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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
February 28,
2023
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
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(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
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(Address of principal executive offices)
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(Zip Code)
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(614)
438-3210
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(Registrant’s telephone number, including area code)
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Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report)
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Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Shares, Without Par Value
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WOR
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New York Stock Exchange
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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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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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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:
On March 31, 2023, the number of common shares, without par value,
of the Registrant issued and outstanding was
49,755,365.
TABLE OF CONTENTS
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 “PSLRA”). Forward-looking
statements reflect the Company’s 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 the Company’s
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;
•
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 Board of
Directors (the “Board”) of Worthington Industries, Inc.
(“Worthington Industries”);
•
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 into 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, as well as potential adverse impacts as a result of the
Inflation Reduction Act of 2022, 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;
•
the effects of privacy and information security laws and standards;
and
•
other risks described from time to time in the filings of
Worthington Industries with the SEC, including those described in
“PART I – Item 1A. — Risk Factors” of the Annual Report on Form
10-K of Worthington Industries for the fiscal year ended May 31,
2022 (“2022 Form 10-K”).
The Company notes 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 the
Company assumes no obligation to correct or update any such
statements in the future, except as required by applicable
law.
iv
Table of Contents
PART I. FINANCIAL
INFORMATION
Item 1. – Financial
Statements
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
February 28,
|
|
|
May 31,
|
|
|
|
|
2023
|
|
|
2022
|
|
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
267,244
|
|
|
$
|
34,485
|
|
|
Receivables, less allowances of $5,233 and
$1,292 at
February 28, 2023
|
|
|
|
|
|
|
|
and May 31, 2022, respectively
|
|
|
715,899
|
|
|
|
857,493
|
|
|
Inventories:
|
|
|
|
|
|
|
|
Raw materials
|
|
|
271,518
|
|
|
|
323,609
|
|
|
Work in process
|
|
|
160,688
|
|
|
|
255,019
|
|
|
Finished products
|
|
|
168,918
|
|
|
|
180,512
|
|
|
Total inventories
|
|
|
601,124
|
|
|
|
759,140
|
|
|
Income taxes receivable
|
|
|
15,619
|
|
|
|
20,556
|
|
|
Assets held for sale
|
|
|
5,191
|
|
|
|
20,318
|
|
|
Prepaid expenses and other current assets
|
|
|
105,689
|
|
|
|
93,661
|
|
|
Total current assets
|
|
|
1,710,766
|
|
|
|
1,785,653
|
|
|
Investments in unconsolidated affiliates
|
|
|
244,277
|
|
|
|
327,381
|
|
|
Operating lease assets
|
|
|
102,474
|
|
|
|
98,769
|
|
|
Goodwill
|
|
|
413,989
|
|
|
|
401,469
|
|
|
