8% compared to 21.5% for the prior year quarter.  For additional information regarding the Company’s income taxes, refer to “NOTE M – Income Taxes”.

Six Months Year-to-dateYear-to-Date – Fiscal 2022 Compared2023 compared to Fiscal 20212022

 

The following discussion provides a review of results for the six months ended November 30, 20212022 and 2020.2021.

 

Six Months Ended

 

November 30,

 

Six Months Ended

 

(Dollars in millions)

2021

 

 

2020

 

 

Increase/

(Decrease)

 

November 30,

 

(In millions, except per share amounts)

2022

 

 

2021

 

 

Increase/
(Decrease)

 

Net sales

$

2,343.7

 

 

$

1,434.0

 

 

$

909.7

 

$

2,584.2

 

 

$

2,343.7

 

 

$

240.5

 

Operating income

 

226.3

 

 

 

7.3

 

 

 

219.0

 

 

59.7

 

 

 

226.3

 

 

 

(166.6

)

Equity income

 

113.1

 

 

 

49.2

 

 

 

63.9

 

 

68.6

 

 

 

113.1

 

 

 

(44.5

)

Net earnings attributable to controlling interest

 

242.8

 

 

 

542.7

 

 

 

(299.9

)

 

80.3

 

 

 

242.8

 

 

 

(162.5

)

Earnings per diluted share attributable to controlling interest

 

4.71

 

 

 

9.97

 

 

 

(5.26

)

$

1.63

 

 

$

4.71

 

 

 

(3.08

)

28

Table of Contents

Net Sales and Volume

The following table provides the percentagea breakdown of our consolidated net sales by reportable operating segment, along with the respective percentage of the total consolidated net sales represented by each, for the six months ended November 30, 2021 and 2020.periods indicated.

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

% of

 

 

 

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2021

 

 

Net sales

 

 

2020

 

 

 

 

Net sales

 

 

(Decrease)

 

Steel Processing

$

1,760.7

 

 

 

75.1

%

 

$

899.7

 

 

 

 

 

62.7

%

 

$

861.0

 

Consumer Products

 

288.6

 

 

 

12.3

%

 

 

251.1

 

 

 

 

 

17.5

%

 

 

37.5

 

Building Products

 

235.9

 

 

 

10.1

%

 

 

182.1

 

 

 

 

 

12.7

%

 

 

53.8

 

Sustainable Energy Solutions

 

58.6

 

 

 

2.5

%

 

 

61.9

 

 

 

 

 

4.3

%

 

 

(3.3

)

Other

 

-

 

 

 

0.0

%

 

 

39.2

 

 

 

 

 

2.7

%

 

 

(39.2

)

   Consolidated Net Sales

$

2,343.8

 

 

 

100.0

%

 

$

1,434.0

 

 

 

 

 

100.0

%

 

$

909.8

 


 

Six Months Ended

 

 

November 30,

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2022

 

 

Net sales

 

 

2021

 

 

Net sales

 

 

(Decrease)

 

Steel Processing

$

1,880.8

 

 

 

72.8

%

 

$

1,760.7

 

 

 

75.1

%

 

$

120.1

 

Consumer Products

 

342.5

 

 

 

13.3

%

 

 

288.6

 

 

 

12.3

%

 

 

53.9

 

Building Products

 

292.0

 

 

 

11.3

%

 

 

235.9

 

 

 

10.1

%

 

 

56.1

 

Sustainable Energy Solutions

 

68.9

 

 

 

2.7

%

 

 

58.6

 

 

 

2.5

%

 

 

10.3

 

Other

 

-

 

 

 

0.0

%

 

 

-

 

 

 

0.0

%

 

 

-

 

Consolidated Net Sales

$

2,584.2

 

 

 

100.0

%

 

$

2,343.8

 

 

 

100.0

%

 

$

240.4

 

 

The following table provides volume by reportable businessoperating segment for the six months ended November 30,periods presented.

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

 

2022

 

 

2021

 

 

(Decrease)

 

Steel Processing (Tons)

 

1,900,083

 

 

 

2,129,877

 

 

 

(229,794

)

Consumer Products (Units)

 

38,966,668

 

 

 

40,086,729

 

 

 

(1,120,061

)

Building Products (Units)

 

5,289,933

 

 

 

5,450,736

 

 

 

(160,803

)

Sustainable Energy Solutions (Units)

 

288,820

 

 

 

285,677

 

 

 

3,143

 

•
Steel Processing – Net sales increased $120.1 million over the prior year period. The increase was driven primarily by contributions from Tempel, which was acquired on December 1, 2021, partially offset by lower average selling prices and 2020.

lower tolling volumes. The mix of direct versus toll tons processed was 56% to 44% in the current year period, compared to 48% to 52% in the prior year period. The shift in mix towards direct tons was driven primarily by lower tolling volume with the steel mills and the exit of our consolidated toll processing joint venture, WSP.

