December 31, 2022December 31, 2022falseDecember 31, 2023December 31, 2022--05-31January 31, 20230000108516July 31, 2023December 31, 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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
For the quarterly period ended November 30, 2022
or
☐ TRANSITION REPORT 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.
(Exact name of registrant as specified in its charter)
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Ohio |
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31-1189815 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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200 Old Wilson Bridge Road, Columbus, Ohio |
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43085 |
(Address of principal executive offices) |
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(Zip Code) |
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(614) 438-3210 |
(Registrant’s telephone number, including area code) |
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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:
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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.
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Large accelerated filer |
☒ |
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Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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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 30, 2022, the number of Common Shares, without par value, issued and outstanding was 49,707,649.
TABLE OF CONTENTS
i
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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 “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,” “project,” “positioned,” “strategy,” “targets,” “aims,” “seek,” “foresee,” 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.
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:
•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;
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•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;
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•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;
•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.
We note these factors for investors as contemplated by the 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 Form 10-Q are based on current information as of the date of this Form 10-Q, and we assume no obligation to correct or update any such statements in the future, except as required by applicable law.
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PART I. FINANCIAL INFORMATION
Item 1. – Financial Statements
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
November 30, |
|
|
May 31, |
|
|
2022 |
|
|
2022 |
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
129,596 |
|
|
$ |
34,485 |
|
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 |
|
304,692 |
|
|
|
323,609 |
|
Work in process |
|
159,772 |
|
|
|
255,019 |
|
Finished products |
|
190,160 |
|
|
|
180,512 |
|
Total inventories |
|
654,624 |
|
|
|
759,140 |
|
Income taxes receivable |
|
19,834 |
|
|
|
20,556 |
|
Assets held for sale |
|
5,191 |
|
|
|
20,318 |
|
Prepaid expenses and other current assets |
|
98,873 |
|
|
|
93,661 |
|
Total current assets |
|
1,602,786 |
|
|
|
1,785,653 |
|
Investments in unconsolidated affiliates |
|
240,859 |
|
|
|
327,381 |
|
Operating lease assets |
|
103,488 |
|
|
|
98,769 |
|
Goodwill |
|
412,971 |
|
|
|
401,469 |
|
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 |
|
25,439 |
|
|
|
34,394 |
|
Property, plant and equipment: |
|
|
|
|
|
Land |
|
49,644 |
|
|
|
51,483 |
|
Buildings and improvements |
|
302,999 |
|
|
|
303,269 |
|
Machinery and equipment |
|
1,223,841 |
|
|
|
1,196,806 |
|
Construction in progress |
|
60,673 |
|
|
|
59,363 |
|
Total property, plant and equipment |
|
1,637,157 |
|
|
|
1,610,921 |
|
Less: accumulated depreciation |
|
954,974 |
|
|
|
914,581 |
|
Total property, plant and equipment, net |
|
682,183 |
|
|
|
696,340 |
|
Total assets |
$ |
3,390,660 |
|
|
$ |
3,643,023 |
|
|
|
|
|
|
|
Liabilities and equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
481,273 |
|
|
$ |
668,438 |
|
Short-term borrowings |
|
4,935 |
|
|
|
47,997 |
|
Accrued compensation, contributions to employee benefit plans and related taxes |
|
86,998 |
|
|
|
117,530 |
|
Dividends payable |
|
17,663 |
|
|
|
15,988 |
|
Other accrued items |
|
58,046 |
|
|
|
70,125 |
|
Current operating lease liabilities |
|
11,719 |
|
|
|
11,618 |
|
Income taxes payable |
|
- |
|
|
|
300 |
|
Current maturities of long-term debt |
|
257 |
|
|
|
265 |
|
Total current liabilities |
|
660,891 |
|
|
|
932,261 |
|
Other liabilities |
|
115,688 |
|
|
|
115,991 |
|
Distributions in excess of investment in unconsolidated affiliate |
|
91,643 |
|
|
|
81,149 |
|
Long-term debt |
|
693,453 |
|
|
|
696,345 |
|
Noncurrent operating lease liabilities |
|
93,513 |
|
|
|
88,183 |
|
Deferred income taxes, net |
|
96,180 |
|
|
|
115,132 |
|
Total liabilities |
|
1,751,368 |
|
|
|
2,029,061 |
|
Shareholders' equity - controlling interest |
|
1,513,393 |
|
|
|
1,480,752 |
|
Noncontrolling interests |
|
125,899 |
|
|
|
133,210 |
|
Total equity |
|
1,639,292 |
|
|
|
1,613,962 |
|
Total liabilities and equity |
$ |
3,390,660 |
|
|
$ |
3,643,023 |
|
See condensed notes to consolidated financial statements.
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Table of Contents
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
November 30, |
|
|
November 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net sales |
$ |
1,175,541 |
|
|
$ |
1,232,861 |
|
|
$ |
2,584,206 |
|
|
$ |
2,343,679 |
|
Cost of goods sold |
|
1,069,778 |
|
|
|
1,048,270 |
|
|
|
2,309,069 |
|
|
|
1,939,714 |
|
Gross margin |
|
105,763 |
|
|
|
184,591 |
|
|
|
275,137 |
|
|
|
403,965 |
|
Selling, general and administrative expense |
|
107,813 |
|
|
|
96,130 |
|
|
|
211,261 |
|
|
|
191,981 |
|
Impairment of long-lived assets |
|
- |
|
|
|
- |
|
|
|
312 |
|
|
|
- |
|
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 (expense), net |
|
1,405 |
|
|
|
1,040 |
|
|
|
(3,681 |
) |
|
|
1,670 |
|
Interest expense |
|
(7,612 |
) |
|
|
(7,312 |
) |
|
|
(16,210 |
) |
|
|
(15,030 |
) |
Equity in net income of unconsolidated affiliates |
|
36,857 |
|
|
|
60,218 |
|
|
|
68,569 |
|
|
|
113,134 |
|
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 |
|
3,287 |
|
|
|
2,884 |
|
|
|
4,449 |
|
|
|
11,868 |
|
Net earnings attributable to controlling interest |
$ |
16,218 |
|
|
$ |
110,301 |
|
|
$ |
80,300 |
|
|
$ |
242,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
48,558 |
|
|
|
50,381 |
|
|
|
48,518 |
|
|
|
50,618 |
|
Earnings per share attributable to controlling interest |
$ |
0.33 |
|
|
$ |
2.19 |
|
|
$ |
1.66 |
|
|
$ |
4.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
49,330 |
|
|
|
51,214 |
|
|
|
49,293 |
|
|
|
51,532 |
|
Earnings per share attributable to controlling interest |
$ |
0.33 |
|
|
$ |
2.15 |
|
|
$ |
1.63 |
|
|
$ |
4.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding at end of period |
|
48,572 |
|
|
|
50,334 |
|
|
|
48,572 |
|
|
|
50,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share |
$ |
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
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
November 30, |
|
|
November 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
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 |
|
28,354 |
|
|
|
21,090 |
|
|
|
56,355 |
|
|
|
43,154 |
|
Impairment of long-lived assets |
|
- |
|
|
|
- |
|
|
|
312 |
|
|
|
- |
|
Provision for (benefit from) deferred income taxes |
|
(3,617 |
) |
|
|
1,309 |
|
|
|
(14,673 |
) |
|
|
2,675 |
|
Bad debt expense |
|
1,098 |
|
|
|
335 |
|
|
|
1,440 |
|
|
|
514 |
|
Equity in net income of unconsolidated affiliates, net of distributions |
|
18,352 |
|
|
|
(31,274 |
) |
|
|
61,197 |
|
|
|
(64,492 |
) |
Net gain on sale of assets |
|
(4,265 |
) |
|
|
(496 |
) |
|
|
(5,034 |
) |
|
|
(13,202 |
) |
Stock-based compensation |
|
4,547 |
|
|
|
4,248 |
|
|
|
8,783 |
|
|
|
7,551 |
|
Changes in assets and liabilities, net of impact of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
119,674 |
|
|
|
(89,817 |
) |
|
|
157,093 |
|
|
|
(121,685 |
) |
Inventories |
|
72,293 |
|
|
|
(97,182 |
) |
|
|
113,460 |
|
|
|
(260,864 |
) |
Accounts payable |
|
(100,535 |
) |
|
|
(47,594 |
) |
|
|
(202,116 |
) |
|
|
(926 |
) |
Accrued compensation and employee benefits |
|
3,336 |
|
|
|
14,358 |
|
|
|
(30,532 |
) |
|
|
(31,819 |
) |
Income taxes payable |
|
(7,629 |
) |
|
|
(22,922 |
) |
|
|
(300 |
) |
|
|
12,935 |
|
Other operating items, net |
|
(18,172 |
) |
|
|
15,656 |
|
|
|
(16,755 |
) |
|
|
2,583 |
|
Net cash provided (used) by operating activities |
|
132,941 |
|
|
|
(119,104 |
) |
|
|
213,979 |
|
|
|
(168,916 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
Investment in property, plant and equipment |
|
(24,490 |
) |
|
|
(24,234 |
) |
|
|
(45,967 |
) |
|
|
(48,159 |
) |
Investment in non-marketable equity securities |
|
(140 |
) |
|
|
- |
|
|
|
(250 |
) |
|
|
- |
|
Acquisitions, net of cash acquired |
|
- |
|
|
|
(3,000 |
) |
|
|
(56,088 |
) |
|
|
(107,750 |
) |
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: |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
(11,760 |
) |
|
|
(2,879 |
) |
|
|
(11,760 |
) |
|
|
(12,076 |
) |
Repurchase of common shares |
|
- |
|
|
|
(12,702 |
) |
|
|
- |
|
|
|
(73,587 |
) |
Dividends paid |
|
(15,181 |
) |
|
|
(14,565 |
) |
|
|
(29,065 |
) |
|
|
(29,263 |
) |
Net cash used by financing activities |
|
(38,222 |
) |
|
|
(32,850 |
) |
|
|
(88,152 |
) |
|
|
(122,113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
93,828 |
|
|
|
(174,052 |
) |
|
|
95,111 |
|
|
|
(415,117 |
) |
Cash and cash equivalents at beginning of period |
|
35,768 |
|
|
|
399,246 |
|
|
|
34,485 |
|
|
|
640,311 |
|
Cash and cash equivalents at end of period |
$ |
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)
Note 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.
We own controlling interests in the following three operating joint ventures: Spartan Steel Coating, L.L.C. (“Spartan”) (52%); TWB Company, L.L.C. (“TWB”) (55%); and Worthington Samuel Coil Processing LLC (“Samuel” or “Samuel joint venture”) (63%). The last remaining manufacturing facility of our Worthington Specialty Processing (“WSP”) 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” 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 and consolidated statements of comprehensive income, respectively. Investments in unconsolidated affiliates are accounted for using the equity method. See further discussion of our unconsolidated affiliates in “Note D – Investments in Unconsolidated Affiliates.”
These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the U.S. (“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 Form 10-Q, necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included. Operating results for the three months and the six months ended November 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2023 (“fiscal 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, 2022 (“fiscal 2022”) of Worthington Industries, Inc. (the “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.
Steel Processing Separation
On September 29, 2022, the Company announced that the Board of Directors of Worthington Industries, Inc. approved a plan to pursue a separation into two independent, publicly-traded companies – one company is expected to be comprised of the Company’s Steel Processing operating segment, and the other company is expected to be comprised of the Company’s Consumer Products, Building Products and Sustainable Energy Solutions operating segments. The Company 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. 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 statements of earnings as “Separation costs”. Separation costs totaled $9,246,000 during the three and six months ended November 30, 2022.
Note B – Inventory
Due 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 operating segment and product class for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
November 30, |
|
|
November 30, |
|
(in thousands) |
2022 |
|
|
2021 |
|
|
2022 |
|
|