Other intangible assets, net of accumulated amortization of
$107,167 and
|
|
|
|
|
|
|
|
$93,973 at
February 28, 2023 and May 31, 2022, respectively
|
|
|
318,483
|
|
|
|
299,017
|
|
|
Other assets
|
|
|
25,454
|
|
|
|
34,394
|
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
Land
|
|
|
49,695
|
|
|
|
51,483
|
|
|
Buildings and improvements
|
|
|
306,296
|
|
|
|
303,269
|
|
|
Machinery and equipment
|
|
|
1,247,994
|
|
|
|
1,196,806
|
|
|
Construction in progress
|
|
|
57,307
|
|
|
|
59,363
|
|
|
Total property, plant and equipment
|
|
|
1,661,292
|
|
|
|
1,610,921
|
|
|
Less: accumulated depreciation
|
|
|
979,063
|
|
|
|
914,581
|
|
|
Total property, plant and equipment, net
|
|
|
682,229
|
|
|
|
696,340
|
|
|
Total assets
|
|
$
|
3,497,672
|
|
|
$
|
3,643,023
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
489,346
|
|
|
$
|
668,438
|
|
|
Short-term borrowings
|
|
|
3,605
|
|
|
|
47,997
|
|
|
Accrued compensation, contributions to employee benefit plans and
related taxes
|
|
|
84,098
|
|
|
|
117,530
|
|
|
Dividends payable
|
|
|
17,630
|
|
|
|
15,988
|
|
|
Other accrued items
|
|
|
57,703
|
|
|
|
70,125
|
|
|
Current operating lease liabilities
|
|
|
12,166
|
|
|
|
11,618
|
|
|
Income taxes payable
|
|
|
-
|
|
|
|
300
|
|
|
Current maturities of long-term debt
|
|
|
261
|
|
|
|
265
|
|
|
Total current liabilities
|
|
|
664,809
|
|
|
|
932,261
|
|
|
Other liabilities
|
|
|
118,736
|
|
|
|
115,991
|
|
|
Distributions in excess of investment in unconsolidated
affiliate
|
|
|
116,825
|
|
|
|
81,149
|
|
|
Long-term debt
|
|
|
689,339
|
|
|
|
696,345
|
|
|
Noncurrent operating lease liabilities
|
|
|
92,481
|
|
|
|
88,183
|
|
|
Deferred income taxes, net
|
|
|
100,224
|
|
|
|
115,132
|
|
|
Total liabilities
|
|
|
1,782,414
|
|
|
|
2,029,061
|
|
|
Shareholders' equity - controlling interest
|
|
|
1,585,426
|
|
|
|
1,480,752
|
|
|
Noncontrolling interests
|
|
|
129,832
|
|
|
|
133,210
|
|
|
Total equity
|
|
|
1,715,258
|
|
|
|
1,613,962
|
|
|
Total liabilities and equity
|
|
$
|
3,497,672
|
|
|
$
|
3,643,023
|
|
See condensed notes to consolidated financial
statements.
1
Table of Contents
WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
February 28,
|
|
|
February 28,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
Net sales
|
$
|
1,103,322
|
|
|
$
|
1,378,235
|
|
|
$
|
3,687,528
|
|
|
$
|
3,721,914
|
|
|
Cost of goods sold
|
|
959,515
|
|
|
|
1,235,107
|
|
|
|
3,268,584
|
|
|
|
3,174,821
|
|
|
Gross margin
|
|
143,807
|
|
|
|
143,128
|
|
|
|
418,944
|
|
|
|
547,093
|
|
|
Selling, general and administrative expense
|
|
106,057
|
|
|
|
102,945
|
|
|
|
317,318
|
|
|
|
294,926
|
|
|
Impairment of long-lived assets
|
|
484
|
|
|
|
3,076
|
|
|
|
796
|
|
|
|
3,076
|
|
|
Restructuring and other expense (income), net
|
|
824
|
|
|
|
(504
|
)
|
|
|
(4,558
|
)
|
|
|
(14,782
|
)
|
|
Separation costs
|
|
6,347
|
|
|
|
-
|
|
|
|
15,593
|
|
|
|
-
|
|
|
Operating income
|
|
30,095
|
|
|
|
37,611
|
|
|
|
89,795
|
|
|
|
263,873
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous income (expense), net
|
|
1,327
|
|
|
|
393
|
|
|
|
(2,354
|
)
|
|
|
2,063
|
|
|
Interest expense, net
|
|
(6,035
|
)
|
|
|
(8,140
|
)
|
|
|
(22,245
|
)
|
|
|
(23,170
|
)
|
|
Equity in net income of unconsolidated affiliates
|
|
36,926
|
|
|
|
47,466
|
|
|
|
105,495
|
|
|
|
160,600
|
|
|
Earnings before income taxes
|
|
62,313
|
|
|
|
77,330
|
|
|
|
170,691
|
|
|
|
403,366
|
|
|
Income tax expense
|
|
12,055
|
|
|
|
18,683
|
|
|
|
35,684
|
|
|
|
90,059
|
|
|
Net earnings
|
|
50,258
|
|
|
|
58,647
|
|
|
|
135,007
|
|
|
|
313,307
|
|
|
Net earnings attributable to noncontrolling interests
|
|
3,933
|
|
|
|
2,305
|
|
|
|
8,382
|
|
|
|
14,173
|
|
|
Net earnings attributable to controlling interest
|
$
|
46,325
|
|
|
$
|
56,342
|
|
|
$
|