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

 

2021

 

 

2020

 

 

(Decrease)

 

Steel Processing (Tons)

 

2,129,877

 

 

 

1,952,423

 

 

 

177,454

 

Consumer Products (Units)

 

40,086,729

 

 

 

35,478,377

 

 

 

4,608,352

 

Building Products (Units)

 

5,450,736

 

 

 

4,986,611

 

 

 

464,125

 

Sustainable Energy Solutions (Units)

 

285,677

 

 

 

437,197

 

 

 

(151,520

)

Other (Units)

 

-

 

 

 

21,626

 

 

 

(21,626

)

•
Consumer Products – Net sales increased 18.7%, or $53.9 million, over the prior year period. The increase was driven by higher average selling prices, and, to a lesser extent, contributions from the June 2, 2022 acquisition of Level5. Excluding Level5 units shipped in the current period, overall volumes were down 5% as retail customers reduced inventory levels resulting in lower customer orders.
•
Building Products – Net sales increased 23.8%, or $56.1 million, over the prior year period. The increase was driven primarily by higher average selling prices, partially offset by lower volumes.
•
Sustainable Energy Solutions – Net sales increased $10.3 million, or 17.6%, over the prior year period due to the combined impact of increased volume and higher average selling prices.

•

Steel Processing – Net sales almost doubled over the prior year period to $1,760.7 million. The increase was driven by higher average selling prices, and contributions from the acquisition of the Shiloh Industries U.S. BlankLight® business on June 8, 2021.

•

Consumer Products – Net sales increased 14.9%, or $37.5 million, over the prior year period.  The increase was driven primarily by higher volume due, in large part, to the acquisition of General Tools & Instruments Company LLC in the third quarter of fiscal 2021.

•

Building Products – Net sales increased 29.5%, or $53.8 million, over the prior year period. The increase was driven by higher average selling prices ($37.8 million) and to a lesser extent higher volume ($16.0 million), which were at depressed levels in the prior year period due to the COVID-19 pandemic.

•

Sustainable Energy Solutions – Net sales decreased $3.3 million, or 5.3%, from the prior year period.  The decrease was driven primarily by lower volume, which was negatively impacted by the May 31, 2021 divestiture of the LPG business in Poland as well as the ongoing semi-conductor chip shortage.

Gross Margin

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2022

 

 

Net sales

 

 

2021

 

 

Net sales

 

 

(Decrease)

 

Gross Margin

$

275.1

 

 

 

10.6

%

 

$

404.0

 

 

 

17.2

%

 

$

(128.9

)

29

Table of Contents

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

Gross Margin

$

404.0

 

 

 

17.2

%

 

$

248.8

 

 

 

17.4

%

 

$

155.2

 

•
Gross margin decreased $128.9 million from the prior year period to $275.1 million, due primarily to lower contributions from Steel Processing, down $137.8 million, as declining steel prices resulted in an estimated $143.7 million unfavorable swing from prior year estimated inventory holding gains to current year estimated holding losses.

 

•

Gross margin increased $155.2 million over the prior year period to $404.0 million.  The improvement over the prior year period was primarily due to improved spreads in Steel Processing and, to a lesser extent, higher overall volume across all operating segments except Sustainable Energy Solutions.

Selling, General and Administrative Expense

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

% of

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2022

 

 

Net sales

 

 

2021

 

 

Net sales

 

 

(Decrease)

 

Selling, general and administrative expense

$

211.3

 

 

 

8.2

%

 

$

192.0

 

 

 

8.2

%

 

$

19.3

 

 

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

Selling, general and administrative expense

$

192.0

 

 

 

8.2

%

 

$

164.3

 

 

 

11.5

%

 

$

27.7

 

•
SG&A expense increased $19.3 million over the prior year period due primarily to the impact of acquisitions, partially offset by lower profit sharing and bonus expense.

•

SG&A expense increased $27.7 million over the prior year period.  The increase was driven primarily by higher profit sharing and bonus expense to correspond with the increase in operating income over the prior year period.


 

Other Operating CostsCosts/Income

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

Impairment of long-lived assets

$

0.3

 

 

$

-

 

 

$

0.3

 

Restructuring and other income, net

 

3.9

 

 

 

14.3

 

 

 

(10.4

)

Separation costs

 

9.2

 

 

 

-

 

 

 

(9.2

)

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

Impairment of long-lived assets

$

-

 

 

$

13.7

 

 

$

(13.7

)

Restructuring and other (income) expense, net

 

(14.3

)

 

 

9.4

 

 

 

(23.7

)

Incremental expenses related to Nikola gains

 

-

 

 

 

54.1

 

 

 

(54.1

)

•

There were no impairment charges recorded during the current period. Impairment charges in the prior year period related primarily to the write-down of certain assets in the Company’s former cryogenics and oil and gas businesses.

•

Restructuring activity during the six months ended November 30, 2021, related primarily to the divestiture of the WSP joint venture’s facilities in Canton, Michigan, which generated a pre-tax gain of $12.1 million within restructuring and other (income) expense, net and our exit from the former Cabs facility located in Stow, Ohio, which generated a pre-tax gain of $1.8 million within restructuring and other (income) expense, net.  Restructuring activity in the prior year period primarily resulted from a $7.1 million pre-tax loss within the historical Pressure Cylinders segment on the sale of the former cryogenics business previously operated out of Theodore, Alabama and severance expense in connection with the reduction in workforce in Steel Processing related to the impact of COVID-19.

•

Incremental expenses related to Nikola gains of $54.1 million consisted of $33.5 million of discretionary profit sharing and bonus expenses directly related to the Nikola gains and $20.6 million for the contribution of 500,000 shares of Nikola common stock to the Worthington Industries Foundation.

Equity Income

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

  WAVE

$

48.1

 

 

$

35.0

 

 

$

13.1

 

  ClarkDietrich

 

44.8

 

 

 

10.3

 

 

 

34.5

 

  Serviacero Worthington

 

18.1

 

 

 

3.2

 

 

 

14.9

 

  ArtiFlex

 

3.0

 

 

 

1.1

 

 

 

1.9

 

  Other

 

(0.9

)

 

 

(0.4

)

 

 

(0.5

)

   Total Equity Income

$

113.1

 

 

$

49.2

 

 

$

63.9

 

•

Equity income increased $63.9 million over the prior year period to $113.1 million.  The increase was driven by higher contributions from ClarkDietrich, WAVE, and Serviacero Worthington, up a combined $62.5 million on strong volume and the favorable impact of higher steel prices. The Company received cash distributions of $48.6 million from unconsolidated joint ventures during the current year period.

Other Income

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

Miscellaneous income, net

$

1.7

 

 

$

0.8

 

 

$

0.9

 

Gains on investment in Nikola

 

-

 

 

 

652.3

 

 

 

(652.3

)

•

Gains on investment in Nikola totaled $652.3 million and consisted of $508.5 million of realized gains from the sale and charitable contribution of the Company’s Nikola shares in the first quarter of fiscal 2021 combined with a $143.8 million


 

•
Impairment of long-lived assets in the current year period was driven by our commitment to a plan to sell certain fixed assets at our Samuel joint venture’s facility in Cleveland, Ohio that were written down to fair value less cost to sell.
•
Restructuring and other income, net in the current year period was driven by gains realized from the sale of long-lived assets, including a $3.9 million gain realized from the sale of WSP’s manufacturing facility in Jackson, Michigan. Refer to “Note F – Restructuring and Other Income, Net” for additional information.
•
Separation costs of $9.2 million reflect direct and incremental costs incurred in connection with the planned Separation of the Company’s Steel Processing business, including audit, advisory, and legal costs. Refer to “Note A - Basis of Presentation” for additional information.

Equity Income

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

WAVE

$

42.8

 

 

$

48.1

 

 

$

(5.3

)

ClarkDietrich

 

36.2

 

 

 

44.8

 

 

 

(8.6

)

Serviacero Worthington

 

3.7

 

 

 

18.1

 

 

 

(14.4

)

ArtiFlex

 

(13.4

)

 

 

3.0

 

 

 

(16.4

)

Workhorse

 

(0.7

)

 

 

(0.9

)

 

 

0.2

 

Total Equity Income

$

68.6

 

 

$

113.1

 

 

$

(44.5

)

•
Equity income decreased $44.5 million from the prior year period to $68.6 million. The decrease was driven by a $15.8 million pre-tax loss related to the sale of our noncontrolling equity interest in ArtiFlex and lower contributions from WAVE, ClarkDietrich, and Serviacero Worthington.

30

Table of Contents

Other income (expense)

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

Miscellaneous income (expense), net

$

(3.7

)

 

$

1.7

 

 

$

(5.4

)

•
Miscellaneous expense in the current year period was driven primarily by the annuitization of a portion of the total projected benefit obligation of the inactive Gerstenslager Company Bargaining Unit Employees’ Pension Plan, which resulted in a pre-tax, non-cash settlement charge of $4.8 million to accelerate a portion of deferred pension cost.

 

unrealized gain related to the 7,048,020 shares of Nikola common stock the Company continued to own at November 30, 2020.

Adjusted EBIT

The following table provides a reconciliation of consolidated net earnings (loss) attributable to controlling interest to adjusted EBIT for the periods presented:

 

 

Six Months Ended

 

 

November 30,

 

(In millions)

2022

 

 

2021

 

Net earnings attributable to controlling interest

$

80.3

 

 

$

242.8

 

Interest expense

 

16.2

 

 

 

15.0

 

Income tax expense

 

23.6

 

 

 

71.4

 

Earnings before interest and taxes

$

120.1

 

 

$

329.2

 

Incremental expense related to Level5 earnout

 

1.1

 

 

$

-

 

Impairment of long-lived assets (1)

 

0.2

 

 

 

-

 

Restructuring and other income, net (1)

 

(3.6

)

 

 

(8.3

)

Separation costs

 

9.2

 

 

 

-

 

Pension settlement charge

 

4.8

 

 

 

-

 

Loss on sale of investment in ArtiFlex

 

15.8

 

 

 

-

 

Adjusted earnings before interest and taxes (1)

$

147.6

 

 

$

320.9

 

 

Six Months Ended

 

 

November 30,

 

(In millions)

2021

 

 

2020

 

Net earnings attributable to controlling interest

$

242.8

 

 

$

542.6

 

Interest expense

 

15.0

 

 

 

15.1

 

Income tax expense

 

71.4

 

 

 

144.3

 

Earnings before interest and taxes

$

329.2

 

 

$

702.0

 

Impairment of long-lived assets

 

-

 

 

 

13.7

 

Restructuring and other (income) expense, net (1)

 

(8.3

)

 

 

9.3

 

Incremental expenses related to Nikola gains

 

-

 

 

 

54.1

 

Gains on investment in Nikola

 

-

 

 

 

(652.4

)

Adjusted earnings before interest and taxes (1)

$

320.9

 

 

$

126.7

 

(1) Excludes the impact of the noncontrolling interests.

 

(1)
Excludes the impact of the noncontrolling interests.

 

The following table provides a summary of adjusted EBIT by segment for the periods presented.

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

Steel Processing

$

179.6

 

 

$

48.6

 

 

$

131.0

 

Consumer Products

 

38.1

 

 

 

41.3

 

 

 

(3.2

)

Building Products

 

103.5

 

 

 

49.3

 

 

 

54.2

 

Sustainable Energy Solutions

 

(1.8

)

 

 

1.0

 

 

 

(2.8

)

Other

 

1.5

 

 

 

(13.5

)

 

 

15.0

 

   Total Adjusted EBIT

$

320.9

 

 

$

126.7

 

 

 

194.2

 

•

Steel Processing – Adjusted EBIT was up $131.0 million over the prior year period to $179.6 million on improved operating results and a higher contribution of equity income from Serviacero Worthington, which was up $14.9 million due to the favorable impact of higher steel prices.  Direct spreads in the current year period benefited from significant inventory holding gains, estimated to be $89.1 million, compared to inventory holding losses in the prior year period of $6.6 million, partially offset by a higher gap in the current year period between the cost of steel and scrap prices.  The mix of direct versus toll tons processed was 48% to 52% in the current year period, compared to 49% to 51% in the prior year period.  

•

Consumer Products – Adjusted EBIT was down $3.2 million over the prior year period to $38.1 million as higher material and conversion costs more than offset the impact of higher net sales.

•

Building Products – Adjusted EBIT of $103.5 million was $54.2 million more than the prior year period, due primarily to higher equity earnings at ClarkDietrich and WAVE, up $47.7 million on strong volume and the favorable impact of higher steel prices.  Operating income was up $7.7 million on the combined impact of higher volume and higher average selling prices, partially offset by an increase in labor and material costs.  Volume in the prior year period had been at depressed levels due to the COVID-19 pandemic.

•

Sustainable Energy Solutions – Adjusted EBIT reflected a loss of $1.8 million, unfavorable by $2.8 million when compared to the prior year period, on the combined impact of lower volume, and an unfavorable product mix.  Both volume and mix in the current period were negatively impacted by the ongoing semi-conductor chip shortage.  Volume in the current period was also negatively impacted by the May 31, 2021, divestiture of the LPG business in Poland.   


 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

Steel Processing

$

17.7

 

 

$

179.6

 

 

$

(161.9

)

Consumer Products

 

34.4

 

 

 

38.1

 

 

 

(3.7

)

Building Products

 

94.0

 

 

 

103.5

 

 

 

(9.5

)

Sustainable Energy Solutions

 

(0.3

)

 

 

(1.8

)

 

 

1.5

 

Other

 

1.8

 

 

 

1.5

 

 

 

0.3

 

Total Adjusted EBIT

$

147.6

 

 

$

320.9

 

 

 

(173.3

)

 

•
Steel Processing – Adjusted EBIT was down $161.9 million from the prior year period to $17.7 million, on lower contributions of both operating income and equity income. Excluding restructuring, operating income was down $151.9 million from the prior year period driven primarily by an estimated $143.7 million unfavorable swing related to estimated inventory holding losses of $54.6 million in the current year period compared to estimated inventory holding gains of $89.1 million in the prior year period. Adjusted EBIT was also negatively impacted by lower equity income at Serviacero Worthington, down $14.4 million from the prior year period, as lower steel prices reduced spreads.

31

Table of Contents

•
Consumer Products – Adjusted EBIT was down $3.7 million from the prior year period to $34.4 million as the favorable impact of higher average selling prices was more than offset by lower volumes and higher input and production costs, including $2.7 million of incremental material cost related to Level 5 inventory that was written-up to fair value at acquisition. Adjusted EBIT was also negatively impacted by higher SG&A expense, up $9.9 million, primarily on the impact of the Level5 acquisition.
•
Building Products – Adjusted EBIT decreased $9.5 million from the prior year period to $94.0 million, on lower contributions of equity income, which were down $13.9 million, partially offset by a $4.3 million increase in operating income driven by higher average selling prices and a favorable product mix.
•
Sustainable Energy Solutions – Adjusted EBIT was a loss of $0.3 million, favorable by $1.5 million compared to the prior year period, driven by increased volume and higher average selling prices, partially offset by higher production costs and an unfavorable product mix.

Interest Expense

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2022

 

 

2021

 

 

(Decrease)

 

Interest Expense

$

16.2

 

 

$

15.0

 

 

$

1.2

 

 

Six Months Ended

 

 

November 30,

 

 

 

 

 

 

 

 

 

 

Increase/

 

(In millions)

2021

 

 

2020

 

 

(Decrease)

 

Interest Expense

$

15.0

 

 

$

15.1

 

 

$

(0.1

)

•
Interest expense was $16.2 million in the current year period, up $1.2 million over the prior year period due to the impact of higher average debt levels associated with short-term borrowings.

 

•

Interest expense of $15.0 million for the current year period was down slightly, compared to $15.1 million in the prior year period, primarily due to favorable exchange rates on our euro-denominated debt.

Income Taxes

 

Six Months Ended

 

 

November 30,

 

(In millions)

2022

 

 

Effective Tax Rate

 

 

2021

 

 

Effective Tax Rate

 

 

Increase/
(Decrease)

 

Income tax expense

$

23.6

 

 

 

23.7

%

 

$

71.4

 

 

 

22.8

%

 

$

(47.8

)

 

Six Months Ended

 

 

November 30,

 

(In millions)

2021

 

 

Effective Tax Rate

 

 

2020

 

 

Effective Tax Rate

 

 

Increase/

(Decrease)

 

Income tax expense

$

71.4

 

 

 

22.8

%

 

$

144.3

 

 

 

21.5

%

 

$

(72.9

)

•
Income tax expense was down $47.8 million in the current year period to $23.6 million. The decrease was driven primarily by lower pre-tax earnings. Tax expense in the current year period reflected an estimated annual effective rate of 23.7% compared to 22.8% for the prior year period. For additional information regarding our income taxes, refer to “Note M – Income Taxes”.

•

Income tax expense decreased $72.9 million from the comparable period in the prior year due to the impact of the Nikola gains and associated expenses in the prior year period, partially offset by higher pre-tax earnings in the current year period. The current year period tax expense reflected an estimated annual effective income tax rate of 22.8% versus 21.5% in the prior year period. For additional information regarding the Company’s income taxes, refer to “NOTE M – Income Taxes”.

Liquidity and Capital Resources

During the six months ended November 30, 20212022, we generated $214.0 million of cash from operating activities, invested $48.2$46.0 million in property, plant and equipment, and paid $104.8spent $56.1 million to acquire certainLevel5, and generated net cash proceeds of $71.6 million from the sale of assets, including $36.1 million from the sale of the Shiloh Industries U.S BlankLight ® business.our noncontrolling equity interest in ArtiFlex. Additionally, Worthington Industries, Inc. acquired 1,235,000we repaid $43.1 million of its common shares at a cost of $73.6 millionshort-term borrowings and paid dividends of $29.3$29.1 million on Worthington Industries, Inc.’s common shares. The following table summarizes our consolidated cash flows for the periods presented:

 

Six Months Ended

 

Six Months Ended

 

November 30,

 

November 30,

 

(in millions)

2021

 

 

2020

 

2022

 

 

2021

 

Net cash (used) provided by operating activities

$

(168.9

)

 

$

224.8

 

Net cash (used) provided by investing activities

 

(124.1

)

 

 

460.4

 

Net cash provided (used) by operating activities

$

214.0

 

 

$

(168.9

)

Net cash used by investing activities

 

(30.7

)

 

 

(124.1

)

Net cash used by financing activities

 

(122.1

)

 

 

(119.3

)

 

(88.2

)

 

 

(122.1

)

(Decrease) increase in cash and cash equivalents

 

(415.1

)

 

 

565.9

 

Increase (decrease) in cash and cash equivalents

 

95.1

 

 

 

(415.1

)

Cash and cash equivalents at beginning of period

 

640.3

 

 

 

147.2

 

 

34.5

 

 

 

640.3

 

Cash and cash equivalents at end of period

$

225.2

 

 

$

713.1

 

$

129.6

 

 

$

225.2

 

 

As disclosed previously in “NOTE S – Subsequent Events”, the Company closed its acquisition32

Table of Tempel Steel Company on December 1, 2021, for approximately $275 million, which was funded primarily with existing cash and some borrowing from our lines of credit.  Following the acquisition, we continue toContents

We believe that the available borrowing capacity of our committed linesline of credit is sufficient to meet the needs of our existing businesses for normal operating costs, mandatory capital expenditures, debt redemptions, dividend payments, and working capital, to the extent not funded by cash provided by operating activities.    activities, for at least 12 months and for the foreseeable future thereafter, and expenditures related to the Separation of our Steel Processing business.

 

Although we do not currently anticipate a need based on our current operating structure, we also believe that we could access the financial markets to be in a position to sell long-term debt or equity securities to strengthen our liquidity or capital resources.securities. However, lingering supply chain disruptions and other challenges caused by the COVID-19 pandemic supply chain issues, labor shortages and other national and globalsoftening economic conditions could create uncertainty and volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so. As the impact of such challenges on the economy and our operations is evolving, we will continue to review our discretionary spending and other variable costs as well as our liquidity needs.

We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. We are also in the process of evaluating our post-Separation capital structure. Should we seek such additional capital, there can be no assurance that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing or additional equity could increase our interest cost and/or dilute the interests of our existing shareholders.


shareholders and/or increase our interest costs. We may also from time to time seek to retire or repurchase our outstanding debt through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in such transaction may or may not be material.

 

Operating Activities

Our business is cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic and industry conditions. We rely on cash and short-term borrowings to meet cyclical increases in working capital needs. These needs generally rise during periods of increased economic activity or increasing raw material prices, requiring higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.

Net cash usedprovided by operating activities was $214.0 million during the six months ended November 30, 2022, compared to a net operating cash outflow of $168.9 million during the six months ended November 30, 2021, a decrease of $393.7 million from the net cash provided by operating activities in the prior year period.2021. This decreasechange was primarily due to a $490.4$451.9 million increasedecrease in net operating working capital (accounts receivable, inventory,inventories, and accounts payable) requirements over the prior year-to-dateyear six-month period, mainly driven by higherthe impact of lower average steel prices.

Investing Activities

Net cash used by investing activities was $124.1$30.7 million during the six months ended November 30, 20212022 compared to net cash provided by investing activities of $460.4$124.1 million induring the prior year period. Net cash providedused by investing activities in the prior year period resulted primarily from proceeds fromcash used to acquire certain assets of the sale of Nikola shares which totaled $487.9Shiloh Industries’ U.S BlankLight ® business on June 8, 2021, for $104.8 million. Net cash used by investing activities in the current year period resulted primarily from the purchase of the Shiloh Industries U.S BlankLight ®Level5 business on June 8, 2021,2, 2022, for $104.8 million.  Capital$56.1 million, net of cash acquired, and capital expenditures in the current year period totaled $48.2of $46.0 million, a decreasepartially offset by combined cash proceeds of $0.7$71.4 million from the prior year period.sale of our equity investment in ArtiFlex, and the sale of our WSP Jackson, Michigan facility and other long-lived assets.

Investment activities are largely discretionary, and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant. We assess acquisition opportunities as they arise, and such opportunities may require additional financing. There can be no assurance, however, that any such opportunities will arise, that any such acquisition opportunities will be consummated, or that any needed additional financing will be available on satisfactory terms if required.

Financing Activities

Net cash used by financing activities was $122.1$88.2 million during the six months ended November 30, 20212022 compared to $119.3$122.1 million in the prior year period. DuringThe change was primarily due to $43.1 million of net repayments of short-term borrowings in the six months ended November 30, 2021, Worthington Industries, Inc. paid $73.6 million tocurrent year period and the repurchase of 1,235,000 common shares of Worthington Industries, Inc.’s common shares and paid dividends, at a cost of $29.3$73.6 million, on Worthington Industries, Inc.’s common shares. Duringin the six months ended November 30, 2020, we paid $92.9 million to repurchase 2,318,464 of Worthington Industries, Inc.’s common shares and paid dividends of $26.8 million on Worthington Industries, Inc.’s common shares.prior year period.

Long-term debt and short-term borrowings – As of November 30, 2021, we were in compliance with our short-term and long-term financial debt covenants.  Our debt agreements do not include credit rating triggers or material adverse change provisions.Our credit ratings at November 30, 2021 were unchanged from those reported as of May 31, 2021.

Common shares – On September 29, 2021,December 20, 2022, the Worthington Industries, Inc. Board of Directors (the “Worthington Industries Board”) declared a quarterly dividend of $0.28 per common share payable on December 29, 2021, to shareholders of record on December 15, 2021.  This represented a $0.03 per common share increase over the dividend paid in the prior year quarter.  On December 16, 2021, the Worthington Industries Board declared a quarterly dividend for the third quarter of fiscal 2022 of $0.28$0.31 per share payable on March 29, 2022,2023, to shareholders of record on March 15, 2022.   2023.

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On March 20, 2019, the Worthington Industries, Inc. Board of Directors authorized the repurchase of up to 6,600,000 of Worthington Industries, Inc.’s outstanding common shares.  These

On March 24, 2021, the Worthington Industries, Inc. Board of Directors authorized the repurchase of up to an additional 5,618,464 common shares, increasing the total number of common shares then authorized for repurchase to 10,000,000. As of November 30, 2022, 6,065,000 common shares remained available for repurchase under these two authorizations.

The common shares available for repurchase under the authorizations currently in effect may be repurchased from time to time, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flows from operations, general economic conditions and other relevant considerations. Repurchases may be made on the open market or through privately negotiated transactions.  On March 24, 2021, the Worthington Industries Board authorized the repurchase of up to an additional 5,618,464 of Worthington Industries, Inc.’s common shares, increasing the total number of common shares then authorized for repurchase to 10,000,000.

Long-term debt and short-term borrowings – As of November 30, 2021, 8,065,000 common shares remained2022, we were in compliance with the financial covenants of our short-term and long-term financial debt agreements. Our debt agreements do not include credit rating triggers or material adverse change provisions. During the first quarter of fiscal 2023, our credit rating was upgraded from Baa3 to Baa2 by Moody’s Investors Service, Inc. There were no outstanding borrowings drawn against our AR Facility at November 30, 2022, leaving the full borrowing capacity of $175.0 million available for repurchasefuture use. This is in addition to $500.0 million of short-term borrowing capacity available under these authorizations.


our Credit Facility.

 

Dividend Policy

We currently have no material contractual or regulatory restrictions on the payment of dividends. Dividends are declared at the discretion of the Worthington Industries, Board.Inc. Board of Directors. The Worthington Industries, Inc. Board of Directors reviews the dividend quarterly and establishes the dividend rate based upon our consolidated financial condition, results of operations, capital requirements, current and projected cash flows, business prospects, and other relevant factors. While we have paid a dividend every quarter since becoming a public company in 1968, there is no guarantee that payments will continue in the future.

Contractual Cash Obligations and Other Commercial Commitments

Our contractual cash obligations and other commercial commitments have not materially changed from those disclosed in “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Cash Obligations and Other Commercial Commitments” of the Form 10-K.

Off-Balance Sheet Arrangements

We do not have guarantees or other off-balance sheet financing arrangements that we believe are reasonably likely to have a material current or future effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.  

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates, including those related to our valuation of receivables, inventories, intangible assets, accrued liabilities, income and other tax accruals, contingencies and litigation, and business combinations. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. These results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical accounting policies are defined as those that reflect our significant judgments and uncertainties that could potentially result in materially different results under different assumptions and conditions. Although actual results historically have not deviated significantly from those determined using our estimates, our consolidated financial position or results of operations could be materially different if we were to report under different conditions or to use different assumptions in the application of such policies. Our critical accounting policies have not significantly changed from those discussed in “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” of the 2022 Form 10-K.

Item 3. – Quantitative and Qualitative Disclosures About Market Risk

Market risks have not materially changed from those disclosed in “Part II – Item 7A. – Quantitative and Qualitative Disclosures About Market Risk” of the 2022 Form 10-K.

Item 4. – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures [as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)] that are designed to provide reasonable assurance that information required to be disclosed in the reports that we fileWorthington Industries, Inc. files or submitsubmits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’sSEC’s rules and forms, and that such information is accumulated and communicated to our management, including ourWorthington Industries, Inc.’s principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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Management, under the supervision of and with the participation of ourWorthington Industries, Inc.’s principal executive officer and our principal financial officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q (the quarterly period ended November 30, 2021)2022). Based on that evaluation, ourWorthington Industries, Inc.’s principal executive officer and our principal financial officer have concluded that such disclosure controls and procedures were effective at a reasonable assurance level as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q.


 

Changes in Internal Control Over Financial Reporting

There were no changes that occurred during the period covered by this Quarterly Report on Form 10-Q (the quarterly period ended November 30, 2021)2022) in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Various legal actions, which generally have arisenWe are involved in various judicial and administrative proceedings, as both plaintiff and defendant, arising in the ordinary course of business, are pending against the Company.  None of this pending litigation, individually or collectively, is expected tobusiness. We do not believe that any such proceedings will have a material adverse effect on our consolidatedbusiness, financial position, results of operationsoperation or cash flows.

Item 1A. – Risk Factors

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In “PART I – Item 1A. – Risk Factors” of the 2022 Form 10-K, as filed with the U.S. Securities and Exchange CommissionSEC on July 30, 2021,August 1, 2022, and available at www.sec.gov or at www.worthingtonindustries.com, we included a detailed discussion of our risk factors. Our risk factors have not changed significantly from those disclosed in the 2022 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report on Form 10-Q. Any of the risks described in the 2022 Form 10-K could materially affect our business, consolidated financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. The risk factors described in the 2022 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, consolidated financial condition and/or future results.

Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases madeThere were no unregistered sales of equity securities of Worthington Industries, Inc. during the period covered by the Form 10-Q. There were no common shares of Worthington Industries, Inc. repurchased by, or on behalf of, Worthington Industries, Inc. or any “affiliated purchaser”affiliated purchaser (as defined in Rule 10b-18(a) 10b - 18(a)(3) under the Securities Exchange Act of 1934, as amended) of common shares of Worthington Industries, Inc.Act) during each month of the quarterly periodthree months ended November 30, 2021:2022.

 

 

 

 

 

 

 

 

 

Total Number of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchased as

 

 

Maximum Number of

 

 

Total Number

 

 

Average Price

 

 

Part of Publicly

 

 

Common Shares that

 

 

of Common

 

 

Paid per

 

 

Announced

 

 

May Yet Be

 

 

Shares

 

 

Common

 

 

Plans or

 

 

Purchased Under the

 

Period

Purchased

 

 

Share

 

 

Programs

 

 

Plans or Programs (1)

 

September 1-30, 2021

 

65,000

 

 

$

53.55

 

 

 

65,000

 

 

 

8,235,000

 

October 1-31, 2021

 

170,000

 

 

 

54.39

 

 

 

170,000

 

 

 

8,065,000

 

November 1-30, 2021

 

-

 

 

 

-

 

 

 

-

 

 

 

8,065,000

 

Total

 

235,000

 

 

$

54.03

 

 

 

235,000

 

 

 

 

 

(1)

The numbers shown in this column represent, as of the end of each period, the maximum number of common shares that were available for repurchase under authorizations of the Worthington Industries Board.  On March 20, 2019, the Worthington Industries Board authorized the repurchase of up to 6,600,000 of Worthington Industries, Inc.’s outstanding common shares. On March 24, 2021, the Company announced that on that same day, the Worthington Industries Board authorized the repurchase of up to an additional 5,618,464 of Worthington Industries, Inc.’s outstanding common shares, increasing the total number of common shares then authorized for repurchase to 10,000,000.  A total of 1,935,000 common shares have been repurchased since the latest authorization, leaving 8,065,000 common shares available for repurchase under the existing authorizations at November 30, 2021.

The common shares available for repurchase under the authorizations currently in effect may be purchased from time to time, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flows from operations, general economic conditions, and other relevant considerations. Repurchases may be made on the open market or through privately negotiated transactions.


 

Item 3. – Defaults Upon Senior Securities

Not applicable.

Item 4. – Mine Safety Disclosures

Not applicable.

Item 5. – Other Information

Not applicable.


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Item 6. – Exhibits

 

Exhibit No.

 

Description

 

 

 

2.1

 

Equity Interest Purchase Agreement, dated as of October 29, 2021, by and among Worthington Steel of Michigan, Inc., Tempel Holdings Inc., and Tempel Steel Company (Incorporated herein by reference to Exhibit 2.01 to the Current Report on Form 8-K of Worthington Industries, Inc. dated November 1, 2021 and filed with the SEC on the same date (SEC File No. 1-8399)) †

 

 

 

3.1

 

Amended Articles of Incorporation of Worthington Industries, Inc., as filed with the Ohio Secretary of State on October 13, 1998 (Incorporated herein by reference to Exhibit 3(a) to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 1998 (SEC File No. 0-4016)) P

 

 

 

3.2

 

Code of Regulations of Worthington Industries, Inc. (reflecting all amendments through the date of this Quarterly Report on Form 10-Q) [This document represents the Code of Regulations of Worthington Industries, Inc. in compiled form incorporating all amendments.] (Incorporated herein by reference to Exhibit 3(b) to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2000 (SEC File No. 1-8399))

 

 

 

31.110.1

First Amendment to the Receivables Financing Agreement, dated as of October 6, 2022, among Worthington Receivables Company, LLC, Worthington Industries, Inc., PNC Bank, National Association, and PNC Capital Markets LLC (Incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2022 (SEC file No. 1-8399))

31.1

 

Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Executive Officer) *

 

 

 

31.2

 

Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Financial Officer) *

 

 

 

32.1

 

Certifications of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

 

 

 

32.2

 

Certifications of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

 

 

 

101.INS

 

XBRL Instance Document – the instance document does not appear in the Interactive Date File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document #

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document #

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document #

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document #

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document #

 

 

 

104

 

Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2021,2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).

*

Filed herewith.

**

Furnished herewith.

†

The Disclosure Schedules and Exhibits referenced in the Equity Purchase Agreement have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K.  Worthington Industries, Inc. will supplementally furnish a copy of any of the omitted Disclosure Schedules and Exhibits to the Securities and Exchange Commission on a confidential basis upon request.

#

Attached as Exhibit 101 to this Quarterly Report on Form 10-Q of Worthington Industries, Inc. are the following documents formatted in Inline XBRL (Extensible Business Reporting Language):

(i)

Consolidated Balance Sheets at November 30, 2021 and May 31, 2021;

(ii)

Consolidated Statements of Earnings (Loss) for the three months and six months ended November 30, 2021 and November 30, 2020;

(iii)

Consolidated Statements of Comprehensive Income (Loss) for the three months and six months ended November 30, 2021 and November 30, 2020;

(iv)

Consolidated Statements of Cash Flows for the three months and six months ended November 30, 2021 and November 30, 2020; and

(v)

Condensed Notes to Consolidated Financial Statements.


 

* Filed herewith.

Signatures** Furnished herewith.

† The Disclosure Schedules and Exhibits referenced in the Equity Interest Purchase Agreement have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. Worthington Industries, Inc. will supplementally furnish a copy of any of the omitted Disclosure Schedules and Exhibits to the SEC on a confidential basis upon request.

# Attached as Exhibit 101 to this Quarterly Report on Form 10-Q of Worthington Industries, Inc. are the following documents formatted in Inline XBRL (Extensible Business Reporting Language):

(i)
Consolidated Balance Sheets at November 30, 2022 and May 31, 2022;
(ii)
Consolidated Statements of Earnings for the three months and the six months ended November 30, 2022 and November 30, 2021;
(iii)
Consolidated Statements of Comprehensive Income for the three months and the six months ended November 30, 2022 and November 30, 2021;

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(iv)
Consolidated Statements of Cash Flows for the three months and the six months ended November 30, 2022 and November 30, 2021; and
(v)
Condensed Notes to Consolidated Financial Statements.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

WORTHINGTON INDUSTRIES, INC.

 

 

 

Date: January 10, 20229, 2023

By:

 /s/ Joseph B. Hayek

 

 

Joseph B. Hayek,

 

 

Vice President and Chief Financial Officer

 

 

(On behalf of the Registrant as Duly Authorized Officer and as Principal Financial Officer)

 

 

 

 

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