126,625
|
|
|
$
|
299,134
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
48,587
|
|
|
|
49,749
|
|
|
|
48,541
|
|
|
|
50,331
|
|
|
Earnings per share attributable to controlling interest
|
$
|
0.95
|
|
|
$
|
1.13
|
|
|
$
|
2.61
|
|
|
$
|
5.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
49,493
|
|
|
|
50,641
|
|
|
|
49,356
|
|
|
|
51,275
|
|
|
Earnings per share attributable to controlling interest
|
$
|
0.94
|
|
|
$
|
1.11
|
|
|
$
|
2.57
|
|
|
$
|
5.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding at end of period
|
|
48,619
|
|
|
|
49,364
|
|
|
|
48,619
|
|
|
|
49,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
$
|
0.31
|
|
|
$
|
0.28
|
|
|
$
|
0.93
|
|
|
$
|
0.84
|
|
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
|
|
|
Nine Months Ended
|
|
|
|
February 28,
|
|
|
February 28,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
Net earnings
|
$
|
50,258
|
|
|
$
|
58,647
|
|
|
$
|
135,007
|
|
|
$
|
313,307
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of tax
|
|
1,563
|
|
|
|
(1,482
|
)
|
|
|
(7,680
|
)
|
|
|
(10,324
|
)
|
|
Pension liability adjustment, net of tax
|
|
323
|
|
|
|
1,368
|
|
|
|
3,180
|
|
|
|
1,364
|
|
|
Cash flow hedges, net of tax
|
|
34,342
|
|
|
|
(19,234
|
)
|
|
|
17,042
|
|
|
|
(72,520
|
)
|
|
Other comprehensive income (loss)
|
|
36,228
|
|
|
|
(19,348
|
)
|
|
|
12,542
|
|
|
|
(81,480
|
)
|
|
Comprehensive income
|
|
86,486
|
|
|
|
39,299
|
|
|
|
147,549
|
|
|
|
231,827
|
|
|
Comprehensive income attributable to noncontrolling
interests
|
|
3,933
|
|
|
|
2,305
|
|
|
|
8,382
|
|
|
|
14,173
|
|
|
Comprehensive income attributable to controlling
interest
|
$
|
82,553
|
|
|
$
|
36,994
|
|
|
$
|
139,167
|
|
|
$
|
217,654
|
|
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
|
|
|
Nine Months Ended
|
|
|
|
February 28,
|
|
|
February 28,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
50,258
|
|
|
$
|
58,647
|
|
|
$
|
135,007
|
|
|
$
|
313,307
|
|
|
Adjustments to reconcile net earnings to net cash provided (used)
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
28,153
|
|
|
|
27,425
|
|
|
|
84,508
|
|
|
|
70,579
|
|
|
Impairment of long-lived assets
|
|
484
|
|
|
|
3,076
|
|
|
|
796
|
|
|
|
3,076
|
|
|
Provision for (benefit from) deferred income taxes
|
|
(5,525
|
)
|
|
|
10,661
|
|
|
|
(20,198
|
)
|
|
|
13,336
|
|
|
Bad debt expense
|
|
2,346
|
|
|
|
382
|
|
|
|
3,786
|
|
|
|
896
|
|
|
Equity in net income of unconsolidated affiliates, net of
distributions
|
|
23,218
|
|
|
|
(18,604
|
)
|
|
|
84,415
|
|
|
|
(83,096
|
)
|
|
Net loss (gain) on sale of assets
|
|
46
|
|
|
|
(628
|
)
|
|
|
(4,988
|
)
|
|
|
(13,830
|
)
|
|
Stock-based compensation
|
|
4,975
|
|
|
|
4,408
|
|
|
|
13,758
|
|
|
|
11,959
|
|
|
Changes in assets and liabilities, net of impact of
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
3,382
|
|
|
|
(33,766
|
)
|
|
|
160,475
|
|
|
|
(155,451
|
)
|
|
Inventories
|
|
53,499
|
|
|
|
31,051
|
|
|
|
166,959
|
|
|
|
(229,813
|
)
|
|
Accounts payable
|
|
6,627
|
|
|
|
51,893
|
|
|
|
(195,489
|
)
|
|
|
50,967
|
|
|
Accrued compensation and employee benefits
|
|
(2,900
|
)
|
|
|
(21,105
|
)
|
|
|
(33,432
|
)
|
|
|
(52,924
|
)
|
|
Income taxes payable
|
|
-
|
|
|
|
(14,422
|
)
|
|
|
(300
|
)
|
|
|
(1,487
|
)
|
|
Other operating items, net
|
|
17,588
|
|
|
|
(24,828
|
)
|
|
|
833
|
|
|
|
(22,245
|
)
|
|
Net cash provided (used) by operating activities
|
|
182,151
|
|
|
|
74,190
|
|
|
|
396,130
|
|
|
|
(94,726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in property, plant and equipment
|
|
(22,748
|
)
|
|
|
(23,645
|
)
|
|
|
(68,715
|
)
|
|
|
(71,804
|
)
|
|
Investment in non-marketable equity securities
|
|
(20
|
)
|
|
|
-
|
|
|
|
(270
|
)
|
|
|
-
|
|
|
Acquisitions, net of cash acquired
|
|
-
|
|
|
|
(269,511
|
)
|
|
|
(56,088
|
)
|
|
|
(377,261
|
)
|
|
Net proceeds from sale of investment in ArtiFlex
|
|
(300
|
)
|
|
|
-
|
|
|
|
35,795
|
|
|
|
-
|
|
|
Proceeds from sale of assets, net of selling costs
|
|
51
|
|
|
|
4,083
|
|
|
|
35,545
|
|
|
|
35,904
|
|
|
Net cash used by investing activities
|
|
(23,017
|
)
|
|
|
(289,073
|
)
|
|
|
(53,733
|
)
|
|
|
(413,161
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from (repayments of) short-term borrowings
|
|
(1,330
|
)
|
|
|
105,638
|
|
|
|
(44,392
|
)
|
|
|
105,638
|
|
|
Principal payments on long-term obligations
|
|
(5,759
|
)
|
|
|
(152
|
)
|
|
|
(5,909
|
)
|
|
|
(554
|
)
|
|
Proceeds from issuance of common shares, net of tax
withholdings
|
|
704
|
|
|
|
269
|
|
|
|
(3,411
|
)
|
|
|
(6,516
|
)
|
|
Payments to noncontrolling interests
|
|
-
|
|
|
|
(3,360
|
)
|
|
|
(11,760
|
)
|
|
|
(15,436
|
)
|
|
Repurchase of common shares
|
|
-
|
|
|
|
(54,255
|
)
|
|
|
-
|
|
|
|
(127,842
|
)
|
|
Dividends paid
|
|
(15,101
|
)
|
|
|
(14,127
|
)
|
|
|
(44,166
|
)
|
|
|
(43,390
|
)
|
|
Net cash provided (used) by financing activities
|
|
(21,486
|
)
|
|
|
34,013
|
|
|
|
(109,638
|
)
|
|
|
(88,100
|
)
|
|
Increase (decrease) in cash and cash equivalents
|
|
137,648
|
|
|
|
(180,870
|
)
|
|
|
232,759
|
|
|
|
(595,987
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
129,596
|
|
|
|
225,194
|
|
|
|
34,485
|
|
|
|
640,311
|
|
|
Cash and cash equivalents at end of period
|
$
|
267,244
|
|
|
$
|
44,324
|
|
|
$
|
267,244
|
|
|
$
|
44,324
|
|
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 and consolidated subsidiaries (collectively,
“we,” “our,” “us” “Worthington,” or the “Company”). All amounts in
these financial statements, notes and tables have been rounded to
the nearest thousand dollars, except share and per share amounts,
unless otherwise indicated. 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”)
(63%).
We also own a
51%
controlling interest in Worthington Specialty Processing (“WSP”),
which became a non-operating joint venture on October 31, 2022,
when the remaining net assets of the joint venture were disposed
of. See “Note F – Restructuring and Other Expense (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”) are 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
with our proportionate share of income or loss recognized within
equity in net income of unconsolidated affiliates (“equity income”)
in our consolidated statements of earnings. 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. (“U.S. GAAP”) 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 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 nine months ended February 28,
2023 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 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
materially differ from those estimates.
Steel Processing Separation
On September 29, 2022, we announced that the Board approved a plan
to pursue a separation into two independent, publicly-traded
companies – one company (“Worthington
Steel”) is expected to be comprised of our Steel Processing
operating segment, and the other company (“New
Worthington”) is expected to be comprised of our Consumer Products,
Building Products and Sustainable Energy Solutions operating
segments. We plan 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. 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 $6,347,000
and $15,593,000
for the
three months and nine months ended February 28,
2023,
respectively.
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 either of the three months ended November 30, 2022 or
the
three months ended February 28, 2023.
5
Table of Contents
Note C – Revenue Recognition
The following table summarizes net sales by operating segment and
product class for the periods presented: