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wor:ShilohIndustriesMember 2021-06-08 0000108516 us-gaap:SubsequentEventMember wor:WPSJointVentureMember 2021-06-09 2021-06-09 0000108516 wor:WPSJointVentureMember srt:ScenarioForecastMember 2022-06-01 2022-08-31 0000108516 us-gaap:SubsequentEventMember 2021-06-10 2021-06-10 0000108516 us-gaap:SubsequentEventMember 2021-06-08 2021-06-08 0000108516 us-gaap:AllowanceForCreditLossMember 2020-05-31 0000108516 us-gaap:AllowanceForCreditLossMember 2019-05-31 0000108516 us-gaap:AllowanceForCreditLossMember 2018-05-31 0000108516 us-gaap:AllowanceForCreditLossMember 2020-06-01 2021-05-31 0000108516 us-gaap:AllowanceForCreditLossMember 2019-06-01 2020-05-31 0000108516 us-gaap:AllowanceForCreditLossMember 2018-06-01 2019-05-31 0000108516 us-gaap:AllowanceForCreditLossMember 2021-05-31

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the fiscal year ended May 31, 2021

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 1-8399

WORTHINGTON INDUSTRIES, 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)

 

 

Registrant’s telephone number, including area code:            (614438-3210       

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

 

Securities registered pursuant to Section 12(g) of the Act:     None     

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes      No 

 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes      No 

 

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.   

 

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

 

The aggregate market value of the Common Shares (the only common equity of the Registrant) held by non-affiliates of the Registrant, based on the closing price of the Common Shares on the New York Stock Exchange on November 30, 2020, the last business day of the Registrant’s most recently completed second fiscal quarter, was $1,793,568,865. For this purpose, executive officers and directors of the Registrant are considered affiliates.

 

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date. On July 23, 2021, the number of Common Shares issued and outstanding was 51,741,899.

DOCUMENT INCORPORATED BY REFERENCE:

 

Selected portions of the Registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on September 29, 2021, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent provided herein.

 

 


TABLE OF CONTENTS

 

SAFE HARBOR STATEMENT

ii

PART I

 

 

 

Item 1.

 

Business

1

Item 1A.

 

Risk Factors

9

Item 1B.

 

Unresolved Staff Comments

20

Item 2.

 

Properties

20

Item 3.

 

Legal Proceedings

21

Item 4.

 

Mine Safety Disclosures

21

Supplemental Item.

 

Information about our Executive Officers

21

PART II

 

 

 

Item 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

23

Item 6.

 

Selected Financial Data

26

Item 7.

 

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

27

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

41

Item 8.

 

Financial Statements and Supplementary Data

43

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

98

Item 9A.

 

Controls and Procedures

98

Item 9B.

 

Other Information

102

Item 9C.

 

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

       102

PART III

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

103

Item 11.

 

Executive Compensation

104

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

104

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

104

Item 14.

 

Principal Accountant Fees and Services

105

PART IV

 

 

 

Item 15.

 

Exhibits and Financial Statement Schedules

106

Item 16.

 

Form 10-K Summary

106

Signatures

123

 

 

 

 

i

 


SAFE HARBOR STATEMENT

Selected statements contained in this Annual Report on Form 10-K, including, without limitation, in “PART I – Item 1. – Business” and “PART II – Item 7. – 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”).  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,” “intend,” “estimate,” “plan,” “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;

 

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;

ii


 

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 are impossible to predict, including the possibility of future resurgence in the spread of COVID-19 or variants thereof – and the availability and effectiveness 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;

 

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;

 

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 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;

iii


 

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, interruption in utility services, civil unrest, international conflicts, 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, 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;

 

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 this Annual Report on Form 10-K.

We note these factors for investors as contemplated by the Act.  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 Annual Report on Form 10-K are based on current information as of the date of this Annual Report on Form 10-K, and we assume no obligation to correct or update any such statements in the future, except as required by applicable law.

 

iv


PART I

 

As used in this Annual Report on Form 10-K (this "Form 10-K"), unless otherwise indicated, all Note references contained in Part I of this Form 10-K refer to the Notes to the Consolidated Financial Statements included in “Part II – Item 8. – Financial Statements and Supplementary Data” of this Form 10-K.

Item 1. — Business

General Overview

Worthington Industries, Inc. is a corporation formed under the laws of the State of Ohio (individually, the “Registrant” or “Worthington Industries” or, collectively with the subsidiaries of Worthington Industries, Inc., “we,” “our,” “Worthington” or the “Company”).  Founded in 1955, Worthington is an industrial manufacturing company, focused on value-added steel processing and manufactured metal products.  Our manufactured metal products include: pressure cylinders for liquefied petroleum gas (“LPG”), compressed natural gas (“CNG”), oxygen, refrigerant and other industrial gas storage; water well tanks for commercial and residential uses; hand torches and filled hand torch cylinders; propane-filled camping cylinders; helium-filled balloon kits; specialty tools; and, through our joint ventures, complete ceiling grid solutions; laser welded blanks; light gauge steel framing for commercial and residential construction; current and past model automotive service stampings; and engineered cabs and operator stations and cab components.

 

Worthington is headquartered at 200 Old Wilson Bridge Road, Columbus, Ohio 43085, telephone (614) 438-3210.  The common shares of Worthington Industries are traded on the New York Stock Exchange under the symbol WOR.

Worthington Industries maintains an Internet web site at www.worthingtonindustries.com.  This uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate Worthington Industries’ web site into this Annual Report on Form 10-K.  Worthington Industries’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as Worthington Industries’ definitive proxy materials for annual meetings of shareholders filed pursuant to Section 14 of the Exchange Act, are available free of charge, on or through the Worthington Industries web site, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).

Segments

As of May 31, 2021, we, together with our unconsolidated affiliates, operated 68 manufacturing facilities in 22 states and 8 countries. Twenty-one of these facilities are operated by wholly-owned and consolidated subsidiaries of the Company.  The remaining facilities are operated by our consolidated and unconsolidated joint ventures.  

 

Our operations are managed principally on a products and services basis and are comprised of two primary operating segments which correspond with our reportable business segments: “Steel Processing” and “Pressure Cylinders”. Steel Processing consists of the Worthington Steel business unit (“Worthington Steel”) which operates nine manufacturing facilities (eight of which were being operated as of May 31, 2021, and one of which was acquired in June of 2021); and four consolidated joint ventures: Spartan Steel Coating, L.L.C. (“Spartan”), which operates a cold-rolled, hot-dipped coating line in Monroe, Michigan; TWB Company, L.L.C. (“TWB”), which operates eleven laser welded blank facilities (eight of which were being operated as of May 31, 2021, and three of which were acquired in June of 2021) and is headquartered in Monroe, Michigan; Worthington Samuel Coil Processing LLC (“Samuel” or the “Samuel joint venture”), which operates three tolling facilities and is headquartered in Cleveland, Ohio; and Worthington Specialty Processing (“WSP”), which processes wide-sheet steel for the auto industry and operates two facilities in Michigan.  Pressure Cylinders consists of the Worthington Cylinders business unit (“Worthington Cylinders”) which operates 13 manufacturing facilities.

 

We hold equity positions in nine joint ventures, which are further discussed in the Joint Ventures section below.  Of these, Spartan, TWB, Samuel and WSP are consolidated with their operating results reported within Steel Processing.

 

1


During the fiscal year ended May 31, 2021 (“fiscal 2021”), Steel Processing and Pressure Cylinders served approximately 760 and 4,400 customers, respectively, located primarily in the United States.  International operations accounted for approximately 7% of our consolidated net sales during fiscal 2021 and were comprised primarily of sales to customers in Europe.  Sales to one customer in the automotive industry accounted for 11.2% of our consolidated net sales in fiscal 2021.

Refer to “Note P – Segment Data” for a full description of our reportable business segments.

Recent Developments

On June 3, 2020, Nikola Corporation (“Nikola”) became a public company through a reverse merger with a subsidiary of VectoIQ Acquisition Corporation, a NASDAQ listed publicly-traded company. The Company owned 19,048,020 shares of Nikola common stock following the reverse merger and subsequently sold all of the Company’s shares, resulting in pre-tax gains of $655.1 million, which was comprised of $634.4 million in cash proceeds and $20.7 million in value from Nikola shares contributed to the Worthington Industries Foundation.  See “Note C – Investment in Nikola” for additional information.  

Pursuant to a leadership succession plan announced on June 24, 2020 by the Company, effective September 1, 2020, B. Andrew Rose became Chief Executive Officer (“CEO”) of Worthington Industries, in addition to continuing to serve as President, and John P. McConnell, the prior CEO, became Executive Chairman.

In October 2020, the Company sold its cryogenic trailer and hydrogen trailer business, including the Theodore, Alabama manufacturing site, to Chart Industries, Inc. and the cryo-science and microbulk storage unit business to IC Biomedical US, LLC.  The combined sales proceeds from the two transactions was $21.2 million, resulting in a pre-tax loss of $7.1 million within restructuring and other expense, net.

On January 4, 2021, the Company acquired PTEC Pressure Technology GmbH (“PTEC”), a leading independent designer and manufacturer of valves and components for high-pressure hydrogen and compressed natural gas storage, transport and onboard fueling systems.  The total purchase price was $10.8 million.  The PTEC business is being operated as part of the Company’s Pressure Cylinders segment.  For additional information, refer to “Note Q – Acquisitions”.

On January 29, 2021, the Company sold its oil & gas equipment business to an affiliate of Ten Oaks Group. The Company retained the real estate associated with the business and received nominal consideration at closing, resulting in a pre-tax loss of $27.7 million within restructuring and other expense, net.

On January 29, 2021, the Company acquired General Tools & Instruments Company LLC (“GTI”), a provider of feature-rich, specialized tools in various categories including environmental health & safety, precision measurement & layout, home repair & remodel, lawn & garden and specific purpose tools.  The total purchase price was $120.4 million, after adjustment for final working capital.  The GTI business is being operated as part of the Company’s Pressure Cylinders segment.  For additional information, refer to “Note Q – Acquisitions”.

On March 12, 2021, the Company sold its Structural Composites Industries, LLC business located in Pomona, California to Luxfer Holdings PLC.  The Company received net proceeds of $19.1 million, resulting in a pre-tax loss of $7.2 million within restructuring and other expense, net.

On March 24, 2021, the Company announced an additional share repurchase authorization covering 5,618,464 common shares.

On May 31, 2021, the Company sold its LPG fuel storage business, located in Poland, to Westport Fuel Systems, Inc.  The Company received total consideration of approximately $6.0 million, resulting in a pre-tax loss of $11.0 million, subject to closing adjustments, within restructuring and other expense, net.

On June 8, 2021, the Company acquired the Shiloh Industries U.S. BlankLight® business, a provider of laser welded solutions, for cash consideration of approximately $105.0 million, subject to closing adjustments. The acquisition includes three facilities that will expand the capacity and capabilities of our TWB joint venture’s laser welded products business and an additional blanking facility that will support the Company’s core steel processing operations.

2


On June 9, 2021, the Company’s consolidated joint venture, WSP, sold the remaining assets of its Canton, Michigan, facility for cash proceeds of approximately $20.0 million. The Company will recognize a gain of approximately $12.0 million in the first quarter of the fiscal year ending May 31, 2022 (“fiscal 2022”) related to the divestiture. WSP continues to operate locations in Jackson and Taylor, Michigan.

 

On June 10, 2021, the Company announced that its Pressure Cylinders segment was being divided into three new reportable segments: Consumer Products, Building Products and Sustainable Energy Solutions, effective at the start of fiscal 2022. The three new reportable segments are in addition to the Company’s Steel Processing segment.

Steel Processing

Steel Processing consists of the Worthington Steel business unit, and our consolidated joint ventures, Samuel, Spartan, TWB, and WSP.  For fiscal 2021, fiscal 2020 and fiscal 2019, the percentage of our consolidated net sales generated by Steel Processing was approximately 65%, 61% and 65%, respectively.

 

Worthington Steel is one of the largest independent intermediate processors of flat-rolled steel in the United States.  It occupies a niche in the steel industry by focusing on products requiring exact specifications.  These products cannot typically be supplied as efficiently by steel mills to the end-users of these products.

 

As of May 31, 2021, Steel Processing, including Spartan, TWB, Samuel and WSP, operated 22 manufacturing facilities located in Ohio (8), Michigan (4), Tennessee (2), Alabama (1), Indiana (1), Kentucky (1), New York (1), Canada (1) and Mexico (3). As noted above, Steel Processing acquired four additional facilities in June of 2021 (one in Kentucky being operated by the Worthington Steel business unit; and two in Ohio and one in Michigan being operated by TWB).

 

Steel Processing serves approximately 760 customers in many markets including automotive, aerospace, agricultural, appliance, construction, container, hardware, heavy-truck, HVAC, lawn and garden, leisure and recreation, office furniture, and office equipment.  The automotive industry is one of the largest consumers of flat-rolled steel, and thus the largest end market for Steel Processing.  For fiscal 2021, Steel Processing’s top three customers represented approximately 30% of the operating segment’s total net sales.

 

Steel Processing buys coils of steel from integrated steel mills and mini-mills and processes them to the precise type, thickness, length, width, shape and surface quality required by customer specifications.  Computer-aided processing capabilities include, among others:

 

 

cold reducing, which achieves close tolerances of thickness;

 

configured blanking, which mechanically stamps steel into specific shapes;

 

coil fed laser blanking, which uses lasers to cut coils of steel, aluminum and other metals into specific shapes;

 

cutting-to-length, which cuts coils into sheets of exact length;

 

dry-lube, the process of coating steel with a dry, soap-based lubricant;

 

hot dip coating, which coats steel with either zinc, zinc alloy or aluminum and silicon through a hot dip process;

 

hydrogen annealing, a thermal process that changes the hardness and certain metallurgical characteristics of steel;

 

laser welding, which joins steel or aluminum blanks with different thicknesses, coatings or material strength;

3


 

pickling, a chemical process using an acidic solution to remove surface oxide which develops on hot-rolled steel;

 

slitting, which cuts steel coils or steel sheets to specific widths;

 

oscillate slitting, a slitting process that spools together several narrow coils welded end-to-end into one larger coil;

 

temper rolling, which is the process of light cold-rolling steel;

 

tension leveling, a method of applying pressure to achieve precise flatness tolerances; and

 

non-metallic coating, including acrylic and paint coating.

Steel Processing also toll processes steel for steel mills, large end-users, service centers and other processors.  Toll processing is different from typical steel processing in that the mill, end-user or other party retains title to the steel and has the responsibility for selling the end product.  Toll processing enhances Worthington Steel’s participation in the market for wide sheet steel and large standard orders, a market generally served by steel mills rather than by intermediate steel processors.

The steel processing industry is fragmented and highly competitive.  There are many competitors, including other independent intermediate processors.  Competition is primarily on the basis of price, product quality and the ability to meet delivery requirements.  Technical service and support for material testing and customer-specific applications enhance the quality of products (see the Technical Services section below).  However, the extent to which technical service and support capability has improved Steel Processing’s competitive position has not been quantified.  Steel Processing’s ability to meet tight delivery schedules is, in part, based on the proximity of our facilities to customers, suppliers and one another.  The extent to which plant location has impacted Steel Processing’s competitive position has not been quantified.  Processed steel products are priced competitively, primarily based on market factors, including, among other things, market pricing, the cost and availability of raw materials, transportation and shipping costs, and overall economic conditions in the United States and abroad.

Pressure Cylinders

Pressure Cylinders consists of the Worthington Cylinders business unit.  The percentage of our consolidated net sales generated by Pressure Cylinders was approximately 35%, 37% and 32% in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.  

Pressure Cylinders manufactures and sells filled and unfilled pressure cylinders, tanks, hand torches, tools, well water and expansion tanks, along with various accessories and related products for diversified end-use market applications.  The following is a description of these markets: 

 

Industrial Products: This market sector includes high pressure and acetylene cylinders for industrial gases, refrigerant and certain propane gas (LPG) cylinders, alternative fuel cylinders and other specialty products. Cylinders in this market sector are generally sold to gas producers, cylinder exchangers and industrial distributors. Industrial gas cylinders hold fuel for uses such as cutting, brazing and soldering, and semiconductor production. Refrigerant gas cylinders are used to hold refrigerant gases for commercial, residential and automotive air conditioning and refrigeration systems.  LPG cylinders hold fuel for barbeque grills, recreational vehicle equipment, residential and light commercial heating systems, industrial forklifts and commercial/residential cooking (the latter, generally outside North America). Alternative fuel cylinders include composite and steel cylinders used to hold CNG and hydrogen for automobiles, buses, and light-duty trucks. Specialty products include a variety of fire suppression, life support and chemical tanks. 

4


 

Consumer Products: This market sector includes propane-filled cylinders for torches, camping stoves and other applications, hand-held torches, Balloon Time® helium-filled balloon kits, well water tanks and expansion tanks and specialized hand tools and instruments. These products are sold primarily to mass merchandisers, retailers and distributors.

While a large percentage of Pressure Cylinders sales are made to major accounts, this operating segment served approximately 4,400 customers during fiscal 2021.  Sales to one customer represented approximately 10% of net sales for Pressure Cylinders during fiscal 2021.  

 

As of May 31, 2021, Pressure Cylinders operated 13 manufacturing facilities located in Kansas, Kentucky, Maryland, New Jersey, Ohio (3), Rhode Island, Wisconsin, Austria, Germany, Poland, and Portugal.  

 

For sales in the United States and Canada, high-pressure and low-pressure cylinders are primarily manufactured in accordance with United States Department of Transportation and Transport Canada specifications.  Outside the United States and Canada, cylinders are manufactured according to European norm specifications, as well as various other international standards.  Other products are produced to applicable industry standards including, as applicable, those standards issued by the American Petroleum Institute, ASME and UL.

 

Worthington Cylinders has one principal domestic competitor in the low-pressure LPG cylinder market, and there are a number of foreign competitors in the LPG cylinder market and in the non-refillable refrigerant market.  We believe that Worthington Cylinders has the largest market share in its domestic low-pressure cylinder markets.  In the other cylinder markets, there are several competitors.  Worthington Cylinders is a leading supplier to the European markets for both the high-pressure cylinders and the low-pressure non-refillable cylinders.  Worthington Cylinders generally has a strong competitive position for its industrial, energy, retail and specialty products, but competition varies on a product-by-product basis.  As with our other operating segment, competition is based upon price, service and quality.

 

Pressure Cylinders uses the trade names “Worthington Cylinders”, “AMTROL”, “Alfa”, “General”, “Garden Weasel”, and “PacTool” to conduct business.

The Company uses the registered trademark “Balloon Time®” to market helium-filled balloon kits; the registered trademark “BERNZOMATIC®” to market certain fuel cylinders and hand-held-torches; the trademark “WORTHINGTON PRO-GRADE” to market certain LPG cylinders, hand torches and camping fuel cylinders; the registered trademark “Coleman®” to market certain camping fuel cylinders; the registered trademarks “MAP-PRO®” and “Pro-Max®” to market certain hand torch cylinders; the registered trademark “Mag-Torch®” to market certain hand-held torches; the registered trademarks General®, Garden-Weasel® and Pactool International® to market certain tools; the registered trademarks “Therm-X-Trol®” and “Extrol®” to market thermal expansion tanks; the registered trademarks “Well X Trol®”, “Champion®”, and “Wel-Flo and Design®” to market well tanks; and the registered trademarks “Hydromax®” and “Boilermate®” to market indirect fired water heaters.

Each registered trademark has an original duration of 10 to 20 years, depending on the date it was registered and the country in which it is registered, and is subject to an indefinite number of renewals for a like period upon continued use and appropriate application.  The Company intends to continue using the trade names and trademarks described above and to timely renew each of its registered trademarks that remains in use.

Other

The Other category includes the results of the Company’s former Engineered Cabs operating segment, on a historical basis through November 1, 2019, when the Company contributed substantially all of the related net assets to a then newly-formed joint venture, Taxi Workhorse Holdings, LLC (the “Cabs joint venture”) in which the Company owns a 20% non-controlling interest.  The deconsolidated net assets included the two primary manufacturing facilities of the Engineered Cabs business located in Greeneville, Tennessee and Watertown, South Dakota.  The remaining non-core assets of the Engineered Cabs business, including the fabricated products facility in Stow, Ohio, and the steel packaging facility in Greensburg, Indiana, were retained and have since been exited.

 

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Segment Financial Data

Financial information for the reportable business segments is provided in “Note P – Segment Data”.  

Suppliers

The primary raw material purchased by Worthington is steel.  We purchase steel in large quantities at regular intervals from major primary producers of steel, both domestic and foreign.  The amount purchased from any particular supplier varies from year to year depending on a number of factors including market conditions, then current relationships and prices and terms offered.  In nearly all market conditions, steel is available from a number of suppliers and generally any supplier relationship or contract can and has been replaced with little or no significant interruption to our business.  During fiscal 2021, we purchased approximately 2.45 million tons of steel (74.0% hot-rolled, 14.3% cold-rolled and 11.7% galvanized) on a consolidated basis. 

Steel is primarily purchased and processed based on specific customer orders for Steel Processing, while Pressure Cylinders purchases steel to meet production schedules.  For certain raw materials, there are more limited suppliers -- for example, helium and zinc, which are generally purchased at market prices.  Since there are a limited number of suppliers in the helium and zinc markets, if delivery from a major supplier is disrupted due to a force majeure type occurrence, it may be difficult to obtain an alternative supply.  Raw materials are generally purchased in the open market on a negotiated spot-market basis at prevailing market prices.  Supply contracts are also entered into, some of which have fixed pricing and some of which are indexed (monthly or quarterly).  During fiscal 2021, we purchased steel from the following major suppliers, in alphabetical order: Cleveland-Cliffs Inc.; NLMK USA; North Star BlueScope Steel, LLC; Nucor Corporation; Steel Dynamics, Inc.; and United States Steel Corporation (“U.S. Steel”).  Major suppliers of aluminum to Pressure Cylinders in fiscal 2021 were, in alphabetical order:  Arconic Inc.; DK Resources Limited; Geumsan Tech; Horizon; Meyer Aluminum; Norsk Hydro; Novelis Corporation; and Shanghai Everskill.  Major suppliers of zinc to Steel Processing in fiscal 2021 were, in alphabetical order: Considar Metal Marketing Inc. (a/k/a HudBay); Glencore Ltd.; Teck Resources Limited; and Trafigura Trading LLC.  Approximately 44.13 million pounds of zinc and 3.37 million pounds of aluminum were purchased in fiscal 2021.  We believe our supplier relationships are favorable.

Technical Services

We employ a staff of engineers and other technical personnel, and we maintain fully-equipped laboratories to support operations.  These facilities enable verification, analysis and documentation of the physical, chemical, metallurgical and mechanical properties of raw materials and products.  Technical Service personnel also work in conjunction with the sales force to specify components and materials required to fulfill customer needs. Laboratory facilities also perform metallurgical and chemical testing as dictated by International Organization for Standardization (ISO), ASTM International, and other customer and industry specific requirements.  

Seasonality and Backlog

Demand for most of our products remained strong throughout fiscal 2021, but sales are generally strongest in the fourth quarter of our fiscal year as our operating segments are generally operating at seasonal peaks.  Historically, sales have generally been weaker in the third quarter of our fiscal year, primarily due to reduced activity in the building and construction industry as a result of inclement weather, as well as customer plant shutdowns, particularly in the automotive industry, due to holidays.  We do not believe backlog is a significant indicator of our business.

Employees

As of May 31, 2021, we had approximately 9,000 employees, including those employed by our unconsolidated joint ventures.  Approximately 8% of our consolidated labor force is represented by collective bargaining units.  Worthington believes it has good relationships with its employees, including those covered by collective bargaining units.

Joint Ventures

As part of our strategy to selectively develop new products, markets and technological capabilities and to expand our international presence, while mitigating the risks and costs associated with those activities, as of May 31, 2021, we participated in four consolidated and five unconsolidated joint ventures.

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Consolidated

The results of the following four joint ventures have been consolidated with the financial results of the Company since the respective dates on which the Company acquired majority ownership or effective control.  The equity owned by the other joint venture members is shown as noncontrolling interests on our consolidated balance sheets and their portions of net earnings are included as net earnings attributable to noncontrolling interests in our consolidated statements of earnings.  The financial results of these four joint ventures are consolidated within Steel Processing.

 

Samuel, a 63%-owned joint venture with Samuel Manu-Tech Pickling Inc., operates three steel pickling facilities in Ohio.

 

Spartan is a 52%-owned consolidated joint venture with AK-Steel, a subsidiary of Cleveland-Cliffs Inc.  Located in Monroe, Michigan, Spartan operates a cold-rolled, hot-dipped coating line for toll processing steel coils into galvanized, galvannealed and aluminized products intended primarily for the automotive industry.

 

TWB is a 55%-owned consolidated joint venture with a subsidiary of Baoshan Iron & Steel Co., Ltd. TWB is a leading North American supplier of laser welded blanks, tailor welded aluminum blanks, laser welded coils and other laser welded products for use primarily in the automotive industry for products such as inner-door panels, body sides, rails and pillars.  TWB operates facilities in Cambridge, Ontario, Canada; Glasgow, Kentucky; Puebla, Monterrey, and Silao, Mexico; Monroe and Canton, Michigan; Valley City, Ohio (2) and Antioch and Smyrna, Tennessee.

 

WSP, a 51%-owned joint venture with a subsidiary of U.S. Steel, operates two steel processing facilities located in Jackson, and Taylor, Michigan, which are managed by Steel Processing. WSP serves primarily as a toll processor for U.S. Steel and others. WSP’s services include slitting, blanking, cutting-to-length, laser blanking, tension leveling and warehousing.

Unconsolidated

Since we do not control the following five joint ventures, they are unconsolidated, and their results have been accounted for using the equity method. Accordingly, our investment is reflected on a single line in the consolidated balance sheets and our portion of their earnings is included as equity in net income of unconsolidated affiliates in our consolidated statements of earnings. As this equity is reflected below operating income, they are not included in any of the segment results.

 

ArtiFlex Manufacturing, LLC (“ArtiFlex”), a 50%-owned joint venture with ITS-H Holdings, LLC, provides an integrated solution for engineering, tooling, current and past model automotive service stamping, assembly and other services to customers primarily in the automotive industry. ArtiFlex operates five manufacturing facilities: three in Michigan and two in Ohio.

 

Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”), a 25%-owned joint venture with CWBS-MISA, Inc., is an industry leader in the manufacture and supply of light gauge steel framing products in the United States.  ClarkDietrich manufactures a full line of drywall studs and accessories, structural studs and joists, metal lath and accessories, shaft wall studs and track, vinyl and finishing products used primarily in residential and commercial construction.  This joint venture operates 13 manufacturing facilities, one each in Connecticut, Georgia, Illinois, Maryland and Missouri and two each in California, Florida, Ohio, and Texas.

 

Serviacero Planos, S. de R.L. de C.V. (“Serviacero Worthington”), a 50%-owned joint venture with Inverzer, S.A. de C.V., operates three steel processing facilities in Mexico, one each in Leon, Monterrey and Queretaro. Serviacero Worthington provides steel processing services, such as pickling, blanking, slitting, multi-blanking and cutting-to-length, to customers in a variety of industries including automotive, appliance and heavy equipment.

 

Taxi Workhorse Holdings, LLC, a 20%-owned joint venture with an affiliate of Angeles Equity Partners, LLC, is a non-captive designer and manufacturer of high-quality, custom-engineered open and enclosed cabs and operator stations and custom fabrications and packaging for heavy mobile equipment used primarily in the agricultural, construction, forestry, military and mining industries. The Cabs joint venture operates six manufacturing facilities, one each in Brazil, South Dakota and Tennessee and three in Minnesota.

 

WAVE, a 50%-owned joint venture with a subsidiary of Armstrong World Industries, Inc., is the largest of the four national North American manufacturers of ceiling suspension systems for concealed and lay-in panel ceilings used in commercial and residential ceiling markets.  It competes with the other North American

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manufacturers and numerous regional manufacturers.  WAVE operates six manufacturing facilities, one each in Georgia, Maryland, Michigan and Nevada and two in California.

See “Note D – Investments in Unconsolidated Affiliates” for additional information about our unconsolidated joint ventures.

Government Regulations

Our manufacturing facilities, generally in common with those of similar industries making similar products, are subject to many federal, state, local and foreign laws and regulations, including those relating to the protection of our employees and the environment.  We examine ways to improve safety, reduce emissions and waste, and to decrease costs related to compliance with environmental and other government regulations.  The cost of compliance or capital expenditures for environmental control facilities necessary to meet regulatory requirements are not anticipated to be material when compared with overall costs and capital expenditures and, accordingly, are not anticipated to have a material effect on our financial position, results of operations or cash flows, or on the competitive position of Worthington or any particular business segment.

 

Human Capital Management

Culture

 

In line with our people-first Philosophy, our employees have always been, and will always be, our most important asset. Worthington operates under a set of core values that are rooted in our long-standing Philosophy, which emphasizes the Golden Rule.  These core values guide us as a company, including in our approach to human capital management. As such, we are continually focused on creating and maintaining a strong Company culture. Our culture provides employees with opportunities for personal and professional development, as well as community engagement, all of which we believe contribute to the Company’s overall success. We have repeatedly been recognized as a top place to work and we offer our employees competitive pay and above-market benefits, as compared to others in our industry, all while focusing on safety, wellness, and promoting a diverse and inclusive culture.

Employee Base

 

As of May 31, 2021, we had approximately 9,000 employees, including those employed by our unconsolidated joint ventures.  Approximately 8% of our consolidated labor force is represented by collective bargaining units.  Worthington believes that our open-door policy has created an environment which fosters open communication and serves to cultivate the good relationships we have with our employees, including those covered by collective bargaining units, which is evidenced by the results of recent employee engagement surveys. For example, in the fall of 2020, 71% of employees, excluding those employed by our unconsolidated joint ventures – nearly 4,300 people worldwide – participated in our engagement survey, and the Company’s results exceeded both manufacturing and global benchmarks in a number of categories, such as Employee Engagement (74%), Safety (89%), and Manager Effectiveness (74%).

Safety, Health and Wellness

 

We have always made the safety and well-being of our people a top priority, and we have regularly maintained an industry-leading safety record.  For us, safety is about engagement, and our employees have adopted a culture where safety is everyone’s responsibility, and not just the safety of our employees, but the safety of everyone who enters our facilities. We also provide our employees and their families with access to above-market benefits, as compared to others in our industry, including a parental leave benefit that offers all new parents the opportunity for paid time off.  Worthington has a broad array of other employee centered-benefits and programs, including a medical center, a pharmacy, chiropractic care, on-site fitness centers, free health screenings, health fairs, and other company-wide and location-specific wellness events and challenges. We believe our investments in safety, health and wellness are key to supporting and protecting our most important asset, our people.

 

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Diversity, Inclusion and Equity

 

We believe that diversity, of all types, contributes to our success. Worthington is committed to increasing the diversity of our employee base at all levels of our organization because we believe our differences make us better and that diverse thought and experiences drive innovation and produce better results.  With our Philosophy as our foundation, we are building an environment where diversity is valued, and where all employees feel they belong and are empowered to do their best work.

 

To further such efforts, we have established a Diversity, Equity and Inclusion Council (“Council”) chaired by our Senior Vice President and Chief Human Resources Officer. The Council has developed a strategy where our diversity, inclusion and equity efforts are focused on strengthening four primary pillars: workforce, workplace, community and partnership. These pillars serve as a foundation for continually building and fostering an inclusive culture. We are also working to establish employee resource groups (“ERGs”) that will each have executive sponsors. These ERGs will not only be tasked with raising awareness, but will also offer mentoring and development opportunities to their members.

 

Talent Development and Retention

 

Our ability to successfully operate, grow our business and implement our business strategies is largely dependent on our ability to attract, train and retain talented personnel at all levels of our organization. As a result, we offer our employees competitive compensation and benefits, as compared to others in our industry, which include opportunities to participate in profit sharing plans. We also strive to provide our employees with continuous opportunities to learn the skills necessary to maximize their performance, and develop new skills that allow them to maximize their potential.

Item 1A.  — Risk Factors  

Future results and the market price for Worthington Industries’ common shares are subject to numerous risks, many of which are driven by factors that cannot be controlled or predicted.  The following discussion, as well as other sections of this Annual Report on Form 10-K, including “PART II—Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe certain business risks.  Consideration should be given to the risk factors described below as well as those in the Safe Harbor Statement at the beginning of this Annual Report on Form 10-K, in conjunction with reviewing the forward-looking statements and other information contained in this Annual Report on Form 10-K.  The risks described below are not the only risks we face.  Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial in our operations.

Risks Related to Our Business

The COVID-19 Pandemic

The Novel Coronavirus (COVID-19) pandemic has significantly impacted the global economy and has had and could continue to have material adverse effects on our business, financial position, results of operations and cash flows. The COVID-19 pandemic has had, and may continue to have, an adverse impact on our business. These  impacts  include,  without  limitation, potential  significant  volatility  or  continued decreases  in  the  demand  for  our  products,  changes  in  customer  and consumer behavior and preferences,  disruptions in or additional closures of our manufacturing operations or those of our customers and suppliers, disruptions within our supply chain, limitations on our employees’ ability to work and travel, potential financial difficulties of customers and suppliers, significant changes in economic or political conditions, and related financial and commodity volatility, including volatility in raw material and other input costs. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which cannot be predicted and are highly uncertain. The situation is changing rapidly and there may be additional impacts of which we are currently unaware.

It is also uncertain what the impact of various legislation and other responses being taken in the United States and other countries will have on the economy, international trade, our industries, our businesses and the businesses of our customers and suppliers. Governments around the world have implemented stringent measures to help control the spread of COVID-19, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business

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curtailments, school and childcare closures, and other measures. These actions have caused, and are continuing to cause, business shutdowns or slowdowns and significant disruption in the global economy.

Despite our efforts to manage the impacts, the degree to which COVID-19 and related actions ultimately impact our business, financial position, results of operations  and  cash  flows  will  depend  on  factors  beyond  our  control  including  the  duration,  extent  and  severity  of  the  outbreak,  the  actions  taken  to  contain COVID-19 and mitigate its public health effects, the impact on the U.S. and global economies and demand for our products, and how quickly and to what extent normal economic and operating conditions resume. Although there has been an increase in vaccinations throughout the United States at the end of fiscal 2021, vaccinations internationally have progressed at a slower rate. Continued disruption to the global economy, as well as to the end markets our businesses serve, could result in material adverse effects on our business, financial position, results of operations and cash flows.

General Economic or Industry Downturns and Weakness

The automotive and construction industries account for a significant portion of our net sales, and reduced demand from these industries could adversely affect our business.  An overall downturn in the general economy, a disruption in capital and credit markets, high unemployment, reduced consumer confidence or other factors, could cause reductions in demand from our end markets in general and, in particular, the automotive and construction end markets.  If demand for the products we sell to the automotive, construction or other end markets which we supply were to be reduced, our sales, financial results and cash flows could be negatively affected.

We face intense competition which may cause decreased demand, decreased market share and/or reduced prices for our products and services.  Our businesses operate in industries that are highly competitive and have been subject to increasing consolidation of customers. Because of the range of the products and services we sell and the variety of markets we serve, we encounter a wide variety of competitors.   Our failure to compete effectively and/or pricing pressures resulting from competition may adversely impact our businesses and financial results.

Financial difficulties and bankruptcy filings by our customers could have an adverse impact on our businesses.  In past years, some customers have experienced, and some continue to experience, whether due to COVID-19 or otherwise, challenging financial conditions. The financial difficulties of certain customers and/or their failure to obtain credit or otherwise improve their overall financial condition could result in changes within the markets we serve, including plant closings, decreased production, reduced demand, changes in product mix, unfavorable changes in the prices, terms or conditions we are able to obtain and other changes that may result in decreased purchases from us and otherwise negatively impact our businesses. These conditions also increase the risk that our customers may delay or default on their payment obligations to us.  If the general economy or any of our markets decline, the risk of bankruptcy filings by and financial difficulties of our customers may increase.  While we have taken and will continue to take steps intended to mitigate the impact of financial difficulties and potential bankruptcy filings by our customers, these matters could have a negative impact on our businesses.

Raw Material Pricing and Availability  

Our operating results may be adversely affected by declining steel prices.  Over the past year, steel prices have increased due to supplier consolidation, tight mill orders due to the COVID-19 pandemic and tariffs on foreign steel. However, if steel prices or other raw material prices were to decrease, competitive conditions may impact how quickly we must reduce our prices to our customers, and we could be forced to use higher-priced raw materials then on hand to complete orders for which the selling prices have decreased. Decreasing steel prices could also eliminate or reduce arbitrage opportunities, and/or require us to write-down the value of our inventory to reflect current market pricing.

Our operating results may be affected by fluctuations in raw material prices and our ability to pass on increases in raw material costs to our customers.  Our principal raw material is flat-rolled steel, which we purchase from multiple primary steel producers. The steel industry as a whole has been cyclical, and at times availability and pricing can be volatile due to a number of factors beyond our control. These factors include general economic conditions, domestic and worldwide supply and demand, the influence of hedge funds and other investment funds participating in commodity markets, curtailed production from major suppliers due to factors such as the closing or idling of facilities, COVID-19 or other pandemics, accidents or equipment breakdowns, repairs or catastrophic events, labor costs, shortages, strikes or other problems, competition, new laws and regulations, import duties, tariffs, energy costs, availability and cost of steel inputs (e.g., ore, scrap, coke and energy), foreign currency exchange rates and other factors described in the immediately following paragraph. This volatility, as well as any increases in raw material costs, could significantly affect our steel costs and adversely impact our financial results. If our suppliers increase the

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prices of our critical raw materials, we may not have alternative sources of supply. In addition, in an environment of increasing prices for steel and other raw materials, competitive conditions may impact how much of the price increases we can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our customers, our financial results could be adversely affected.

The costs of manufacturing our products and our ability to meet our customers’ demands could be negatively impacted if we experience interruptions in deliveries of needed raw materials or supplies.  If, for any reason, our supply of flat-rolled steel or other key raw materials, such as aluminum, zinc, copper or helium, or other supplies is curtailed or we are otherwise unable to obtain the quantities we need at competitive prices, our business could suffer and our financial results could be adversely affected. Such interruptions could result from a number of factors, including a shortage of capacity in the supplier base of raw materials, energy or the inputs needed to make steel or other supplies, a failure of suppliers to fulfill their supply or delivery obligations, financial difficulties of suppliers resulting in the closing or idling of supplier facilities, other significant events affecting supplier facilities, significant weather events, those factors listed in the immediately preceding paragraph or other factors beyond our control like pandemics such as COVID-19. Further, the number of suppliers has decreased in recent years due to industry consolidation and the financial difficulties of certain suppliers, and this consolidation may continue.

An increase in the spread between the price of steel and steel scrap prices can have a negative impact on our margins.  No matter how efficient, our operations which use steel as a raw material, create some amount of scrap.  The expected price of scrap compared to the price of the steel raw material is generally factored into pricing.  Generally, as the price of steel increases, the price of scrap increases by a similar amount.  When increases in scrap prices do not keep pace with the increases in the price of the steel raw material, it can have a negative impact on our margins.

Inventories

Our businesses could be harmed if we fail to maintain proper inventory levels. We are required to maintain sufficient inventories to accommodate the needs of our customers including, in many cases, short lead times and just-in-time delivery requirements. Although we typically have customer orders in hand prior to placement of our raw material orders for Steel Processing, we anticipate and forecast customer demand for each of our operating segments. We purchase raw materials on a regular basis in an effort to maintain our inventory at levels that we believe are sufficient to satisfy the anticipated needs of our customers based upon orders, customer volume expectations, historic buying practices and market conditions. Inventory levels in excess of customer demand may result in the use of higher-priced inventory to fill orders reflecting lower selling prices, if raw material prices have significantly decreased. For example, if steel prices decrease, we could be forced to use higher-priced steel then on hand to complete orders for which the selling price has decreased.  These events could adversely affect our financial results. Conversely, if we underestimate demand for our products or if our suppliers fail to supply quality products in a timely manner, we may experience inventory shortages. Inventory shortages could result in unfilled orders, negatively impacting our customer relationships and resulting in lost revenues, which could harm our businesses and adversely affect our financial results.

Customers and Suppliers

The loss of significant volume from our key customers could adversely affect us. A significant loss of, or decrease in, business from any of our key customers could have an adverse effect on our sales and financial results if we cannot obtain replacement business. Also, due to consolidation in the industries we serve, including the automotive, construction and retail industries, our sales may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments with respect to, one or more of our top customers. In addition, certain of our top customers may be able to exert pricing and other influences on us, requiring us to market, deliver and promote our products in a manner that may be more costly to us. We generally do not have long-term contracts with our customers. As a result, although our customers periodically provide notice of their future product needs and purchases, they generally purchase our products on an order-by-order basis, and the relationship, as well as particular orders, can be terminated at any time.

Many of our key industries, such as automotive and construction, are cyclical in nature. Many of our key industries, such as automotive and construction, are cyclical and can be impacted by both market demand and raw material supply, particularly with respect to steel. The demand for our products is directly related to, and quickly impacted by, customer demand in our industries, which can change as the result of changes in the general U.S. or worldwide economies and other factors beyond our control. Adverse changes in demand or pricing can have a negative effect on our businesses.

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Significant reductions in sales to any of the Detroit Three automakers, or to our automotive-related customers in general, could have a negative impact on our business. More than half of the net sales of Steel Processing and a significant amount of the net sales of certain joint ventures are to automotive-related customers. Although we do sell to the domestic operations of foreign automakers and their suppliers, a significant portion of our automotive sales are to Ford, General Motors, and FCA US (the “Detroit Three automakers”) and their suppliers. A reduction in sales for any of the Detroit Three automakers, as well as additional or prolonged idling of production facilities in response to COVID-19 or related supply chain constraints, has and could continue to negatively impact our business. In addition, certain automakers have begun using greater amounts of aluminum and smaller proportions of steel in some new models, thereby reducing the demand for our products.

The closing or relocation of customer facilities could adversely affect us. Our ability to meet delivery requirements and the overall cost of our products as delivered to customer facilities are important competitive factors. If customers close or move their production facilities further away from our manufacturing facilities which can supply them, it could have an adverse effect on our ability to meet competitive conditions, which could result in the loss of sales. Likewise, if customers move their production facilities outside the United States, it could result in the loss of potential sales for us.

Sales conflicts with our customers and/or suppliers may adversely impact us. In some instances, we may compete with one or more of our customers and/or suppliers in pursuing the same business.    Such conflicts may strain our relationships with the parties involved, which could adversely affect our future business with them.

The closing or idling of steel manufacturing facilities could have a negative impact on us. As steel makers have reduced their production capacities by closing or idling production lines, whether due to COVID-19 or otherwise, the number of facilities from which we can purchase steel, in particular certain specialty steels, has decreased. Accordingly, if delivery from a supplier is disrupted, particularly with respect to certain types of specialty steel, it may be more difficult to obtain an alternate supply than in the past. These closures and disruptions could also have an adverse effect on our suppliers’ on-time delivery performance, which could have an adverse effect on our ability to meet our own delivery commitments and may have other adverse effects on our businesses.

The loss of key supplier relationships could adversely affect us. Over the years, our various manufacturing operations have developed relationships with certain steel and other suppliers which have been beneficial to us by providing more assured delivery and a more favorable all-in cost, which includes price and shipping costs. If any of those relationships were disrupted, it could have an adverse effect on delivery times and the overall cost and quality of our products or raw materials, which could have a negative impact on our businesses.  In addition, we do not have long-term contracts with any of our suppliers. If, in the future, we are unable to obtain sufficient amounts of steel and other products at competitive prices and on a timely basis from our traditional suppliers, we may be unable to obtain these products from alternative sources at competitive prices to meet our delivery schedules, which could have a material adverse impact on our results of operations.

Competition

Our businesses are highly competitive, and increased competition could negatively impact our financial results.  Generally, the markets in which we conduct business are highly competitive. Our competitors include a variety of both domestic and foreign companies in all major markets. Competition for most of our products is primarily on the basis of price, product quality and our ability to meet delivery requirements. Depending on a variety of factors, including raw material, energy, labor and capital costs, government control of foreign currency exchange rates and government subsidies of foreign steel producers or competitors, our businesses may be materially adversely affected by competitive forces.  In addition, anti-dumping actions we may pursue to counter government subsidiaries to and dumping by foreign competitors may prove to be ineffective.  Competition may also increase if suppliers to or customers of our industries begin to more directly compete with our businesses through new facilities, acquisitions or otherwise. As noted above, we can have conflicts with our customers or suppliers who, in some cases, supply the same products and services as we do. Increased competition could cause us to lose market share, increase expenditures, lower our margins or offer additional services at a higher cost to us, which could adversely impact our financial results.

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Material Substitution

If steel prices increase compared to certain substitute materials, the demand for our products could be negatively impacted, which could have an adverse effect on our financial results.  In certain applications, steel competes with other materials, such as aluminum (particularly in the automobile industry), cement and wood (particularly in the construction industry), composites, glass and plastic. Prices of all of these materials fluctuate widely, and differences between the prices of these materials and the price of steel may adversely affect demand for our products and/or encourage material substitution, which could adversely affect the prices of and demand for steel products. The higher cost of steel relative to certain other materials may make material substitution more attractive for certain uses.

If increased government mileage standards for automobiles result in the substitution of other materials for steel, demand for our products could be negatively impacted, which could have an adverse effect on our financial results.  Due to government requirements that manufacturers increase the fuel efficiency of automobiles, the automobile industry is exploring alternative materials to steel to decrease weight. The substitution of lighter weight material for steel in automobiles could adversely affect prices of and demand for our steel products.

Freight and Energy

Increasing freight and energy costs could increase our operating costs, which could have an adverse effect on our financial results.  The availability and cost of freight and energy, such as electricity, natural gas and diesel fuel, are important in the manufacture and transport of our products. Our operations consume substantial amounts of energy, and our operating costs generally increase when energy costs rise. Factors that may affect our energy costs include significant increases in fuel, oil or natural gas prices, unavailability of electrical power or other energy sources due to droughts, hurricanes or other natural causes or due to shortages resulting from insufficient supplies to serve customers, or interruptions in energy supplies due to equipment failure or other causes. During periods of increasing energy and freight costs, we may be unable to fully recover our operating cost increases through price increases without reducing demand for our products. Our financial results could be adversely affected if we are unable to pass all of the cost increases on to our customers or if we are unable to obtain the necessary freight and/or energy. Also, increasing energy costs could put a strain on the transportation of our materials and products if the increased costs force certain transporters to discontinue their operations.

We depend on third parties for freight services, and increases in the costs or the lack of availability of freight services can adversely affect our operations.  We rely primarily on third parties for transportation of our products as well as delivery of our raw materials, primarily by truck and container ship. If, due to a lack of freight services, raw materials or products are not delivered to us in a timely manner, we may be unable to manufacture and deliver our products to meet customer demand. Likewise, if due to a lack of freight services, we cannot deliver our products in a timely manner, it could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our results of operations. In addition, any increase in the cost of the transportation of raw materials or our products, as a result of increases in fuel or labor costs, higher demand for logistics services or otherwise, may adversely affect our results of operations as we may not be able to pass such cost increases on to our customers.

Information Systems

We are subject to information system security risks and systems integration issues that could disrupt our internal operations. We are dependent upon information technology and networks in connection with a variety of business activities including the distribution of information internally and to our customers and suppliers. This information technology is subject to potential damage or interruption from a variety of sources, including, without limitation, computer viruses, security breaches, and natural disasters.  We could also be adversely affected by system or network disruptions if new or upgraded business management systems are defective, not installed properly or not properly integrated into operations.  In addition, security breaches of our information systems could result in unauthorized disclosure or destruction of confidential or proprietary information and/or loss of the functionality of our systems. These risks may be increased as more employees continue to work from home as a result of the COVID-19 pandemic. Various measures have been implemented to manage our risks related to information system and network disruptions and to prevent attempts to gain unauthorized access to our information systems. While we undertake mitigating activities to counter these risks, a system failure could negatively impact our operations and financial results and cyber attacks could threaten the integrity of our trade secrets and sensitive intellectual property.

13


Business Disruptions

Disruptions to our business or the business of our customers or suppliers could adversely impact our operations and financial results.  Business disruptions, including increased costs for, or interruptions in, the supply of energy or raw materials, resulting from pandemic disease such as COVID-19, shortages of supply or transportation, severe weather events (such as hurricanes, tsunamis, earthquakes, tornados, floods and blizzards), casualty events (such as explosions, fires or material equipment breakdown), acts of terrorism, labor disruptions, the idling of facilities due to reduced demand (resulting from a downturn in economic activity or otherwise) or other events (such as required maintenance shutdowns), could cause interruptions to our businesses as well as the operations of our customers and suppliers. While we maintain insurance coverage that can offset some losses relating to certain types of these events, losses from business disruptions could have an adverse effect on our operations and financial results and we could be adversely impacted to the extent any such losses are not covered by insurance or cause some other adverse impact to us.

Foreign Operations

Economic, political and other risks associated with foreign operations could adversely affect our international financial results.  Although the substantial majority of our business activity takes place in the United States, we derive a portion of our revenues and earnings from operations in foreign countries, and we are subject to risks associated with doing business internationally. We have wholly-owned facilities in Austria, Germany, Poland and Portugal and joint venture facilities in Brazil, Canada, and Mexico and are active in exploring other foreign opportunities. The risks of doing business in foreign countries include, among other factors: the potential for adverse changes in the local political climate, in diplomatic relations between foreign countries and the United States or in government policies, laws or regulations; terrorist activity that may cause social disruption; logistical and communications challenges; costs of complying with a variety of laws and regulations; difficulty in staffing and managing geographically diverse operations; deterioration of foreign economic conditions; inflation and fluctuations in interest rates; foreign currency exchange rate fluctuations; foreign exchange restrictions; differing local business practices and cultural considerations; restrictions on imports and exports or sources of supply, including energy and raw materials; changes in duties, quotas, tariffs, taxes or other protectionist measures; and potential issues related to matters covered by the Foreign Corrupt Practices Act, regulations related to import/export controls, the Office of Foreign Assets Control sanctions program, anti-boycott provisions or similar laws. We believe that our business activities outside of the United States involve a higher degree of risk than our domestic activities, and any one or more of these factors could adversely affect our operating results and financial condition. In addition, global and regional economic conditions and the volatility of worldwide capital and credit markets have significantly impacted and may continue to significantly impact our foreign customers and markets. These factors may result in decreased demand in our foreign operations and have had significant negative impacts on our business. Refer to the General Economic or Industry Downturns and Weakness risk factors herein for additional information concerning the impact of the global economic conditions and the volatility of capital and credit markets on our business.

Joint Ventures and Investments

A change in the relationship between the members of any of our joint ventures may have an adverse effect on that joint venture. We have been successful in the development and operation of various joint ventures, and our equity in net income from our joint ventures, particularly WAVE, has been important to our financial results. We believe an important element in the success of any joint venture is a solid relationship between the members of that joint venture. If there is a change in ownership, a change of control, a change in management or management philosophy, a change in business strategy or another event with respect to a member of a joint venture that adversely impacts the relationship between the joint venture members, it could adversely impact that joint venture. The other members in our joint ventures may also, as a result of financial or other reasons, be unable or unwilling to fulfill their obligations in the respective joint ventures.  In addition, joint ventures necessarily involve special risks. Whether or not we hold a majority interest or maintain operational control in a joint venture, the other members in our joint ventures may have economic or business interests or goals that are inconsistent with our interests or goals. For example, the other members in our joint ventures may exercise veto rights to block actions that we believe to be in our best interests, may take action contrary to our policies or objectives with respect to our investments, or may be unable or unwilling to fulfill their obligations or commitments to the joint venture.

14


Acquisitions

We may be unable to successfully consummate, manage or integrate our acquisitions or our acquisitions may not meet our expectations. A portion of our growth has occurred through acquisitions.  We may from time to time continue to seek attractive opportunities to acquire businesses, enter into joint ventures and make other investments that are complementary to our existing strengths. There are no assurances, however, that any acquisition opportunities will arise or, if they do, that they will be consummated, or that any needed additional financing for such opportunities will be available on satisfactory terms when required. In addition, acquisitions involve risks that the businesses acquired will not perform in accordance with expectations, that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect, that we may assume unknown liabilities from the seller, that the acquired businesses may not be integrated successfully and that the acquisitions may strain our management resources or divert management’s attention from other business concerns. International acquisitions may present unique challenges and increase our exposure to the risks associated with foreign operations and countries. Also, failure to successfully integrate any of our acquisitions may cause significant operating inefficiencies and could adversely affect our operations and financial condition.  Even if the operations of an acquisition are integrated successfully, we may fail to realize the anticipated benefits of the acquisition, including the synergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated timeframe, or at all. Failing to realize the benefits could have a material adverse effect on our financial condition and results of operations.

Capital Expenditures

Our business requires capital investment and maintenance expenditures, and our capital resources may not be adequate to provide for all of our cash requirements.  Many of our operations are capital intensive. For the five-year period ended May 31, 2021, our total capital expenditures, including acquisitions and investment activity, were approximately $862.4 million.  Additionally, as of May 31, 2021, we were obligated to make aggregate operating and financing lease payments of $41.0 million and $7.3 million, respectively, under lease agreements. Our businesses also require expenditures for maintenance of our facilities. We currently believe that we have adequate resources (including cash and cash equivalents, cash provided by operating activities, and availability under existing credit facilities) to meet our cash needs for normal operating costs, capital expenditures, debt repayments, dividend payments, future acquisitions and working capital for our existing businesses. However, given the potential for challenges, uncertainty and volatility in the domestic and global economies and financial markets, there can be no assurance that our capital resources will be adequate to provide for all of our cash requirements.

Litigation

We may be subject to legal proceedings or investigations, the resolution of which could negatively affect our results of operations and liquidity in a particular period.  Our results of operations or liquidity in a particular period could be affected by an adverse ruling in any legal proceedings or investigations which may be pending against us or filed against us in the future. We are also subject to a variety of legal and compliance risks, including, without limitation, potential claims relating to product liability, product recall, privacy and information security, health and safety, environmental matters, intellectual property rights, taxes and compliance with U.S. and foreign export laws, anti-bribery laws, competition laws and sales and trading practices. While we believe that we have adopted appropriate risk management and compliance programs to address and reduce these risks, the global and diverse nature of our operations means that these risks will continue to exist and additional legal proceedings and contingencies may arise from time to time. An adverse ruling or settlement or an unfavorable change in laws, rules or regulations could have a material adverse effect on our results of operations or liquidity in a particular period.

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Claims and Insurance

Adverse claims experience, to the extent not covered by insurance, may have an adverse effect on our financial results.  We self-insure most of our risks for product recall, cyber liability and pollution liability.  We also self-insure a significant portion of our potential liability for workers’ compensation, product liability, general liability, property liability, automobile liability and employee medical claims, and in order to reduce risk for these liabilities, we purchase insurance from highly-rated, licensed insurance carriers that cover most claims in excess of the applicable deductible or retained amounts. We also maintain reserves for the estimated cost to resolve certain open claims that have been made against us (which may include active product recall or replacement programs), as well as an estimate of the cost of claims that have been incurred but not reported. The occurrence of significant claims, our failure to adequately reserve for such claims, a significant cost increase to maintain our insurance or the failure of our insurance providers to perform could have an adverse impact on our financial condition and results of operations.

Accounting and Tax-Related Estimates

We are required to make accounting and tax-related estimates, assumptions and judgments in preparing our consolidated financial statements, and actual results may differ materially from the estimates, assumptions and judgments that we use.  In preparing our consolidated financial statements in accordance with accounting principles generally accepted in the United States, we are required to make certain estimates and assumptions that affect the accounting for and recognition of assets, liabilities, revenues and expenses. These estimates and assumptions must be made because certain information that is used in the preparation of our consolidated financial statements is dependent on future events or cannot be calculated with a high degree of precision from data available to us. In some cases, these estimates and assumptions are particularly difficult to determine and we must exercise significant judgment. Some of the estimates, assumptions and judgments having the greatest amount of uncertainty, subjectivity and complexity are related to our accounting for bad debts, returns and allowances, inventory, self-insurance reserves, derivatives, stock-based compensation, deferred tax assets and liabilities and asset impairments. Our actual results may differ materially from the estimates, assumptions and judgments that we use, which could have a material adverse effect on our financial condition and results of operations.

Our internal controls could be negatively impacted by COVID-19. As a result of COVID-19, a portion of our workforce will continue to work remotely, so new processes, procedures, and controls could be required due to the changes in our business environment, which could negatively impact our internal control over financial reporting.

Principal Shareholder

Our principal shareholder may have the ability to exert significant influence in matters requiring a shareholder vote and could delay, deter or prevent a change in control of Worthington Industries.  Pursuant to our charter documents, certain matters such as those in which a person would attempt to acquire or take control of the Company, must be approved by the vote of the holders of common shares representing at least 75% of Worthington Industries’ outstanding voting power. Approximately 32% of our outstanding common shares are beneficially owned, directly or indirectly, by John P. McConnell, our Executive Chairman. As a result of his beneficial ownership of our common shares, Mr. McConnell may have the ability to exert significant influence in these matters and other proposals upon which our shareholders may vote.

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Employees

The loss of, or inability to attract and retain, qualified personnel could adversely affect our business. Our ability to successfully operate, grow our business and implement our business strategies is largely dependent on the efforts, abilities and services of our employees. The loss of employees or our inability to attract, train and retain additional personnel could reduce the competitiveness of our business or otherwise impair our operations or prospects. Our future success will also depend, in part, on our ability to attract and retain qualified personnel, including engineers and other skilled technicians, who have experience in the application of our products and are knowledgeable about our business, markets and products. We also face risks associated with the actions taken in response to COVID-19, including those associated with workforce reductions, and may experience difficulties with hiring additional employees or replacing employees following the pandemic, which may be exacerbated by the tight labor market. In addition, COVID-19 has, and may again result in quarantines of our personnel or an inability to access facilities, which could adversely affect our operations.

If we lose senior management or other key employees, our business may be adversely affected. We cannot assure that we will be able to retain our existing senior management personnel or other key employees or attract additional qualified personnel when needed. The loss of any member of our management team could adversely impact our business and operations.  We have not entered into any formal employment contracts with or other stand-alone change in control provisions relative to our executive officers.  However, we do have certain change in control provisions in our various compensation plans.  We may modify our management structure from time to time or reduce our overall workforce, which may create marketing, operational and other business risks.

Credit Ratings

Ratings agencies may downgrade our credit ratings, which may make it more difficult for us to raise capital and could increase our financing costs.  Any downgrade in our credit ratings may make raising capital more difficult, may increase the cost and affect the terms of future borrowings, may affect the terms under which we purchase goods and services and may limit our ability to take advantage of potential business opportunities. In addition, the interest rate on our revolving credit facility is tied to our credit ratings, and any downgrade of our credit ratings would likely result in an increase in the cost of borrowings under our revolving credit facility.

Difficult Financial Markets

If we are required to raise capital in the future, we could face higher borrowing costs, less available capital, more stringent terms and tighter covenants or, in extreme conditions, an inability to raise capital.  Although we currently have cash reserves, as well as significant borrowing availability under our existing credit facilities and should be able to access other capital if needed, should those facilities become unavailable due to covenant or other defaults, or should financial markets tighten so that we otherwise cannot raise capital outside our existing facilities, or the terms under which we do so change, we may be negatively impacted. Any adverse change in our access to capital or the terms of our borrowings, including increased costs, could have a negative impact on our financial condition.

Environmental, Health and Safety

We may incur additional costs related to environmental and health and safety matters. Our operations and facilities are subject to a variety of federal, state, local and foreign laws and regulations relating to the protection of the environment and human health and safety. Compliance with these laws and regulations and any changes therein may sometimes involve substantial operating costs and capital expenditures, and any failure to maintain or achieve compliance with these laws and regulations or with the permits required for our operations could result in increased costs and capital expenditures and potentially fines and civil or criminal sanctions, third-party claims for property damage or personal injury, cleanup costs or temporary or permanent discontinuance of operations. Over time, we and predecessor operators of our facilities have generated, used, handled and disposed of hazardous and other regulated wastes.  Environmental liabilities, including cleanup obligations, could exist at our facilities or at off-site locations where materials from our operations were disposed of or at facilities we have divested, which could result in future expenditures that cannot be currently quantified and which could reduce our profits and cash flow. We may be held strictly liable for any contamination of these sites, and the amount of any such liability could be material. Under the “joint and several” liability principle of certain environmental laws, we may be held liable for all remediation costs at a particular site, even with respect to contamination for which we are not responsible. In addition, changes in environmental and human health and safety laws, rules, regulations or enforcement policies could have a material adverse effect on our business, financial condition or results of operations.

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Seasonality

Our operations have historically been subject to seasonal fluctuations that may impact our cash flows for a particular period. Although we experienced consistently strong demand in each quarter of fiscal 2021, our sales are generally strongest in the fourth quarter of the fiscal year when all of our business segments are normally operating at seasonal peaks, and our sales are generally weaker in the third quarter of the fiscal year, primarily due to reduced activity in the building and construction industry as a result of the colder, more inclement weather, as well as customer plant shutdowns in the automotive industry due to holidays. Our quarterly results may also be affected by the timing of large customer orders. Consequently, our cash flow from operations may fluctuate significantly from quarter to quarter. If, as a result of any such fluctuation, our quarterly cash flows were significantly reduced, we may be unable to service our indebtedness or maintain compliance with certain covenants under our credit facilities. A default under any of the documents governing our indebtedness could prevent us from borrowing additional funds, limit our ability to pay interest or principal and allow our lenders to declare the amounts outstanding to be immediately due and payable and to exercise certain other remedies.

General Risks

General Economic or Industry Downturns and Weakness

Our industries are cyclical and weakness or downturns in the general economy or certain industries could have an adverse effect on our business. If the domestic or global economies, or certain industry sectors of those economies that are key to our sales, contract or deteriorate, it could result in a corresponding decrease in demand for our products and negatively impact our results of operations and financial conditions.

Volatility in the United States and worldwide capital and credit markets could impact our end markets and result in negative impacts on demand, increased credit and collection risks and other adverse effects on our businesses. The domestic and worldwide capital and credit markets have experiences significant volatility, disruptions and dislocations with respect to price and credit availability. These factors caused diminished availability of credit and other capital in our end markets, and for participants in, and the customers of, those markets.  Although domestic credit markets have largely stabilized from the height of the financial crisis, the effects of the financial crisis, as well as the concerns over the economic impact of COVID-19, continue to present risks to us, our customers and suppliers. In particular, there is no guarantee that the credit markets or liquidity will not once again be restricted. Additionally, government stimulus programs may not be available to the Company, its customers, or its suppliers, or may prove to be ineffective.  Stricter lending standards may make it more difficult and costly for some firms to access the credit markets. Further, uncertainties in Europe regarding the financial sector and sovereign debt and the potential impact on banks in other regions of the world will continue to weigh on global and domestic growth. Although we believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities, these risks could temporarily restrict our ability to borrow money on acceptable terms in the credit markets and potentially could affect our ability to draw on our credit facilities. In addition, restricted access to the credit markets could make it difficult, or in some cases, impossible for customers to borrow money to fund their operations. Lack of, or limited access to, capital would adversely affect our customers’ ability to purchase our products or, in some cases, to pay for our products on a timely basis.

Tax Laws and Regulations

Tax increases or changes in tax laws or regulations could adversely affect our financial results.  We are subject to tax and related obligations in the jurisdictions in which we operate or do business, including state, local, federal and foreign taxes. The taxing rules of the various jurisdictions in which we operate or do business often are complex and subject to varying interpretations. Tax authorities may challenge tax positions that we take or historically have taken and may assess taxes where we have not made tax filings or may audit the tax filings we have made and assess additional taxes. Some of these assessments may be substantial, and also may involve the imposition of penalties and interest.

In addition, governments could change their existing tax laws, impose new taxes on us or increase the rates at which we are taxed in the future. The payment of substantial additional taxes, penalties or interest resulting from tax assessments, or the imposition of any new taxes, could materially and adversely impact our results of operations and financial condition.  For example, on March 31, 2021, President Biden unveiled his infrastructure plan, which includes a proposal to increase the federal corporate income tax rate from 21% to 28% as part of a package of tax reforms to help fund the spending proposals in the plan. The Biden plan is in the early stages of the legislative process.  

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If adopted as proposed, the increase in the federal corporate income tax rate would adversely affect our results of operations in future periods.

Legislation and Regulations

Certain proposed legislation and regulations may have an adverse impact on the economy in general and in our markets specifically, which may adversely affect our businesses.  Our businesses may be negatively impacted by a variety of new or proposed legislation or regulations. For example, legislation and regulations proposing increases in taxation on, or heightened regulation of, greenhouse gas emissions may result in higher prices for steel, higher prices for utilities required to run our facilities, higher fuel costs for us and our suppliers and distributors, limitations on our ability to use or sell certain products and other adverse impacts. To the extent that new legislation or regulations increase our costs, we may not be able to fully pass these costs on to our customers without a resulting decline in sales and adverse impact to our profits. Likewise, to the extent new legislation or regulations would have an adverse effect on the economy, our markets or the ability of domestic businesses to compete against foreign operations, we could also be adversely impacted.

 

Changes to global data privacy laws and cross-border transfer requirements could adversely affect our businesses and operations.  Our businesses depend on the transfer of data between our affiliated entities, to and from our business partners, and with third-party service provides, which may be subject to global data privacy laws and cross-border transfer restrictions.  In particular, the European Union has implemented the General Data Protection Regulation (“GDPR”), which contains numerous requirements that must be complied with in connection with how we handle personal data related to our European-based operations and employees.  A number of U.S. states have also recently introduced and passed legislation to expand data breach notification rules and to mirror some of the protections provided by GDPR.  While we take steps to comply with these legal requirements, the volatility and changes to the applicability of those laws may impact our ability to effectively transfer data across borders in support of our business operations.  Compliance with GDPR, or other regulatory standards, could also increase our cost of doing business and/or force us to change our business practices in a manner adverse to our businesses.  In addition, violations of GDPR, or other privacy regulations, may result in significant fines, penalties and damage to our brands and businesses which could, individually or in the aggregate, materially harm our businesses and reputation.

 

Significant changes to the U.S. federal government’s trade policies, including new tariffs or the renegotiation or termination of existing trade agreements and/or treaties, may adversely affect our financial performance.  In recent years, the U.S. federal government has altered U.S. international trade policy and has indicated its intention to renegotiate or terminate certain existing trade agreements and treaties with foreign governments.  In the past year, the U.S. federal government has re-negotiated the North American Free Trade Agreement with Mexico and Canada, replacing it with the United States-Mexico-Canada Agreement (“USMCA”).  The U.S. federal government’s decision to implement new trade agreements, and/or withdraw or materially modify other existing trade agreements or treaties may adversely impact our business, customers and/or suppliers by disrupting trade and commercial transactions and/or adversely affecting the U.S. economy or specific portions thereof. Further, it is uncertain what impact COVID-19 and the reactions of governmental authorities and others thereto will have on international trade and what impact any changes in international trade will have on the economy or on the businesses of the Company and those of its customers and its suppliers.

 

Additionally, the U.S. federal government has imposed tariffs on certain foreign goods.  The U.S. federal government has imposed tariffs on certain steel products imported into the United States.  Although the new steel tariffs may benefit portions of our business, these tariffs, as well as country-specific or product-specific exemptions, may also lead to steel price fluctuations and retaliatory actions from foreign governments and/or modifications to the purchasing patterns of our customers that could adversely affect our business or the steel industry as a whole. In particular, certain foreign governments, including Canada, China and Mexico, as well as the European Union, have instituted or are considering imposing tariffs on certain U.S. goods. Restrictions on trade with foreign countries, imposition of customs duties or further modifications to U.S. international trade policy have the potential to disrupt our supply chain or the supply chains of our customers and to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof, potentially leading to negative effects on our business.

 

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Impairment Charges

Weakness or instability in the general economy, our markets or our results of operations could result in future asset impairments, which would reduce our reported earnings and net worth.  Economic conditions remain fragile in some markets and the possibility remains that the domestic or global economies, or certain industry sectors that are key to our sales, may deteriorate. If certain of our business segments are adversely affected by challenging economic and financial conditions, we may be required to record future impairments, which would negatively impact our results of operations.

 

Item 1B.  — Unresolved Staff Comments

None.

Item 2.  — Properties.

General

Our principal corporate offices are located in an owned office building in Columbus, Ohio, which also houses the principal corporate offices of Pressure Cylinders. Our Steel Processing corporate offices are located in an office building next to the principal corporate offices where we lease office space.  We also own three facilities in Columbus, Ohio used for administrative and medical purposes.  As of May 31, 2021, excluding our consolidated and unconsolidated joint ventures, we operated 21 manufacturing facilities and 9 warehouses.  Including our consolidated and unconsolidated joint ventures, we owned or leased a total of approximately 10,000,000 square feet of space for our operations, of which approximately 8,800,000 square feet (9,600,000 square feet with warehouses) was devoted to manufacturing, product distribution and sales offices.  Major leases contain renewal options for periods of up to 10 years.  For information concerning rental obligations, refer to “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Cash Obligations and Other Commercial Commitments” as well as “Note T – Leases”.  We believe these facilities are well maintained and in good operating condition and are sufficient to meet our current needs.

Steel Processing

As of May 31, 2021, our wholly-owned operations within Steel Processing operated a total of eight manufacturing facilities, seven of which are owned by the Company, and one of which is leased. Steel Processing also acquired an additional manufacturing facility, which is leased, in June of 2021. These facilities are located in Alabama, Indiana, Kentucky (acquired in June of 2021), New York and Ohio (5). As of May 31, 2021, this operating segment also owned one warehouse in Ohio and one in South Carolina. As noted above, this operating segment’s corporate offices are located in Columbus, Ohio.

Pressure Cylinders

As of May 31, 2021, our wholly-owned operations within Pressure Cylinders operated a total of 13 manufacturing facilities, 12 of which are owned by the Company and one of which is leased.  These facilities are located in Kansas, Kentucky, Maryland, New Jersey, Ohio (3), Rhode Island, Wisconsin, Austria, Germany, Poland and Portugal.  As of May 31, 2021, Pressure Cylinders also operated two owned warehouses, both in Poland, and six leased warehouses, one each in Kentucky, New Jersey, Ohio and Rhode Island, and two in Portugal.  As noted above, this operating segment’s corporate offices are located in Columbus, Ohio.

Other

The Company also owns a manufacturing facility in Wooster, Ohio, that is subject to a lease agreement with our automotive body panels joint venture, ArtiFlex.  

Joint Ventures

As outlined below, our consolidated and unconsolidated joint ventures operated a total of 47 manufacturing facilities as of May 31, 2021.

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Consolidated

 

Samuel operates three steel pickling facilities in Ohio, two of which are owned and one of which is leased.

 

Spartan owns and operates one manufacturing facility in Monroe, Michigan.

 

TWB operates eleven manufacturing facilities (eight of which were being operated as of May 31, 2021), one owned facility located in Monroe, Michigan, and ten leased facilities located in Kentucky, Michigan (acquired in June 2021), Ohio (2, both of which were acquired in June of 2021), Tennessee (2), Canada, and Mexico (3).

 

WSP owns and operates two steel processing facilities located in Michigan.

Unconsolidated

 

ArtiFlex operates five manufacturing facilities, three of which are owned.  These facilities are located in Michigan (3), and Ohio (2).

 

ClarkDietrich operates 13 manufacturing facilities, one each in Connecticut, Georgia, Illinois, Maryland and Missouri and two each in California, Florida, Ohio and Texas.  The two facilities in Ohio are owned.  The remaining 11 facilities are leased.

 

Serviacero Worthington owns and operates three steel processing facilities in Mexico. 

 

WAVE operates six manufacturing facilities, including one owned facility each in California, Michigan and Nevada, and one leased facility each in California, Georgia and Maryland.  

The Company is involved in various judicial and administrative proceedings, as both plaintiff and defendant, arising in the ordinary course of business.  The Company does not believe that any such proceedings will have a material adverse effect on its business, financial position, results of operation or cash flows.

Item 4.  — Mine Safety Disclosures

Not Applicable

Supplemental Item — Information about our Executive Officers

The following table lists the names, positions held and ages of the individuals serving as executive officers of Worthington Industries as of July 30, 2021.

 


Name

Age

Position(s) with the Registrant

Present Office

Held Since

John P. McConnell

67

Executive Chairman; a Director

2020

B. Andrew Rose

51

President and CEO

2020

Geoffrey G. Gilmore

49

Executive Vice President and Chief Operating Officer

2018

Joseph B. Hayek

49

Vice President and Chief Financial Officer

2018

Patrick J. Kennedy

40

Vice President, General Counsel and Secretary

2021

Jeff R. Klingler

49

President – Steel Processing

2019

Eric M. Smolenski

51

President – Building Products and Sustainable Energy Solutions

2021

Steven M. Caravati

Catherine M. Lyttle

39

62

President – Consumer Products

Senior Vice President and Chief Human Resources Officer

2021

2018

Richard G. Welch

63

Corporate Controller

2000

 

 

 

 

 

John P. McConnell has served as Worthington Industries’ Executive Chairman since September 2020, as a director of Worthington Industries continuously since 1990, and as Chairman of the Board of Worthington Industries since September 1996. Mr. McConnell also serves as the Chair of the Executive Committee of Worthington Industries’

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Board of Directors.  Mr. McConnell served as CEO of Worthington Industries from June 1993 to August 2020 and in various other positions with the Company from 1975 to June 1993.

 

B. Andrew ‘Andy’ Rose has served as CEO of Worthington Industries since September 2020 and President since August 2018.  Mr. Rose served as Chief Financial Officer of Worthington Industries on an interim basis from August 2018 to November 2018.  Mr. Rose served as Executive Vice President and Chief Financial Officer of Worthington Industries from July 2014 to August 2018 and as Vice President and Chief Financial Officer of Worthington Industries from December 2008 to July 2014.  From 2007 to 2008, Mr. Rose served as a senior investment professional with MCG Capital Corporation, a publicly-traded company specializing in debt and equity investments in middle market companies; and from 2002 to 2007, he was a founding partner at Peachtree Equity Partners, L.P., a private equity firm backed by Goldman Sachs.

 

Geoffrey G. Gilmore has served as Executive Vice President and Chief Operating Officer of Worthington Industries since August 2018.  Mr. Gilmore served as President of Worthington Cylinder Corporation from June 2016 to August 2018.  Mr. Gilmore served as President of The Worthington Steel Company from August 2012 through May 2016.  From July 2011 to July 2012, Mr. Gilmore served as Vice President-Purchasing for Worthington Industries.  From April 2010 to July 2011, Mr. Gilmore served as General Manager of The Worthington Steel Company’s Delta, Ohio facility; and from June 2006 to February 2010, he served as Director of Automotive Sales for The Worthington Steel Company.  Mr. Gilmore served in various other positions with the Company from 1998 to June 2006.  

 

Joseph B. Hayek has served as Worthington Industries’ Vice President and Chief Financial Officer since November 2018.  Mr. Hayek served as Vice President and General Manager of Worthington’s oil and gas equipment business unit from March 2017 to November 2018.  From April 2014 to March 2017, Mr. Hayek served as Worthington Industries’ Vice President – Mergers & Acquisitions and Corporate Development. Prior to joining Worthington, Mr. Hayek served as President of Sarcom, Inc., a value-added IT solutions provider (n/k/a PCM Sales, Inc.) and the largest division of PCM, Inc.  

 

Patrick J. Kennedy has served as Worthington Industries’ Vice President, General Counsel and Secretary since January 2021.  Mr. Kennedy served as Corporate Counsel of Worthington Industries from June 2018 to December 2020, and was a participant in the Worthington Industries Rotational Experience and Development program (WIRED) from June 2016 to May 2018. Prior to joining Worthington, Mr. Kennedy was a partner with the law firm Ice Miller LLP, where he was a member of the firm’s business law group.

 

Jeff R. Klinger has served as President of The Worthington Steel Company since May 2019. Mr. Klingler served as General Manager of various business units within The Worthington Steel Company from May 2014 until April 2019.  Mr. Klingler served as vice president of sales, marketing and procurement for Banner Services Corporation, a supplier and processor of metal bar products, from 2008 until 2014, after serving in numerous capacities with The Worthington Steel Company from 1992 to 2008.    

 

Eric M. Smolenski has served as President of Worthington’s Building Products and Sustainable Energy Solutions reportable segments since June 2021.  Mr. Smolenski served as President of Worthington Cylinder Corporation from May 2019 to May 2020. Mr. Smolenski served as General Manager of Worthington Cylinder Corporation’s industrial products business unit from May 2017 until April 2019 and of its oil and gas business unit from January 2015 until May 2017. Mr. Smolenski joined Worthington in 1994 and has worked in numerous accounting, finance, human resources and information technology capacities, including Vice President of Human Resources of Worthington Industries from 2006 to 2012 and Chief Information Officer of Worthington Industries from 2012 to 2014.

 

Steven M. Caravati has served as President of Worthington’s Consumer Products reportable segment since June of 2021. Mr. Caravati served as General Manager of Worthington Cylinder Corporation’s Consumer Products business unit from June 2019 to May 2021 and Director of Sales from July 2014 to May 2019. Mr. Caravati joined Worthington in 2005 and served in numerous sales capacities from 2005 to 2014.

 

Catherine M. Lyttle has served as Worthington Industries’ Senior Vice President and Chief Human Resources Officer since September 2018.  Ms. Lyttle served as Vice President-Communications and Investor Relations of Worthington Industries from April 2009 to September 2018.  Ms. Lyttle served as Vice President of Communications of Worthington Industries from January 1999 to April 2009.  Ms. Lyttle served as Vice President of Marketing for the Columbus Chamber of Commerce from 1987 to September 1997 and as Vice President of JMAC Hockey from 1997 to 1999.

22


 

Richard G. Welch has served as the Corporate Controller of Worthington Industries since March 2000 and prior thereto, he served as Assistant Controller of Worthington Industries from August 1999 to March 2000.  He served as Principal Financial Officer of Worthington Industries on an interim basis from September 2008 to December 2008.  

 

Executive officers serve at the pleasure of the Worthington Industries Board of Directors.  There are no family relationships among any of Worthington Industries’ executive officers or directors.  No arrangements or understandings exist pursuant to which any individual has been, or is to be, selected as an executive officer of Worthington Industries.

 

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Shares Information

The common shares of Worthington Industries, Inc. (“Worthington Industries”) trade on the New York Stock Exchange (“NYSE”) under the symbol “WOR” and are listed in most newspapers as “WorthgtnInd.”  As of July 23, 2021, Worthington Industries had 6,592 registered shareholders.    

The Worthington Industries Board of Directors reviews the dividend on a quarterly basis and establishes the dividend rate based upon Worthington Industries’ financial condition, results of operations, capital requirements, current and projected cash flows, business prospects and other factors which the directors may deem relevant.  While Worthington Industries has paid a dividend every quarter since becoming a public company in 1968, there is no guarantee this will continue in the future.  We currently have no material contractual or regulatory restrictions on the payment of dividends.

For additional information on the Worthington Industries dividend policy, see “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Dividend Policy.”

Shareholder Return Performance

The following information in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or Regulation 14C under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the  Securities Act of 1933, as amended, or the Exchange Act, except to the extent we specifically incorporate such information into such a filing.

23


The following graph compares the five-year cumulative return on Worthington Industries’ common shares, the S&P Midcap 400 Index and the S&P 1500 Steel Composite Index.  The graph assumes that $100 was invested at May 31, 2016, in Worthington Industries’ common shares and each index.

 

 

 

 

5/16

 

 

5/17

 

 

5/18

 

 

5/19

 

 

5/20

 

 

5/21

 

Worthington Industries, Inc.

 

$

100.00

 

 

$

114.32

 

 

$

133.01

 

 

$

96.80

 

 

$

87.32

 

 

$

198.02

 

S&P Midcap 400 Index

 

$

100.00

 

 

$

117.16

 

 

$

134.57

 

 

$

127.25

 

 

$

126.22

 

 

$

197.87

 

S&P 1500 Steel Composite Index

 

$

100.00

 

 

$

122.69

 

 

$

161.08

 

 

$

105.31

 

 

$

96.22

 

 

$

230.82

 

 

Data and graph provided by Zacks Investment Research, Inc. Copyright© 2021, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved. Used with permission.

Worthington Industries is a component of the S&P Midcap 400 Index.  The S&P 1500 Steel Composite Index, of which Worthington Industries is also a component, is the most specific index relative to the largest line of business of Worthington Industries and its subsidiaries.  At May 31, 2021, in addition to Worthington Industries, the S&P 1500 Steel Composite Index included 13 other steel related companies from the S&P 500, S&P Midcap 400 and S&P 600 indices:  Allegheny Technologies Incorporated; Carpenter Technology Corporation; Cleveland-Cliffs Inc.; Commercial Metals Company; Haynes International, Inc.; Nucor Corporation; Olympic Steel, Inc.; Reliance Steel & Aluminum Co.; Steel Dynamics, Inc.; SunCoke Energy, Inc.; TimkenSteel Corporation; United States Steel Corporation; Warrior Met Coal, Inc.; and Worthington Industries.

Issuer Purchases of Equity Securities

The following table provides information about purchases made by, or on behalf of, Worthington Industries or any “affiliated purchaser” (as defined in Rule 10b – 18(a) (3) under the Exchange Act) of common shares of Worthington Industries, Inc. during each month of the fiscal quarter ended May 31, 2021. For additional information on the authorization by the Worthington Industries Board of Directors with respect to the repurchase of common shares of Worthington Industries, please see “Part II Item 7. Management’s Discussion and Analysis of Financial Condition and Result of Operations Financing Activities.”

 

24


 

 

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 1-31, 2021

 

 

112,000

 

 

$

67.47

 

 

 

112,000

 

 

 

9,888,000

 

April 1-30, 2021 (2)

 

 

606,583

 

 

$

66.76

 

 

 

588,000

 

 

 

9,300,000

 

May 1-31, 2021

 

 

-

 

 

$

-

 

 

 

-

 

 

 

9,300,000

 

Total

 

 

718,583

 

 

$

-

 

 

 

700,000

 

 

 

 

 

 

(1)

The number shown represents, as of the end of each period, the maximum number of common shares that could be purchased under the publicly announced repurchase authorizations then in effect.  On September 27, 2017, the Worthington Industries Board authorized the repurchase of up to 6,828,855 of the outstanding common shares of Worthington Industries.  On March 20, 2019, the Worthington Industries Board authorized the repurchase of up to an additional 6,600,000 of the outstanding common shares of Worthington Industries, increasing the total number of common shares then available for repurchase to 10,000,000.  On March 24, 2021, the Worthington Industries Board authorized the repurchase of up to 5,618,464 outstanding common shares of Worthington Industries, increasing the then total number of common shares available for repurchase to 10,000,000.  A total of 700,000 common shares have been repurchased since the latest authorization, leaving 9,300,000 common shares available for repurchase at May 31, 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.

(2)

Includes an aggregate of 18,583 common shares surrendered by employees in the period from April 1, 2021 through April 30, 2021 to satisfy withholding obligations upon the vesting of restricted common shares.  These common shares were not counted against the share repurchase authorizations in effect during the fiscal quarter ended May 31, 2021 and discussed in footnote (1) above.

 

(3)


25


Item 6. – Selected Financial Data

 

Fiscal Years Ended May 31,

 

(In thousands, except per share amounts)

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

FINANCIAL RESULTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

3,171,429

 

 

$

3,059,119

 

 

$

3,759,556

 

 

$

3,581,620

 

 

$

3,014,108

 

Cost of goods sold

 

2,532,351

 

 

 

2,615,782

 

 

 

3,279,601

 

 

 

3,018,763

 

 

 

2,478,203

 

Gross margin

 

639,078

 

 

 

443,337

 

 

 

479,955

 

 

 

562,857

 

 

 

535,905

 

Selling, general and administrative expense

 

351,145

 

 

 

328,110

 

 

 

338,392

 

 

 

367,460

 

 

 

316,373

 

Impairment of goodwill and long-lived assets

 

13,739

 

 

 

82,690

 

 

 

7,817

 

 

 

61,208

 

 

 

-

 

Restructuring and other expense (income), net

 

56,097

 

 

 

10,048

 

 

 

(11,018

)

 

 

(7,421

)

 

 

6,411

 

Incremental expenses related to Nikola gains

 

50,624

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Operating income

 

167,473

 

 

 

22,489

 

 

 

144,764

 

 

 

141,610

 

 

 

213,121

 

Miscellaneous income, net

 

2,163

 

 

 

9,099

 

 

 

2,716

 

 

 

2,996

 

 

 

3,764

 

Interest expense

 

(30,346

)

 

 

(31,616

)

 

 

(38,063

)

 

 

(38,675

)

 

 

(29,796

)

Equity in net income of unconsolidated affiliates

 

123,325

 

 

 

114,848

 

 

 

97,039

 

 

 

103,139

 

 

 

110,038

 

Gains on investment in Nikola

 

655,102

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Loss on extinguishment of debt

 

-

 

 

 

(4,034

)

 

 

-

 

 

 

-

 

 

 

-

 

Earnings before income taxes

 

917,717

 

 

 

110,786

 

 

 

206,456

 

 

 

209,070

 

 

 

297,127

 

Income tax expense

 

176,267

 

 

 

26,342

 

 

 

43,183

 

 

 

8,220

 

 

 

79,190

 

Net earnings

 

741,450

 

 

 

84,444

 

 

 

163,273

 

 

 

200,850

 

 

 

217,937

 

Net earnings attributable to noncontrolling interests

 

17,655

 

 

 

5,648

 

 

 

9,818

 

 

 

6,056

 

 

 

13,422

 

Net earnings attributable to controlling interest

$

723,795

 

 

$

78,796

 

 

$

153,455

 

 

$

194,794

 

 

$

204,515

 

Earnings per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share attributable to controlling interest

$

13.42

 

 

$

1.41

 

 

$

2.61

 

 

$

3.09

 

 

$

3.15

 

Depreciation and amortization

$

87,654

 

 

$

92,678

 

 

$

95,602

 

 

$

103,359

 

 

$

86,793

 

Capital expenditures (including acquisitions)

 

211,793

 

 

 

126,251

 

 

 

94,901

 

 

 

361,116

 

 

 

68,386

 

Cash dividends declared

 

55,115

 

 

 

53,721

 

 

 

53,391

 

 

 

51,771

 

 

 

51,448

 

Per common share

$

1.03

 

 

$

0.96

 

 

$

0.92

 

 

$

0.84

 

 

$

0.80

 

Average common shares outstanding - diluted

 

53,917

 

 

 

55,983

 

 

 

58,823

 

 

 

63,042

 

 

 

64,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL POSITION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

$

1,967,992

 

 

$

983,179

 

 

$

1,165,913

 

 

$

1,241,122

 

 

$

1,190,969

 

Total current liabilities

 

787,901

 

 

 

388,238

 

 

 

698,020

 

 

 

646,895

 

 

 

520,783

 

Working capital

$

1,180,091

 

 

$

594,941

 

 

$

467,893

 

 

$

594,227

 

 

$

670,186

 

Total property, plant and equipment, net

$

515,017

 

 

$

572,644

 

 

$

578,664

 

 

$

584,970

 

 

$

570,489

 

Total assets

 

3,373,245

 

 

 

2,331,515

 

 

 

2,510,796

 

 

 

2,621,787

 

 

 

2,325,344

 

Total debt

 

710,489

 

 

 

699,665

 

 

 

749,299

 

 

 

750,368

 

 

 

578,610

 

Total shareholders' equity - controlling interest

 

1,398,193

 

 

 

820,821

 

 

 

831,246

 

 

 

918,769

 

 

 

951,635

 

Per share

$

27.24

 

 

$

15.03

 

 

$

14.99

 

 

$

15.60

 

 

$

15.15

 

Common shares outstanding

 

51,330

 

 

 

54,616

 

 

 

55,468

 

 

 

58,877

 

 

 

62,802

 

 

The Selected Financial Data above reflects the impact of the following acquisitions and dispositions from the date of the transactions: the May 2021 disposal of the Company’s LPG fuel storage business in Poland; the March 2021 disposal of the Company’s Structured Composites Industries, Inc. business in Pomona, California; the January 2021 acquisition by the Company of General Tools & Instruments Company LLC; the January 2021 disposition of the Company’s oil & gas equipment business in Bremen, Ohio and Tulsa, Oklahoma; the January 2021 acquisition by the Company of PTEC Pressure Technology GmbH in Germany; the October 2020 sale of the Company’s cryogenics business in Theodore, Alabama which included the disposal of each of the Company’s cryogenic trailer and hydrogen trailer business and the Company’s cryo-science and microbulk storage unit business; the consolidation of the Samuel joint venture since January 2020 when the Company obtained control of the joint venture; the November 2019 deconsolidation of the Engineered Cabs contributed assets; the acquisition of the Heidtman Cleveland facility from October 1, 2019 through its contribution to the Samuel joint venture on December 31, 2019; the July 2019 disposal of the Company’s cryogenic business in Turkey; the May 2019 acquisition of the net assets of Magna Industries, Inc.; the December 2018 disposal of the Company’s solder business in Winston-Salem, North Carolina and Mount Orab, Ohio; the July 2018 disposal of the Garden City, Kansas and Dickinson, North Dakota oil & gas equipment facilities; the Company’s March 2018 disposal of its 65% stake in Worthington Energy Innovations, LLC; and the June 2017 acquisition of New AMTROL Holdings, Inc. and its subsidiaries (“AMTROL”).

26


 

Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Selected statements contained in this “Item 7. – 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 Annual Report on Form 10-K and “Part I - Item 1A. - Risk Factors” of this Annual Report on Form 10-K.

 

Unless otherwise indicated, all Note references contained in this Part II – Item 7. refer to the Notes to the Consolidated Financial Statements included in “Part II – Item 8. – Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (this “Form 10-K”).

Introduction

Worthington Industries, Inc. is a corporation formed under the laws of the State of Ohio (individually, the “Registrant” or “Worthington Industries” or, collectively with the subsidiaries of Worthington Industries, Inc., “we,” “our,” “Worthington” or the “Company”).  Founded in 1955, Worthington is an industrial manufacturing company, focused on value-added steel processing and manufactured metal products.  Our manufactured metal products include: pressure cylinders for liquefied petroleum gas (“LPG”), compressed natural gas (“CNG”), oxygen, refrigerant and other industrial gas storage; water well tanks for commercial and residential uses; hand torches and filled hand torch cylinders; propane-filled camping cylinders; helium-filled balloon kits; specialty tools; and, through our joint ventures, complete ceiling grid solutions; laser welded blanks; light gauge steel framing for commercial and residential construction; current and past model automotive service stampings; and engineered cabs and operator stations and cab components.  The Company follows a people-first Philosophy with earning money for its shareholders as its first corporate goal, which we seek to accomplish by optimizing existing operations, developing and commercializing new products and applications, and pursuing strategic acquisitions and joint ventures.

As of May 31, 2021, excluding our joint ventures, we operated 21 manufacturing facilities worldwide, principally in two operating segments, which correspond with our reportable business segments: Steel Processing and Pressure Cylinders.

We also held equity positions in nine joint ventures, which operated 47 manufacturing facilities worldwide, including 28 facilities which were operated by joint ventures in which we held a controlling interest, as of May 31, 2021.  Four of these joint ventures are consolidated within Steel Processing with the equity owned by the other joint venture member(s) shown as noncontrolling interests in our consolidated balance sheets, and the other joint venture member(s)’ portion of net earnings and other comprehensive income shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively.  The remaining five joint ventures are unconsolidated and accounted for using the equity method.

Overview

The Company generated net earnings attributable to controlling interest of $723.8 million in fiscal 2021 driven largely by pre-tax realized gains of $655.1 million related to the divestiture of the Company’s investment in Nikola Corporation (“Nikola”).  This amount was partially offset by incremental expenses related to the Nikola gains of $50.6 million within operating income, as discussed further in “Note C – Investment in Nikola.”  Despite the incremental expenses within operations, operating income was up $145.0 million in fiscal 2021 to $167.5 million.  The increase was driven largely by improved direct spreads in our Steel Processing segment, as rising steel prices led to estimated inventory holding gains of $75.0 million in fiscal 2021 compared to estimated holding losses of $20.3 million in the prior fiscal year.  Results in fiscal 2021 also benefitted from lower impairment and restructuring charges, which were down $22.9 million from the prior year.  Impairment and restructuring activity in fiscal 2021 related primarily to the divestiture of underperforming assets in Pressure Cylinders, as discussed further in “Note E – Goodwill and Other Long-Lived Assets” and “Note F – Restructuring and Other Expense (Income), Net.”

Equity in net income of unconsolidated affiliates (“equity income”) increased $8.5 million.  The increase was primarily driven by higher contributions from ClarkDietrich and Serviacero, where results benefited from rising steel prices, partially offset by a decline in equity income at WAVE due to a $23.1 million gain in the prior fiscal year

27


related to the sale of WAVE’s international operations.  See additional information in Note D – Investments in Unconsolidated Affiliates.       

The COVID-19 Pandemic

The COVID-19 pandemic, and the various governmental, industry and consumer actions related thereto, have had and could continue to have negative impacts on our business and have exacerbated and could further exacerbate conditions in our other risk factors noted below.   These  impacts  include,  without  limitation:  potential  significant  volatility  or  continued decreases  in  the  demand  for  our  products;  changes  in  customer  and consumer behavior and preferences;  disruptions in or additional closures of our manufacturing operations or those of our customers and suppliers; disruptions within our supply chain; limitations on our employees’ ability to work and travel; potential financial difficulties of customers and suppliers; significant changes in economic or political conditions; and related financial and commodity volatility, including volatility in raw material and other input costs. The situation is changing rapidly and there may be additional impacts of which we are not yet aware.

It is also uncertain what the impact of various legislation and other responses being taken in the United States and other countries will have on the economy, international trade, our industries, our businesses and the businesses of our customers and suppliers. Governments around the world have implemented stringent measures to help control the spread of COVID-19, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school and childcare closures, and other measures. These actions have caused, and are continuing to cause, business shutdowns or slowdowns and significant disruption in the global economy.

Despite our efforts to manage the impacts, the degree to which COVID-19 and related actions ultimately impact our business, financial position, results of operations  and  cash  flows  will  depend  on  factors  beyond  our  control  including  the  duration,  spread  and  severity  of  the  outbreak,  the  actions  taken  to  contain COVID-19 and mitigate its public health effects, the impact on the U.S. and global economies and demand for our products, and how quickly and to what extent normal economic and operating conditions resume. Continued disruption to the global economy, as well as to the end markets our businesses serve, could result in material adverse effects on our business, financial position, results of operations and cash flows.

Recent Business Developments

 

On June 3, 2020, Nikola Corporation (“Nikola”) became a public company through a reverse merger with a subsidiary of VectoIQ Acquisition Corporation, a NASDAQ listed publicly-traded company. The Company owned 19,048,020 shares of Nikola common stock following the reverse merger and subsequently sold all of the Company’s shares, resulting in pre-tax gains of $655.1 million, which were comprised of $634.4 million in cash proceeds and $20.7 million in value from Nikola shares contributed to the Worthington Industries Foundation.  See “Note C – Investment in Nikola” for additional information.  

 

Pursuant to a leadership succession plan announced on June 24, 2020 by the Company, effective September 1, 2020, B. Andrew Rose became Chief Executive Officer (“CEO”) of Worthington Industries, in addition to continuing to serve as President, and John P. McConnell, the prior CEO, became Executive Chairman.

 

In October 2020, the Company sold its cryogenic trailer and hydrogen trailer business, including the Theodore, Alabama manufacturing site, to Chart Industries, Inc. and the cryo-science and microbulk storage unit business to IC Biomedical US, LLC.  The combined sales proceeds from the two transactions was $21.2 million, resulting in a pre-tax loss of $7.1 million within restructuring and other expense, net.

 

On January 4, 2021, the Company acquired PTEC Pressure Technology GmbH, a leading independent designer and manufacturer of valves and components for high-pressure hydrogen and compressed natural gas storage, transport and onboard fueling systems. The total purchase price was approximately $10.8 million.

 

On January 29, 2021, the Company sold its oil & gas equipment business to an affiliate of Ten Oaks Group. The Company retained the real estate associated with the business and received nominal consideration at closing, resulting in a pre-tax loss of $27.7 million within restructuring and other expense, net.

 

On January 29, 2021, the Company acquired General Tools & Instruments Company LLC, a provider of feature-rich, specialized tools in various categories including environmental health & safety, precision measurement & layout, home repair & remodel, lawn & garden and specific purpose tools. The total purchase price was approximately $120.4 million, after an adjustment for final working capital.

28


 

On March 12, 2021, the Company sold its Structural Composites Industries, LLC business located in Pomona, California to Luxfer Holdings PLC.  The Company received net proceeds of $19.1 million, resulting in a pre-tax loss of $7.2 million within restructuring and other expense, net.

 

On March 24, 2021, Worthington Industries’ Board of Directors authorized the repurchase of up to an additional 5,618,464 of the outstanding common shares of Worthington Industries, increasing the total number of common shares then available for purchase to 10,000,000.

 

On May 31, 2021, the Company sold its LPG fuel storage business, located in Poland, to Westport Fuel Systems, Inc.  The Company received net proceeds of approximately $6.0 million, resulting in a pre-tax loss, of $11.0 million, subject to closing adjustments, within restructuring and other expense, net.

 

On June 8, 2021, the Company acquired the Shiloh Industries U.S. BlankLight® business, a provider of laser welded solutions, for cash consideration of approximately $105.0 million, subject to closing adjustments. The acquisition includes three facilities that will expand the capacity and capabilities of our TWB joint venture’s laser welded products business and an additional blanking facility that will support the Company’s core steel processing operations.

 

On June 9, 2021, the Company’s consolidated joint venture, WSP, sold the remaining assets of its Canton, Michigan, facility for cash proceeds of approximately $20.0 million.  The Company will recognize a gain of approximately $12.0 million in the first quarter of fiscal 2022 related to the divestiture.

 

On June 10, 2021, the Company announced that its Pressure Cylinders segment was being divided into three new reportable segments: Consumer Products, Building Products and Sustainable Energy Solutions, effective at the start of fiscal 2022. The three new reportable segments are in addition to the Company’s Steel Processing segment.

 

On June 23, 2021, Worthington Industries’ Board of Directors declared a quarterly dividend of $0.28 per share payable on September 29, 2021 to shareholders of record on September 15, 2021.

Market & Industry Overview

We sell our products and services to a diverse customer base and a broad range of end markets.  The breakdown of our net sales by end market for fiscal 2021 and fiscal 2020 is illustrated in the following chart:

 

 

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 57% of the net sales of our Steel Processing operating segment are to the automotive market.  North American vehicle production, primarily by Ford, General Motors and FCA US (the “Detroit Three automakers”), has a considerable impact on the activity within this operating segment.  The majority of the net sales of three of our unconsolidated joint ventures are also to the automotive end market.

29


Approximately 18% 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: 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 price of framing lumber and steel.

Substantially all of the net sales of our Pressure Cylinders operating segment and approximately 25% of the net sales of our Steel Processing operating segment are to other markets such as agricultural, appliance, consumer products, heavy-truck, industrial products, and lawn and 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 this portion 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:

 

 

 

Fiscal Year Ended May 31,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

2019

 

 

2021 vs. 2020

 

 

2020 vs. 2019

 

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

 

 

-3.5

%

 

 

1.9

%

 

 

2.8

%

 

 

-5.4

%

 

 

-0.9

%

Hot-Rolled Steel ($ per ton) 2

 

$

869

 

 

$

547

 

 

$

783

 

 

$

322

 

 

$

(236

)

Detroit Three Auto Build (000's vehicles) 3

 

 

6,808

 

 

 

6,425

 

 

 

8,339

 

 

 

383

 

 

 

(1,914

)

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

 

 

14,813

 

 

 

13,312

 

 

 

16,742

 

 

 

1,501

 

 

 

(3,430

)

Zinc ($ per pound) 4

 

$

1.15

 

 

$

1.03

 

 

$

1.23

 

 

$

0.12

 

 

$

(0.20

)

Natural Gas ($ per mcf) 5

 

$

2.49

 

 

$

2.15

 

 

$

3.05

 

 

$

0.34

 

 

$

(0.90

)

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

 

$

2.68

 

 

$

2.91

 

 

$

3.17

 

 

$

(0.23

)

 

$

(0.26

)

Crude Oil - WTI ($ per barrel) 6

 

$

49.05

 

 

$

47.97

 

 

$

61.98

 

 

$

1.08

 

 

$

(14.01

)

1

2020/2019 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

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, decreasing 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 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 current steel prices, we expect to have significant inventory holding gains in the first quarter of fiscal 2022.

The following table presents the average quarterly market price per ton of hot-rolled steel during fiscal 2021, fiscal 2020 and fiscal 2019:

 

 

 

Fiscal Year Ended May 31,

 

(Dollars per ton 1 )

 

2021

 

 

2020

 

 

2019

 

1st Quarter

 

$

475

 

 

$

564

 

 

$

900

 

2nd Quarter

 

$

625

 

 

$

526

 

 

$

836

 

3rd Quarter

 

$

1,016

 

 

$

571

 

 

$

725

 

4th Quarter

 

$

1,358

 

 

$

527

 

 

$

672

 

Annual Avg.

 

$

869

 

 

$

547

 

 

$

783

 

 

 

1

CRU Hot-Rolled Index

30


Sales to one Steel Processing customer in the automotive industry represented 11.2% of our consolidated net sales during fiscal 2021.  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 fiscal 2021, vehicle production for the Detroit Three automakers and the North American vehicle production were up 6% and 11%, respectively

Certain other commodities, such as copper, 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

Fiscal 2021 Compared to Fiscal 2020

Consolidated Operations

The following table presents consolidated operating results for the periods indicated:

 

 

Fiscal Year Ended May 31,

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

(Dollars in millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

Net sales

$

3,171.4

 

 

 

100.0

%

 

$

3,059.1

 

 

 

100.0

%

 

$

112.3

 

Cost of goods sold

 

2,532.4

 

 

 

79.9

%

 

 

2,615.8

 

 

 

85.5

%

 

 

(83.4

)

Gross margin

 

639.0

 

 

 

20.1

%

 

 

443.3

 

 

 

14.5

%

 

 

195.7

 

Selling, general and administrative expense

 

351.1

 

 

 

11.1

%

 

 

328.1

 

 

 

10.7

%

 

 

23.0

 

Impairment of goodwill and long-lived assets

 

13.7

 

 

 

0.4

%

 

 

82.7

 

 

 

2.7

%

 

 

(69.0

)

Restructuring and other expense, net

 

56.1

 

 

 

1.8

%

 

 

10.0

 

 

 

0.3

%

 

 

46.1

 

Incremental expenses related to Nikola gains

 

50.6

 

 

 

1.6

%

 

 

-

 

 

 

0.0

%

 

 

50.6

 

Operating income

 

167.5

 

 

 

5.3

%

 

 

22.5

 

 

 

0.7

%

 

 

145.0

 

Miscellaneous income, net

 

2.2

 

 

 

0.1

%

 

 

9.0

 

 

 

0.3

%

 

 

(6.8

)

Interest expense

 

(30.3

)

 

 

-1.0

%

 

 

(31.6

)

 

 

-1.0

%

 

 

1.3

 

Equity in net income of unconsolidated affiliates

 

123.3

 

 

 

3.9

%

 

 

114.8

 

 

 

3.8

%

 

 

8.5

 

Gains on investment in Nikola

 

655.1

 

 

 

20.7

%

 

 

-

 

 

 

0.0

%

 

 

655.1

 

Loss on extinguishment of debt

 

-

 

 

 

0.0

%

 

 

(4.0

)

 

 

-0.1

%

 

 

4.0

 

Income tax expense

 

(176.3

)

 

 

-5.6

%

 

 

(26.3

)

 

 

-0.9

%

 

 

(150.0

)

Net earnings

 

741.5

 

 

 

23.4

%

 

 

84.4

 

 

 

2.8

%

 

 

657.1

 

Net earnings attributable to noncontrolling interests

 

17.7

 

 

 

0.6

%

 

 

5.6

 

 

 

0.2

%

 

 

12.1

 

Net earnings attributable to controlling interests

$

723.8

 

 

 

22.8

%

 

$

78.8

 

 

 

2.6

%

 

$

645.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity income (loss) by unconsolidated affiliate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WAVE

$

78.9

 

 

 

 

 

 

$

101.1

 

 

 

 

 

 

$

(22.2

)

ClarkDietrich

 

24.6

 

 

 

 

 

 

 

17.2

 

 

 

 

 

 

 

7.4

 

Serviacero Worthington

 

16.0

 

 

 

 

 

 

 

1.3

 

 

 

 

 

 

 

14.7

 

ArtiFlex

 

4.5

 

 

 

 

 

 

 

2.7

 

 

 

 

 

 

 

1.8

 

Other

 

(0.7

)

 

 

 

 

 

 

(7.5

)

 

 

 

 

 

 

6.8

 

Total

 

123.3

 

 

 

 

 

 

$

114.8

 

 

 

 

 

 

$

8.5

 

 

Fiscal 2021 net earnings attributable to controlling interest increased $645.0 million over fiscal 2020.  Net sales and operating highlights for fiscal 2021 were as follows:

 

 

Net sales increased $112.3 million over fiscal 2020. The increase was driven primarily by higher direct volume and higher average direct selling prices in our Steel Processing segment, partially offset by the impact of divestitures in fiscal 2021.

 

Gross margin increased $195.7 million over fiscal 2020. The increase was driven primarily by improved direct spreads in our Steel Processing segment, which were up $152.8 million due to the favorable year-over-

31


 

year impact of inventory holding gains and losses and arbitrage opportunities in fiscal 2021.  Inventory holding gains were estimated to be $75.0 million in fiscal 2021 compared to inventory holding losses of $20.3 million in fiscal 2020.

 

SG&A expense increased $23.0 million over fiscal 2020.  The increase was driven primarily by higher profit sharing and bonus expense as a result of the significant increase in earnings, partially offset by lower wages due to the reduction in workforce implemented in response to COVID-19.  Overall, SG&A expense was 11.1% of consolidated net sales in fiscal 2021 compared to 10.7% in fiscal 2020.

 

Impairment charges totaled $13.7 million in fiscal 2021 compared to $82.7 million in fiscal 2020.  Fiscal 2021 impairment charges related primarily to divestitures within our Pressure Cylinders segment.  Fiscal 2020 impairment charges related primarily to the deconsolidation of our former Engineered Cabs business and the impairment of certain long-lived assets in our former oil & gas equipment business within our Pressure Cylinders segment.  For additional information regarding these impairment charges, refer to “Note E – Goodwill and Other Long-Lived Assets”.

 

Restructuring and other expense, net totaled $56.1 million and primarily resulted from losses recognized from the sale of non-core businesses with Pressure Cylinders in fiscal 2021. See “Note F – Restructuring and Other Expense (Income), Net” for additional information related to these divestitures.

 

Incremental expenses related to Nikola gains of $50.6 million in fiscal 2021 consisted of $30.0 million of increased profit sharing and bonus expenses related to the Nikola investment gains and $20.7 million for the contribution of 500,000 shares of Nikola common stock to the Worthington Industries Foundation in the first quarter of fiscal 2021.  For additional information, refer to “Note C – Investment in Nikola”.

 

Miscellaneous income, net decreased $6.8 million from fiscal 2020 when the Company recognized a $6.1 million gain to remeasure its previously held equity interest in Worthington Samuel Coil Processing LLC, which was consolidated effective December 31, 2019.

 

Equity income increased $8.5 million over fiscal 2020 to $123.3 million. The increase was primarily driven by higher contributions from ClarkDietrich and Serviacero, where results benefited from rising steel prices, partially offset by a decline in equity income at WAVE due to a $23.1 million gain in fiscal 2020 related to the sale of WAVE’s international operations.  We received cash distributions from our unconsolidated joint ventures of $91.0 million. For additional financial information regarding our unconsolidated affiliates, refer to “Note D – Investments in Unconsolidated Affiliates”.

 

The $655.1 million in pre-tax gains from the Nikola investment were realized as the Company sold or donated its shares in Nikola at various times throughout fiscal 2021. For additional information, refer to “Note C – Investment in Nikola”.

 

Income tax expense increased $150.0 million from fiscal 2020 due to the significant increase in pre-tax income driven by the Nikola gains partially offset by losses generated from the sale of the oil & gas equipment and Poland cylinders businesses. These losses and a favorable change in the mix of earnings were the primary reason for the decrease in the estimated annual effective tax rate to 19.6% from 25.1% in fiscal 2020. For additional information regarding the Company’s income taxes, refer to “Note N – Income Taxes”.

 

32


Segment Operations

Steel Processing

The following table presents a summary of operating results for our Steel Processing operating segment for the periods indicated:

 

 

Fiscal Year Ended May 31,

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

(Dollars in millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

Net sales

$

2,059.4

 

 

 

100.0

%

 

$

1,859.7

 

 

 

100.0

%

 

$

199.7

 

Cost of goods sold

 

1,683.5

 

 

 

81.7

%

 

 

1,677.1

 

 

 

90.2

%

 

 

6.4

 

Gross margin

 

375.9

 

 

 

18.3

%

 

 

182.6

 

 

 

9.8

%

 

 

193.3

 

Selling, general and administrative expense

 

165.4

 

 

 

8.0

%

 

 

136.7

 

 

 

7.4

%

 

 

28.7

 

Restructuring and other expense, net

 

1.9

 

 

 

0.1

%

 

 

3.5

 

 

 

0.2

%

 

 

(1.6

)

Operating income

$

208.6

 

 

 

10.1

%

 

$

40.6

 

 

 

2.2

%

 

$

168.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Material cost

$

1,360.1

 

 

 

 

 

 

$

1,339.9

 

 

 

 

 

 

$

20.2

 

Tons shipped (in thousands)

 

4,067

 

 

 

 

 

 

 

3,830

 

 

 

 

 

 

 

237

 

 

Net sales and operating highlights for fiscal 2021 were as follows:

 

Net sales increased $199.7 million over fiscal 2020.  The increase in net sales was driven by higher average direct selling prices associated with the rise in the overall market price of steel combined with higher volume, as both direct tons and toll tons processed increased over fiscal 2020, which had been negatively impacted by COVID-19.  The mix of direct tons versus toll tons processed was 48% to 52% in both fiscal 2021 and fiscal 2020.  

 

Operating income increased $168.0 million over fiscal 2020, primarily due to improved direct spreads, which were up $152.8 million due to the favorable year-over-year impact of inventory holding gains and losses and arbitrage opportunities in fiscal 2021.  Inventory holding gains were estimated to be $75.0 million in fiscal 2021 compared to inventory holding losses of $20.3 million in fiscal 2020.

33


Pressure Cylinders

The following table presents a summary of operating results for our Pressure Cylinders operating segment for the periods indicated:

 

 

Fiscal Year Ended May 31,

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

(Dollars in millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

Net sales

$

1,111.0

 

 

 

100.0

%

 

$

1,148.4

 

 

 

100.0

%

 

$

(37.4

)

Cost of goods sold

 

847.4

 

 

 

76.3

%

 

 

886.3

 

 

 

77.2

%

 

 

(38.9

)

Gross margin

 

263.6

 

 

 

23.7

%

 

 

262.1

 

 

 

22.8

%

 

 

1.5

 

Selling, general and administrative expense

 

186.4

 

 

 

16.8

%

 

 

180.7

 

 

 

15.7

%

 

 

5.7

 

Impairment of goodwill and long-lived assets

 

13.7

 

 

 

1.2

%

 

 

37.2

 

 

 

3.2

%

 

 

(23.5

)

Restructuring and other expense, net

 

54.2

 

 

 

4.9

%

 

 

5.3

 

 

 

0.5

%

 

 

48.9

 

Operating income

$

9.3

 

 

 

0.8

%

 

$

38.9

 

 

 

3.4

%

 

$

(29.6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Material cost

$

465.9

 

 

 

 

 

 

$

496.9

 

 

 

 

 

 

$

(31.0

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Units shipped by principal class of products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer products

 

71,399,889

 

 

 

 

 

 

 

68,596,103

 

 

 

 

 

 

 

2,803,786

 

Industrial products

 

15,368,823

 

 

 

 

 

 

 

13,921,973

 

 

 

 

 

 

 

1,446,850

 

Oil & gas equipment

 

435

 

 

 

 

 

 

 

1,753

 

 

 

 

 

 

 

(1,318

)

Total Pressure Cylinders

 

86,769,147

 

 

 

 

 

 

 

82,519,829

 

 

 

 

 

 

 

4,249,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales by principal class of products:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer products

$

537.9

 

 

 

 

 

 

$

486.0

 

 

 

 

 

 

$

51.9

 

Industrial products

 

552.1

 

 

 

 

 

 

 

550.5

 

 

 

 

 

 

 

1.6

 

Oil & gas equipment

 

20.9

 

 

 

 

 

 

 

111.9

 

 

 

 

 

 

 

(91.0

)

Total Pressure Cylinders

$

1,110.9

 

 

 

 

 

 

$

1,148.4

 

 

 

 

 

 

$

(37.5

)

 

Net sales and operating highlights for fiscal 2021 were as follows:

 

Net sales decreased $37.4 million from fiscal 2020, primarily due to the divestiture of the oil & gas equipment business on January 29, 2021, which decreased net sales by $91.0 million, partially offset by the impact of acquisitions and higher volumes in the base consumer products business.

 

Operating income decreased $29.6 million from fiscal 2020.  The decrease was mainly driven by higher impairment and restructuring charges, up an aggregate of $25.4 million over fiscal 2020 as discussed further in “Note E – Goodwill and Other Long-Lived Assets” and “Note F – Restructuring and Other Expenses (Income), Net”. The remaining decrease was due to higher SG&A expense, up $5.7 million on higher allocated corporate profit sharing and bonus expense resulting from the increase in earnings.

Other

The Other category includes certain income and expense items not allocated to our operating segments, including product liability and healthcare reserves.  The Other category also includes the results of the former Engineered Cabs operating segment, on a historical basis, through November 1, 2019, when substantially all of the

34


net assets were deconsolidated.  The following table presents a summary of operating results for the Other category for the periods indicated:

 

 

Fiscal Year Ended May 31,

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

Increase/

 

(In millions)

2021

 

 

Net sales

 

 

2020

 

 

Net sales

 

 

(Decrease)

 

Net sales

$

1.1

 

 

 

100.0

%

 

$

51.0

 

 

 

100.0

%

 

$

(49.9

)

Cost of goods sold

 

1.5

 

 

 

136.4

%

 

 

52.3

 

 

 

102.5

%

 

 

(50.8

)

Gross margin

 

(0.4

)

 

 

-36.4

%

 

 

(1.3

)

 

 

-2.5

%

 

 

0.9

 

Selling, general and administrative expense

 

(0.6

)

 

 

-54.5

%

 

 

10.7

 

 

 

21.0

%

 

 

(11.3

)

Impairment of goodwill and long-lived assets

 

-

 

 

 

0.0

%

 

 

43.7

 

 

 

85.7

%

 

 

(43.7

)

Restructuring and other expense

 

0.1

 

 

 

9.1

%

 

 

1.3

 

 

 

2.5

%

 

 

(1.2

)

Operating income (loss)

$

0.1

 

 

 

9.1

%

 

$

(57.0

)

 

 

-111.8

%

 

$

57.1

 

 

Net sales and operating highlights for fiscal 2021 were as follows:

 

Net sales decreased $49.9 million from fiscal 2020.  The decrease was primarily driven by the deconsolidation of Engineered Cabs effective November 1, 2019.  For additional information on the deconsolidation, refer to “Note A – Summary of Significant Accounting Policies”.

 

Operating income of $0.1 million in fiscal 2021 was a $57.1 million improvement over fiscal 2020.  The improvement was driven by prior year impairment charges related primarily to the deconsolidation of Engineered Cabs and a lower allocation of corporate costs. For additional information on the impairment charges in fiscal 2020, refer to “Note E – Goodwill and Other Long-Lived Assets”.

Fiscal 2020 Compared to Fiscal 2019

For a comparison of our results of operations for the fiscal years ended May 31, 2020 and May 31, 2019, see “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Fiscal 2020 Compared to Fiscal 2019” of our Annual Report on Form 10-K for the fiscal year ended May 31, 2020, filed with the SEC on July 31, 2020.

Liquidity and Capital Resources

During fiscal 2021, we received $634.4 million of cash proceeds from the sale of Nikola shares, generated $274.4 million of cash from operating activities, received $45.9 million in proceeds from asset sales, net of selling costs, invested $82.2 million in property, plant and equipment, and paid a combined $129.6 million to acquire GTI and PTEC.  Additionally, we paid dividends of $53.0 million on Worthington Industries’ common shares and spent $192.1 million to repurchase 4,018,464 of Worthington Industries’ common shares.  The following table summarizes our consolidated cash flows for each period shown:

 

 

Fiscal Year Ended

 

 

May 31,

 

(in millions)

2021

 

 

2020

 

 

2019

 

Net cash provided by operating activities

$

274.4

 

 

$

336.7

 

 

$

197.9

 

Net cash provided (used) by investing activities

 

468.5

 

 

 

(116.2

)

 

 

11.5

 

Net cash used by financing activities

 

(249.8

)

 

 

(165.7

)

 

 

(239.0

)

Increase (decrease) in cash and cash equivalents

 

493.1

 

 

 

54.8

 

 

 

(29.6

)

Cash and cash equivalents at beginning of period

 

147.2

 

 

 

92.4

 

 

 

122.0

 

Cash and cash equivalents at end of period

$

640.3

 

 

$

147.2

 

 

$

92.4

 

 

We believe we have access to adequate resources 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.  These resources include cash and cash equivalents and unused committed lines of credit.  These committed lines of credit had a total of $500.0 million of borrowing capacity available to be drawn as of July 30, 2021.  

 

35


Although we do not currently anticipate a need, we believe that we could access the financial markets to be in a position to sell long-term debt or equity securities.  However, COVID-19 and other 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 the COVID-19 pandemic on the economy and our operations is fluid and 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. However, 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 could dilute the interests of our existing shareholders and/or increase our interest costs.  

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 provided by operating activities was $274.4 million during fiscal 2021 compared to $336.7 million in fiscal 2020.  The decrease in net cash provided by operating activities was driven by a combination of lower cash adjusted operating results and an increase in working capital.

Investing Activities

Net cash provided by investing activities was $468.5 million during fiscal 2021 compared to a net cash outflow of $116.2 million in fiscal 2020.  The change from fiscal 2020 was driven in large part by $634.4 million of proceeds from the sale of Nikola shares, partially offset by $129.6 million in cash outflow related to the acquisitions of GTI and PTEC.  In fiscal 2021, we also received $45.9 million in proceeds from asset sales, net of selling costs, primarily related to fiscal 2021 divestitures in Pressure Cylinders. See “Note F – Restructuring and Other Expense (Income), Net” for additional information.

Capital expenditures reflect cash used for investment in property, plant and equipment and is presented below by reportable business segment (this information excludes cash flows related to acquisition and divestiture activity):

 

 

Fiscal Year Ended

 

 

May 31,

 

(in millions)

2021

 

 

2020

 

 

2019

 

Steel Processing

$

28.3

 

 

$

40.6

 

 

$

39.1

 

Pressure Cylinders

 

45.5

 

 

 

41.5

 

 

 

37.6

 

Other

 

8.4

 

 

 

13.4

 

 

 

7.8

 

Total capital expenditures

$

82.2

 

 

$

95.5

 

 

$

84.5

 

 

Capital expenditures were $82.2 million in fiscal 2021. Significant capital expenditures for Steel Processing in fiscal 2021 included: $9.0 million for the addition of a new coating capability at our Spartan joint venture and $3.3 million for a new laser weld line and implementation of a new ERP system at our TWB joint venture.  Some of the more significant items at Pressure Cylinders were $8.8 million for new production lines at two facilities and $3.8 million for an equipment update at our Austrian facility.  

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 any 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.  

36


Financing Activities

Net cash used by financing activities was $249.8 million in fiscal 2021 compared to $165.7 million in fiscal 2020.  During fiscal 2021, we paid $192.1 million to repurchase 4,018,464 of our common shares and paid dividends of $53.0 million on our common shares.  In fiscal 2020, we paid $154.0 million to redeem the $150.0 million aggregate principal amount of unsecured 6.50% senior notes that were set to mature on April 15, 2020. In fiscal 2020, we also paid $51.0 million to repurchase 1,300,000 of our common shares and paid dividends of $53.3 million on our common shares.

Long-term debt – Our senior unsecured long-term debt is rated “investment grade” by both Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Group. We typically use the net proceeds from long-term debt for acquisitions, refinancing of outstanding debt, capital expenditures and general corporate purposes.  As of May 31, 2021, we were in compliance with our long-term financial debt covenants.  Our long-term debt agreements do not include ratings triggers or material adverse change provisions.

The issuance of euro-denominated unsecured Senior Notes was completed on August 23, 2019, when two of our European subsidiaries issued an aggregate principal amount of €91.7 million in a private placement and the proceeds were used to retire existing indebtedness of the Company. The Series A Senior Note of €36.7 million bears interest at 1.56% and has principal payments of €30.0 million due on August 23, 2029 and €6.7 million due on August 23, 2031. The Series B Senior Notes totaling €55.0 million bear interest at 1.90% and have principal payments of €23.3 million due on August 23, 2031 and €31.7 million due on August 23, 2034.

Short-term borrowings Our short-term debt agreements do not include ratings triggers or material adverse change provisions.  We were in compliance with our short-term financial debt covenants at May 31, 2021.

We maintain a $500.0 million multi-year revolving credit facility (the “Credit Facility”) with a group of lenders that matures in February 2023.  Borrowings under the Credit Facility have maturities of up to one year.  We have the option to borrow at rates equal to an applicable margin over the LIBOR, Prime or Overnight Bank Funding rate.  The applicable margin is determined by our credit rating.  There were no borrowings outstanding under the Credit Facility at May 31, 2021.  As discussed in “Note H – Guarantees,” we had in place $17.4 million in outstanding letters of credit for third-party beneficiaries as of May 31, 2021.  No amounts were drawn against at May 31, 2021, and the fair value of these guarantee instruments, based on premiums paid, was not material.

During fiscal 2021, fiscal 2020, and fiscal 2019, we maintained a revolving trade accounts receivable securitization facility (the “AR Facility”).  On July 22, 2020, the Company elected to terminate the AR Facility.       

Common shares – We declared dividends at a quarterly rate of $0.25 per common share for the first, second, and third quarters of fiscal 2021, and $0.28 for the fourth quarter of fiscal 2021, compared to $0.24 per common share for each quarter of fiscal 2020.  Dividends paid on our common shares totaled $53.0 million and $53.3 million during fiscal 2021 and fiscal 2020, respectively. On June 23, 2021, the Worthington Industries Board declared a quarterly dividend of $0.28 per common share for the first quarter of fiscal 2022.  The dividend is payable on September 29, 2021 to shareholders of record on September 15, 2021.

On September 27, 2017, the Worthington Industries Board authorized the repurchase of up to 6,828,855 outstanding common shares of Worthington Industries.  On March 20, 2019, the Worthington Industries Board authorized the repurchase of up to an additional 6,600,000 of the outstanding common shares of Worthington Industries.  On March 24, 2021, the Worthington Industries Board authorized the repurchase of up to an additional 5,618,464 outstanding common shares of Worthington Industries, increasing the then total number of common shares available for repurchase to 10,000,000.  These common shares 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.  The total number of common shares available for repurchase at May 31, 2020 was 9,300,000.

During fiscal 2021 and fiscal 2020, we repurchased 4,018,464 and 1,300,000 common shares under the authorizations described above, having an aggregate cost of $192.1 million and $51.0 million, respectively.  

37


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.  The Worthington Industries Board reviews the dividend quarterly and establishes the dividend rate based upon our 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 of dividends will continue in the future.

Contractual Cash Obligations and Other Commercial Commitments

The following table summarizes our contractual cash obligations as of May 31, 2021.  Certain of these contractual obligations are reflected in our consolidated balance sheet, while others are disclosed as future obligations in accordance with U.S. GAAP.

 

 

 

Payments Due by Period

 

 

 

 

 

 

 

Less

Than

 

 

1 - 3

 

 

4 - 5

 

 

After

 

(in millions)

 

Total

 

 

1 Year

 

 

Years

 

 

Years

 

 

5 Years

 

Long-term debt

 

$

713.5

 

 

$

0.5

 

 

$

0.6

 

 

$

150.3

 

 

$

562.1

 

Interest expense on long-term debt

 

 

185.9

 

 

 

28.7

 

 

 

51.8

 

 

 

42.1

 

 

 

63.3

 

Operating leases

 

 

41.0

 

 

 

10.9

 

 

 

14.3

 

 

 

8.4

 

 

 

7.4

 

Financing leases

 

 

7.3

 

 

 

0.8

 

 

 

0.7

 

 

 

0.3

 

 

 

5.5

 

Royalty obligations

 

 

12.0

 

 

 

2.0

 

 

 

4.0

 

 

 

4.0

 

 

 

2.0

 

Total contractual cash obligations

 

$

959.7

 

 

$

42.9

 

 

$

71.4

 

 

$

205.1

 

 

$

640.3

 

 

Interest expense on long-term debt is computed by using the rates of interest on each tranche of long-term debt, including impacts of the related interest rate hedges.  Royalty obligations relate to a trademark license agreement executed in connection with the acquisition of the Coleman Cylinders business in fiscal 2012.  Due to the uncertainty regarding the timing of future cash outflows associated with the unfunded portion of our pension benefit obligations and our unrecognized tax benefits, we are unable to make a reliable estimate of the periods of cash settlement and have not included these amounts in the contractual cash obligations table above.  For additional information, refer to “Note M – Employee Pension Plans” and “Note N – Income Taxes”.

The following table summarizes our other commercial commitments as of May 31, 2021.  These commercial commitments are not reflected in our consolidated balance sheet.

 

 

 

Commitment Expiration by Period

 

 

 

 

 

 

 

Less

Than

 

 

1 - 3

 

 

4 - 5

 

 

After

 

(in millions)

 

Total

 

 

1 Year

 

 

Years

 

 

Years

 

 

5 Years

 

Guarantees

 

$

19.6

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

19.6

 

Standby letters of credit

 

 

17.4

 

 

 

17.4

 

 

 

-

 

 

 

-

 

 

 

-

 

Total commercial commitments

 

$

37.0

 

 

$

17.4

 

 

$

-

 

 

$

-

 

 

$

19.6

 

 

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, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.  However, as of May 31, 2021, we were party to an operating lease for an aircraft in which we have guaranteed a residual value at the termination of the lease.  The maximum obligation under the terms of this guarantee was approximately $19.6 million at May 31, 2021.  Based on current facts and circumstances, we have estimated the likelihood of payment pursuant to this guarantee is not probable and, therefore, no amount has been recognized in our consolidated financial statements.

38


Recently Issued Accounting Standards

In June 2016, amended accounting guidance was issued related to the measurement of credit losses on financial instruments. The amended accounting guidance changes the impairment model for most financial assets to require measurement and recognition of expected credit losses for financial assets held. The amended accounting guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this new accounting standard update in fiscal 2021 did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.  Additionally, there have been no changes to our significant accounting policies as disclosed in this 2021 Form 10-K as a result of the adoption of this new accounting guidance.

Environmental

We do not believe that compliance with environmental laws has or will have a material effect on our capital expenditures, future results of operations or financial position or competitive position.

Inflation

The effects of inflation on our operations were not significant during the periods presented in the consolidated financial statements.

Critical Accounting Policies

The discussion and analysis of our consolidated financial condition and results of operations are 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 and contingencies and litigation.  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, as discussed below, 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.  We believe the following accounting policies are the most critical to us, as these are the primary areas where financial information is subject to our estimates, assumptions and judgment in the preparation of our consolidated financial statements.

Revenue Recognition:  On June 1, 2018, we adopted accounting guidance that replaced most existing revenue recognition accounting guidance under U.S. GAAP, Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”).  Under this accounting guidance, we recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive for those goods or services, including any variable consideration.

Impairment of Definite-Lived Long-Lived Assets:  We review the carrying value of our long-lived assets, including intangible assets with finite useful lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.  Impairment testing involves a comparison of the sum of the undiscounted future cash flows of the asset or asset group to its respective carrying amount.  If the sum of the undiscounted future cash flows exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the sum of the undiscounted future cash flows, then a second step is performed to determine the amount of impairment, if any, to be recognized.  An impairment loss is recognized to the extent that the carrying amount of the asset or asset group exceeds its fair value.

Impairment of Indefinite-Lived Long-Lived Assets:  Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate that impairment may be present.  Application of goodwill impairment testing involves judgment, including but not limited to, the identification of reporting units and estimation of the fair value of

39


each reporting unit.  A reporting unit is defined as an operating segment or one level below an operating segment. With the exception of Pressure Cylinders, we test goodwill at the operating segment level as we have determined that the characteristics of the reporting units within each operating segment are similar and allow for their aggregation in accordance with the applicable accounting guidance.  For our Pressure Cylinders operating segment, the oil & gas equipment business was treated as a separate reporting unit through the date of divestiture on January 29, 2021.

 

For goodwill and indefinite lived intangible assets, we test for impairment by first evaluating qualitative factors including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. If there are no concerns raised from this evaluation, no further testing is performed.  If, however, our qualitative analysis indicates it is more likely than not that the fair value is less than the carrying amount, a quantitative analysis is performed. The quantitative analysis compares the fair value of each reporting unit or indefinite-lived intangible asset to the respective carrying amount, and an impairment loss is recognized in our consolidated statements of earnings equivalent to the excess of the carrying amount over the fair value. Fair value is determined based on discounted cash flows or appraised values, as appropriate. Either way, our policy is to perform a quantitative analysis of each reporting unit at least every three years.

Impairment of Equity Method Investments:  We review our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of the investment might not be recoverable.  Events and circumstances can include, but are not limited to:  evidence we do not have the ability to recover the carrying value; the inability of the investee to sustain earnings; the current fair value of the investment is less than the carrying value; and other investors cease to provide support or reduce their financial commitment to the investee.  If the fair value of the investment is less than the carrying value, and the investment will not recover in the near term, then other-than-temporary impairment may exist.  When the loss in value of an investment is determined to be other-than-temporary, we recognize an impairment in the period the conclusion is made.

Strategic Investments:  From time to time the Company may make investments in both privately and publicly held equity securities in which the Company does not have a controlling interest or significant influence.   Investments are recorded at fair value and changes in fair value for equity securities are reported in the consolidated statement of earnings.  The Company elected to record equity securities without readily determinable fair values at cost, less impairment, plus or minus subsequent adjustments for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. 

Income Taxes:  In accordance with the authoritative accounting guidance, we account for income taxes using the asset and liability method.  The asset and liability method requires the recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between the tax basis and financial reporting basis of our assets and liabilities.  We evaluate the deferred tax assets to determine whether it is more likely than not that some, or a portion, of the deferred tax assets will not be realized, and provide a valuation allowance as appropriate.

In accordance with accounting literature related to uncertainty in income taxes, tax benefits from uncertain tax positions that are recognized in the consolidated financial statements are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

We have reserves for income taxes and associated interest and penalties that may become payable in future years as a result of audits by taxing authorities.  It is our policy to record these in income tax expense.  While we believe the positions taken on previously filed tax returns are appropriate, we have established the tax and interest reserves in recognition that various taxing authorities may challenge our positions.  These reserves are analyzed periodically, and adjustments are made as events occur to warrant adjustment to the reserves, such as lapsing of applicable statutes of limitations, conclusion of tax audits, additional exposure based on current calculations, identification of new issues, and release of administrative guidance or court decisions affecting a particular tax issue.

Business Combinations: We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair values of identifiable assets and liabilities requires significant judgments and estimates and the use of valuation techniques when market value is not readily available. For the valuation of intangible assets acquired in a business combination, we typically use an income approach. The purchase price allocated to the intangible assets is based on unobservable assumptions, inputs and

40


estimates, including but not limited to, forecasted revenue growth rates, projected expenses, discount rates, customer attrition rates, royalty rates, and useful lives, among others. The excess of the purchase price over the fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

The critical accounting policies discussed herein are not intended to represent a comprehensive list of all of our accounting policies.  In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP, with a lesser need for our judgment in their application.  There are also areas in which our judgment in selecting an available alternative would not produce a materially different result.

Item 7A. – Quantitative and Qualitative Disclosures About Market Risk

 

Unless otherwise indicated, all Note references contained in this Part II – Item 7A. refer to the Notes to the Consolidated Financial Statements included in “Part II – Item 8. – Financial Statements and Supplementary Data” of this Form 10-K.

In the normal course of business, we are exposed to various market risks.  We continually monitor these risks and regularly develop appropriate strategies to manage them.  Accordingly, from time to time, we may enter into certain financial and commodity-based derivative financial instruments.  These instruments are used solely to mitigate market exposure and are not used for trading or speculative purposes.  Refer to “Note R – Derivative Financial Instruments and Hedging Activities” for additional information.

Interest Rate Risk

We are exposed to changes in interest rates primarily as a result of our borrowing and investing activities to maintain liquidity and fund operations.  The nature and amount of our long-term and short-term debt can be expected to fluctuate as a result of business requirements, market conditions and other factors.  We manage exposures to interest rates using a mix of fixed and variable rate debt.  We use interest rate swap instruments to manage our exposure to interest rate movements.

We entered into an interest rate swap in June 2017, in anticipation of the issuance of $200.0 million aggregate principal amount of senior unsecured notes due August 1, 2032 (the “2032 Notes”).  Refer to “Note I – Debt and Receivables Securitization” for additional information regarding the 2032 Notes.  The interest rate swap had a notional amount of $150.0 million to hedge the risk of changes in the semi-annual interest rate payments attributable to changes in the benchmark interest rate during the several days leading up to the issuance of the 15-year fixed-rate debt.  Upon pricing of the 2032 Notes, the derivative financial instrument was settled resulting in a gain of approximately $3.1 million, which was reflected in accumulated other comprehensive income (loss) in our consolidated statements of equity and will be recognized in earnings, as a decrease to interest expense, over the life of the related 2032 Notes.

We entered into an interest rate swap in March 2014, in anticipation of the issuance of $250.0 million aggregate principal amount of senior unsecured notes due April 15, 2026 (the “2026 Notes”).  Refer to “Note I – Debt and Receivables Securitization” for additional information regarding the 2026 Notes.  The interest rate swap had a notional amount of $150.0 million to hedge the risk of changes in the semi-annual interest payments attributable to changes in the benchmark interest rate during the several days leading up to the issuance of the 12-year fixed-rate debt.  Upon pricing of the 2026 Notes, the derivative financial instrument was settled and resulted in a loss of approximately $3.1 million, a significant portion of which was reflected within accumulated other comprehensive income (loss) in our consolidated statements of equity and will be recognized in earnings, as an increase to interest expense, over the life of the related 2026 Notes.

Foreign Currency Exchange Risk

The translation of foreign currencies into U.S. dollars subjects us to exposure related to fluctuating foreign currency exchange rates.  Derivative financial instruments are not used to manage this risk; however, we do make use of forward contracts to manage exposure to certain intercompany loans with our foreign affiliates as well as exposure to transactions denominated in a currency other than the related foreign affiliate’s local currency.  Such forward contracts limit exposure to both favorable and unfavorable foreign currency exchange rate fluctuations.  At May 31,

41


2021, the difference between the contract and book value of these forward contracts was not material to our consolidated financial position, results of operations or cash flows.  A 10% change in the foreign currency exchange rate to the U.S. dollar forward rate is not expected to materially impact our consolidated financial position, results of operations or cash flows.  A sensitivity analysis of changes in the U.S. dollar exchange rate on these foreign currency-denominated contracts indicates that if the U.S. dollar uniformly weakened by 10% against all of these foreign currency exposures, the fair value of these forward contracts would not be materially impacted.  Any resulting changes in fair value would be offset by changes in the underlying hedged balance sheet position.  A sensitivity analysis of changes in the foreign currency exchange rates of our foreign locations indicates that a 10% increase in those rates would not have materially impacted our net results.  The sensitivity analysis assumes a uniform shift in all foreign currency exchange rates.  The assumption that foreign currency exchange rates change in uniformity may overstate the impact of changing foreign currency exchange rates on assets and liabilities denominated in a foreign currency.

Commodity Price Risk

We are exposed to market risk for price fluctuations on purchases of steel, natural gas, copper, zinc and other raw materials as well as our utility requirements.  We attempt to negotiate the best prices for commodities and to competitively price products and services to reflect the fluctuations in market prices. Derivative financial instruments have been used to manage a portion of our exposure to fluctuations in the cost of certain commodities, including steel, natural gas, zinc, copper and other raw materials.  These contracts covered periods commensurate with known or expected exposures throughout fiscal 2021.  The derivative financial instruments were executed with highly rated financial institutions.  No credit loss is anticipated.

A sensitivity analysis of changes in the price of hedged commodities indicates that a 10% decline in the market prices of steel, zinc, copper, natural gas or any combination of these would not have a material impact to the value of our hedges or our reported results.

The fair values of our outstanding derivative positions as of May 31, 2021 and 2020 are summarized below.  Fair values of these derivative financial instruments do not consider the offsetting impact of the underlying hedged item.

 

 

 

Fair Value At

 

 

 

May 31,

 

(in millions)

 

2021

 

 

2020

 

Foreign currency exchange contracts

 

$

(0.5

)

 

$

-

 

Commodity contracts

 

 

63.5

 

 

 

(8.6

)

Total derivative financial instruments

 

$

63.0

 

 

$

(8.6

)

 

Safe Harbor

Quantitative and qualitative disclosures about market risk include forward-looking statements with respect to management’s opinion about risks associated with the use of derivative financial instruments.  These statements are based on certain assumptions with respect to market prices and industry supply of, and demand for, steel products and certain raw materials.  To the extent these assumptions prove to be inaccurate, future outcomes with respect to hedging programs may differ materially from those discussed in the forward-looking statements.

42


Item 8. – Financial Statements and Supplementary Data

 

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors


Worthington Industries, Inc.:

 

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Worthington Industries, Inc. and subsidiaries (the Company) as of May 31, 2021 and 2020, the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three-year period ended May 31, 2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended May 31, 2021, in conformity with U.S. generally accepted accounting principles.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated July 30, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Notes A and T to the consolidated financial statements, the Company has changed its method of accounting for leases as of June 1, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

 

43


 

Fair value of customer relationships and certain trade name indefinite lived intangible assets in the acquisition of General Tools & Instruments Company LLC

 

As discussed in Note Q to the consolidated financial statements, on January 29, 2021, the Company acquired General Tools & Instruments Company LLC (“GTI”) in a business combination for approximately $120,388,000, net of cash acquired. As a result of the transaction, the Company acquired customer relationships and trade name intangible assets associated with the generation of future revenues. Of the total assets acquired, the fair value assigned to customer relationships and trade name indefinite lived intangible assets amounted to $40,600,000 and $27,400,000, respectively.

We identified the evaluation of the fair value of the customer relationships and certain trade name indefinite lived intangible assets acquired in the GTI business combination as a critical audit matter. There was a high degree of subjective auditor judgment related to significant assumptions used in the valuation models, specifically the forecasted revenue growth rates and the discount rate applied. Changes in these assumptions could have a significant impact on the fair value of the customer relationships and certain trade name indefinite lived intangible assets. Professionals with specialized skill and knowledge were also required to assess the significant assumptions and evaluate the evidence obtained.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the above significant assumptions. We evaluated the amount and timing of forecasted revenue growth rates used by the Company by comparing them to certain publicly available information for comparable companies, industry reports, and historical results. We performed sensitivity analyses over the Company’s revenue growth rates used to determine the estimated fair value of the customer relationships and certain trade name indefinite lived intangible assets to assess the effect of changes in those assumptions on the Company’s determination of fair value. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating:

 

the forecasted revenue growth rates by comparing the revenue growth rates to certain publicly available information for comparable companies and industry reports; and

 

the discount rate used in the valuations, by comparing it to a discount range that was independently developed using publicly available market data.

/s/KPMG LLP

 

 

 

 

We have served as the Company’s auditor since 2001.

 

Columbus, Ohio
July 30, 2021

 

 

 

 

44


WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

May 31,

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

640,311

 

 

$

147,198

 

Receivables, less allowances of $608 and $1,521 at May 31, 2021

 

 

 

 

 

 

 

and May 31, 2020, respectively

 

639,964

 

 

 

341,038

 

Inventories:

 

 

 

 

 

 

 

Raw materials

 

266,208

 

 

 

234,629

 

Work in process

 

183,413

 

 

 

76,497

 

Finished products

 

115,133

 

 

 

93,975

 

Total inventories

 

564,754

 

 

 

405,101

 

Income taxes receivable

 

1,958

 

 

 

8,376

 

Assets held for sale

 

51,956

 

 

 

12,928

 

Prepaid expenses and other current assets

 

69,049

 

 

 

68,538

 

Total current assets

 

1,967,992

 

 

 

983,179

 

Investments in unconsolidated affiliates

 

233,126

 

 

 

203,329

 

Operating lease assets

 

35,101

 

 

 

31,557

 

Goodwill

 

351,056

 

 

 

321,434

 

Other intangible assets, net of accumulated amortization of $80,513 and

 

 

 

 

 

 

 

$92,774 at May 31, 2021 and May 31, 2020, respectively

 

240,387

 

 

 

184,416

 

Other assets

 

30,566

 

 

 

34,956

 

Property, plant and equipment:

 

 

 

 

 

 

 

Land

 

21,744

 

 

 

24,197

 

Buildings and improvements

 

271,196

 

 

 

302,796

 

Machinery and equipment

 

1,046,065

 

 

 

1,055,139

 

Construction in progress

 

53,903

 

 

 

52,231

 

Total property, plant and equipment

 

1,392,908

 

 

 

1,434,363

 

Less: accumulated depreciation

 

877,891

 

 

 

861,719

 

Total property, plant and equipment, net

 

515,017

 

 

 

572,644

 

Total assets

$

3,373,245

 

 

$

2,331,515

 

 

See notes to consolidated financial statements.

45


WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

 

May 31,

 

 

2021

 

 

2020

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

567,392

 

 

$

247,017

 

Accrued compensation, contributions to employee benefit plans and related taxes

 

137,698

 

 

 

64,650

 

Dividends payable

 

16,536

 

 

 

14,648

 

Other accrued items

 

52,250

 

 

 

49,974

 

Current operating lease liabilities

 

9,947

 

 

 

10,851

 

Income taxes payable

 

3,620

 

 

 

949

 

Current maturities of long-term debt

 

458

 

 

 

149

 

Total current liabilities

 

787,901

 

 

 

388,238

 

Other liabilities

 

82,824

 

 

 

75,786

 

Distributions in excess of investment in unconsolidated affiliate

 

99,669

 

 

 

103,837

 

Long-term debt

 

710,031

 

 

 

699,516

 

Noncurrent operating lease liabilities

 

27,374

 

 

 

25,763

 

Deferred income taxes, net

 

113,751

 

 

 

71,942

 

Total liabilities

 

1,821,550

 

 

 

1,365,082

 

Shareholders' equity - controlling interest:

 

 

 

 

 

 

 

Preferred shares, without par value; authorized - 1,000,000 shares; issued and

 

 

 

 

 

 

 

outstanding - none

 

-

 

 

 

-

 

Common shares, without par value; authorized - 150,000,000 shares; issued and

 

 

 

 

 

 

 

outstanding, 2021 - 51,330,347 shares, 2020 - 54,616,485 shares

 

-

 

 

 

-

 

Additional paid-in capital

 

282,790

 

 

 

283,776

 

Accumulated other comprehensive income (loss), net of taxes of $(12,550) and $7,922 at May 31, 2021 and May 31, 2020, respectively

 

45,387

 

 

 

(35,217

)

Retained earnings

 

1,070,016

 

 

 

572,262

 

Total shareholders' equity - controlling interest

 

1,398,193

 

 

 

820,821

 

Noncontrolling interests

 

153,502

 

 

 

145,612

 

Total equity

 

1,551,695

 

 

 

966,433

 

Total liabilities and equity

$

3,373,245

 

 

$

2,331,515

 

 

See notes to consolidated financial statements.

46


WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

 

 

Fiscal Years Ended May 31,

 

 

2021

 

 

2020

 

 

2019

 

Net sales

$

3,171,429

 

 

$

3,059,119

 

 

$

3,759,556

 

Cost of goods sold

 

2,532,351

 

 

 

2,615,782

 

 

 

3,279,601

 

Gross margin

 

639,078

 

 

 

443,337

 

 

 

479,955

 

Selling, general and administrative expense

 

351,145

 

 

 

328,110

 

 

 

338,392

 

Impairment of goodwill and long-lived assets

 

13,739

 

 

 

82,690

 

 

 

7,817

 

Restructuring and other expense (income), net

 

56,097

 

 

 

10,048

 

 

 

(11,018

)

Incremental expenses related to Nikola gains

 

50,624

 

 

 

-

 

 

 

-

 

Operating income

 

167,473

 

 

 

22,489

 

 

 

144,764

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Miscellaneous income, net

 

2,163

 

 

 

9,099

 

 

 

2,716

 

Interest expense

 

(30,346

)

 

 

(31,616

)

 

 

(38,063

)

Equity in net income of unconsolidated affiliates

 

123,325

 

 

 

114,848

 

 

 

97,039

 

Gains on investment in Nikola

 

655,102

 

 

 

-

 

 

 

-

 

Loss on extinguishment of debt

 

-

 

 

 

(4,034

)

 

 

-

 

Earnings before income taxes

 

917,717

 

 

 

110,786

 

 

 

206,456

 

Income tax expense

 

176,267

 

 

 

26,342

 

 

 

43,183

 

Net earnings

 

741,450

 

 

 

84,444

 

 

 

163,273

 

Net earnings attributable to noncontrolling interests

 

17,655

 

 

 

5,648

 

 

 

9,818

 

Net earnings attributable to controlling interest

$

723,795

 

 

$

78,796

 

 

$

153,455

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding

 

52,701

 

 

 

54,958

 

 

 

57,196

 

Earnings per share attributable to controlling interest

$

13.73

 

 

$

1.43

 

 

$

2.68

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding

 

53,917

 

 

 

55,983

 

 

 

58,823

 

Earnings per share attributable to controlling interest

$

13.42

 

 

$

1.41

 

 

$

2.61

 

 

See notes to consolidated financial statements.

 

47


WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

 

 

Fiscal Years Ended May 31,

 

 

2021

 

 

2020

 

 

2019

 

Net earnings

$

741,450

 

 

$

84,444

 

 

$

163,273

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation, net of tax

 

10,921

 

 

 

10,497

 

 

 

(14,772

)

Pension liability adjustment, net of tax

 

5,931

 

 

 

(4,030

)

 

 

(1,785

)

Cash flow hedges, net of tax

 

63,752

 

 

 

1,780

 

 

 

(12,447

)

Other comprehensive income (loss)

 

80,604

 

 

 

8,247

 

 

 

(29,004

)

Comprehensive income

 

822,054

 

 

 

92,691

 

 

 

134,269

 

Comprehensive income attributable to noncontrolling interests

 

17,655

 

 

 

5,648

 

 

 

9,698

 

Comprehensive income attributable to controlling interest

$

804,399

 

 

$

87,043

 

 

$

124,571

 

 

See notes to consolidated financial statements.

 

48


WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands, except per share amounts)

 

 

 

Controlling Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

Paid-in

 

 

Income (Loss),

 

 

Retained

 

 

 

 

 

 

Noncontrolling

 

 

 

 

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Net of Tax

 

 

Earnings

 

 

Total

 

 

Interests

 

 

Total

 

Balance at May 31, 2018

 

 

58,876,921

 

 

$

-

 

 

$

295,592

 

 

$

(14,580

)

 

$

637,757

 

 

$

918,769

 

 

$

117,606

 

 

$

1,036,375

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

153,455

 

 

 

153,455

 

 

 

9,818

 

 

 

163,273

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(28,884

)

 

 

-

 

 

 

(28,884

)

 

 

(120

)

 

 

(29,004

)

Common shares issued, net of withholding tax

 

 

690,604

 

 

 

-

 

 

 

(6,371

)

 

 

-

 

 

 

-

 

 

 

(6,371

)

 

 

-

 

 

 

(6,371

)

Theoretical common shares in NQ plans

 

 

-

 

 

 

-

 

 

 

680

 

 

 

-

 

 

 

-

 

 

 

680

 

 

 

-

 

 

 

680

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

13,927

 

 

 

-

 

 

 

-

 

 

 

13,927

 

 

 

-

 

 

 

13,927

 

ASC 606 transition adjustment

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,174

 

 

 

1,174

 

 

 

570

 

 

 

1,744

 

Repurchases and retirement of common shares

 

 

(4,100,000

)

 

 

-

 

 

 

(20,651

)

 

 

-

 

 

 

(147,462

)

 

 

(168,113

)

 

 

-

 

 

 

(168,113

)

Dividends to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,726

)

 

 

(10,726

)

Cash dividends declared ($0.92 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(53,391

)

 

 

(53,391

)

 

 

-

 

 

 

(53,391

)

Balance at May 31, 2019

 

 

55,467,525

 

 

$

-

 

 

$

283,177

 

 

$

(43,464

)

 

$

591,533

 

 

$

831,246

 

 

$

117,148

 

 

$

948,394

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

78,796

 

 

 

78,796

 

 

 

5,648

 

 

 

84,444

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,247

 

 

 

-

 

 

 

8,247

 

 

 

-

 

 

 

8,247

 

Common shares issued, net of withholding tax

 

 

448,960

 

 

 

-

 

 

 

(6,513

)

 

 

-

 

 

 

-

 

 

 

(6,513

)

 

 

-

 

 

 

(6,513

)

Theoretical common shares in NQ plans

 

 

-

 

 

 

-

 

 

 

547

 

 

 

-

 

 

 

-

 

 

 

547

 

 

 

-

 

 

 

547

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

13,191

 

 

 

-

 

 

 

-

 

 

 

13,191

 

 

 

-

 

 

 

13,191

 

Consolidation of Worthington Samuel Coil Processing LLC

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,269

 

 

 

24,269

 

Repurchases and retirement of common shares

 

 

(1,300,000

)

 

 

-

 

 

 

(6,626

)

 

 

-

 

 

 

(44,346

)

 

 

(50,972

)

 

 

-

 

 

 

(50,972

)

Dividends to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,453

)

 

 

(1,453

)

Cash dividends declared ($0.96 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(53,721

)

 

 

(53,721

)

 

 

-

 

 

 

(53,721

)

Balance at May 31, 2020

 

 

54,616,485

 

 

$

-

 

 

$

283,776

 

 

$

(35,217

)

 

$

572,262

 

 

$

820,821

 

 

$

145,612

 

 

$

966,433

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

723,795

 

 

 

723,795

 

 

 

17,655

 

 

 

741,450

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

80,604

 

 

 

-

 

 

 

80,604

 

 

 

-

 

 

 

80,604

 

Common shares issued, net of withholding tax

 

 

732,326

 

 

 

-

 

 

 

6,581

 

 

 

-

 

 

 

-

 

 

 

6,581

 

 

 

-

 

 

 

6,581

 

Theoretical common shares in NQ plans

 

 

-

 

 

 

-

 

 

 

556

 

 

 

-

 

 

 

-

 

 

 

556

 

 

 

-

 

 

 

556

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

13,005

 

 

 

-

 

 

 

-

 

 

 

13,005

 

 

 

-

 

 

 

13,005

 

Partner contribution to Worthington Samuel Coil Processing, LLC

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

925

 

 

 

925

 

Repurchases and retirement of common shares

 

 

(4,018,464

)

 

 

-

 

 

 

(21,128

)

 

 

-

 

 

 

(170,926

)

 

 

(192,054

)

 

 

-

 

 

 

(192,054

)

Dividends to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,690

)

 

 

(10,690

)

Cash dividends declared ($1.03 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(55,115

)

 

 

(55,115

)

 

 

-

 

 

 

(55,115

)

Balance at May 31, 2021

 

 

51,330,347

 

 

$

-

 

 

$

282,790

 

 

$

45,387

 

 

$

1,070,016

 

 

$

1,398,193

 

 

$

153,502

 

 

$

1,551,695

 

 

See notes to consolidated financial statements

 

49


WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

Fiscal Years Ended May 31,

 

 

2021

 

 

2020

 

 

2019

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net earnings

$

741,450

 

 

$

84,444

 

 

$

163,273

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

87,654

 

 

 

92,678

 

 

 

95,602

 

Impairment of goodwill and long-lived assets

 

13,739

 

 

 

82,690

 

 

 

7,817

 

Provision for (benefit from) deferred income taxes

 

4,822

 

 

 

(1,309

)

 

 

17,435

 

Bad debt expense (income)

 

(255

)

 

 

580

 

 

 

659

 

Equity in net income of unconsolidated affiliates, net of

   distributions

 

(32,318

)

 

 

8,106

 

 

 

7,347

 

Net (gain) loss on sale of assets

 

53,607

 

 

 

(5,057

)

 

 

(7,059

)

Stock-based compensation

 

19,129

 

 

 

11,883

 

 

 

11,733

 

Gains on investment in Nikola

 

(655,102

)

 

 

-

 

 

 

-

 

Charitable contribution of Nikola shares

 

20,653

 

 

 

-

 

 

 

-

 

Loss on extinguishment of debt

 

-

 

 

 

4,034

 

 

 

-

 

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

 

 

 

 

 

 

 

 

 

 

 

Receivables

 

(223,254

)

 

 

147,225

 

 

 

73,346

 

Inventories

 

(169,740

)

 

 

62,126

 

 

 

(33,649

)

Accounts payable

 

315,222

 

 

 

(142,685

)

 

 

(93,294

)

Accrued compensation and employee benefits

 

75,725

 

 

 

(11,878

)

 

 

(19,159

)

Income taxes payable

 

2,671

 

 

 

(215

)

 

 

(3,429

)

Other operating items, net

 

20,376

 

 

 

4,104

 

 

 

(22,763

)

Net cash provided by operating activities

 

274,379

 

 

 

336,726

 

 

 

197,859

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

Investment in property, plant and equipment

 

(82,178

)

 

 

(95,503

)

 

 

(84,499

)

Proceeds from sale of Nikola shares

 

634,449

 

 

 

-

 

 

 

-

 

Acquisitions, net of cash acquired

 

(129,615

)

 

 

(30,748

)

 

 

(10,402

)

Distributions from unconsolidated affiliate

 

-

 

 

 

-

 

 

 

56,693

 

Proceeds from sale of assets, net of selling costs

 

45,854

 

 

 

10,036

 

 

 

49,683

 

Net cash provided (used) by investing activities

 

468,510

 

 

 

(116,215

)

 

 

11,475

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from long-term debt, net of issuance costs

 

-

 

 

 

101,464

 

 

 

-

 

Principal payments on long-term debt

 

(622

)

 

 

(154,913

)

 

 

(1,394

)

Proceeds from issuance of common shares, net of tax withholdings

 

6,581

 

 

 

(6,513

)

 

 

(6,371

)

Payments to noncontrolling interests

 

(10,690

)

 

 

(1,453

)

 

 

(10,726

)

Repurchase of common shares

 

(192,054

)

 

 

(50,972

)

 

 

(168,113

)

Dividends paid

 

(52,991

)

 

 

(53,289

)

 

 

(52,334

)

Net cash used by financing activities

 

(249,776

)

 

 

(165,676

)

 

 

(238,938

)

Increase (decrease) in cash and cash equivalents

 

493,113

 

 

 

54,835

 

 

 

(29,604

)

Cash and cash equivalents at beginning of year

 

147,198

 

 

 

92,363

 

 

 

121,967

 

Cash and cash equivalents at end of year

$

640,311

 

 

$

147,198

 

 

$

92,363

 

 

See notes to consolidated financial statements.

50


WORTHINGTON INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended May 31, 2021, 2020 and 2019

Note A – Summary of Significant Accounting Policies

Consolidation:  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 are eliminated.

The Company owns controlling interests in the following four joint ventures: Spartan Steel Coating, L.L.C. (“Spartan”) (52%), TWB Company, L.L.C. (“TWB”) (55%), Worthington Samuel Coil Processing LLC (“Samuel” or the “Samuel joint venture”) (63%), and Worthington Specialty Processing (“WSP”) (51%).  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 their 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 comprehensive income, respectively.  As more fully described in “Note Q – Acquisitions,” on December 31, 2019, we acquired an additional 31.75% interest in Samuel, increasing our ownership to a 63% controlling interest, with Samuel’s results being consolidated within the Steel Processing operating segment since the acquisition date.  The transaction resulted in a one-time net pre-tax gain of $6,055,000 within miscellaneous income in our consolidated statement of earnings during fiscal 2020.

Deconsolidation of Engineered Cabs:  On November 1, 2019, we contributed substantially all of the net assets of our former Engineered Cabs business to a newly-formed joint venture, Taxi Workhorse Holdings, LLC (the “Cabs joint venture”), in exchange for a 20% noncontrolling interest.  Immediately following the contribution, the Cabs joint venture acquired the net assets of Crenlo Cab Products, LLC (“Crenlo”).  The investment in the Cabs joint venture is accounted for under the equity method, due to lack of control as more fully described in “Note D – Investments in Unconsolidated Affiliates”.

The Company’s contribution to the Cabs joint venture consisted of the net assets of the two primary manufacturing facilities of the Company’s Engineered Cabs business located in Greeneville, Tennessee and Watertown, South Dakota.  As a result of the contribution, an impairment charge of $35,194,000 was recognized when the disposal group met the criteria as assets held for sale during the first quarter of 2020.  Certain non-core assets of the Engineered Cabs business, including the fabricated products facility in Stow, Ohio, and the steel packaging facility in Greensburg, Indiana, were retained and subsequently exited.

Upon closing of the transaction, the contributed net assets were deconsolidated, resulting in a one-time net gain of $258,000 within restructuring and other expense (income), net in our fiscal 2020 consolidated statement of earnings, as summarized below.

 

(in thousands)

 

 

 

Retained investment (at fair value)

$

13,831

 

Contributed net assets (at carrying value)

 

13,394

 

Gain on deconsolidation

 

437

 

Less: deal costs

 

(179

)

Net gain on deconsolidation

$

258

 

  In accordance with the applicable accounting guidance, our minority ownership interest in the Cabs joint venture was recorded at fair value as of the closing date.  For additional information regarding the fair value of our minority ownership interest in the Cabs joint venture, refer to “Note S – Fair Value Measurements”.

Use of Estimates:  The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“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.

51


Cash and Cash Equivalents:  We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Inventories:  Inventories are valued at the lower of cost or net realizable value.  Cost is determined using the first-in, first-out method for all inventories.  The assessment of net realizable value requires the use of estimates to determine cost to complete, normal profit margin and the ultimate selling price of the inventory.  We believe our inventories were valued appropriately as of May 31, 2021 and May 31, 2020.

Derivative Financial Instruments:  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 risk and commodity price risk.  All derivative financial instruments are accounted for using mark-to-market accounting.  The accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it.  Gains and losses on fair value hedges are recognized in current period earnings in the same line as the underlying hedged item.  Gains and losses on cash flow hedges are deferred as a component of accumulated other comprehensive income or loss (“AOCI”) and recognized in earnings at the time the hedged item affects earnings, in the same financial statement caption as the underlying hedged item.  Classification in the consolidated statements of earnings of gains and losses related to derivative financial instruments that do not qualify for hedge accounting is determined based on the underlying intent of the instruments.  Cash flows related to derivative financial instruments are generally classified as operating activities in our consolidated statements of cash flows.

In order for hedging relationships to qualify for hedge accounting under current accounting guidance, we formally document each hedging relationship and its risk management objective.  Derivative financial instruments are executed only with highly-rated counterparties.  No credit loss is anticipated on existing instruments, and no material credit losses have been experienced to date.  We monitor our positions, as well as the credit ratings of counterparties to those positions.

We discontinue hedge accounting when it is determined that the derivative financial instrument is no longer effective in offsetting the hedged risk, expires or is sold, is terminated or is no longer designated as a hedging instrument because it is unlikely that a forecasted transaction will occur or we determine that designation of the hedging instrument is no longer appropriate.  In all situations in which hedge accounting is discontinued and the derivative financial instrument is retained, we continue to carry the derivative financial instrument at its fair value on the consolidated balance sheet and recognize any subsequent changes in its fair value in net earnings immediately.  When it is probable that a forecasted transaction will not occur, we discontinue hedge accounting and immediately recognize the gains and losses that were accumulated in AOCI.

Refer to “Note R – Derivative Financial Instruments and Hedging Activities” for additional information regarding the consolidated balance sheet location and the risk classification of our derivative financial instruments.

Risks and Uncertainties:  As of May 31, 2021, excluding our joint ventures, we operated 21 manufacturing facilities worldwide, principally in two operating segments, which corresponded with our reportable business segments: Steel Processing and Pressure Cylinders.  We also held equity positions in nine joint ventures, which operated 47 manufacturing facilities worldwide, as of May 31, 2021.  Our largest end market is the automotive industry, which comprised 37%, 32%, and 38% of consolidated net sales in fiscal 2021, fiscal 2020, and fiscal 2019, respectively.  Our international operations represented 7%, 7%, and 5% of consolidated net sales and -1%, 2%, and 6% of consolidated net earnings attributable to controlling interest in fiscal 2021, fiscal 2020, and fiscal 2019, respectively, and 9% and 13% of consolidated net assets as of May 31, 2021 and May 31, 2020. As of May 31, 2021, approximately 8% of our consolidated labor force was represented by collective bargaining units.  The concentration of credit risks from financial instruments related to the markets we serve is not expected to have a material adverse effect on our consolidated financial position, cash flows or future results of operations.

In fiscal 2021, our largest customer accounted for approximately 11% of our consolidated net sales, and our ten largest customers accounted for approximately 34% of our consolidated net sales. In fiscal 2020, our largest customer accounted for slightly less than 10% of our consolidated net sales, and our ten largest customers accounted for approximately 30% of our consolidated net sales. A significant loss of, or decrease in, business from any of these customers could have an adverse effect on our consolidated net sales and financial results if we were not able to obtain replacement business.  Also, due to consolidation within the industries we serve, including the construction,

52


automotive and retail industries, our sales may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments with respect to, one or more of our largest customers.

Our principal raw material is flat-rolled steel, which we purchase from multiple primary steel producers.  The steel industry as a whole has been cyclical, and at times availability and pricing can be volatile due to a number of factors beyond our control.  This volatility can significantly affect our steel costs.  In an environment of increasing prices for steel and other raw materials, in general, competitive conditions may impact how much of the price increases we can pass on to our customers.  To the extent we are unable to pass on future price increases in our raw materials to our customers, our financial results could be adversely affected.  Also, if steel prices decrease, in general, competitive conditions may impact how quickly we must reduce our prices to our customers, and we could be forced to use higher-priced raw materials to complete orders for which the selling prices have decreased.  Declining steel prices could also require us to write-down the value of our inventories to reflect current market pricing.  Further, the number of suppliers has decreased in recent years due to industry consolidation and the financial difficulties of certain suppliers, and consolidation may continue.  Accordingly, if delivery from a major steel supplier is disrupted, it may be more difficult to obtain an alternative supply than in the past.

The COVID-19 pandemic and the various actions taken to contain or mitigate the outbreak have caused, and are continuing to cause, business slowdowns or shutdowns and significant disruption in global markets and economies, which has exacerbated and could further exacerbate the conditions noted in the risks above.  The extent to which our operations will continue to be impacted by COVID-19 will depend on future developments, which are highly uncertain and cannot be accurately predicted, including the further spread, the duration of the pandemic and its eventual impact on world economies.

Receivables:  We review our receivables on an ongoing basis to ensure that they are properly valued and collectible.  With the adoption of Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments, as discussed further below in “Recently Adopted Accounting Standards”, expected lifetime credit losses on receivables are recognized at the time of origination.  We estimate the allowance for credit losses based on the expected future credit losses using the internal historical loss information and observable and forecasted macroeconomic data.    

The allowance for doubtful accounts is used to record the estimated risk of loss related to the customers’ inability to pay.  This allowance is maintained at a level that we consider appropriate based on factors that affect collectability, such as the financial health of our customers, historical trends of charge-offs and recoveries and current economic and market conditions.  As we monitor our receivables, we identify customers that may have payment problems, and we adjust the allowance accordingly, with the offset to selling, general and administrative (“SG&A”) expense.  Account balances are charged off against the allowance when recovery is considered remote.  The allowance for doubtful accounts decreased approximately $913,000 during fiscal 2021 to $608,000.

While we believe our allowance for doubtful accounts is adequate, changes in economic conditions, the financial health of customers and bankruptcy settlements could impact our future earnings.  If the economic environment and market conditions deteriorate, particularly in the automotive and construction end markets where our exposure is greatest, additional reserves may be required.

Property and Depreciation:  Property, plant and equipment are carried at cost and depreciated using the straight-line method.  Buildings and improvements are depreciated over 10 to 40 years and machinery and equipment over 3 to 20 years.  Depreciation expense was $74,779,000 $79,368,000 and $80,316,000 during fiscal 2021, fiscal 2020 and fiscal 2019, respectively.  Accelerated depreciation methods are used for income tax purposes.

 

Goodwill and Other Long-Lived Assets: We use the purchase method of accounting for all business combinations and recognize amortizable and indefinite-lived intangible assets separately from goodwill.  The acquired assets and assumed liabilities in an acquisition are measured and recognized based on their estimated fair values at the date of acquisition, with goodwill representing the excess of the purchase price over the fair value of the identifiable net assets.  A bargain purchase may occur, wherein the fair value of identifiable net assets exceeds the purchase price, and a gain is then recognized in the amount of that excess. Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that impairment may be present.  Application of goodwill impairment testing involves judgment, including but not limited to, the identification of reporting units and estimation of the fair value of each reporting unit.  A reporting unit is defined as an operating segment or one level below an operating segment.  We test goodwill at the operating segment level as we have determined that the characteristics of the reporting units within each operating segment are similar and allow for their aggregation in accordance with the

53


applicable accounting guidance.  Refer to “Note E – Goodwill and Other Long-Lived Assets” for additional information on the goodwill impairment.

 

For goodwill and indefinite-lived intangible assets, we test for impairment by first evaluating qualitative factors including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. If there are no potential impairments raised from this evaluation, no further testing is performed.  If however, our qualitative analysis indicates it is more likely than not that the fair value is less than the carrying amount, a quantitative analysis is performed. The quantitative analysis compares the fair value of each reporting unit or indefinite-lived intangible asset to the related carrying amount, and an impairment loss is recognized in our consolidated statements of earnings equivalent to the excess of the carrying amount over the fair value. Fair value is determined based on discounted cash flows or appraised values, as appropriate. Our policy is to perform a quantitative analysis of each reporting unit at least every three years.

We performed our annual impairment evaluation of goodwill and other indefinite-lived intangible assets during the fourth quarter of fiscal 2021 and concluded that no impairment indicators were present.  

We review the carrying value of our long-lived assets, including intangible assets with finite useful lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.  Impairment testing involves a comparison of the sum of the undiscounted future cash flows of the asset or asset group to its respective carrying amount.  If the sum of the undiscounted future cash flows exceeds the carrying amount, then no impairment exists.  If the carrying amount exceeds the sum of the undiscounted future cash flows, then a second step is performed to determine the amount of impairment, if any, to be recognized.  The impairment loss recognized is equal to the amount that the carrying value of the asset or asset group exceeds its fair value.  Long-lived assets held for sale are reported at the lower of cost or fair value less costs to sell and are recorded in a single line in the consolidated balance sheets. We classify assets as held for sale if we commit to a plan to sell the assets within one year and actively market the assets in their current condition for a price that is reasonable in comparison to their estimated fair value.

Our impairment testing for both goodwill and other long-lived assets, including intangible assets with finite useful lives, is largely based on cash flow models that require significant judgment and require assumptions about future volume trends, revenue and expense growth rates; and, in addition, external factors such as changes in economic trends and cost of capital.  Significant changes in any of these assumptions could impact the outcomes of the tests performed. See “Note E – Goodwill and Other Long-Lived Assets” for additional details regarding these assets and related impairment testing.

Equity method investments:  Investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity method.  We review our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of the investment might not be recoverable.  Events and circumstances can include, but are not limited to:  evidence we do not have the ability to recover the carrying value; the inability of the investee to sustain earnings; the current fair value of the investment is less than the carrying value; and other investors cease to provide support or reduce their financial commitment to the investee.  If the fair value of the investment is less than the carrying value, and the investment will not recover in the near term, then other-than-temporary impairment may exist.  When the loss in value of an investment is determined to be other-than-temporary, we recognize an impairment in the period the conclusion is made.

Strategic Investments:  From time to time the Company may make investments in both privately and publicly held equity securities in which the Company does not have a controlling interest or significant influence.   Investments are recorded at fair value and changes in the fair value of equity securities are recognized in net earnings below operating income.  The Company elected to record equity securities without readily determinable fair values at cost, less impairment, plus or minus subsequent adjustments for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. 

Leases:  On June 1, 2019, we adopted the lease accounting standard under U.S. GAAP, ASU 2016-02, Leases (Topic 842) (“Topic 842”) using the modified retrospective approach.  Under Topic 842, leases are categorized as operating or financing leases upon inception.  Lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.  Operating lease right of use (“ROU”) assets include any initial direct costs and prepayments less lease incentives. Lease terms include options to renew or terminate the lease when it is reasonably certain the Company will exercise such options.  As most of our leases do not include an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date, in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of goods sold or selling,

54


general and administrative expense depending on the underlying nature of the leased assets.  For operating leases with variable payments dependent upon an index or rate that commenced subsequent to adoption of Topic 842, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the operating lease liability as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred.  Leases with a term of twelve months or less upon the commencement date are considered short-term leases and are not included on the consolidated balance sheets and are expensed on a straight-line basis over the lease term.  Refer to “Note T – Leases” for additional information on the adoption and impact of Topic 842.

Stock-Based Compensation:  At May 31, 2021, we had stock-based compensation plans for our employees as well as our non-employee directors as described more fully in “Note L – Stock-Based Compensation.”  All share-based awards, including grants of stock options and restricted common shares, are recorded as expense in the consolidated statements of earnings over the vesting period based on their grant-date fair values.  Forfeitures are recognized as they occur.

Revenue Recognition:  On June 1, 2018, we adopted accounting guidance that replaced most existing revenue recognition accounting guidance under U.S. GAAP, ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”).  

 

Under this revenue recognition accounting guidance, we recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive for those goods or services, including any variable consideration.

Returns and allowances are used to record estimates of returns or other allowances resulting from quality, delivery, discounts or other issues and are estimated based on historical trends and current market conditions, with the offset to net sales.

Shipping and handling costs charged to customers are treated as fulfillment activities and are recorded in both net sales and cost of goods sold at the time control is transferred to the customer.  Due to the short-term nature of our contracts with customers, we have elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract; and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less.  When we satisfy (or partially satisfy) a performance obligation, prior to being able to invoice the customer, we recognize an unbilled receivable when the right to consideration is unconditional and a contract asset when the right to consideration is conditional.  Unbilled receivables and contract assets are included in receivables and prepaid and other current assets, respectively, on the consolidated balance sheets.  Additionally, we do not maintain contract liability balances, as performance obligations are satisfied prior to customer payment for product.  Payments from customers are generally due within 30 to 60 days of invoicing, which generally occurs upon shipment or delivery of the goods.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer, are excluded from revenue.

Certain contracts with customers include warranties associated with the delivered goods or services.  These warranties are not considered to be separate performance obligations, and accordingly, we record an estimated liability for potential warranty costs as the goods or services are transferred.

With the exception of the toll processing revenue stream in Steel Processing, we recognize revenue at the point in time the performance obligation is satisfied and control of the product is transferred to the customer upon shipment or delivery.  Generally, we receive and acknowledge purchase orders from our customers, which define the quantity, pricing, payment and other applicable terms and conditions.  In some cases, we receive a blanket purchase order from our customers, which includes pricing, payment and other terms and conditions, with quantities defined at the time each customer subsequently issues periodic releases against the blanket purchase order.

Toll processing revenues are recognized over time.  Revenue is primarily measured using the cost-to-cost method, which we believe best depicts the transfer of control to the customer.  Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation.  Revenues are recorded proportionally as costs are incurred.  We have elected to not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

55


Certain contracts contain variable consideration, which is not constrained, and primarily include estimated sales returns, customer rebates, and sales discounts which are recorded on an expected value basis.  These estimates are based on historical returns, analysis of credit memo data and other known factors.  We account for rebates by recording reductions to revenue for rebates in the same period the related revenue is recorded.  The amount of these reductions is based upon the terms agreed to with the customer.  We do not exercise significant judgments in determining the timing of satisfaction of performance obligations or the transaction price.  Refer to “Note B – Revenue Recognition” for additional information.

Advertising Expense:  Advertising costs are expensed as incurred and included in SG&A expense.  Advertising expense was $17,462,000, $17,603,000, and $15,574,000 for fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

Statements of Cash Flows:  Supplemental cash flow information was as follows for the fiscal years ended May 31:

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Interest paid, net of amount capitalized

 

$

29,080

 

 

$

32,994

 

 

$

38,807

 

Income taxes paid, net of refunds

 

$

160,847

 

 

$

25,076

 

 

$

38,848

 

 

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 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.  

Income Taxes:  We account for income taxes using the asset and liability method.  The asset and liability method requires the recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between the tax basis and the financial reporting basis of our assets and liabilities.  We evaluate the deferred tax assets to determine whether it is more likely than not that all, or a portion, of the deferred tax assets will not be realized and provide a valuation allowance as appropriate.

Tax benefits from uncertain tax positions that are recognized in the consolidated financial statements are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

We have reserves for income taxes and associated interest and penalties that may become payable in future years as a result of audits by taxing authorities.  It is our policy to record these in income tax expense.  While we believe the positions taken on previously filed tax returns are appropriate, we have established the tax and interest/penalties reserves in recognition that various taxing authorities may challenge our positions.  These reserves are analyzed periodically, and adjustments are made as events occur to warrant adjustment to the reserves, such as lapsing of applicable statutes of limitations, conclusion of tax audits, additional exposure based on current calculations, identification of new issues and release of administrative guidance or court decisions affecting a particular tax issue.

Business Combinations: We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair values of identifiable assets and liabilities requires significant judgments and estimates and the use of valuation techniques when market value is not readily available. For the valuation of intangible assets acquired in a business combination, we typically use an income approach. The purchase price allocated to the intangible assets is based on unobservable assumptions, inputs and estimates, including but not limited to, forecasted revenue growth rates, projected expenses, discount rates, customer attrition rates, royalty rates, and useful lives, among others. The excess of the purchase price over the fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Self-Insurance Reserves:  We self-insure most of our risks for product, cyber, pollution, workers’ compensation, general and automobile, and property liabilities, and for employee medical claims.  However, in order

56


to reduce risk and better manage our overall loss exposure for these liabilities, we purchase stop-loss insurance that covers individual claims in excess of the deductible amounts.  We also maintain reserves for the estimated cost to resolve certain open claims that have been made against us (which may include active product recall or replacement programs), as well as an estimate of the cost of claims that have been incurred but not reported.  These estimates are based on actuarial valuations that take into consideration the historical average claim volume, the average cost for settled claims, current trends in claim costs, changes in our business and workforce, general economic factors and other assumptions believed to be reasonable under the circumstances.  The estimated reserves for these liabilities could be affected if future occurrences and claims differ from the assumptions used and historical trends.

 

Recently Issued Accounting Standards

 

In December 2019, the FASB issued 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 aspects of the current guidance to promote consistency among reporting entities. The new guidance is effective for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. We do not expect the adoption of ASU 2019-12 will have a material impact on the consolidated financial statements.

 

Recently Adopted Accounting Standards:

 

On June 1, 2019, the Company adopted Topic 842, which replaced most existing lease accounting guidance under U.S. GAAP. See “Note T – Leases” for additional information regarding the Company’s adoption of Topic 842, including newly-required disclosures.  

 

On June 1, 2019, the Company adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“Topic 815”), which amended the existing hedge accounting guidance under U.S. GAAP. Topic 815 is intended to simplify and clarify the accounting and disclosure requirements for hedging activities by more closely aligning the results of cash flow and fair value hedge accounting with the underlying risk management activities. The adoption of the standard had no current or historical impact on our consolidated financial position or results of operations.

 

On June 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments and additional related ASUs which introduced an expected credit loss model for impairment of financial assets measured at amortized cost, including trade receivables.  The model replaces the probable, incurred loss model for those assets and broadens the information an entity must consider when developing its expected credit loss estimate for assets measured at amortized cost.  The adoption of the accounting standard did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

 

Note B – Revenue Recognition

 

On June 1, 2018, we adopted revenue recognition accounting guidance that replaced most existing revenue recognition accounting guidance under U.S. GAAP, Topic 606.  Under Topic 606, we recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive for those goods or services, including any variable consideration.  

 

The accounting guidance was adopted using the modified retrospective approach as applied to customer contracts that were not complete at the date of adoption, with the cumulative effect recognized in retained earnings.  The cumulative effect adjustment resulted from a change in the pattern of recognition for our toll processing revenue stream and certain contracts within our former oil & gas equipment revenue stream, which previously were accounted for as point in time and are now accounted for over time.

57


 

The following table outlines the cumulative effect of adopting the new revenue recognition guidance:

 

(in thousands)

 

May 31, 2018

(As Reported)

 

 

Cumulative Effect of

Topic 606 Adoption

 

 

June 1, 2018

(As Adjusted)

 

Consolidated Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Receivables

 

$

572,689

 

 

$

4,706

 

 

$

577,395

 

Total inventories

 

 

454,027

 

 

 

(3,452

)

 

 

450,575

 

Prepaid expenses and other current assets

 

 

60,134

 

 

 

944

 

 

 

61,078

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes, net

 

 

60,188

 

 

 

454

 

 

 

60,642

 

Retained earnings

 

 

637,757

 

 

 

1,174

 

 

 

638,931

 

Noncontrolling interests

 

 

117,606

 

 

 

570

 

 

 

118,176

 

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

 

(in thousands)

 

Fiscal Year Ended May 31,

 

Reportable segments by product class:

 

2021

 

 

2020

 

 

2019

 

Steel Processing

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

1,927,418

 

 

$

1,729,972

 

 

$

2,308,756

 

Toll

 

 

131,979

 

 

 

129,698

 

 

 

127,062

 

Total

 

 

2,059,397

 

 

 

1,859,670

 

 

 

2,435,818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pressure Cylinders

 

 

 

 

 

 

 

 

 

 

 

 

Industrial products

 

 

552,093

 

 

 

550,543

 

 

 

627,053

 

Consumer products

 

 

537,930

 

 

 

485,990

 

 

 

470,447

 

Oil & gas equipment

 

 

20,950

 

 

 

111,891

 

 

 

110,298

 

Total

 

 

1,110,973

 

 

 

1,148,424

 

 

 

1,207,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

Engineered Cabs

 

 

1,058

 

 

 

50,954

 

 

 

115,902

 

Other

 

 

1

 

 

 

71

 

 

 

38

 

Total

 

 

1,059

 

 

 

51,025

 

 

 

115,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

3,171,429

 

 

$

3,059,119

 

 

$

3,759,556

 

 

We recognize revenue at a point in time, with the exception of the toll processing revenue stream and certain contracts within the oil & gas equipment business, which was divested, on January 29, 2021. The following table summarizes the revenue that has been recognized over time for the periods presented:

 

 

 

Fiscal Year Ended May 31,

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Steel Processing - toll

 

$

131,979

 

 

$

129,698

 

 

$

127,062

 

Pressure Cylinders - certain oil & gas contracts

 

 

15,666

 

 

 

100,774

 

 

 

75,159

 

Total over time revenue

 

$

147,645

 

 

$

230,472

 

 

$

202,221

 

 

The following table summarizes the unbilled receivables and contract assets for the periods indicated:

 

 

 

 

 

Fiscal Year Ended May 31,

 

(in thousands)

 

Balance Sheet Classification

 

2021

 

 

2020

 

Unbilled receivables

 

Receivables

 

$

5,317

 

 

$

5,552

 

Contract assets

 

Prepaid expenses and other current assets

 

$

-

 

 

$

4,127

 

 

 

58


 

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 on the Effective Date.

 

During fiscal 2021, we sold or contributed all of these shares and recognized pre-tax gains of $655,102,000, which was comprised of $634,449,000 in cash proceeds and $20,653,000 in value from Nikola shares contributed to the Worthington Industries Foundation to establish a charitable endowment focused on the communities in which the Company operates. We also recognized $50,624,000 of incremental expenses in operating income related to Nikola gains consisting of $29,971,000 for discretionary profit sharing and bonus expenses and $20,653,000 for the charitable contribution of Nikola shares.  

 

Note 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 May 31, 2021, the Company held investments in the following affiliated companies:  ArtiFlex Manufacturing, LLC (“ArtiFlex”) (50%), the Cabs joint venture (20%), Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”) (25%), Serviacero Planos, S. de R. L. de C.V. (“Serviacero Worthington”) (50%), and Worthington Armstrong Venture (“WAVE”) (50%)

 

On December 31, 2019, the Company contributed the then recently acquired operating net assets of Heidtman Steel Products, Inc.’s Cleveland facility (“Heidtman”) to the Samuel joint venture in exchange for an incremental 31.75% ownership interest in the Samuel joint venture, bringing our total ownership interest to 63%. The Samuel joint venture’s results have been consolidated within Steel Processing since that date. Refer to “Note Q – Acquisitions” for additional information.

 

On November 1, 2019, we closed on an agreement with an affiliate of Angeles Equity Partners, LLC by which we contributed substantially all of the net assets of our former Engineered Cabs business to a newly-formed joint venture, in exchange for a 20% noncontrolling interest. Immediately following the contribution, the Cabs joint venture acquired the net assets of Crenlo. Our contribution to the Cabs joint venture consisted of the net assets of our primary Engineered Cabs manufacturing facilities located in Greeneville, Tennessee and Watertown, South Dakota.  Our investment in the Cabs joint venture is accounted for under the equity method due to lack of control.

 

During the fourth quarter of fiscal 2019, we determined our 10% ownership interest in our joint venture in China, Nisshin, was other than temporarily impaired due to then current and projected operating losses.  As a result, in the fourth quarter of fiscal 2019, an impairment charge of $4,017,000 was recognized within equity income in our consolidated statement of earnings to write down the investment to its estimated fair value of $3,700,000.  During the first quarter of fiscal 2020, the Company began the process of exploring the potential exit of its interest in the Nisshin joint venture in China. As a result, the Company evaluated its investment for potential impairment. The Company concluded the remaining book value of the investment was fully impaired, resulting in an impairment charge of $4,236,000 within equity income during the first quarter of fiscal 2020.  On December 19, 2019, the Company finalized an agreement to transfer the risks and rewards related to its 10% interest to the other joint venture partners. As a result, the Company has no further rights or obligations related to the Nisshin joint venture.

We received distributions from unconsolidated affiliates totaling $91,007,000, $122,953,000, and $161,079,000 in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.  We have received cumulative distributions from WAVE in excess of our investment balance, which resulted in a negative asset balance of $99,669,000 and $103,837,000 at May 31, 2021 and 2020, respectively.  In accordance with the applicable accounting guidance, we reclassified the negative balances to other liabilities within our consolidated balance sheets.  We will continue to record our equity in the net income of WAVE as a debit to the investment account, and if it becomes positive, it will again be shown as an asset on our consolidated balance sheets. If it becomes probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any balance classified as a liability as income immediately.

59


The following table presents combined information regarding the financial position of our unconsolidated affiliates accounted for using the equity method as of May 31:

 

(in thousands)

2021

 

 

2020

 

Cash

$

11,651

 

 

$

68,730

 

Other current assets

 

733,834

 

 

 

528,631

 

Noncurrent assets

 

382,585

 

 

 

399,731

 

Total assets

$

1,128,070

 

 

$

997,092

 

Current liabilities

$

232,626

 

 

$

174,709

 

Short-term borrowings

 

1,155

 

 

 

500

 

Current maturities of long-term debt

 

30,209

 

 

 

37,542

 

Long-term debt

 

311,871

 

 

 

346,690

 

Other noncurrent liabilities

 

92,209

 

 

 

73,656

 

Equity

 

460,000

 

 

 

363,995

 

Total liabilities and equity

$

1,128,070

 

 

$

997,092

 

 

     

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The following table presents summarized financial information for our four largest unconsolidated affiliates as of, and for the fiscal years ended May 31.  All other unconsolidated affiliates are combined and presented in the Other category.

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

 

WAVE

 

$

371,814

 

 

$

368,820

 

 

$

379,103

 

ClarkDietrich

 

 

893,371

 

 

 

855,994

 

 

 

892,758

 

Serviacero Worthington

 

 

311,543

 

 

 

273,276

 

 

 

351,671

 

ArtiFlex

 

 

144,834

 

 

 

175,428

 

 

 

201,526

 

Other

 

 

196,915

 

 

 

146,478

 

 

 

32,753

 

Total net sales

 

$

1,918,477

 

 

$

1,819,996

 

 

$

1,857,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin (loss)

 

 

 

 

 

 

 

 

 

 

 

 

WAVE

 

$

215,692

 

 

$

208,040

 

 

$

205,909

 

ClarkDietrich

 

 

158,074

 

 

 

131,619

 

 

 

93,947

 

Serviacero Worthington

 

 

51,253

 

 

 

15,739

 

 

 

34,494

 

ArtiFlex

 

 

20,596

 

 

 

14,212

 

 

 

12,928

 

Other

 

 

(7,057

)

 

 

7,320

 

 

 

(6,000

)

Total gross margin

 

$

438,558

 

 

$

376,930

 

 

$

341,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

WAVE

 

$

165,381

 

 

$

166,404

 

 

$

166,969

 

ClarkDietrich

 

 

94,888

 

 

 

66,952

 

 

 

33,384

 

Serviacero Worthington

 

 

43,075

 

 

 

7,513

 

 

 

25,636

 

ArtiFlex

 

 

9,628

 

 

 

6,248

 

 

 

5,524

 

Other

 

 

(2,372

)

 

 

(23,596

)

 

 

(9,964

)

Total operating income

 

$

310,600

 

 

$

223,521

 

 

$

221,549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

WAVE

 

$

4,073

 

 

$

4,032

 

 

$

3,634

 

ClarkDietrich

 

 

11,917

 

 

 

11,869

 

 

 

11,600

 

Serviacero Worthington

 

 

4,305

 

 

 

4,324

 

 

 

4,319

 

ArtiFlex

 

 

5,728

 

 

 

5,605

 

 

 

6,055

 

Other

 

 

8,965

 

 

 

4,689

 

 

 

875

 

Total depreciation and amortization

 

$

34,988

 

 

$

30,519

 

 

$

26,483

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

WAVE

 

$

8,909

 

 

$

11,061

 

 

$

10,547

 

ClarkDietrich

 

 

101

 

 

 

378

 

 

 

912

 

Serviacero Worthington

 

 

42

 

 

 

87

 

 

 

493

 

ArtiFlex

 

 

528

 

 

 

801

 

 

 

1,443

 

Other

 

 

2,704

 

 

 

1,665

 

 

 

-

 

Total interest expense

 

$

12,284

 

 

$

13,992

 

 

$

13,395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

 

 

 

 

 

 

 

 

 

 

 

WAVE

 

$

200

 

 

$

216

 

 

$

219

 

ClarkDietrich

 

 

-

 

 

 

-

 

 

 

-

 

Serviacero Worthington

 

 

11,341

 

 

 

3,267

 

 

 

7,629

 

ArtiFlex

 

 

149

 

 

 

(15

)

 

 

29

 

Other

 

 

270

 

 

 

(15

)

 

 

-

 

Total income tax expense

 

$

11,960

 

 

$

3,453

 

 

$

7,877

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss)

 

 

 

 

 

 

 

 

 

 

 

 

WAVE (1)

 

$

156,869

 

 

$

202,451

 

 

$

162,849

 

ClarkDietrich

 

 

98,313

 

 

 

68,899

 

 

 

34,560

 

Serviacero Worthington

 

 

31,865

 

 

 

2,573

 

 

 

16,155

 

ArtiFlex

 

 

8,950

 

 

 

5,461

 

 

 

4,051

 

Other

 

 

(2,811

)

 

 

(19,934

)

 

 

(8,383

)

Total net earnings

 

$

293,186

 

 

$

259,450

 

 

$

209,232

 

 

 

(1)

On September 30, 2019, WAVE completed the sale of its international operations to Knauf Ceilings and Holding GmbH (“Knauf”), as part of the broader transaction between Knauf and Armstrong World Industries, Inc., our partner in the WAVE joint venture.  The net earnings in this table include net income attributable

61


 

to discontinued operations of  $49,770,000 and $6,830,000 in fiscal 2020 and fiscal 2019, respectively.  All other amounts presented in the table above exclude the activity of the discontinued operations of WAVE.  

 

At May 31, 2021 and 2020, $59,015,000 and $39,995,000, respectively, of our consolidated retained earnings represented undistributed earnings of our unconsolidated affiliates, net of tax.

Note E – Goodwill and Other Long-Lived Assets

Goodwill

The following table summarizes the changes in the carrying amount of goodwill during fiscal 2021 and fiscal 2020 by reportable business segment:

 

(in thousands)

 

Steel

Processing

 

 

Pressure

Cylinders

 

 

Other

 

 

Total

 

Balance at May 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$

7,899

 

 

$

330,723

 

 

$

172,178

 

 

$

510,800

 

Impairment losses

 

 

-

 

 

 

(4,015

)

 

 

(172,178

)

 

 

(176,193

)

 

 

 

7,899

 

 

 

326,708

 

 

 

-

 

 

 

334,607

 

Acquisitions and purchase accounting adjustments (1)

 

 

11,796

 

 

 

(52

)

 

 

-

 

 

 

11,744

 

Divestitures (2)

 

 

-

 

 

 

(2,511

)

 

 

-

 

 

 

(2,511

)

Translation adjustments

 

 

-

 

 

 

(309

)

 

 

-

 

 

 

(309

)

Impairment losses (3)

 

 

-

 

 

 

(22,097

)

 

 

-

 

 

 

(22,097

)

 

 

 

11,796

 

 

 

(24,969

)

 

 

-

 

 

 

(13,173

)

Balance at May 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

19,695

 

 

 

327,851

 

 

 

172,178

 

 

 

519,724

 

Impairment losses

 

 

-

 

 

 

(26,112

)

 

 

(172,178

)

 

 

(198,290

)

 

 

 

19,695

 

 

 

301,739

 

 

 

-

 

 

 

321,434

 

Acquisitions and purchase accounting adjustments (1)

 

 

523

 

 

 

37,353

 

 

 

-

 

 

 

37,876

 

Divestitures (2)

 

 

-

 

 

 

(13,556

)

 

 

-

 

 

 

(13,556

)

Translation adjustments

 

 

-

 

 

 

5,302

 

 

 

-

 

 

 

5,302

 

 

 

 

523

 

 

 

29,099

 

 

 

-

 

 

 

29,622

 

Balance at May 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

20,218

 

 

 

356,950

 

 

 

172,178

 

 

 

549,346

 

Impairment losses

 

 

-

 

 

 

(26,112

)

 

 

(172,178

)

 

 

(198,290

)

 

 

$

20,218

 

 

$

330,838

 

 

$

-

 

 

$

351,056

 

 

 

(1)

For additional information regarding the Company’s acquisitions, refer to “Note Q – Acquisitions.”  

 

(2)

Fiscal 2020 divestitures related to the sale of the Company’s cryogenics business in Turkey. Fiscal 2021 divestitures related to the sale of the Company’s Structural Composites Industries, LLC business located in Pomona, California and the sale of its cryogenic and hydrogen trailer business, including the Theodore, Alabama site, and the cryo-science and microbulk storage unit business.

 

(3)

Fiscal 2020 impairment losses included $22,097,000 of goodwill impairment related to the oil & gas equipment reporting unit.

62


Other Intangible Assets

Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives, which range from 10 to 20 years.  The following table summarizes other intangible assets by class as of May 31, 2021 and 2020:

 

 

2021

 

 

2020

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Accumulated

 

(in thousands)

Cost

 

 

Amortization

 

 

Cost

 

 

Amortization

 

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

$

99,901

 

 

$

-

 

 

$

72,101

 

 

$

-

 

Total indefinite-lived intangible assets

 

99,901

 

 

 

-

 

 

 

72,101

 

 

 

-

 

Definite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

$

198,234

 

 

$

72,499

 

 

$

170,887

 

 

$

73,207

 

Non-compete agreements

 

4,098

 

 

 

4,098

 

 

 

8,001

 

 

 

8,001

 

Technology / know-how

 

13,165

 

 

 

3,614

 

 

 

22,484

 

 

 

7,850

 

Other

 

5,502

 

 

 

302

 

 

 

3,716

 

 

 

3,716

 

Total definite-lived intangible assets

 

220,999

 

 

 

80,513

 

 

 

205,088

 

 

 

92,774

 

Total intangible assets

$

320,900

 

 

$

80,513

 

 

$

277,189

 

 

$

92,774

 

 

Amortization expense totaled $12,257,000, $12,870,000, and $15,286,000 in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

Amortization expense for each of the next five fiscal years is estimated to be:

 

(in thousands)

 

 

 

 

2022

 

$

11,604

 

2023

 

$

11,517

 

2024

 

$

11,517

 

2025

 

$

11,338

 

2026

 

$

11,053

 

 

Impairment of Long-Lived Assets

 

Fiscal 2021:   Due to the economic impact of the COVID-19 pandemic and related market softness in the oil & gas equipment manufacturing operations in Tulsa, Oklahoma, 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 value 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 resulting in an impairment of $2,374,000.

 

The future undiscounted cash flows of the cryogenics business primarily operated out of the Theodore, Alabama facility did not support its book value.  As a result, property, plant and equipment with a carrying value of $13,526,000 was written down to its estimated fair value of $9,193,000 (determined using Level 2 inputs), resulting in an impairment charge of $4,333,000.  Additionally, the customer list intangible assets and technology/know-how intangible assets with a carrying value of $3,662,000 were deemed to be fully impaired (using unobservable Level 3 inputs) and written off.  These assets were subsequently sold in October 2020 (refer to “Note F – Restructuring and Other Expense (Income), Net” for additional information on this sale).

 

We decided to discontinue our operation of the manufacturing line for alternative fuel cylinders at the Jefferson, Ohio facility.  As a result, long-lived assets with a carrying value of $1,823,000 were written down to their

63


estimated fair market value of $400,000 (determined using Level 2 inputs), resulting in an impairment charge of $1,423,000.

 

The Company recognized a $506,000 impairment charge related to the Superior Tools business that was acquired as part of Magna Industries, Inc. in fiscal 2019 and subsequently sold.

 

Fiscal 2020:  During the fourth quarter of 2020, the Company performed the annual impairment test on its indefinite-lived assets.  The results of the analysis indicated the fair market value of certain European tradenames used in the Pressure Cylinders businesses was estimated to be $2,800,000 which no longer supported their book value of $6,600,000, resulting in an impairment charge of $3,800,000.  The key assumptions used in the fair value calculation were projected cash flows and the discount rate, which represent unobservable Level 3 inputs.

 

During the fourth quarter of fiscal 2020, the Company identified an impairment indicator related to the TWB Hermosillo facility operating lease due to the economic impact of COVID-19.  As a result, the lease ROU asset with a net book value of $565,000 was deemed fully impaired and written off.

 

In May 2020, the Company committed to a plan to shut down the packaging solutions business in Greensburg, Indiana.  As a result, long-lived assets with a carrying value of $2,810,000 were written down to their estimated fair market value of $266,000 (determined using Level 2 inputs), resulting in an impairment charge of $2,544,000.  

 

On February 12, 2020, the Company announced a plan to consolidate its oil & gas equipment operations in Wooster, Ohio, into its existing manufacturing facility in Bremen, Ohio. As a result, the Company tested the long-lived assets of the combined asset group, consisting of fixed assets and customer list intangible assets with net book values of $14,274,000 and $6,577,000, respectively, for impairment. The book value of the fixed assets was determined to be in excess of fair market value, resulting in an impairment charge of $4,679,000 during the third quarter of fiscal 2020.  Additionally, the customer list intangible assets were deemed to be fully impaired and written off.  Fair market value of the fixed assets was determined using observable Level 2 inputs and the fair value of the customer list intangible assets was determined using unobservable Level 3 inputs.  The land and building of the Wooster facility met the criteria for classification as assets held for sale and, accordingly, have been presented separately as assets held for sale in our consolidated balance sheet at May 31, 2020.  

 

As a result of the impairment charges noted above, the Company also performed an interim goodwill impairment test of its oil & gas equipment reporting unit. The results of the analysis indicated that the fair value of the reporting unit no longer supported the book value of the corresponding goodwill, resulting in an impairment charge of $22,097,000 during the third quarter of fiscal 2020.  The key assumptions used in the fair value calculation were projected cash flows and the discount rate, which represent unobservable, Level 3 inputs.

 

During the third quarter of fiscal 2020, the Company’s consolidated joint venture WSP committed to a plan to sell the Canton, Michigan facility and some of the production equipment at that facility. The land and building related to the facility were determined to not be impaired. The book value of the production equipment was determined to be above the fair market value.  Therefore, the net assets were written down to their estimated fair market value less cost to sell of $700,000 (determined using Level 2 inputs), resulting in an impairment charge of $1,274,000 in the third quarter of fiscal 2020.  These assets, with a net book value of $7,813,000, have been presented separately as assets held for sale in the consolidated balance sheet at May 31, 2020.

 

During the first quarter of fiscal 2020, we closed on an agreement by which we contributed substantially all of the net assets of our Engineered Cabs business with the exception of the fabricated products facility in Stow, Ohio, and the steel packaging facility in Greensburg, Indiana to the Cabs joint venture. The book value of the disposal group exceeded its estimated fair market value of $12,860,000 (determined using Level 2 inputs), which resulted in the recording of a $35,194,000 impairment charge during the first quarter of fiscal 2020. Included in the impairment charge were lease ROU assets with a net book value of $905,000 that were deemed fully impaired and written off. For additional information, refer to “Note D – Investments in Unconsolidated Affiliates”.  The Company also identified an impairment indicator for the long-lived assets of the Engineered Cabs fabricated products business as the sale would have an adverse impact on the manner and extent in which the remaining assets were used.  As a result, fixed assets with a net book value of $1,469,000 and lease ROU assets with a net book value of $3,938,000 were deemed to be fully impaired and written off during the first quarter of fiscal 2020.

 

64


Fiscal 2019:  During the fourth quarter of fiscal 2019, management finalized plans to close the Company’s compressed natural gas fuel systems facility in Salt Lake City, Utah.  As a result, long-lived assets with a carrying value of $2,405,000 were written down to their estimated fair market value of $238,000 (determined using Level 2 inputs), resulting in an impairment charge of $2,167,000 in fourth quarter of fiscal 2019.  The Company ceased production at this facility in May 2019.

During the fourth quarter of fiscal 2019, management determined that indicators of impairment were present with regard to certain long-lived assets of the Canton, Michigan facility operated by the Company’s consolidated joint venture, WSP.  As a result, long-lived assets with a carrying value of $4,269,000 were written down to their estimated fair market value of $1,000,000 (determined using Level 2 inputs), resulting in an impairment charge of $3,269,000 in the fourth quarter of fiscal 2019.

During the first quarter of fiscal 2019, changes in the facts and circumstances related to the planned sale of our cryogenics business in Turkey, Worthington Aritas, resulted in our lowering the estimate of fair market value less cost to sell to $7,000,000, which generated an impairment charge of $2,381,000 in the first quarter of fiscal 2019.  Fair market value was determined using observable (Level 2) inputs.

Note F – Restructuring and Other Expense (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 expense, net financial statement caption in our consolidated statement of earnings for fiscal 2021, is summarized below:

 

 

 

Beginning

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending

 

(in thousands)

 

Balance

 

 

Expense

 

 

Payments

 

 

Adjustments

 

 

Balance

 

Early retirement and severance

 

$

6,536

 

 

$

1,314

 

 

$

(6,980

)

 

$

(99

)

 

$

771

 

Facility exit and other costs

 

 

156

 

 

 

1,438

 

 

 

(1,330

)

 

 

185

 

 

 

449

 

 

 

$

6,692

 

 

 

2,752

 

 

$

(8,310

)

 

$

86

 

 

$

1,220

 

Net loss on sale of assets

 

 

 

 

 

 

53,345

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and other expense, net

 

 

 

 

 

$

56,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During fiscal 2021, the following actions were taken related to the Company’s restructuring activities:

 

 

In October 2020, the Company’s Pressure Cylinders segment completed the sale of its cryogenic and hydrogen trailer business, including the Theodore, Alabama manufacturing site, and the cryo-science and microbulk storage unit business.  In connection with these transactions, the Company realized net cash proceeds of $21,275,000 after working capital adjustments, which generated a pre-tax loss of $7,064,000, primarily related to allocated goodwill.  

 

 

On January 29, 2021, the Company’s Pressure Cylinders segment sold its oil & gas equipment business to an affiliate of Ten Oaks Group for deferred proceeds in the form of contingent consideration that entitles the Company to up to 15% of future sales proceeds upon the exit of the business by the acquirer, subject to limitations and certain adjustments.  Due to then current and forecasted losses of the business combined with uncertain market conditions, the Company did not assign any value to the contingent consideration arrangement. As a result, the Company recognized a loss of $27,671,000 within restructuring and other expense, net during fiscal 2021.  The Company retained the three real property locations (one in each of Breman and Wooster, Ohio, and one in Tulsa, Oklahoma).  In conjunction with the sale, the Company executed operating lease agreements with the buyer for the Breman and Tulsa locations.  These assets are being marketed for sale and have been classified as assets held for sale in our consolidated balance sheet as of May 31, 2021.

 

65


 

During the third quarter of fiscal 2021, we recognized a $181,000 gain from the auction of certain assets related to the fabricated products facility in Stow, Ohio within restructuring and other expense, net.

 

 

On March 12, 2021, the Company sold its Structural Composites Industries, LLC business located in Pomona, California to Luxfer Holdings PLC. The Company received net proceeds of $19,059,000 resulting in a pre-tax loss of $7,219,000 within restructuring and other expense, net.

 

 

On May 31, 2021, the Company sold its LPG fuel storage business, located in Poland, to Westport Fuel Systems, Inc. The Company received total consideration of approximately $6,000,000, resulting in a pre-tax loss of $11,034,000 within restructuring and other expense, net.

 

The total liability as of May 31, 2021 is expected to be paid in the immediately following twelve months.

A progression of the liabilities associated with our restructuring activities, combined with a reconciliation to the restructuring and other expense, net financial statement caption in our consolidated statement of earnings for fiscal 2020, is summarized below:

 

 

 

Beginning

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending

 

(in thousands)

 

Balance

 

 

Expense

 

 

Payments

 

 

Adjustments

 

 

Balance

 

Early retirement and severance

 

$

774

 

 

$

9,096

 

 

$

(3,245

)

 

$

(89

)

 

$

6,536

 

Facility exit and other costs

 

 

2

 

 

 

829

 

 

 

(730

)

 

 

55

 

 

 

156

 

 

 

$

776

 

 

 

9,925

 

 

$

(3,975

)

 

$

(34

)

 

$

6,692

 

Net loss on sale of assets

 

 

 

 

 

 

123

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and other income, net

 

 

 

 

 

$

10,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During fiscal 2020, the following actions were taken related to the Company’s restructuring activities:

 

 

In July 2019, our Pressure Cylinders segment completed the sale of its cryogenics business in Turkey, the net assets of which had been previously classified as assets held for sale. In connection with the sale, the Company realized net cash proceeds of $8,295,000 and recognized a net loss of $481,000.

 

 

In November 2019, the Company contributed substantially all of the net assets of the Engineered Cabs business to the then newly-formed Cabs joint venture. In connection with the transaction, the Company recognized a net gain of $50,000. In fiscal 2020, final closing adjustments resulted in the recognition of an additional net gain of $208,000.  Subsequent to closing the transaction, the Company sold some assets of the retained fabricated products business in Stow, Ohio for a net gain of $100,000 and recognized facility exit costs of $103,000.

 

 

In February 2020, the Company announced the closure of the Hermosillo, Mexico facility and an office in Sonata, Mexico, both operated by the Company’s consolidated joint venture, TWB within our Steel Processing segment.  In connection with the closures, and a reduction in personnel at Puebla, Mexico, the Company recognized severance expense of $620,000.

 

 

In February 2020, the Company’s WSP joint venture within our Steel Processing segment committed to plans to close and sell the assets of its Canton, Michigan facility. In connection with the sale, the Company recognized severance expense of $450,000.

 

 

In the third quarter of fiscal 2020, the Company announced a plan, within our Pressure Cylinders segment, to consolidate its oil & gas equipment operations in Wooster, Ohio into its existing facility in Bremen, Ohio.  In connection with the consolidation, the Company recognized $2,313,000 in severance expense and $522,000 in facility exit costs.

66


 

 

In the fourth quarter of fiscal 2020, the Company recognized severance expense of $2,175,000 in our Steel Processing segment, $2,296,000 in our Pressure Cylinders segment and $873,000 in Other in connection with the reduction in workforce related to the impact of COVID-19.

 

 

In the fourth quarter of fiscal 2020, the Company committed to plans to close the packaging solutions business served through the facility in Greensburg, Indiana.  In connection with the closure, the Company recognized $166,000 in severance expenses.

 

 

In connection with other non-significant restructuring activities, the Company recognized severance expense of $203,000 within our Steel Processing segment and facility exit costs of $204,000, of which $151,000 were within our Pressure Cylinders segment and $53,000 within our Steel Processing segment.

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.

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 its 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.  In connection with this matter, we recorded a $13,000,000 charge to cost of goods sold during the third quarter of fiscal 2019 to reflect our estimated costs of the replacement program.  During the third quarter of fiscal 2020, a favorable adjustment of $2,265,000 was recorded related to lower than expected freight costs. As of May 31, 2021, the Company has a reserve of $4,878,000 for estimated remaining direct costs related to the replacement program, which are expected to be paid in the next twelve months.  The actual costs incurred by the Company related to this matter may vary from the initial estimate.

A progression of the liabilities recorded in connection with this matter during fiscal 2021 is summarized in the following table:

 

(in thousands)

Beginning

Balance

 

 

Expense

 

 

Payments

 

 

Adjustments

 

 

Ending

Balance

 

Tank replacement costs

$

4,964

 

 

$

-

 

 

$

(86

)

 

$

-

 

 

$

4,878

 

 

We believe these liabilities are sufficient to absorb our remaining direct costs related to the replacement program, which are expected to be paid in the next twelve months.  

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.  However, as of May 31, 2021, we were party to an operating lease for an aircraft in which we have guaranteed a residual value at the termination of the lease.  The maximum obligation under the terms of this guarantee was approximately $19,553,000 at May 31, 2021.  Based on current facts and circumstances, we have estimated the likelihood of payment pursuant to this guarantee is not probable and, therefore, no amounts have been recognized in our consolidated financial statements.

We also had in place $17,350,000 of outstanding stand-by letters of credit issued to third-party service providers at May 31, 2021.  The fair value of these guarantee instruments, based on premiums paid, was not material and no amounts were drawn against them at May 31, 2021.

67


Note I – Debt and Receivables Securitization

The following table summarizes our long-term debt and short-term borrowings outstanding at May 31, 2021 and 2020:

 

(in thousands)

2021

 

2020

 

1.56% Series A senior notes due August 23, 2031

 

44,871

 

 

40,750

 

1.90% Series B senior notes due August 23, 2034

 

67,245

 

 

61,071

 

4.30% senior notes due August 1, 2032

 

200,000

 

 

200,000

 

4.55% senior notes due April 15, 2026

 

250,000

 

 

250,000

 

4.60% senior notes due August 10, 2024

 

150,000

 

 

150,000

 

Other

 

1,363

 

 

1,239

 

Total debt

 

713,479

 

 

703,060

 

Unamortized discount and debt issuance costs

 

(2,990

)

 

(3,395

)

Total debt, net

 

710,489

 

 

699,665

 

Less: current maturities and short-term borrowings

 

458

 

 

149

 

Total long-term debt

$

710,031

 

$

699,516

 

 

Maturities of long-term debt in the next five fiscal years, and the remaining years thereafter, are as follows:

 

(in thousands)

 

 

 

 

2022

 

$

458

 

2023

 

 

302

 

2024

 

 

302

 

2025

 

 

150,302

 

2026

 

 

-

 

Thereafter

 

 

562,115

 

Total

 

$

713,479

 

 

Long-Term Debt

On August 23, 2019, two of our European subsidiaries issued a €36,700,000 principal amount unsecured 1.56% Series A Senior Note due August 23, 2031 (the “Series A Senior Note”) and €55,000,000 aggregate principal amount of unsecured 1.90% Series B Senior Notes due August 23, 2034 (the “Series B Senior Notes”).  The Series A Senior Note is to be repaid in the principal amount of €30,000,000, together with accrued interest, on August 23, 2029, with the remaining €6,700,000 principal amount payable on August 23, 2031, together with accrued interest.  The Series B Senior Notes are to be repaid in the aggregate principal amount of €23,300,000, together with accrued interest, on August 23, 2031, with the remaining €31,700,000 aggregate principal amount payable on August 23, 2034, together with accrued interest.  Debt issuance costs of $134,000 were incurred in connection with the issuance of the Senior Notes and have been recorded on the consolidated balance sheets within long-term debt as a contra-liability.  They will continue to be amortized, through interest expense, in our consolidated statements of earnings over the term of the respective Senior Notes.  The unamortized portion of the debt issuance costs was $116,000 at May 31, 2021.

The Senior Notes were issued in a private placement and the proceeds thereof were used in the redemption of $150,000,000 aggregate principal amount of unsecured 6.50% senior notes that were set to mature on April 15, 2020 (the “2020 Notes”).  The 2020 Notes were redeemed in full on August 30, 2019.  In connection with the early redemption, the Company recognized a loss on extinguishment of debt of $4,034,000, which was presented separately in our consolidated statement of earnings for fiscal 2020.

On July 28, 2017, we issued $200,000,000 aggregate principal amount of senior unsecured notes due August 1, 2032 (the “2032 Notes”).  The 2032 Notes bear interest at a rate of 4.300%.  The 2032 Notes were sold to the public at 99.901% of the principal amount thereof, to yield 4.309% to maturity.  We used a portion of the net proceeds from the offering to repay amounts then outstanding under our multi-year revolving credit facility and amounts then outstanding under our revolving trade accounts receivable securitization facility, both of which are described in more detail below.  We entered into an interest rate swap in June 2017, in anticipation of the issuance of the 2032 Notes.  The interest rate swap had a notional amount of $150,000,000 to hedge the risk of changes in the semi-annual interest

68


rate payments attributable to changes in the benchmark interest rate during the several days leading up to the issuance of the 2032 Notes.  Upon pricing of the 2032 Notes, the derivative instrument was settled resulting in a gain of approximately $3,098,000, which was reflected in AOCI.  Approximately $2,116,000 and $198,000 were allocated to debt issuance costs and the debt discount, respectively.  The debt issuance costs and the debt discount have been recorded on the consolidated balance sheets within long-term debt as a contra-liability.  Each will continue to be amortized, through interest expense, in our consolidated statements of earnings over the term of the 2032 Notes.  The unamortized portions of the debt issuance costs and the debt discount were $1,575,000 and $147,000, respectively, at May 31, 2021 and $1,717,000 and $161,000, respectively, at May 31, 2020.

On April 15, 2014, we issued $250,000,000 aggregate principal amount of unsecured senior notes due on April 15, 2026 (the “2026 Notes”).  The 2026 Notes bear interest at a rate of 4.55%.  The 2026 Notes were sold to the public at 99.789% of the principal amount thereof, to yield 4.573% to maturity.  We used a portion of the net proceeds from the offering to repay borrowings then outstanding under our revolving credit facility.  Approximately $3,081,000, $2,279,000 and $528,000 were allocated to the settlement of a derivative contract entered into in anticipation of the issuance of the 2026 Notes, debt issuance costs, and the debt discount, respectively.  The debt issuance costs and the debt discount have been recorded on the consolidated balance sheets within long-term debt as a contra-liability, and the loss on the derivative contract recorded within AOCI.  Each will continue to be amortized, through interest expense, in our consolidated statements of earnings over the term of the 2026 Notes.  The unamortized portions of the debt issuance costs and the debt discount were $918,000 and $212,000, respectively, at May 31, 2021 and $1,108,000 and $256,000, respectively, at May 31, 2020.

On August 10, 2012, we issued $150,000,000 aggregate principal amount of unsecured senior notes due August 10, 2024 (the “2024 Notes”).  The 2024 Notes bear interest at a rate of 4.60%.  The net proceeds from this issuance were used to repay a portion of the then outstanding borrowings under our revolving credit facilities.  Approximately $80,000 of the aggregate proceeds were allocated to debt issuance costs.  The unamortized portion of the debt issuance costs was $21,000 and $28,000 at May 31, 2021 and 2020, respectively.

Other Financing Arrangements

During fiscal 2021, fiscal 2020, and fiscal 2019, we maintained a revolving trade accounts receivable securitization facility (the “AR Facility”).  On July 22, 2020, the Company elected to terminate the AR Facility. Facility fees of $5,500, $132,000 and $202,000 were recognized within interest expense during fiscal 2021, fiscal 2020 and fiscal 2019, respectively.  

We maintain a $500,000,000 multi-year revolving credit facility (the “Credit Facility”) with a group of lenders that matures in February 2023. Debt issuance costs of $805,000 were incurred as a result of the renewal.  These costs have been deferred and are being amortized over the life of the Credit Facility to interest expense.  Borrowings under the Credit Facility have maturities of up to one year.  We have the option to borrow at rates equal to an applicable margin over the LIBOR, Prime rate or Overnight Bank Funding rate.  The applicable margin is determined by our credit rating.  There were no borrowings outstanding under the Credit Facility at May 31, 2021.  As discussed in “Note G – Guarantees,” we provided $17,350,000 in letters of credit for third-party beneficiaries as of May 31, 2021.  None of these letters of credit were issued against availability under the Credit Facility, leaving $500,000,000 available at May 31, 2021.

Note J – Comprehensive Income (Loss)

Other Comprehensive Income (Loss):  The following table summarizes the tax effects of each component of other comprehensive income (loss) for the fiscal years ended May 31:

 

 

2021

 

 

2020

 

 

2019

 

(in thousands)

Before-

Tax

 

 

Tax

 

 

Net-of-

Tax

 

 

Before-

Tax

 

 

Tax

 

 

Net-of-

Tax

 

 

Before

-Tax

 

 

Tax

 

 

Net-of-

Tax

 

Foreign currency translation

$

9,958

 

 

 

963

 

 

$

10,921

 

 

$

10,480

 

 

 

17

 

 

$

10,497

 

 

$

(14,772

)

 

$

-

 

 

$

(14,772

)

Pension liability adjustment

 

7,684

 

 

 

(1,753

)

 

 

5,931

 

 

 

(5,395

)

 

 

1,365

 

 

 

(4,030

)

 

 

(2,203

)

 

 

418

 

 

 

(1,785

)

Cash flow hedges

 

83,434

 

 

 

(19,682

)

 

 

63,752

 

 

 

2,339

 

 

 

(559

)

 

 

1,780

 

 

 

(16,227

)

 

 

3,780

 

 

 

(12,447

)

Other comprehensive income (loss)

$

101,076

 

 

$

(20,472

)

 

$

80,604

 

 

$

7,424

 

 

$

823

 

 

$

8,247

 

 

$

(33,202

)

 

$

4,198

 

 

$

(29,004

)

 

69


 

Accumulated Other Comprehensive Income (Loss):  The components of the changes in accumulated other comprehensive income (loss) for the fiscal years ended May 31, 2021 and May 31, 2020 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Foreign

 

 

Pension

 

 

Cash

 

 

Other

 

 

 

Currency

 

 

Liability

 

 

Flow

 

 

Comprehensive

 

(in thousands)

 

Translation

 

 

Adjustment

 

 

Hedges

 

 

Income (Loss)

 

Balance at May 31, 2019

 

$

(19,639

)

 

$

(17,856

)

 

$

(5,969

)

 

$

(43,464

)

Other comprehensive income (loss) before reclassifications

 

 

10,480

 

 

 

(5,948

)

 

 

(9,497

)

 

 

(4,965

)

Reclassification adjustments to income (a)

 

 

-

 

 

 

553

 

 

 

11,836

 

 

 

12,389

 

Income tax effect

 

 

17

 

 

 

1,365

 

 

 

(559

)

 

 

823

 

Balance at May 31, 2020

 

$

(9,142

)

 

$

(21,886

)

 

$

(4,189

)

 

$

(35,217

)

Other comprehensive income before reclassifications

 

 

9,958

 

 

 

6,909

 

 

 

93,415

 

 

 

110,282

 

Reclassification adjustments to income (a)

 

 

-

 

 

775

 

 

 

(9,981

)

 

 

(9,206

)

Income tax effect

 

 

963

 

 

 

(1,753

)

 

 

(19,682

)

 

 

(20,472

)

Balance at May 31, 2021

 

$

1,779

 

 

$

(15,955

)

 

$

59,563

 

 

$

45,387

 

 

 

(a)

The statement of earnings classification of amounts reclassified to income include

 

(1)

Pension liability adjustment – disclosed in “Note M – Employee Pension Plans”.

 

(2)

Cash flow hedges – disclosed in “Note R – Derivative Instruments and Hedging Activities”.

The estimated net amount of the gains in AOCI at May 31, 2021 expected to be reclassified into net earnings within the succeeding twelve months is $58,732,000 (net of tax of $18,169,000).  This amount was computed using the fair value of the cash flow hedges at May 31, 2021 and will change before actual reclassification from other comprehensive income to net earnings during fiscal 2021.

Note K – Equity

Preferred Shares:  The Worthington Industries, Inc. Amended Articles of Incorporation authorize two classes of preferred shares and their relative voting rights.  The Board of Directors of Worthington Industries, Inc. is empowered to determine the issue prices, dividend rates, amounts payable upon liquidation and other terms of the preferred shares when issued.  No preferred shares are issued or outstanding.

Common Shares:  On September 27, 2017, the Board of Directors of Worthington Industries, Inc. (the “Worthington Industries Board”) authorized the repurchase of up to 6,828,855 outstanding common shares of Worthington Industries, Inc.  On March 20, 2019, the Worthington Industries Board authorized the repurchase of up to an additional 6,600,000 of the outstanding common shares of Worthington Industries, Inc.  On March 24, 2021, the Worthington Industries Board authorized the repurchase of up to an additional 5,618,464 outstanding common shares of Worthington Industries, Inc., increasing the then total number of common shares available for repurchase to 10,000,000.  These common shares 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.  The total number of common shares available for repurchase at May 31, 2021 was 9,300,000.

70


During fiscal 2021, fiscal 2020 and fiscal 2019, we repurchased 4,018,464, 1,300,000 and 4,100,000 common shares, respectively, having an aggregate cost of $192,054,000, $50,972,000 and $168,113,000, respectively.

On October 1, 2014, Worthington Industries, Inc. amended its non-qualified deferred compensation plans for employees to require that any portion of a participant’s current account credited to the theoretical common share option, which reflects the fair value of the common shares of Worthington Industries, Inc. with dividends reinvested, and any new contributions credited to the theoretical common share option remain credited to the theoretical common share option until distributed.  For amounts credited to the theoretical common share option, payouts are required to be made in the form of whole common shares of Worthington Industries, Inc. and cash in lieu of fractional common shares.  As a result, we account for the deferred compensation obligation credited to the theoretical common share option within equity.  The amounts recorded in equity totaled $556,000, $547,000 and $680,000 at May 31, 2021, 2020 and 2019, respectively.  Prior to October 1, 2014, participant accounts credited to the theoretical common share option were settled in cash and classified as a liability in the Company’s consolidated balance sheets.

 

Note L – Stock-Based Compensation

Under our employee and non-employee director stock-based compensation plans (the “Plans”), we may grant incentive or non-qualified stock options, restricted common shares and performance shares to employees and non-qualified stock options and restricted common shares to non-employee directors.  We classify share-based compensation expense within SG&A expense to correspond with the same financial statement caption as the majority of the cash compensation paid to employees.  A total of 2,109,134 of Worthington Industries, Inc. common shares were authorized and available for issuance in connection with the Plans in place at May 31, 2021.

We recognized pre-tax stock-based compensation expense of $19,129,000 ($14,729,000 after-tax), $11,883,000 ($9,150,000 after-tax), and $11,733,000 ($9,034,000 after-tax) under the Plans during fiscal 2021, fiscal 2020 and fiscal 2019, respectively.  At May 31, 2021, the total unrecognized compensation cost related to non-vested awards was $17,525,000, which will be expensed over the next three fiscal years.

Non-Qualified Stock Options

Stock options may be granted to purchase common shares at not less than 100% of the fair market value of the underlying common shares on the date of the grant.  All outstanding stock options are non-qualified stock options.  The exercise price of all stock options granted has been set at 100% of the fair market value of the underlying common shares on the date of grant.  Generally, stock options granted to employees vest and become exercisable at the rate of (i) 20% per year for options granted before June 30, 2011, and (ii) 33% per year for options granted on or after June 30, 2011, in each case beginning one year from the date of grant, and expire ten years after the date of grant.  Non-qualified stock options granted to non-employee directors vest and become exercisable on the earlier of (a) the first anniversary of the date of grant or (b) the date on which the next annual meeting of shareholders of Worthington Industries, Inc. is held following the date of grant for any stock option granted as of the date of an annual meeting of shareholders of Worthington Industries, Inc.  Stock options can be exercised through net-settlement, at the election of the option holder.

U.S. GAAP requires that all share-based awards be recorded as expense in the statement of earnings based on their grant-date fair value.  We calculate the fair value of our non-qualified stock options using the Black-Scholes option pricing model and certain assumptions.  The computation of fair values for all stock options incorporates the following assumptions: expected volatility (based on the historical volatility of Worthington Industries, Inc. common shares); risk-free interest rate (based on the U.S. Treasury strip rate for the expected term of the stock options); expected term (based on historical exercise experience); and dividend yield (based on annualized current dividends and an average quoted price of Worthington Industries, Inc. common shares over the preceding annual period).

The table below sets forth the non-qualified stock options granted during each of the last three fiscal years.  For each grant, the exercise price was equal to the closing market price of the underlying common shares at the respective grant date.  The fair values of these stock options were based on the Black-Scholes option pricing model, calculated at the respective grant dates.  The calculated pre-tax stock-based compensation expense for these stock options, will be recognized on a straight-line basis over the respective vesting periods of the stock options.

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

 

2019

 

Granted

 

 

116

 

 

 

101

 

 

 

96

 

Weighted average exercise price, per share

 

$

36.93

 

 

$

38.91

 

 

$

42.86

 

Weighted average grant date fair value, per share

 

$

10.43

 

 

$

10.21

 

 

$

12.54

 

Pre-tax stock-based compensation

 

$

1,213

 

 

$

1,029

 

 

$

1,199

 

 

71


The weighted average fair value of stock options granted in fiscal 2021, fiscal 2020 and fiscal 2019 was based on the following weighted average assumptions:

 

 

 

2021

 

 

2020

 

 

2019

 

Assumptions used:

 

 

 

 

 

 

 

 

 

 

 

 

Dividend yield

 

 

2.94

%

 

 

2.42

%

 

 

2.02

%

Expected volatility

 

 

40.82

%

 

 

33.10

%

 

 

33.09

%

Risk-free interest rate

 

 

0.43

%

 

 

1.86

%

 

 

2.79

%

Expected life (years)

 

 

6.0

 

 

 

6.0

 

 

 

6.0

 

 

The following tables summarize our stock option activity for the years ended May 31:

 

 

 

2021

 

 

2020

 

 

2019

 

(in thousands, except per share amounts)

 

Stock

Options

 

 

Weighted

Average

Exercise

Price

 

 

Stock

Options

 

 

Weighted

Average

Exercise

Price

 

 

Stock

Options

 

 

Weighted

Average

Exercise

Price

 

Outstanding, beginning of year

 

 

1,352

 

 

$

27.34

 

 

 

1,555

 

 

$

24.01

 

 

 

2,019

 

 

$

22.26

 

Granted

 

 

116

 

 

 

36.93

 

 

 

101

 

 

 

38.91

 

 

 

96

 

 

 

42.86

 

Exercised

 

 

(854

)

 

 

22.16

 

 

 

(303

)

 

 

13.99

 

 

 

(506

)

 

 

18.45

 

Forfeited

 

 

(12

)

 

 

31.52

 

 

 

(1

)

 

 

43.04

 

 

 

(54

)

 

 

44.31

 

Outstanding, end of year

 

 

602

 

 

 

36.44

 

 

 

1,352

 

 

 

27.34

 

 

 

1,555

 

 

 

24.01

 

Exercisable at end of year

 

 

389

 

 

 

35.55

 

 

 

1,167

 

 

 

25.34

 

 

 

1,397

 

 

 

21.96

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Number of

 

 

Remaining

 

 

Aggregate

 

 

 

Stock

 

 

Contractual

 

 

Intrinsic

 

 

 

Options

 

 

Life

 

 

Value

 

 

 

(in thousands)

 

 

(in years)

 

 

(in thousands)

 

May 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding

 

 

602

 

 

 

5.61

 

 

$

18,037

 

Exercisable

 

 

389

 

 

 

4.15

 

 

$

12,415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding

 

 

1,352

 

 

 

3.21

 

 

$

8,846

 

Exercisable

 

 

1,167

 

 

 

2.44

 

 

$

8,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding

 

 

1,555

 

 

 

3.15

 

 

$

18,728

 

Exercisable

 

 

1,397

 

 

 

2.62

 

 

$

18,728

 

72


The total intrinsic value of stock options exercised during fiscal 2021 was $14,934,000.  The total amount of cash received from the exercise of stock options during fiscal 2021 was $12,102,000, and the related excess tax benefit realized from share-based payment awards was $4,261,000.

The following table summarizes information about non-vested stock option awards for the year ended May 31, 2021:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

Number of

 

 

Grant Date

 

 

 

Stock Options

 

 

Fair Value

 

 

 

(in thousands)

 

 

Per Share

 

Non-vested, beginning of year

 

 

185

 

 

$

11.06

 

Granted

 

 

116

 

 

 

10.43

 

Vested

 

 

(76

)

 

 

12.50

 

Forfeited

 

 

(12

)

 

 

9.58

 

Non-vested, end of year

 

 

213

 

 

$

10.29

 

 

Service-Based Restricted Common Shares

We have awarded restricted common shares to certain employees and non-employee directors that contain service-based vesting conditions.  Service-based restricted common shares granted to employees cliff vest generally three years from the date of grant.  Service-based restricted common shares granted to non-employee directors vest under the same parameters as discussed above with respect to non-qualified stock option grants.  All service-based restricted common shares are valued at the closing market price of the Worthington Industries, Inc. common shares on the date of the grant.

The table below sets forth the service-based restricted common shares we granted during each of fiscal 2021, fiscal 2020 and fiscal 2019.  The calculated pre-tax stock-based compensation expense for these restricted common shares will be recognized on a straight-line basis over their respective service periods.

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

 

2019

 

Granted

 

 

307

 

 

 

247

 

 

 

339

 

Weighted average grant date fair value, per share

 

$

38.99

 

 

$

37.50

 

 

$

43.35

 

Pre-tax stock-based compensation

 

$

11,985

 

 

$

9,258

 

 

$

14,692

 

 

73


The following tables summarize the activity for service-based restricted common shares for the years ended May 31:

 

 

 

2021

 

 

2020

 

 

2019

 

(in thousands, except per share amounts)

 

Restricted

Common

Shares

 

 

Weighted

Average

Grant

Date Fair

Value

 

 

Restricted

Common

Shares

 

 

Weighted

Average

Grant

Date Fair

Value

 

 

Restricted

Common

Shares

 

 

Weighted

Average

Grant

Date Fair

Value

 

Outstanding, beginning of year

 

 

643

 

 

$

41.79

 

 

 

811

 

 

$

43.25

 

 

 

796

 

 

$

40.80

 

Granted

 

 

307

 

 

 

38.99

 

 

 

247

 

 

 

37.50

 

 

 

339

 

 

 

43.35

 

Vested

 

 

(146

)

 

43.41

 

 

 

(395

)

 

 

42.00

 

 

 

(229

)

 

 

34.63

 

Forfeited

 

 

(27

)

 

42.15

 

 

 

(20

)

 

 

44.10

 

 

 

(95

)

 

 

43.83

 

Outstanding, end of year

 

 

777

 

 

 

40.36

 

 

 

643

 

 

 

41.79

 

 

 

811

 

 

 

43.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average remaining contractual life of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   outstanding restricted common shares (in years)

 

 

1.33

 

 

 

 

 

 

 

1.55

 

 

 

 

 

 

 

1.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate intrinsic value of outstanding restricted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   common shares

 

$

51,541

 

 

 

 

 

 

$

19,230

 

 

 

 

 

 

$

27,681

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate intrinsic value of restricted common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   shares vested during the year

 

$

5,873

 

 

 

 

 

 

$

15,322

 

 

 

 

 

 

$

10,388

 

 

 

 

 

 

Market-Based Restricted Common Shares

On June 24, 2014, we granted an aggregate of 50,000 market-based restricted common shares to two key employees under one of the Plans.  Vesting of these restricted common share awards was to be contingent upon the price of the Worthington Industries, Inc. common shares reaching $60.00 per share and remaining at or above that price for 30 consecutive days during the five-year period following the date of grant and the completion of a five-year service vesting period.  The grant-date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $32.06 per share.  The following assumptions were used to determine the grant-date fair value and the derived service period for these market-based restricted common shares:

 

Dividend yield

 

 

1.60

%

Expected volatility

 

 

44.00

%

Risk-free interest rate

 

 

1.70

%

 

The calculated pre-tax stock-based compensation expense was determined to be $1,603,000.  In fiscal 2016, 25,000 of these restricted common shares were forfeited.  On September 26, 2018, the remaining market-based restricted common share award was modified to extend the vesting period by one year, to June 24, 2020.  The incremental fair value as of the modification date was $261,000 and was recognized on a straight-line basis over the remaining term.  The conditions required for vesting of these remaining market-based restricted common shares was not met by June 24, 2020 and they were subsequently forfeited.

On September 28, 2018, we granted an aggregate 225,000 market-based restricted common shares to two key employees under one of the Plans.  Vesting of these restricted common share awards is contingent upon the price of our common shares reaching $65.00 per share and remaining at or above that price for 90 consecutive days during the five-year period following the date of grant and the completion of a five-year service vesting period.  The grant-date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $23.38 per share.  The following assumptions were used to determine the grant-date fair value and the derived service period for these restricted common shares:

 

Dividend yield

 

 

2.16

%

Expected volatility

 

 

33.60

%

Risk-free interest rate

 

 

2.96

%

 

74


The calculated pre-tax stock-based compensation expense for these restricted common shares is $5,261,000 and will be recognized on a straight-line basis over the five-year service vesting period, net of any forfeitures.

 

On September 25, 2019, we granted an aggregate of 50,000 market-based restricted common shares to one key employee under one of the Plans. Vesting of these restricted common share awards is contingent upon the price of our common shares reaching $65.00 per share and remaining at or above that price for 90 consecutive days during the five-year period following the date of grant and the completion of a five-year service vesting period. The grant-date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $14.31 per share. The following assumptions were used to determine the grant-date fair value and the derived service period for these restricted common shares:

 

Dividend yield

 

 

2.69

%

Expected volatility

 

 

34.90

%

Risk-free interest rate

 

 

1.60

%

 

On June 25, 2020, we granted an aggregate of 45,000 restricted common shares to three key employees under one of the Plans. Vesting of these restricted common share awards is contingent upon the price of our common shares reaching $65.00 per share within a five-year period from the grant and remaining at or above that price for 90 consecutive days and the 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 $20.87 per share. The following assumptions were used to determine the grant-date fair value and the derived service period for these restricted common shares:

 

Dividend yield

 

 

2.71

%

Expected volatility

 

 

41.50

%

Risk-free interest rate

 

 

0.32

%

 

Performance Shares

We have awarded performance shares to certain key employees that are contingent (i.e., vest) based upon 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, business unit operating income targets for the three-year periods ended or ending May 31, 2021, 2022 and 2023. 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 value of performance shares is determined by the closing market prices of the underlying common shares at their respective grant dates 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.

The table below sets forth the performance shares we granted (at target levels) during fiscal 2021, fiscal 2020 and fiscal 2019:

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

 

2019

 

Granted

 

 

64

 

 

 

55

 

 

 

43

 

Weighted average grant date fair value, per share

 

$

36.93

 

 

$

38.91

 

 

$

42.91

 

Pre-tax stock-based compensation

 

$

2,362

 

 

$

2,159

 

 

$

1,854

 

 

Note M – Employee Pension Plans

We provide retirement benefits to employees mainly through defined contribution retirement plans.  Eligible participants make pre-tax contributions based on elected percentages of eligible compensation, subject to annual addition and other limitations imposed by the Internal Revenue Code and the various plans’ provisions.  Company contributions consist of employer company matching contributions, annual or monthly employer contributions and discretionary contributions, based on individual plan provisions.

We also have one defined benefit plan, The Gerstenslager Company Bargaining Unit Employees’ Pension Plan (the “Gerstenslager Plan” or “defined benefit plan”).  The Gerstenslager Plan is a non‑contributory pension plan,

75


which covers certain employees based on age and length of service.  Our contributions have complied with ERISA's minimum funding requirements.  Effective May 9, 2011, in connection with the formation of the ArtiFlex joint venture, the Gerstenslager Plan was frozen, which qualified as a curtailment under the applicable accounting guidance.  We did not recognize a gain or loss in connection with the curtailment of the Gerstenslager Plan.  During fiscal 2019, the Gerstenslager Plan was amended to allow certain inactive participants to take a lump sum settlement.

The following table summarizes the components of net periodic pension cost for the Gerstenslager Plan and the defined contribution plans for the years ended May 31:

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Defined benefit plan:

 

 

 

 

 

 

 

 

 

 

 

 

Interest cost

 

$

1,205

 

 

$

1,352

 

 

$

1,503

 

Return on plan assets

 

 

(4,289

)

 

 

(1,928

)

 

 

(532

)

Net amortization and deferral costs

 

 

3,058

 

 

 

628

 

 

 

(918

)

Net periodic pension cost (benefit) on defined benefit plan

 

 

(26

)

 

 

52

 

 

 

53

 

Settlement cost

 

 

18

 

 

 

-

 

 

 

760

 

Defined contribution plans

 

 

17,562

 

 

 

16,495

 

 

 

16,308

 

Total retirement plan cost

 

$

17,554

 

 

$

16,547

 

 

$

17,121

 

 

The following actuarial assumptions were used for the Gerstenslager Plan:

 

 

 

2021

 

 

2020

 

 

2019

 

To determine benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

 

2.90

%

 

 

2.65

%

 

 

3.57

%

To determine net periodic pension cost:

 

 

 

 

 

 

 

 

 

 

 

 

Discount rate

 

 

2.65

%

 

 

3.57

%

 

 

4.02

%

Expected long-term rate of return

 

 

7.00

%

 

 

7.00

%

 

 

7.00

%

 

To calculate the discount rate, we used the expected cash flows of the benefit payments and the FTSE Pension Index (formerly Citigroup).  The Gerstenslager Plan’s expected long-term rate of return in fiscal 2021, fiscal 2020 and fiscal 2019 was based on the actual historical returns adjusted for a change in the frequency of lump-sum settlements upon retirement.  In determining our benefit obligation, we use the actuarial present value of the vested benefits to which each eligible employee is currently entitled, based on the employee’s expected date of separation or retirement.

76


The following tables provide a reconciliation of the changes in the projected benefit obligation and the fair value of plan assets and the funded status of the Gerstenslager Plan as of, and for the fiscal years ended May 31:

 

(in thousands)

 

2021

 

 

2020

 

Change in benefit obligation

 

 

 

 

 

 

 

 

Benefit obligation, beginning of year

 

$

46,167

 

 

$

38,519

 

Interest cost

 

 

1,205

 

 

 

1,352

 

Actuarial (gain) loss

 

 

(4,814

)

 

 

7,671

 

Benefits paid

 

 

(1,345

)

 

 

(1,375

)

Settlements

 

 

(18

)

 

 

-

 

Benefits obligation, end of year

 

$

41,195

 

 

$

46,167

 

 

 

 

 

 

 

 

 

 

Change in plan assets

 

 

 

 

 

 

 

 

Fair value, beginning of year

 

$

28,510

 

 

$

26,258

 

Return on plan assets

 

 

4,289

 

 

 

1,928

 

Company contributions

 

 

1,700

 

 

 

1,699

 

Benefits paid

 

 

(1,345

)

 

 

(1,375

)

Settlements

 

 

(18

)

 

 

-

 

Fair value, end of year

 

 

33,136

 

 

 

28,510

 

Funded status

 

$

(8,059

)

 

$

(17,657

)

 

 

 

 

 

 

 

 

 

Amounts recognized in the consolidated balance sheets consist of:

 

 

 

 

 

 

 

 

Other liabilities

 

$

(8,059

)

 

$

(17,657

)

Accumulated other comprehensive loss

 

 

17,541

 

 

 

25,413

 

 

 

 

 

 

 

 

 

 

Amounts recognized in accumulated other comprehensive loss consist of:

 

 

 

 

 

 

 

 

Net loss

 

 

17,541

 

 

 

25,413

 

Total

 

$

17,541

 

 

$

25,413

 

 

The following table shows other changes in plan assets and benefit obligations recognized in OCI during the fiscal years ended May 31:

 

(in thousands)

 

2021

 

 

2020

 

Net gain (loss)

 

$

7,097

 

 

$

(7,596

)

Amortization of net loss

 

 

775

 

 

 

553

 

Total recognized in other comprehensive income (loss)

 

$

7,872

 

 

$

(7,043

)

Total recognized in net periodic benefit cost and other comprehensive income (loss)

 

$

(7,898

)

 

$

7,095

 

 

The estimated net loss for the defined benefit plan that will be amortized from AOCI into net periodic pension cost during fiscal 2021 is $545,609.

 

Pension plan assets are required to be disclosed at fair value in the consolidated financial statements.  Fair value is defined in “Note S – Fair Value Measurements.”  The pension plan assets’ fair value measurement level within

77


the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table sets forth, by level within the fair value hierarchy, a summary of the defined benefit plan’s assets measured at fair value on a recurring basis at May 31, 2021:

 

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

(in thousands)

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(level 3)

 

Investment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

1,664

 

 

$

1,664

 

 

$

-

 

 

$

-

 

Bond funds

 

 

12,629

 

 

 

12,629

 

 

 

-

 

 

 

-

 

Equity funds

 

 

16,022

 

 

 

16,022

 

 

 

-

 

 

 

-

 

Administrative funds

 

 

2,821

 

 

 

2,821

 

 

 

 

 

 

 

 

 

Total

 

$

33,136

 

 

$

33,136

 

 

$

-

 

 

$

-

 

 

The following table sets forth, by level within the fair value hierarchy, a summary of the defined benefit plan’s assets measured at fair value on a recurring basis at May 31, 2020:

 

 

 

 

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

(in thousands)

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(level 3)

 

Investment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

1,613

 

 

$

1,613

 

 

$

-

 

 

$

-

 

Bond funds

 

 

12,619

 

 

 

12,619

 

 

 

-

 

 

 

-

 

Equity funds

 

 

11,885

 

 

 

11,885

 

 

 

-

 

 

 

-

 

Administrative funds

 

 

2,393

 

 

 

2,393

 

 

 

 

 

 

 

 

 

Total

 

$

28,510

 

 

$

28,510

 

 

$

-

 

 

$

-

 

 

Plan assets for the defined benefit plan consisted principally of the following as of the respective measurement dates:

 

 

 

May 31,

 

 

May 31,

 

 

 

2021

 

 

2020

 

Asset category:

 

 

 

 

 

 

 

 

Equity securities

 

 

48

%

 

 

42

%

Debt securities

 

 

38

%

 

 

44

%

Other

 

 

14

%

 

 

14

%

Total

 

 

100

%

 

 

100

%

 

Equity securities include no employer stock.  The investment policy and strategy for the defined benefit plan is: (i) long-term in nature with liquidity requirements that are anticipated to be minimal due to the projected normal retirement date of the average employee and the current average age of participants;  (ii) to earn nominal returns, net of investment fees, equal to or in excess of the defined benefit plan’s liability growth rate; and (iii) to include a diversified asset allocation of domestic and international equities and fixed income investments.  We have already contributed $142,000 in fiscal 2022 and have 11 contributions planned for fiscal 2022 totaling $1,558,000.

78


The following estimated future benefits, which reflect expected future service, as appropriate, are expected to be paid under the defined benefit plan during the fiscal years noted:

 

(in thousands)

 

 

 

 

2022

 

$

1,466

 

2023

 

$

1,494

 

2024

 

$

1,531

 

2025

 

$

1,583

 

2026

 

$

1,666

 

2027-2031

 

$

9,872

 

 

Commercial law requires us to pay severance and service benefits to employees at our Austrian Pressure Cylinders location.  Severance benefits must be paid to all employees hired before December 31, 2002.  Employees hired after that date are covered under a governmental plan that requires us to pay benefits as a percentage of compensation (included in payroll tax withholdings).  Service benefits are based on a percentage of compensation and years of service.  The accrued liability for these unfunded plans was $7,062,000 and $6,863,000 at May 31, 2021 and 2020, respectively, and was included in other liabilities on the consolidated balance sheets.  Net periodic pension cost for these plans was $625,000, $494,000, and $925,000, for fiscal 2021, fiscal 2020 and fiscal 2019, respectively. The assumed salary rate increase was 2.75% for each of fiscal 2021, fiscal 2020 and fiscal 2019.  The discount rate at May 31, 2021, 2020 and 2019 was 1.10%, 1.65%, and 1.40%, respectively.  Each discount rate was based on a published corporate bond rate with a term approximating the estimated benefit payment cash flows and is consistent with European and Austrian regulations.

Note N – Income Taxes

Consistent with applicable Securities and Exchange Commission guidance in Staff Accounting Bulletin 118 (“SAB118”), the Company recognized a provisional income tax benefit of $38,200,000 related to the re-measurement of deferred tax assets and liabilities and a provisional income tax expense of $6,900,000 for the one-time mandatory deemed repatriation tax during fiscal 2018.  During fiscal 2019, the Company finalized the accounting for the TCJA and made no material adjustments to these provisional amounts.

Earnings before income taxes for the three fiscal years ended May 31 included the following components:

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

U.S. based operations

 

$

897,601

 

 

$

99,493

 

 

$

173,200

 

Non – U.S. based operations

 

 

20,116

 

 

 

11,293

 

 

 

33,256

 

Earnings before income taxes

 

 

917,717

 

 

 

110,786

 

 

 

206,456

 

Less: Net earnings attributable to noncontrolling interests*

 

 

17,655

 

 

 

5,648

 

 

 

9,818

 

Earnings before income taxes attributable to controlling interest

 

$

900,062

 

 

$

105,138

 

 

$

196,638

 

 

 

*

Net earnings attributable to noncontrolling interests are not taxable to Worthington.

79


Significant components of income tax expense (benefit) for the fiscal years ended May 31 were as follows:

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

160,903

 

 

$

20,739

 

 

$

15,454

 

State and local

 

 

6,018

 

 

 

1,713

 

 

 

2,309

 

Foreign

 

 

4,524

 

 

 

5,199

 

 

 

7,985

 

 

 

 

171,445

 

 

 

27,651

 

 

 

25,748

 

Deferred

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

6,668

 

 

 

(2,350

)

 

 

18,195

 

State and local

 

 

(391

)

 

 

732

 

 

 

1,621

 

Foreign

 

 

(1,455

)

 

 

309

 

 

 

(2,381

)

 

 

 

4,822

 

 

 

(1,309

)

 

 

17,435

 

 

 

$

176,267

 

 

$

26,342

 

 

$

43,183

 

 

    

A reconciliation of the federal statutory corporate income tax rate to total tax provision follows:

 

 

 

2021

 

 

2020

 

 

2019

 

Federal statutory corporate income tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State and local income taxes, net of federal tax benefit

 

 

0.8

 

 

 

2.4

 

 

 

2.1

 

Non-U.S. income taxes at other than federal statutory rate

 

 

(0.3

)

 

 

3.1

 

 

 

0.2

 

Excess benefit related to share-based payment awards

 

 

(0.5

)

 

 

(1.2

)

 

 

(1.4

)

Nondeductible executive compensation

 

 

0.6

 

 

 

1.1

 

 

 

0.6

 

Oil & Gas capital stock loss

 

 

(1.5

)

 

 

-

 

 

 

-

 

Other

 

 

(0.5

)

 

 

(1.3

)

 

 

(0.5

)

Effective tax rate attributable to controlling interest

 

 

19.6

%

 

 

25.1

%

 

 

22.0

%

 

 

The above effective tax rate attributable to controlling interest excludes any impact from the inclusion of net earnings attributable to noncontrolling interests in our consolidated statements of earnings. The effective tax rates upon inclusion of net earnings attributable to noncontrolling interests were 19.2%, 23.8% and 20.9% for fiscal 2021, fiscal 2020 and fiscal 2019, respectively. Net earnings attributable to noncontrolling interests are primarily a result of our WSP, Spartan, and TWB consolidated joint ventures. The earnings attributable to the noncontrolling interests in WSP, Spartan and TWB’s U.S. operations do not generate tax expense to Worthington since the investors in WSP, Spartan and TWB’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 tax expense.    

Under applicable accounting guidance, a tax benefit may be recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  Any tax benefits recognized in our financial statements from such a position were measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

The total amount of unrecognized tax benefits was $3,836,000, $1,718,000, and $1,621,000 as of May 31, 2021, 2020 and 2019, respectively.  As of May 31, 2021, the total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate attributable to controlling interest was $3,030,000.  Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken in a tax return, and the benefit recognized for accounting purposes.  Accrued amounts of interest and penalties related to unrecognized tax benefits are recognized as part of income tax expense within our consolidated statements of earnings.  As of May 31, 2021, 2020 and 2019, we had accrued liabilities of $12,000, $68,000 and $287,000, respectively, for interest and penalties related to unrecognized tax benefits.

80


A tabular reconciliation of unrecognized tax benefits follows:

 

(In thousands)

 

 

 

 

Balance at May 31, 2020

 

$

1,718

 

Decreases - tax positions taken in prior years

 

 

(1,445

)

Increases - current tax positions

 

 

3,730

 

Lapse of statutes of limitations

 

 

(167

)

Balance at May 31, 2021

 

$

3,836

 

 

Approximately $53,000 of the liability for unrecognized tax benefits is expected to be settled in the next twelve months due to the expiration of statutes of limitations in various tax jurisdictions and as a result of expected settlements with various tax jurisdictions. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months, any change is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.

The following is a summary of the tax years open to examination by major tax jurisdiction:

U.S. Federal –2018 and forward

U.S. State and Local –2017 and forward

Austria – 2016 and forward

Canada –2018 and forward

Mexico – 2015 and forward

Portugal – 2017 and forward

The components of our deferred tax assets and liabilities as of May 31 were as follows:

 

(in thousands)

 

2021

 

 

2020

 

Deferred tax assets

 

 

 

 

 

 

 

 

Accounts receivable

 

$

1,244

 

 

$

1,246

 

Inventories

 

 

4,946

 

 

 

5,554

 

Accrued expenses

 

 

24,714

 

 

 

21,214

 

Net operating loss carry forwards

 

 

9,907

 

 

 

11,732

 

Stock-based compensation

 

 

6,076

 

 

 

6,931

 

Derivative contracts

 

 

-

 

 

 

1,920

 

Operating lease - ROU liability

 

 

7,642

 

 

 

7,294

 

Other

 

 

2,309

 

 

 

3,549

 

Total deferred tax assets

 

 

56,838

 

 

 

59,440

 

Valuation allowance for deferred tax assets

 

 

(9,124

)

 

 

(11,178

)

Net deferred tax assets

 

 

47,714

 

 

 

48,262

 

Deferred tax liabilities

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

(111,789

)

 

 

(95,553

)

Investment in affiliated companies, principally due

   to undistributed earnings

 

 

(24,034

)

 

 

(15,884

)

Operating lease - ROU asset

 

 

(7,102

)

 

 

(6,241

)

Derivative contracts

 

 

(15,343

)

 

 

-

 

Other

 

 

(3,197

)

 

 

(2,526

)

Total deferred tax liability

 

 

(161,465

)

 

 

(120,204

)

Net deferred tax liability

 

$

(113,751

)

 

$

(71,942

)

 

At May 31, 2021, we had tax benefits for federal net operating loss carry forwards of $1,640,000 with no expiration date, and tax benefits for state net operating loss carry forwards of $8,125,000 that expire from fiscal 2022 to the fiscal year ending May 31, 2041.

81


The valuation allowance for deferred tax assets of $9,124,000 at May 31, 2021 is associated primarily with the state net operating loss carry forwards and relates to our former facility in Decatur, Alabama and our former oil & gas equipment business.

Based on our history of profitability, the scheduled reversal of deferred tax liabilities, and taxable income projections, we have determined that it is more likely than not that the remaining deferred tax assets are otherwise realizable.

Note O – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the fiscal years ended May 31:

 

(in thousands, except per share amounts)

2021

 

 

2020

 

 

2019

 

Numerator (basic & diluted):

 

 

 

 

 

 

 

 

 

 

 

Net earnings attributable to controlling interest - income available to

 

 

 

 

 

 

 

 

 

 

 

common shareholders

$

723,795

 

 

$

78,796

 

 

$

153,455

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per share attributable to controlling

 

 

 

 

 

 

 

 

 

 

 

interest - weighted average common shares

 

52,701

 

 

 

54,958

 

 

 

57,196

 

Effect of dilutive securities

 

1,216

 

 

 

1,025

 

 

 

1,627

 

Denominator for diluted earnings per share attributable to controlling

 

 

 

 

 

 

 

 

 

 

 

interest - adjusted weighted average common shares

 

53,917

 

 

 

55,983

 

 

 

58,823

 

Basic earnings per share attributable to controlling interest

$

13.73

 

 

$

1.43

 

 

$

2.68

 

Diluted earnings per share attributable to controlling interest

$

13.42

 

 

$

1.41

 

 

$

2.61

 

 

There were no anti-dilutive securities for fiscal 2021. Stock options covering 398,498, and 313,144 common shares for fiscal 2020 and fiscal 2019, respectively, have been excluded from the computation of diluted earnings per share because the effect of their inclusion would have been anti-dilutive for those periods.

Note P – Segment Data

Our operations are managed principally on a products and services basis and during fiscal 2021, fiscal 2020 and fiscal 2019, included two reportable business segments: Steel Processing and Pressure Cylinders, each of which is comprised of a similar group of products and services.  Factors used to identify reportable business 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.  A discussion of each of our reportable business segments is included below.  See “Note W – Subsequent Events” for information related to the Company’s change in reportable business segments for Pressure Cylinders, effective at the start of fiscal 2022.

Steel Processing: The Steel Processing reportable segment consists of the Worthington Steel business unit and four consolidated joint ventures: Samuel, Spartan, TWB and WSP.  Spartan operates a cold-rolled, hot-dipped coating line and TWB operates a laser welded blanking business.  WSP serves primarily as a toll processor for United States Steel Corporation and others.  WSP’s services include slitting, blanking, cutting-to-length, laser blanking, tension leveling and warehousing.  Samuel operates steel pickling facilities in Ohio.  Worthington Steel is an intermediate processor of flat-rolled steel.  This operating segment’s processing capabilities include cold reducing, configured blanking, coil fed laser blanking, cutting-to-length, dry-lube, hot-dipped galvanizing, hydrogen annealing, laser welding, pickling, slitting, oscillate slitting, temper rolling, tension leveling, and non-metallic coating, including acrylic and paint coating. Worthington Steel sells to customers principally in the automotive, aerospace, agricultural, appliance, construction, container, hardware, heavy-truck, HVAC, lawn and garden, leisure and recreation, office furniture and office equipment markets. Worthington Steel also toll processes steel for steel mills, large end-users, service centers and other processors.  Toll processing is different from typical steel processing in that the mill, end-user or other party retains title to the steel and has the responsibility for selling the end product.  The percentage of our consolidated net sales generated by the Steel Processing reportable segment was approximately 65%, 61% and 65%, in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

82


Pressure Cylinders: Through May 31, 2021, the Pressure Cylinders reportable segment consisted of the Worthington Cylinders business unit.  The percentage of consolidated net sales generated by the Pressure Cylinders reportable segment was approximately 35%, 37% and 32% in fiscal 2021, fiscal 2020, and fiscal 2019, respectively.

The Pressure Cylinders reportable segment manufactures and sells filled and unfilled pressure cylinders, tanks, hand torches, well water and expansion tanks, and oil & gas equipment along with various accessories and related products for diversified end-use market applications.  The following is a description of these markets:

 

Industrial Products: This market sector includes high pressure and acetylene cylinders for industrial gases, refrigerant and certain propane gas (LPG) cylinders, alternative fuel cylinders, and other specialty products. Cylinders in this market sector are generally sold to gas producers, cylinder exchangers and industrial distributors. Industrial gas cylinders hold fuel for uses such as cutting, brazing and soldering, semiconductor production, and beverage delivery. Refrigerant gas cylinders are used to hold refrigerant gases for commercial, residential and automotive air conditioning and refrigeration systems.  LPG cylinders hold fuel for barbeque grills, recreational vehicle equipment, residential and light commercial heating systems, industrial forklifts and commercial/residential cooking (the latter, generally outside North America). Alternative fuel cylinders includes composite and steel cylinders used to hold CNG and hydrogen for automobiles, buses, and light-duty trucks. Specialty products include a variety of fire suppression, life support and chemical tanks.

 

Consumer Products: This market sector includes propane-filled cylinders for torches, camping stoves and other applications, hand-held torches, Balloon Time® helium-filled balloon kits, plumbing tools, well water tanks and expansion tanks, and specialized hand tools and instruments. These products are sold primarily to mass merchandisers, retailers and distributors.

 

Oil & Gas Equipment:  This market sector included steel storage tanks, separation equipment, processing equipment and other products primarily used in the oil and gas markets prior to the divestiture of the business on January 29, 2021.

Other: Effective November 1, 2019, the Company deconsolidated substantially all of the net assets of the Engineered Cabs business, which had historically been treated as a separate reporting segment.  The deconsolidated net assets included the two primary manufacturing facilities of the Company’s Engineered Cabs business located in Greeneville, Tennessee and Watertown, South Dakota.  The remaining non-core assets of the Engineered Cabs business, including the fabricated products facility in Stow, Ohio, and the steel packaging facility in Greensburg, Indiana, were retained. The retained Engineered Cabs assets, which have since been closed, no longer qualify as a separate operating or reportable segment.  Accordingly, the activity related to our former Engineered Cabs operating segment has been reported in the “Other” category.  Segment information reported in previous periods has been restated to conform to this new presentation.

Certain income and expense items not allocated to our operating segments are included in Other, including product liability and healthcare reserves.

The accounting policies of the reportable business segments and other operating segments are described in “Note A – Summary of Significant Accounting Policies.”  We evaluate operating segment performance based on operating income. Inter-segment sales are not material.

83


The following table presents summarized financial information for our reportable business segments as of, and for the fiscal years ended, May 31:

 

(in thousands)

2021

 

 

2020

 

 

2019

 

Net sales

 

 

 

 

 

 

 

 

 

 

 

Steel Processing

$

2,059,397

 

 

$

1,859,670

 

 

$

2,435,818

 

Pressure Cylinders

 

1,110,973

 

 

 

1,148,424

 

 

 

1,207,798

 

Other

 

1,059

 

 

 

51,025

 

 

 

115,940

 

Total net sales

$

3,171,429

 

 

$

3,059,119

 

 

$

3,759,556

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

Steel Processing

$

208,648

 

 

$

40,564

 

 

$

89,761

 

Pressure Cylinders

 

9,276

 

 

 

38,903

 

 

 

69,872

 

Other

 

(1,499

)

 

 

(54,968

)

 

 

(15,553

)

      Segment operating income

 

216,425

 

 

 

24,499

 

 

 

144,080

 

      Unallocated corporate and other

 

1,672

 

 

 

(2,010

)

 

 

684

 

      Incremental expenses related to Nikola gains

 

(50,624

)

 

 

-

 

 

 

-

 

Total operating income

$

167,473

 

 

$

22,489

 

 

$

144,764

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

Steel Processing

$

40,870

 

 

$

40,819

 

 

$

40,374

 

Pressure Cylinders

 

38,885

 

 

 

42,565

 

 

 

42,403

 

Other

 

7,899

 

 

 

9,294

 

 

 

12,825

 

Total depreciation and amortization

$

87,654

 

 

$

92,678

 

 

$

95,602

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment of goodwill and long-lived assets

 

 

 

 

 

 

 

 

 

 

 

Steel Processing

$

-

 

 

$

1,839

 

 

$

3,269

 

Pressure Cylinders

 

13,739

 

 

 

37,153

 

 

 

4,548

 

Other

 

-

 

 

 

43,698

 

 

 

-

 

Total impairment of goodwill and long-lived assets

$

13,739

 

 

$

82,690

 

 

$

7,817

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and other expense (income), net

 

 

 

 

 

 

 

 

 

 

 

Steel Processing

$

1,883

 

 

$

3,501

 

 

$

(9

)

Pressure Cylinders

 

54,155

 

 

 

5,282

 

 

 

(11,009

)

Other

 

59

 

 

 

1,265

 

 

 

-

 

Total restructuring and other expense (income), net

$

56,097

 

 

$

10,048

 

 

$

(11,018

)

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

 

 

 

 

 

Steel Processing

$

1,267,559

 

 

$

821,657

 

 

$

924,966

 

Pressure Cylinders

 

1,156,092

 

 

 

1,104,603

 

 

 

1,123,115

 

Other (1)

 

949,594

 

 

 

405,255

 

 

 

462,715

 

Total assets

$

3,373,245

 

 

$

2,331,515

 

 

$

2,510,796

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

 

 

 

 

 

 

 

Steel Processing

$

28,306

 

 

$

40,588

 

 

$

39,114

 

Pressure Cylinders

 

45,520

 

 

 

41,484

 

 

 

37,558

 

Other

 

8,352

 

 

 

13,431

 

 

 

7,827

 

Total capital expenditures

$

82,178

 

 

$

95,503

 

 

$

84,499

 

 

 

(1)

The increase in assets for Other primarily relates to cash proceeds the Company received from the sale of its shares of Nikola common stock. For additional information, refer to “Note C – Investment in Nikola.”

84


The following table presents net sales by geographic region for the fiscal years ended May 31:

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

North America

 

$

2,956,962

 

 

$

2,912,777

 

 

$

3,559,650

 

International

 

 

214,467

 

 

 

146,342

 

 

 

199,906

 

Total

 

$

3,171,429

 

 

$

3,059,119

 

 

$

3,759,556

 

 

The following table presents property, plant and equipment, net, by geographic region as of May 31:

 

(in thousands)

 

2021

 

 

2020

 

North America

 

$

442,348

 

 

$

503,393

 

International

 

 

72,669

 

 

 

69,251

 

Total

 

$

515,017

 

 

$

572,644

 

 

Note Q – Acquisitions

PTEC Pressure Technology GmbH (“PTEC”) (fiscal 2021)

On January 4, 2021, we acquired PTEC, a leading independent designer and manufacturer of valves and components for high pressure hydrogen and compressed natural gas storage, transport and onboard fueling systems.  The PTEC business is being operated as part of the industrial products business within our Pressure Cylinders segment.  The total purchase price was $10,784,000.  In connection with this acquisition, the Company recognized total intangible assets of $9,247,000, including goodwill of $3,785,000.  The remaining purchase price was primarily allocated to personal property and working capital.

General Tools & Instruments Company LLC (“GTI”) (fiscal 2021)

On January 29, 2021, we acquired GTI, a provider of feature-rich, specialized tools in various categories including environmental health & safety, precision measurement & layout, home repair & remodel, lawn & garden and specific purpose tools, in a stock deal for cash consideration of $120,388,000, after adjustment for final working capital.  The GTI business is being operated as part of the consumer products business within our Pressure Cylinders segment and GTI’s operating results have been included in the Company’s consolidated statements of earnings since the date of acquisition.  The Company incurred total acquisition related expenses of $660,000 in fiscal 2021 related to the transaction.  

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 GTI, we identified and valued the following identifiable intangible assets:

 

(in thousands)

 

 

 

 

 

 

Category

 

Amount

 

 

Useful Life (Years)

Customer relationships

 

$

40,600

 

 

15

Trade names - indefinite lived

 

 

27,400

 

 

Indefinite

Trade name - finite lived

 

 

400

 

 

9

Total acquired identifiable intangible assets

 

$

68,400

 

 

 

85


The purchase price included the fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g., assembled workforce) or of immaterial value.  The purchase price also included 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.  GTI had a goodwill tax basis of $11,052,000 resulting from its previous acquisitions that will be deductible by the Company for income tax purposes.

The following table summarizes the consideration transferred and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date.  

 

 

 

 

 

 

Measurement

 

 

 

 

 

 

 

Preliminary

 

 

Period

 

 

Revised

 

(in thousands)

 

Valuation

 

 

Adjustments (1)

 

 

Valuation

 

Cash

 

$

1,633

 

 

$

-

 

 

$

1,633

 

Accounts receivable

 

 

16,440

 

 

 

(998

)

 

 

15,442

 

Inventories

 

 

19,795

 

 

 

(16

)

 

 

19,779

 

Prepaid expenses

 

 

924

 

 

 

(173

)

 

 

751

 

Other current assets

 

 

97

 

 

 

(97

)

 

 

-

 

Intangible assets

 

 

68,400

 

 

 

-

 

 

 

68,400

 

Property, plant, and equipment

 

 

956

 

 

 

-

 

 

 

956

 

Operating lease assets

 

 

5,502

 

 

 

-

 

 

 

5,502

 

Other assets

 

 

30

 

 

 

-

 

 

 

30

 

Total identifiable assets

 

 

113,777

 

 

 

(1,284

)

 

 

112,493

 

Accounts payable

 

 

(2,594

)

 

 

40

 

 

 

(2,554

)

Accrued liabilities

 

 

(6,006

)

 

 

133

 

 

 

(5,873

)

Current operating lease liabilities

 

 

(657

)

 

 

-

 

 

 

(657

)

Other current liabilities

 

 

(923

)

 

 

758

 

 

 

(165

)

Noncurrent operating lease liabilities

 

 

(4,845

)

 

 

-

 

 

 

(4,845

)

Deferred tax liabilities

 

 

(11,635

)

 

 

286

 

 

 

(11,349

)

Other long-term liabilities

 

 

(239

)

 

 

9

 

 

 

(230

)

Net identifiable assets

 

 

86,878

 

 

 

(58

)

 

 

86,820

 

Goodwill

 

 

33,714

 

 

 

(146

)

 

 

33,568

 

Purchase price

 

$

120,592

 

 

$

(204

)

 

$

120,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Includes adjustments for final working capital and closing tax balances

 

Operating results of GTI have been included in our consolidated statements of earnings from the acquisition date forward.  Proforma results, including the acquired business since the beginning of fiscal 2019, would not be materially different than the reported results.  Net sales and net earnings since the completion of the acquisition were immaterial.

Heidtman Cleveland (fiscal 2020)

On October 7, 2019, we acquired the operating net assets related to Heidtman’s Cleveland facility, excluding working capital, for cash consideration of $29,593,000.  The acquired net assets were managed and reported as a component of our Steel Processing operating segment until their contribution to the Samuel joint venture on December 31, 2019.  

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, a customer list intangible asset was identified and valued and is being amortized over the estimated useful life of 10 years.

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The purchase price included 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 included 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 is expected to be deductible for income tax purposes.

 

The following table summarizes the consideration paid and the final fair value assigned to the assets acquired and liabilities assumed at the acquisition date:  

 

 

 

 

 

 

Measurement

 

 

 

 

 

 

 

Preliminary

 

 

Period

 

 

Final

 

(in thousands)

 

Valuation

 

 

Adjustments

 

 

Valuation

 

Customer list

 

$

2,900

 

 

$

(100

)

 

$

2,800

 

Property, plant and equipment

 

 

7,515

 

 

 

(1,411

)

 

 

6,104

 

Finance lease assets

 

 

8,000

 

 

 

3,940

 

 

 

11,940

 

Other assets

 

 

725

 

 

 

-

 

 

 

725

 

Net identifiable assets

 

 

19,140

 

 

 

2,429

 

 

 

21,569

 

Goodwill

 

 

10,453

 

 

 

(2,429

)

 

 

8,024

 

Purchase price

 

$

29,593

 

 

$

-

 

 

$

29,593

 

Worthington Samuel Coil Processing LLC (fiscal 2020)

On December 31, 2019, the Company contributed the then recently acquired operating net assets of Heidtman’s Cleveland facility to the Samuel joint venture, in exchange for an incremental 31.75% interest in the joint venture, increasing the Company’s ownership to a 63% controlling interest.  The Heidtman assets were contributed at their net book value of $30,061,000, of which $11,123,000 has been attributed to the noncontrolling interest.  The transaction was accounted for as a step acquisition, which required the re-measurement of our previously held 31.25% ownership interest in the joint venture to fair value resulting a non-cash, net pre-tax gain of $6,055,000 within miscellaneous income, net in our consolidated statement of earnings for the third quarter of fiscal 2020.  The acquired net assets became part of our Steel Processing operating segment upon closing.  In connection with the acquisition, the name of the joint venture was changed to Worthington Samuel Coil Processing LLC.

The assets acquired and liabilities assumed were recognized at their 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 Samuel, we identified and valued the following identifiable intangible assets:

 

(in thousands)

 

 

 

Category

 

Amount

 

 

Useful Life (Years)

Customer relationships

 

$

9,000

 

 

15

Trade name

 

 

1,100

 

 

Indefinite

Total acquired identifiable intangible assets

 

$

10,100

 

 

 

The acquisition price included the fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g., assembled workforce) or of immaterial value.  The acquisition price also included strategic and synergistic benefits (investment value) specific to us, which resulted in an acquisition price in

87


excess of the fair value of the identifiable net assets.  This additional investment value resulted in goodwill, which is expected to be deductible for income tax purposes.  

The following table summarizes the consideration transferred for our 63% controlling interest in Samuel and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date:

(in thousands)

 

Consideration Transferred:

 

 

 

 

Assets contributed (37% of Heidtman net assets)

 

$

11,122

 

Capital contribution

 

 

315

 

Fair value of previously held equity interest in Samuel

 

 

10,948

 

Total consideration

 

$

22,385

 

 

 

 

 

 

Final Fair Value of Assets Acquired and Liabilities Assumed:

 

Cash

 

$

694

 

Accounts receivable

 

 

1,778

 

Inventories

 

 

108

 

Prepaid expenses

 

 

1,012

 

Intangible assets

 

 

10,100

 

Property, plant and equipment

 

 

19,459

 

Total identifiable assets

 

 

33,151

 

Accounts payable

 

 

(766

)

Accrued liabilities

 

 

(1,148

)

Net identifiable assets

 

 

31,237

 

Goodwill

 

 

4,295

 

Net assets

 

 

35,532

 

Noncontrolling interest

 

 

(13,147

)

Total consideration

 

$

22,385

 

The fair value of each of our previously held equity interest and the noncontrolling interest were derived using a market approach.  The minority discount to reflect management’s estimate of a control premium was immaterial.

Operating results of the Samuel joint venture have been included in our consolidated statements of earnings from the acquisition date forward.  For periods prior to the acquisition date, our portion of equity in net income of Samuel was included within equity in net income of unconsolidated affiliates in our consolidated statements of earnings.  Proforma results, including the acquired business since the beginning of fiscal 2019, would not be materially different than the reported results.

Magna Industries, Inc. (fiscal 2019)

On May 1, 2019, the Company acquired the net assets of Magna Industries, Inc., a Cleveland-based manufacturer of Mag-Torch® hand-held torches and Superior Tool® plumbing tools.  The total purchase price was $13,500,000, including contingent consideration with an estimated fair value of $2,000,000 related to an earn-out provision tied to future performance. In connection with the acquisition, the Company recognized total intangible assets of $3,677,000, including goodwill of $777,000 as of May 31, 2019.  The remaining purchase price was allocated primarily to working capital.

In fiscal 2020, two of the three components of the contingent consideration were satisfied resulting in a payment of $1,150,000, and $310,000 was recognized for final post-closing adjustments to net working capital.  Following the post-closing adjustments, net intangible assets recognized were $3,625,000, including goodwill of $725,000.

 

Note R – 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

88


rate risk, foreign currency exchange 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 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 to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.

Foreign Currency Exchange 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 foreign currency exchange rate fluctuations. The translation of foreign currencies into U.S. dollars also subjects us to exposure related to fluctuating foreign 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 contracts to manage the associated price risk.

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 risk of loss is remote and, in any event, would not be material.

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

89


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

 

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

 

Balance

 

 

 

 

 

Balance

 

 

 

 

 

 

Sheet

 

Fair

 

 

Sheet

 

Fair

 

(in thousands)

 

Location

 

Value

 

 

Location

 

Value

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

Receivables

 

$

53,125

 

 

Accounts payable

 

$

-

 

 

 

Other assets

 

 

23

 

 

Other liabilities

 

 

111

 

Totals

 

 

 

$

53,148

 

 

 

 

$

111

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

Receivables

 

$

24,621

 

 

Accounts payable

 

$

14,554

 

 

 

Other assets

 

 

379

 

 

Other liabilities

 

 

-

 

 

 

 

 

 

25,000

 

 

 

 

 

14,554

 

Foreign currency exchange contracts

 

Receivables

 

 

-

 

 

Accounts payable

 

 

532

 

Totals

 

 

 

$

25,000

 

 

 

 

$

15,086

 

Total derivative financial instruments

 

 

 

$

78,148

 

 

 

 

$

15,197

 

 

The amounts in the table above reflect the fair value of the Company’s 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 increase in receivables with a corresponding increase in accounts payable.

The following table summarizes the fair value of our derivative financial instruments and the respective line in which they were recorded in the consolidated balance sheet at May 31, 2020:

 

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

 

Balance

 

 

 

 

 

Balance

 

 

 

 

 

 

Sheet

 

Fair

 

 

Sheet

 

Fair

 

(in thousands)

 

Location

 

Value

 

 

Location

 

Value

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

Receivables

 

$

-

 

 

Accounts payable

 

$

4,294

 

 

 

Other assets

 

 

79

 

 

Other liabilities

 

 

479

 

Total

 

 

 

$

79

 

 

 

 

$

4,773

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

Receivables

 

$

-

 

 

Accounts payable

 

$

3,826

 

 

 

Other assets

 

 

96

 

 

Other liabilities

 

 

178

 

 

 

 

 

 

96

 

 

 

 

 

4,004

 

Foreign currency exchange contracts

 

Receivables

 

 

6

 

 

Accounts payable

 

 

-

 

Total

 

 

 

$

102

 

 

 

 

$

4,004

 

Total derivative financial instruments

 

 

 

$

181

 

 

 

 

$

8,777

 

 

90


The amounts in the table above reflect the fair value of the Company’s 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 $1,780,000 increase in receivables with a corresponding increase in accounts payable.

Cash Flow Hedges

We enter into derivative financial instruments to hedge our exposure to changes in cash flows attributable to interest rate and commodity price fluctuations associated with certain forecasted transactions.  These derivative financial instruments are designated and qualify as cash flow hedges.  Accordingly, the effective portion of the gain or loss on the derivative financial instrument is reported as a component of OCI and reclassified into earnings in the same line associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings.  The ineffective portion of the gain or loss on the derivative financial instrument is recognized in earnings immediately.

The following table summarizes our cash flow hedges outstanding at May 31, 2021:

 

 

 

Notional

 

 

 

(in thousands)

 

Amount

 

 

Maturity Date

Commodity contracts

 

$

181,488

 

 

June 2021 - December 2022

 

The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from AOCI into earnings for derivative financial instruments designated as cash flow hedges during fiscal 2021 and fiscal 2020:

 

 

 

 

 

 

 

Location of

 

Gain (Loss)

 

 

 

Gain (Loss)

 

 

Gain (Loss)

 

Reclassified

 

 

 

Recognized

 

 

Reclassified from AOCI

 

from AOCI

 

(in thousands)

 

in OCI

 

 

into Net Earnings

 

into Net Earnings

 

For the fiscal year ended May 31, 2021:

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

-

 

 

Interest expense

 

$

(1,711

)

Commodity contracts

 

 

93,417

 

 

Cost of goods sold

 

 

11,692

 

Totals

 

$

93,417

 

 

 

 

$

9,981

 

 

 

 

 

 

 

 

 

 

 

 

For the fiscal year ended May 31, 2020:

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

(326

)

 

Interest expense

 

$

391

 

Commodity contracts

 

 

(9,171

)

 

Cost of goods sold

 

 

(12,208

)

Foreign currency exchange contracts

 

 

-

 

 

Miscellaneous income, net

 

 

(19

)

Totals

 

$

(9,497

)

 

 

 

$

(11,836

)

 

The estimated net amount of the gains recognized in AOCI at May 31, 2021 expected to be reclassified into net earnings within the succeeding twelve months is $58,732,000 (net of tax of $18,169,000 ).  This amount was computed using the fair value of the cash flow hedges at May 31, 2021 and will change before actual reclassification from other comprehensive income to net earnings during fiscal 2022.

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 earnings.

The following table summarizes our economic (non-designated) derivative financial instruments outstanding at May 31, 2021:

 

 

 

Notional

 

 

 

(in thousands)

 

Amount

 

 

Maturity Date(s)

Commodity contracts

 

$

95,933

 

 

June 2021 - March 2022

Foreign currency exchange contracts

 

 

6,119

 

 

June 2021 - February 2023

 

91


The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments during fiscal 2021 and fiscal 2020:

 

 

 

 

Gain (Loss)

 

 

 

 

 

Recognized in Earnings

 

 

 

 

 

Fiscal Year Ended

 

 

 

Location of Gain (Loss)

 

May 31,

 

(in thousands)

 

Recognized in Earnings

 

2021

 

 

2020

 

Commodity contracts

 

Cost of goods sold

 

$

47,546

 

 

$

(8,555

)

Foreign currency exchange contracts

 

Miscellaneous income, net

 

 

(765

)

 

 

(9

)

Total

 

 

 

$

46,781

 

 

$

(8,564

)

 

Note S – Fair Value Measurements

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

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

 

 

(in thousands)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Totals

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments (1)

 

$

-

 

 

$

78,148

 

 

$

-

 

 

$

78,148

 

Total assets

 

$

-

 

 

$

78,148

 

 

$

-

 

 

$

78,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments (1)

 

$

-

 

 

$

15,197

 

 

$

-

 

 

$

15,197

 

Total liabilities

 

$

-

 

 

$

15,197

 

 

$

-

 

 

$

15,197

 

 

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At May 31, 2020, our financial assets and liabilities measured at fair value on a recurring basis were as follows:

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

 

 

(in thousands)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Totals

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments (1)

 

$

-

 

 

$

181

 

 

$

-

 

 

$

181

 

Total assets

 

$

-

 

 

$

181

 

 

$

-

 

 

$

181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments (1)

 

$

-

 

 

$

8,777

 

 

$

-

 

 

$

8,777

 

Total liabilities

 

$

-

 

 

$

8,777

 

 

$

-

 

 

$

8,777

 

 

 

(1)

The fair value of our derivative financial instruments was 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 R – Derivative Financial Instruments and Hedging Activities” for additional information regarding our use of derivative financial instruments.

Non-Recurring Fair Value Measurements

At May 31, 2021, our assets measured at fair value on a non-recurring basis were categorized as follows:

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

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)

 

$

-

 

 

$

400

 

 

$

-

 

 

$

400

 

Total assets

 

$

-

 

 

$

400

 

 

$

-

 

 

$

400

 

 

    

 

 

(1)

Comprised of our alternative fuel cylinders assets at the Jefferson, Ohio facility with an estimated fair market value of $400,000. Refer to “Note E – Goodwill and Other Long-Lived Assets” for additional information.

  

At May 31, 2020, our assets measured at fair value on a non-recurring basis were categorized as follows:

 

 

 

Quoted

 

 

Significant

 

 

 

 

 

 

 

 

 

 

 

Prices

 

 

Other

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Observable

 

 

Unobservable

 

 

 

 

 

 

 

Markets

 

 

Inputs

 

 

Inputs

 

 

 

 

 

(in thousands)

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Totals

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in unconsolidated affiliate (1)

 

$

-

 

 

$

-

 

 

$

13,623

 

 

$

13,623

 

Long-lived assets held for sale (2)

 

 

-

 

 

 

4,084

 

 

 

-

 

 

 

4,084

 

Long-lived assets held and used (3)

 

 

-

 

 

 

6,477

 

 

 

2,800

 

 

 

9,277

 

Total assets

 

$

-

 

 

$

10,561

 

 

$

16,423

 

 

$

26,984

 

93


 

 

 

(1)

On November 1, 2019, we contributed substantially all of the net assets of our former Engineered Cabs business to a newly-formed Cabs joint venture, in exchange for a 20% noncontrolling ownership interest.  In accordance with the applicable accounting guidance, our noncontrolling ownership interest in the Cabs joint venture was recorded at its acquisition date fair value of $13,623,000.

 

During the first quarter of fiscal 2020, we determined our 10% minority ownership interest in our Nisshin joint venture was fully impaired based on the estimated recoverability of the related assets.  

 

 

(2)

During the third quarter of fiscal 2020, the Company’s consolidated joint venture, WSP committed to a plan to sell its Canton, Michigan facility and some of the production equipment at that facility.  In accordance with the applicable accounting guidance, certain production equipment was recorded at the lower of net book value or fair market value less costs to sell.  The book value of the WSP production equipment exceeded the estimated fair market value of $700,000, resulting in an impairment charge of $1,274,000.  

 

During the third quarter of fiscal 2020, in connection with the closure of the oil & gas equipment operations in Wooster, Ohio, fixed assets consisting of land and a building were written down to their estimated fair market value of $3,384,000.

 

 

(3)

During the fourth quarter of 2020, in connection with the annual indefinite lived assets impairment test, certain European tradenames were written down to their estimated fair market value of $2,800,000.

 

During the fourth quarter of fiscal 2020, the Company identified an impairment indicator related to the TWB Hermosillo facility operating lease due to the economic impact of COVID-19.  As a result, the lease ROU asset with a net book value of $565,000 was deemed fully impaired and written off.

 

In May 2020, the Company committed to a plan to shut down the packaging solutions business in Greensburg, Indiana.  As a result, long-lived assets with a carrying value of $2,810,000 were written down to their estimated fair market value of $266,000.

 

During the third quarter of fiscal 2020, in connection with the closure of the oil & gas equipment operations in Wooster, Ohio, customer list intangible assets were determined to be fully impaired and written off.  In addition, the remaining fixed assets at Wooster, Ohio were written down to their estimated fair market value of $6,211,000.  

 

During the third quarter of fiscal 2020, the Company identified an impairment indicator for our oil & gas equipment business and performed an interim impairment test of the reporting unit.  In accordance with the applicable accounting guidance, the book value of the corresponding goodwill was written off, resulting in an impairment charge of $22,097,000.

 

During the first quarter of fiscal 2020, the Company identified an impairment indicator for the fabricated products business in Stow, Ohio within the former Engineered Cabs operating segment.  As a result, fixed assets with a net book value of $1,469,000 and lease ROU assets with a net book value of $3,938,000 were deemed to be fully impaired and written off. 

 

94


 

The non-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables. Income taxes receivable, other assets, deferred income taxes accounts payable, short-term borrowings, accrued compensation, contributions to employee benefit plans and related taxes, other accrued expenses, income taxes payable and other liabilities approximate fair value due to their short-term nature. The fair value of long-term debt, including current maturities, based upon models utilizing primarily market observable (Level 2) inputs and credit risk, was $792,632,000 and $740,678,000 at May 31, 2021 and 2020, respectively. The carrying amount of long-term debt, including current maturities, was $710,489,000 and $699,665,000 at May 31, 2021 and 2020, respectively.

Note T – Leases

 

On June 1, 2019, the Company adopted the new lease accounting standard under U.S. GAAP, Topic 842, which among other things, requires right-of-use (“ROU”) assets and liabilities be recognized upon lease commencement for operating leases based on the present value of lease payments over the lease term.  Topic 842 was adopted using the modified retrospective approach as of the effective date of the new standard.  As such, comparative financial information for reporting periods beginning prior to June 1, 2019, has not been restated and continues to be reported under the previous accounting standard.   As allowed, we elected to carry forward the historical lease classification and to apply the short-term lease measurement and recognition exemption whereby ROU assets and ROU liabilities are not recognized for short-term leases.  Adoption of the new standard resulted in the recognition of $42,200,000 of net operating lease ROU assets and $43,400,000 of corresponding operating lease ROU liabilities.  The net operating lease ROU assets include the effect of reclassifying deferred rent as an offset in accordance with the transition guidance.  The impact of the new standard was immaterial to the Company’s results of operations and cash flows.  

The Company determines if an arrangement is a lease at inception.  Operating lease ROU assets include any initial direct costs and prepayments less lease incentives.  Lease terms include options to renew or terminate the lease when it is reasonably certain the Company will exercise such options.  As most of our leases do not include an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date, in determining the present value of lease payments.  Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of goods sold or SG&A expense depending on the underlying nature of the leased assets.  

We lease certain property and equipment from third parties under non-cancellable operating lease agreements.  Certain lease agreements provide for payment of property taxes, maintenance and insurance by the Company.  Under Topic 842, we elected the practical expedient to account for lease and non-lease components as a single component for all asset classes.  Certain leases include variable lease payments based on usage or an index or rate.  

During the second quarter of fiscal 2020, we entered into a non-cancellable financing lease agreement for land and a building which was paid as part of the cash consideration in connection with the acquisition of certain operating assets of Heidtman.  Refer to “Note Q – Acquisitions” for additional information.  In the consolidated balance sheets, the financing lease ROU assets are recorded in other assets and the current and long-term portion of the financing lease ROU liabilities are recorded in other accrued items and other liabilities, respectively.

The components of lease expense for the twelve month periods ending May 31, 2021 and May 31, 2020, were as follows:

 

 

2021

 

 

2020

 

(in thousands)

 

 

 

 

 

 

 

 

Operating lease expense

 

$

10,123

 

 

$

12,454

 

Financing lease expense:

 

 

 

 

 

 

 

 

Amortization of leased assets

 

 

648

 

 

 

451

 

Interest on lease liabilities

 

 

145

 

 

 

61

 

Total financing lease expense

 

 

793

 

 

 

512

 

Short-term lease expense

 

 

578

 

 

 

599

 

Variable lease expense

 

 

2,398

 

 

 

2,580

 

Total lease expense

 

$

13,892

 

 

$

16,145

 

 

95


During the first quarter of fiscal 2020, ROU assets within the Engineered Cabs operating segment with a book value of $4,843,000 were deemed to be fully impaired and written off.  Refer to “Note E – Goodwill and Other Long-Lived Assets” for additional information.

 

During the fourth quarter of fiscal 2020, ROU assets related to the TWB Hermosillo facility with a book value of $565,000 were deemed to be fully impaired and written off.  Refer to “Note E – Goodwill and Other Long-Lived Assets” for additional information.

 

Other information related to the Company’s leases, as of and for the twelve-month periods ended May 31, 2021 and May 31, 2020, is provided below:

 

 

 

2021

 

 

2020

 

(dollars in thousands)

 

Operating Leases

 

 

Financing Leases

 

 

Operating Leases

 

 

Financing Leases

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cash flows

 

$

16,506

 

 

$

145

 

 

$

11,531

 

 

$

61

 

Financing cash flows

 

$

-

 

 

$

392

 

 

$

-

 

 

$

361

 

ROU assets obtained in exchange for lease liabilities

 

$

20,421

 

 

$

-

 

 

$

4,954

 

 

$

15,217

 

Weighted-average remaining lease term (in years)

 

 

5.83

 

 

 

33.03

 

 

 

5.24

 

 

 

31.38

 

Weighted-average discount rate

 

 

2.61

%

 

 

3.71

%

 

 

2.89

%

 

 

3.68

%

Future minimum lease payments for non-cancelable leases having an initial or remaining term in excess of one year at May 31, 2021, were as follows:

(in thousands)

 

Operating Leases

 

 

Financing Leases

 

2022

 

$

10,954

 

 

$

773

 

2023

 

 

8,448

 

 

 

545

 

2024

 

 

5,805

 

 

 

166

 

2025

 

 

4,571

 

 

 

171

 

2026

 

 

3,821

 

 

 

176

 

Thereafter

 

 

7,415

 

 

 

5,473

 

Total

 

 

41,014

 

 

 

7,304

 

Less: imputed interest

 

 

(3,693

)

 

 

(3,124

)

Present value of lease liabilities

 

$

37,321

 

 

$

4,180

 

 

Note U – Related Party Transactions

We purchase from, and sell to, affiliated companies certain raw materials and services at prevailing market prices.  Net sales to affiliated companies for fiscal 2021, fiscal 2020 and fiscal 2019 totaled $41,426,000, $33,826,000, and $53,125,000, respectively.  Purchases from affiliated companies for fiscal 2021, fiscal 2020 and fiscal 2019 totaled $5,000,000, $2,461,000, and $2,906,000, respectively. Accounts receivable from affiliated companies were $3,891,000 and $8,688,000 at May 31, 2021 and 2020, respectively.  Accounts payable to affiliated companies were $9,000 and $4,736,000 at May 31, 2021 and 2020, respectively.

96


Note V – Quarterly Results of Operations (Unaudited)

The following table summarizes the unaudited quarterly consolidated results of operations for fiscal 2021 and fiscal 2020:

 

(in thousands, except per share)

Three Months Ended

 

Fiscal 2021

August 31

 

 

November 30

 

 

February 28

 

 

May 31

 

Net sales

$

702,909

 

 

$

731,092

 

 

$

759,109

 

 

$

978,319

 

Gross margin

 

113,358

 

 

 

135,474

 

 

 

164,098

 

 

 

226,148

 

Impairment of long-lived assets (1)

 

9,924

 

 

 

3,815

 

 

 

-

 

 

 

-

 

Net earnings (loss)

 

618,738

 

 

 

(68,512

)

 

 

72,683

 

 

 

118,542

 

Net earnings (loss) attributable to controlling interest

 

616,675

 

 

 

(74,044

)

 

 

67,609

 

 

 

113,555

 

Basic earnings (loss) per share - controlling interest

$

11.41

 

 

$

(1.40

)

 

$

1.30

 

 

$

2.20

 

Diluted earnings (loss) per share - controlling interest

$

11.22

 

 

$

(1.40

)

 

$

1.27

 

 

$

2.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal 2020

August 31

 

 

November 30

 

 

February 29

 

 

May 31

 

Net sales

$

855,859

 

 

$

827,637

 

 

$

763,996

 

 

$

611,627

 

Gross margin

 

117,291

 

 

 

120,611

 

 

 

115,545

 

 

 

89,890

 

Impairment of goodwill and long-lived assets (1)

 

40,601

 

 

 

-

 

 

 

34,627

 

 

 

7,462

 

Net earnings (loss)

 

(2,455

)

 

 

56,922

 

 

 

18,888

 

 

 

11,089

 

Net earnings (loss) attributable to controlling interest

 

(4,776

)

 

 

52,086

 

 

 

15,311

 

 

 

16,175

 

Basic earnings (loss) per share - controlling interest

$

(0.09

)

 

$

0.95

 

 

$

0.28

 

 

$

0.30

 

Diluted earnings (loss) per share - controlling interest

$

(0.09

)

 

$

0.93

 

 

$

0.27

 

 

$

0.29

 

 

 

(1)

For additional information regarding the Company’s impairment activity, refer to “Note E – Goodwill and Other Long-Lived Assets.”

The sum of the quarterly earnings per share data presented in the table may not equal the annual results due to rounding and the impact of dilutive securities on the annual versus the quarterly earnings per share calculations.

Note W – Subsequent Events

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 $105,000,000, subject to closing adjustments. The acquisition includes 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 9, 2021, the Company’s consolidated joint venture, WSP, sold the remaining assets of its Canton, Michigan., facility for approximately $20,000,000. The Company recognized a gain of approximately $12,000,000 in the first quarter of fiscal 2022 related to the divestiture. WSP continues to operate locations in Jackson and Taylor, Michigan.

On June 10, 2021, the Company announced that its Pressure Cylinders segment was being divided into three new reportable segments: Consumer Products, Building Products and Sustainable Energy Solutions, effective at the start of fiscal year 2022. The three new reportable segments are in addition to the Company’s Steel Processing segment.

 

97


WORTHINGTON INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

 

Description

 

Balance at

Beginning

of Period

 

 

Charged

to Costs

and Expenses

 

 

Uncollectable

Accounts

Charged to

Allowance

 

 

Balance at

End of

Period

 

Fiscal 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deducted from asset accounts: Allowance for

   possible losses on trade accounts receivable

 

$

1,521,000

 

 

$

(254,000

)

 

$

(659,000

)

 

$

608,000

 

Fiscal 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deducted from asset accounts: Allowance for

   possible losses on trade accounts receivable

 

$

1,150,000

 

 

$

580,000

 

 

$

(209,000

)

 

$

1,521,000

 

Fiscal, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deducted from asset accounts: Allowance for

   possible losses on trade accounts receivable

 

$

632,000

 

 

$

659,000

 

 

$

(141,000

)

 

$

1,150,000

 

 

See accompanying Report of Independent Registered Public Accounting Firm.

 

Item 9. – Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. - 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 file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management, with the participation of our 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 fiscal year covered by this Annual Report on Form 10-K (the fiscal year ended May 31, 2021).  Based on that evaluation, our 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 fiscal year covered by this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred in the last fiscal quarter (the fiscal quarter ended May 31, 2021) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Annual Report of Management on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.  Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Worthington Industries, Inc. and our consolidated subsidiaries; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of Worthington Industries, Inc.

98


and our consolidated subsidiaries are being made only in accordance with authorizations of management and directors of Worthington Industries, Inc. and our consolidated subsidiaries, as appropriate; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of Worthington Industries, Inc. and our consolidated subsidiaries that could have a material effect on the financial statements.

Management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of May 31, 2021, the end of our fiscal year.  Management based its assessment on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The scope of the assessment included all of the consolidated operations of the Company except for those of General Tools & Instruments Company LLC and PTEC Pressure Technology GmbH.  The total assets and net sales of the acquired businesses represented $149,494,000 and $24,305,000 of the consolidated total assets and the consolidated net sales of the Company, respectively, as of and for the Company’s fiscal year ended May 31, 2021.

Management’s assessment included evaluation of such elements as the design and operating effectiveness of key controls over financial reporting, process documentation, accounting policies and our overall control environment.  This assessment is supported by testing and monitoring performed under the direction of management.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  Accordingly, even an effective system of internal control over financial reporting will provide only reasonable assurance with respect to financial statement preparation.

Based on the assessment of our internal control over financial reporting, management has concluded that our internal control over financial reporting was effective at a reasonable assurance level as of May 31, 2021.  The results of management’s assessment were reviewed with the Audit Committee of the Worthington Industries, Inc. Board of Directors.

Additionally, our independent registered public accounting firm, KPMG LLP, independently assessed the effectiveness of our internal control over financial reporting and issued the accompanying Report of Independent Registered Public Accounting Firm.

99


Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Directors
Worthington Industries, Inc.:

 

Opinion on Internal Control Over Financial Reporting

We have audited Worthington Industries, Inc. and subsidiaries' (the Company) internal control over financial reporting as of May 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 31, 2021 and 2020, the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three-year period ended May 31, 2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated July 30, 2021 expressed an unqualified opinion on those consolidated financial statements.

 

The Company acquired General Tools & Instruments Company LLC and PTEC Pressure Technology GmbH during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of May 31, 2021, General Tools & Instruments Company LLC and PTEC Pressure Technology GmbH’s internal control over financial reporting associated with total assets of $149,494,000 and total net sales of $24,305,000 included in the consolidated financial statements of the Company as of and for the year ended May 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of General Tools & Instruments Company LLC and PTEC Pressure Technology GmbH.

 

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Annual Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control Over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding

100


prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

 

/s/KPMG LLP

 

 

 

Columbus, Ohio

 

July 30, 2021

 

 

 

 

 

 

 

 


101


 

Item 9B. – Other Information

 

There is nothing to be reported under this Item 9B.

 

Item 9C. – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

 

There is nothing to be reported under this Item 9C.

102


PART III

Item 10. – Directors, Executive Officers and Corporate Governance

Directors, Executive Officers and Persons Nominated or Chosen to Become Directors or Executive Officers

The information required by Item 401 of SEC Regulation S-K concerning the directors of Worthington Industries, Inc. (“Worthington Industries” or the “Registrant”) and the nominees for re-election as directors of Worthington Industries at the Annual Meeting of Shareholders to be held on September 29, 2021 (the “2021 Annual Meeting”) is incorporated herein by reference from the disclosure to be included under the caption “Proposal 1:  Election of Directors” in Worthington Industries’ definitive Proxy Statement relating to the 2021 Annual Meeting (“Worthington Industries’ Definitive 2021 Proxy Statement”), which will be filed pursuant to SEC Regulation 14A not later than 120 days after the end of Worthington Industries’ fiscal 2021 (the fiscal year ended May 31, 2021).

The information required by Item 401 of SEC Regulation S-K concerning the executive officers of Worthington Industries is incorporated herein by reference from the disclosure included under the caption “Supplemental Item – Information about our Executive Officers” in Part I of this Annual Report on Form 10-K.

Compliance with Section 16(a) of the Exchange Act

The information required by Item 405 of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Security Ownership of Certain Beneficial Owners and Management – Delinquent Section 16(a) Reports” in Worthington Industries’ Definitive 2021 Proxy Statement.

Procedures by which Shareholders may Recommend Nominees to Worthington Industries’ Board of Directors

Information concerning the procedures by which shareholders of Worthington Industries may recommend nominees to Worthington Industries’ Board of Directors is incorporated herein by reference from the disclosure to be included under the captions “Committees of the Board – Nominating and Governance Committee” and “Corporate Governance – Nominating Procedures” in Worthington Industries’ Definitive 2021 Proxy Statement.  These procedures have not materially changed from those described in Worthington Industries’ definitive Proxy Statement for the 2020 Annual Meeting of Shareholders held on September 23, 2020.

Audit Committee Matters

The information required by Items 407(d)(4) and 407(d)(5) of SEC Regulation S‑K is incorporated herein by reference from the disclosure to be included under the caption “Committees of the Board – Audit Committee” in Worthington Industries’ Definitive 2021 Proxy Statement.

Code of Conduct; Committee Charters; Corporate Governance Guidelines; Charter of Lead Independent Director

Worthington Industries’ Board of Directors has adopted Charters for each of the Audit Committee, the Compensation Committee, the Executive Committee and the Nominating and Governance Committee as well as Corporate Governance Guidelines as contemplated by the applicable sections of the New York Stock Exchange Listed Company Manual.  Worthington Industries’ Board of Directors has also adopted a Charter of the Lead Independent Director of Worthington Industries’ Board of Directors.

In accordance with the requirements of Section 303A.10 of the New York Stock Exchange Listed Company Manual, the Board of Directors of Worthington Industries has adopted a Code of Conduct covering the directors, officers and employees of Worthington Industries and its subsidiaries, including Worthington Industries’ President and Chief Executive Officer (the principal executive officer), Worthington Industries’ Vice President and Chief Financial Officer (the principal financial officer) and Worthington Industries’ Controller (the principal accounting officer).  The Registrant will disclose the following events, if they occur, in a Current Report on Form 8-K to be filed with the SEC within the required four business days following their occurrence: (A) the date and nature of any amendment to a provision of Worthington Industries’ Code of Conduct that (i) applies to Worthington Industries’ principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, (ii) relates to any element of the “code of ethics” definition enumerated in Item 406(b) of SEC Regulation S‑K, and (iii) is not a technical, administrative or other non-substantive amendment; and (B) a description of any waiver (including the nature of the waiver, the name of the person to whom the waiver was granted and the date of the waiver), including an implicit waiver, from a provision of the Code of Conduct granted to Worthington Industries’ principal

103


executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, that relates to one or more of the elements of the “code of ethics” definition set forth in Item 406(b) of SEC Regulation S-K.  In addition, Worthington Industries will disclose any waivers from the provisions of the Code of Conduct granted to a director or an executive officer of Worthington Industries in a Current Report on Form 8-K to be filed with the SEC within the required four business days following their occurrence.

The text of each of the Charter of the Audit Committee, the Charter of the Compensation Committee, the Charter of the Executive Committee, the Charter of the Nominating and Governance Committee, the Charter of the Lead Independent Director, the Corporate Governance Guidelines and the Code of Conduct is posted on the “Governance” page of the “Investors” section (also referred to as the “Investor Relations” section) of Worthington Industries’ Internet web site located at https://www.worthingtonindustries.com.

Item 11. – Executive Compensation

The information required by Item 402 of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the captions “Security Ownership of Certain Beneficial Owners and Management,” “Executive Compensation,” “Fiscal 2021 Summary Compensation Table,” “Grants of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal 2021 Year-End.” “Option Exercises and Stock Vested,” “Non-Qualified Deferred Compensation,” “Annual Cash Incentive Bonus Awards Granted to NEOs for Fiscal 2022,” “Long-Term Performance Awards, Option Awards, and Restricted Common Share Awards Granted to NEOs in Fiscal 2022,” “CEO Pay Ratio,” “Compensation of Directors” and “ Director Compensation for Fiscal 2021,” in Worthington Industries’ Definitive 2021 Proxy Statement.

The information required by Item 407(e)(4) of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Corporate Governance — Compensation Committee Interlocks and Insider Participation” in Worthington Industries’ Definitive 2021 Proxy Statement.

The information required by Item 407(e)(5) of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Executive Compensation — Compensation Committee Report” in Worthington Industries’ Definitive 2021 Proxy Statement.

Item 12. – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Ownership of Common Shares of Worthington Industries

The information required by Item 403 of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Security Ownership of Certain Beneficial Owners and Management” in Worthington Industries’ Definitive 2021 Proxy Statement.

Equity Compensation Plan Information

The information required by Item 201(d) of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption “Equity Compensation Plan Information” in Worthington Industries’ Definitive 2021 Proxy Statement.

Certain Relationships and Related Person Transactions

The information required by Item 404 of SEC Regulation S-K is incorporated herein by reference from the disclosure in respect of John P. McConnell to be included under the caption “Security Ownership of Certain Beneficial Owners and Management” and from the disclosure to be included under the caption “Transactions With Certain Related Persons” in Worthington Industries’ Definitive 2021 Proxy Statement.

Director Independence

The information required by Item 407(a) of SEC Regulation S-K is incorporated herein by reference from the disclosure to be included under the captions “Corporate Governance – Director Independence” and “Transactions With Certain Related Persons” in Worthington Industries’ Definitive 2021 Proxy Statement.

104


Item 14. – Principal Accountant Fees and Services

The information required by this Item 14 is incorporated herein by reference from the disclosure to be included under the captions “Audit Committee Matters – Independent Registered Public Accounting Firm Fees” and “Audit Committee Matters – Pre-Approval of Services Performed by the Independent Registered Public Accounting Firm” in Worthington Industries’ Definitive 2021 Proxy Statement.

 

105


PART IV

Item 15. – Exhibits and Financial Statement Schedules

(a)

The following documents are filed as a part of this Annual Report on Form 10-K:

(1)Consolidated Financial Statements:

The consolidated financial statements (and report thereon) listed below are filed as a part of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm (KPMG LLP)

Consolidated Balance Sheets as of May 31, 2021 and 2020

Consolidated Statements of Earnings for the fiscal years ended May 31, 2021, 2020 and 2019

Consolidated Statements of Comprehensive Income for the fiscal years ended May 31, 2021, 2020 and 2019

Consolidated Statements of Equity for the fiscal years ended May 31, 2021, 2020 and 2019

Consolidated Statements of Cash Flows for the fiscal years ended May 31, 2021, 2020 and 2019

Notes to Consolidated Financial Statements – fiscal years ended May 31, 2021, 2020 and 2019

(2)Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts

All other financial statement schedules for which provision is made in the applicable accounting regulations of the SEC are omitted because they are not required or the required information has been presented in the aforementioned consolidated financial statements or notes thereto.

(3)Exhibits Required by Item 601 of Regulation S-K:

The documents listed in the Index to Exhibits that immediately precedes the Signatures page of this Annual Report on Form 10-K are filed or furnished with this Annual Report on Form 10-K as exhibits or incorporated by reference as noted.  Each management contract or compensatory plan or arrangement is identified as such in the Index to Exhibits.

(b)

Exhibits:  The documents listed in the Index to Exhibits that immediately precedes the Signatures page of this Annual Report on Form 10-K are filed or furnished with this Annual Report on Form 10-K as exhibits or incorporated into this Annual Report on Form 10-K by reference as noted.

(c)

Financial Statement Schedule:  The financial statement schedule listed in Item 15(a)(2) above is filed with this Annual Report on Form 10-K.

Item 16. – Form 10-K Summary

None.

106


INDEX TO EXHIBITS

 

Exhibit

 

Description of Exhibit

 

Location

 

 

 

 

 

 

 

 

 

 

 

 

 

3.1

 

Amended Articles of Incorporation of Worthington Industries, Inc., as filed with the Ohio Secretary of State on October 13, 1998 P

 

Incorporated herein by reference to Exhibit 3(a) to the Registrant’s Quarterly Report on Form 10-Q  for the quarterly period ended August 31, 1998 (SEC File No. 0-4016)

 

 

 

 

 

3.2

 

Code of Regulations of Worthington Industries, Inc. (reflecting all amendments through the date of this Annual Report on Form 10-K) [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 Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2000 (SEC File No. 1-8399)

 

 

 

 

 

4.1

 

Second Amended and Restated Credit Agreement, dated as of February 16, 2018, among Worthington Industries, Inc., as a Borrower; Worthington Industries International S.à.r.l., as a Borrower; PNC Bank, National Association, as a Lender, and the Swingline Lender, an Issuing Bank and the Administrative Agent; JPMorgan Chase Bank, N.A., as a Lender and the Syndication Agent; Bank of America, N.A.; Branch Banking and Trust Company; U.S. Bank National Association; Wells Fargo Bank, National Association; Fifth Third Bank; The Huntington National Bank; and The Northern Trust Company, as Lenders (collectively with PNC Bank, National Association and JPMorgan Chase Bank, N.A., the “Lenders”); with Bank of America, N.A., Branch Banking and Trust Company, U.S. Bank National Association and Wells Fargo Bank, National Association serving as Co-Documentation Agents; and JPMorgan Chase Bank, N.A. and PNC Capital Markets LLC serving as Joint Bookrunners and Joint Lead Arrangers

 

Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated February 22, 2018 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.2

 

Indenture, dated as of April 13, 2010, between Worthington Industries, Inc. and U.S. Bank National Association, as Trustee

 

Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated April 13, 2010 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.3

 

First Supplemental Indenture, dated as of April 13, 2010, between Worthington Industries, Inc. and U.S. Bank National Association, as Trustee [Note: The First Supplemental Indenture relates to the 6.50% Notes Due April 15, 2020 that were redeemed in full on August 30, 2019.]

 

Incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated April 13, 2010 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.4

 

Form of 6.50% Global Note Due April 15, 2020 (included as Exhibit A in Exhibit 4.3 incorporated by reference in this Annual Report on Form 10-K) [NOTE: The 6.5% Notes Due April 15, 2020 were redeemed in full on August 30, 2019.]

 

Incorporated herein by reference to Exhibit 4.3 (included in Exhibit 4.2) to the Registrant’s Current Report on Form 8-K dated April 13, 2010 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

 

107


Exhibit

 

Description of Exhibit

 

Location

4.5

 

Second Supplemental Indenture, dated as of April 15, 2014, between Worthington Industries, Inc. and U.S. Bank National Association, as Trustee

 

Incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated April 15, 2014 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.6

 

Form of 4.55% Global Note Due April 15, 2026 (included as Exhibit A in Exhibit 4.5 incorporated by reference in this Annual Report on Form 10-K)

 

Incorporated herein by reference to Exhibit 4.3 (included in Exhibit 4.2) to the Registrant’s Current Report on Form 8-K dated April 15, 2014 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.7

 

Third Supplemental Indenture, dated as of July 28, 2017, between Worthington Industries, Inc. and U.S. Bank National Association, as Trustee

 

Incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated July 28, 2017 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.8

 

Form of 4.300% Global Note due August 1, 2032 (included as Exhibit A in Exhibit 4.7 incorporated by reference in this Annual Report on Form 10-K)

 

Incorporated herein by reference to Exhibit 4.3 (included in Exhibit 4.2) to the Registrant’s Current Report on Form 8-K dated July 28, 2017 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.9

 

Note Agreement, dated as of August 10, 2012, between Worthington Industries, Inc. and The Prudential Insurance Company of America, Pruco Life Insurance Company of New Jersey, Pruco Life Insurance Company, Prudential Arizona Reinsurance Universal Company, Prudential Annuities Life Assurance Corporation, The Prudential Life Insurance Company, Ltd. and The Gibraltar Life Insurance Co., Ltd.

 

Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated August 15, 2012 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.10

 

Form of 4.60% Senior Note due August 10, 2024 (included as Exhibit A in Exhibit 4.9 incorporated by reference in this Annual Report on Form 10-K)

 

Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated August 15, 2012 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.11

 

Amendment No. 1 to Note Agreement, dated June 10, 2015, among Worthington Industries, Inc., on the one hand, and The Prudential Insurance Company of America, Pruco Life Insurance Company of New Jersey, Pruco Life Insurance Company, Prudential Arizona Reinsurance Universal Company, Prudential Annuities Life Assurance Corporation, The Prudential Life Insurance Company, Ltd. and The Gibraltar Life Insurance Co., Ltd., on the other hand

 

Incorporated herein by reference to Exhibit 4.9 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2015 (SEC File No. 1-8399)

 

 

 

 

 

 

108


Exhibit

 

Description of Exhibit

 

Location

4.12

 

Amendment No. 2 to Note Agreement, dated August 23, 2019, with reference to the Note Agreement, dated as of August 10, 2012 (as amended by Amendment No. 1 to Note Agreement dated June 10, 2015), among Worthington Industries, Inc., on the one hand, and The Prudential Insurance Company of America, Pruco Life Insurance Company of New Jersey, Pruco Life Insurance Company, Prudential Arizona Reinsurance Universal Company, Prudential Annuities Life Assurance Corporation, The Prudential Life Insurance Company, Ltd. and The Gibraltar Life Insurance Co., Ltd., on the other hand

 

Incorporated herein by reference to Exhibit 4.5 to the Registrant’s Current Report on Form 8-K dated August 28, 2019 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.13

 

Note Purchase and Private Shelf Agreement, dated as of August 23, 2019, among Worthington Industries, Inc., Worthington Industries International S.à r.l. and Worthington Cylinders GmbH, on the one hand, and PGIM, Inc., The Prudential Insurance Company of America, Pruco Life Insurance Company and Prudential Legacy Insurance Company of New Jersey, on the other hand

 

Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated August 28, 2019 and filed with the SEC on the same date (SEC File No., 1-8399)

 

 

 

 

 

4.14

 

Form of 1.56% Series A Senior Note due August 23, 2021 issued on August 23, 2019 by Worthington Industries International S.à r.l. (included as Exhibit A-1 within Exhibit 4.13 incorporated by reference in this Annual Report on Form 10-K)

 

Incorporated herein by reference to Exhibit 4.2 (and included as Exhibit A-1 within Exhibit 4.1) to the Registrant’s Current Report on Form 8-K dated August 28, 2019 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.15

 

Form of 1.90% Series B Senior Note due August 23, 2034 issued on August 23, 2019 by Worthington Cylinders GmbH (included as Exhibit A-2 within Exhibit 4.13 incorporated by reference in this Annual Report on Form 10-K)

 

Incorporated herein by reference to Exhibit 4.3 (and included as Exhibit A-2 within Exhibit 4.1) to the Registrant’s Current Report on Form 8-K dated August 28, 2019 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.16

 

Guaranty Agreement, dated as of August 23, 2019, from Worthington Industries, Inc. in favor of the Holders (as defined in the Guaranty Agreement)

 

Incorporated herein by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K dated August 28, 2019 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

4.17

 

Agreement to furnish instruments and agreements defining rights of holders of long-term debt to the Securities and Exchange Commission upon request

 

Filed herewith

 

 

 

 

 

4.18

 

Description of Capital Stock of Worthington Industries, Inc.

 

Incorporated herein by reference to Exhibit 4.13 to the Registrant’s Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year ended May 31, 2019 (SEC File No. 1-8399)

 

 

 

 

 

10.1

 

Worthington Industries, Inc. Non-Qualified Deferred Compensation Plan effective March 1, 2000*

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2005 (SEC File No. 1-8399)

 

 

 

 

 

 

109


Exhibit

 

Description of Exhibit

 

Location

10.2

 

Amendment to the Worthington Industries, Inc. Non-Qualified Deferred Compensation Plan (Amendment effective as of September 1, 2011)*

 

Incorporated herein by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.3

 

Second Amendment to the Worthington Industries, Inc. Non-Qualified Deferred Compensation Plan (Second Amendment effective as of October 1, 2014)*

 

Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014 (SEC File No. 1-8399)

 

 

 

 

 

10.4

 

Worthington Industries, Inc. Amended and Restated 2005 Non-Qualified Deferred Compensation Plan (Restatement effective December 2008)*

 

Incorporated herein by reference to Exhibit 10.10 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2008 (SEC File No. 1-8399)

 

 

 

 

 

10.5

 

First Amendment to the Worthington Industries, Inc. Amended and Restated 2005 Non-Qualified Deferred Compensation Plan (First Amendment effective as of September 1, 2011)*

 

Incorporated herein by reference to Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.6

 

Second Amendment to the Worthington Industries, Inc. Amended and Restated 2005 Non-Qualified Deferred Compensation Plan (Second Amendment effective as of October 1, 2014)*

 

Incorporated herein by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014 (SEC File No. 1-8399)

 

 

 

 

 

10.7

 

Worthington Industries, Inc. Deferred Compensation Plan for Directors, as Amended and Restated, effective June 1, 2000*

 

Incorporated herein by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2000 (SEC File No. 1-8399)

 

 

 

 

 

10.8

 

Amendment to the Worthington Industries, Inc. Deferred Compensation Plan for Directors, as Amended and Restated, effective June 1, 2000 (Amendment effective as of September 1, 2011)*

 

Incorporated herein by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.9

 

Second Amendment to the Worthington Industries, Inc. Deferred Compensation Plan for Directors, as Amended and Restated (Second Amendment effective as of October 1, 2014)*

 

Incorporated herein by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014 (SEC File No. 1-8399)

 

 

 

 

 

10.10

 

Worthington Industries, Inc. Amended and Restated 2005 Deferred Compensation Plan for Directors (Restatement effective as of December 2008)*

 

Incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2008 (SEC File No. 1-8399)

 

 

 

 

 

10.11

 

First Amendment to the Worthington Industries, Inc. Amended and Restated 2005 Deferred Compensation Plan for Directors (First Amendment effective as of September 1, 2011)*

 

Incorporated herein by reference to Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.12

 

Second Amendment to the Worthington Industries, Inc. Amended and Restated 2005 Deferred Compensation Plan for Directors (Second Amendment effective as of October 1, 2014)*

 

Incorporated herein by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014 (SEC File No. 1-8399)

 

 

 

 

 

10.13

 

Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (amendment and restatement effective as of November 1, 2008)*

 

Incorporated herein by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2008 (SEC File No. 1-8399)

 

 

 

 

 

 

110


Exhibit

 

Description of Exhibit

 

Location

10.14

 

First Amendment to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (First Amendment effective as of June 26, 2013; performance goals approved by shareholders on September 26, 2013)*

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated October 1, 2013 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.15

 

Second Amendment to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Second Amendment effective as of September 26, 2013)*

 

Incorporated herein by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated October 1, 2013 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.16

 

Third Amendment to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Third Amendment effective as of June 28, 2017)*

 

Incorporated herein by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017 (SEC File No. 1-8399)

 

 

 

 

 

10.17

 

Fourth Amendment to the Worthington Industries, Inc. Amended and Restated 1997 Long Term Incentive Plan (Fourth Amendment effective September 25, 2019) *

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 1, 2019 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.18

 

Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (reflects First Amendment, Second Amendment, Third Amendment and Fourth Amendment thereto)*

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated October 1, 2019 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.19

 

Form of Restricted Stock Award Agreement for awards granted after June 1, 2014 entered into by Worthington Industries, Inc. in order to evidence grants of restricted common shares on and after June 30, 2014 and prior to June 28, 2017, in each case which will vest on the third anniversary of the grant date, subject to the terms thereof and of the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan*

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated July 1, 2014 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.20

 

Form of Restricted Stock Award Agreement for awards granted after June 28, 2017 entered into by Worthington Industries, Inc. in order to evidence the grant, after June 28, 2017, of restricted common shares, in each case which will vest on the fourth anniversary of the grant date, subject to the terms thereof and of the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan*

 

Incorporated herein by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017 (SEC File No. 1-8399)

 

 

 

 

 

 

111


Exhibit

 

Description of Exhibit

 

Location

10.21

 

Form of Restricted Stock Award Agreement entered into by Worthington Industries, Inc. with Geoffrey G. Gilmore, in order to evidence the grant, effective June 24, 2014, of 25,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan* [NOTE:  This restricted stock award was forfeited as of June 24, 2020.]

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated July 1, 2014 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.22

 

Amendment No. 1 to Restricted Stock Award Agreement entered into by Worthington Industries, Inc. with Geoffrey G. Gilmore, effective as of September 26, 2018, in order to amend the Restricted Stock Award Agreement, effective as of June 24, 2014, evidencing the grant of 25,000 performance-based restricted common shares to Mr. Gilmore pursuant to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan* [NOTE:  This restricted stock award was forfeited as of June 24, 2020.]

 

Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2018 (SEC File No. 1-8399)

 

 

 

 

 

10.23

 

Form of Restricted Stock Award Agreement for awards granted after June 28, 2017 entered into and to be entered into by Worthington Industries, Inc. in order to evidence the grant, after June 28, 2017, of restricted common shares, in each case which will vest on the third anniversary of the grant date, subject to the terms thereto and of the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan*

 

Incorporated herein by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017 (SEC File No. 1-8399)

 

 

 

 

 

10.24

 

Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors (amended and restated effective as of September 2016)*

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated October 3, 2016 and filed with the SEC on the same day (SEC File No. 1-8399)

 

 

 

 

 

10.25

 

Form of Notice of Grant of Stock Options and Option Agreement under the Worthington Industries, Inc. 2006 Equity Incentive Plan for Non-Employee Directors (now known as the Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors) to evidence the grant of non-qualified stock options to non-employee directors of Worthington Industries, Inc. on and after September 24, 2008*

 

Incorporated herein by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2010 (SEC File No. 1-8399)

 

 

 

 

 

10.26

 

Worthington Industries, Inc. 2010 Stock Option Plan*

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated October 5, 2010 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.27

 

First Amendment to the Worthington Industries, Inc. 2010 Stock Option Plan (First Amendment effective September 26, 2013) *

 

Incorporated herein by reference to Exhibit 10.7 to the Registrant's Current Report on Form 8-K dated October 1, 2013 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

 

112


Exhibit

 

Description of Exhibit

 

Location

10.28

 

Second Amendment to the Worthington Industries, Inc. 2010 Stock Option Plan (Second Amendment effective as of June 28, 2017)*

 

Incorporated herein by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017 (SEC File No. 1-8399)

 

10.29

 

Third Amendment to the Worthington Industries, Inc. 2010 Stock Option Plan (effective September 23, 2020)*

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated September 28, 2020 and filed with the SEC on the same day (SEC File No.1-8399)

 

10.30

 

Worthington Industries, Inc. 2010 Stock Option Plan (as amended by First Amendment, Second Amendment and Third Amendment thereto) *

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated September 28, 2020 and filed with the SEC on the same day (SEC File No. 1-8399)

 

 

 

 

 

 

 

 

 

 

10.31

 

Form of Non-Qualified Stock Option Award Agreement entered into by Worthington Industries, Inc. in order to evidence the grant of non-qualified stock options to executive officers of Worthington Industries, Inc. effective as of June 30, 2011 pursuant to the Worthington Industries, Inc. 2010 Stock Option Plan and to be entered into by Worthington Industries, Inc. in order to evidence future grants of non-qualified stock options to executive officers pursuant to the Worthington Industries, Inc. 2010 Stock Option Plan*

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated July 6, 2011 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.32

 

Worthington Industries, Inc. Annual Incentive Plan for Executives*

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated September 30, 2008 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.33

 

First Amendment to the Worthington Industries, Inc. Annual Incentive Plan for Executives (approved by shareholders on September 26, 2013)*

 

Incorporated herein by reference to Exhibit 10.5 to the Registrant's Current Report on Form 8-K dated October 1, 2013 and filed with the SEC on the same date (SEC File No. 1-8399)

 

 

 

 

 

10.34

 

Form of Letter Evidencing Cash Performance Bonus Awards Granted and to be Granted under the Worthington Industries, Inc. Annual Incentive Plan for Executives (sometimes also referred to as the Worthington Industries, Inc. Annual Short Term Incentive Plan) *

 

Incorporated herein by reference to Exhibit 10.42 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014 (SEC File No. 1-8399)

 

 

 

10.35

Receivables Purchase Agreement, dated as of November 30, 2000, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10(h)(i) to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2001 (SEC File No. 1-8399)

 

 

 

 

 

 

113


Exhibit

 

Description of Exhibit

 

Location

10.36

Amendment No. 1 to Receivables Purchase Agreement, dated as of May 18, 2001, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10(h)(ii) to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2001 (SEC File No. 1-8399)

 

 

 

 

 

10.37

Amendment No. 2 to Receivables Purchase Agreement, dated as of May 31, 2004, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10(g)(x) to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2004 (SEC File No. 1-8399)

 

 

 

 

 

10.38

Amendment No. 3 to Receivables Purchase Agreement, dated as of January 27, 2005, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2005 (SEC File No. 1-8399)

 

 

 

 

 

10.39

Amendment No. 4 to Receivables Purchase Agreement, dated as of January 25, 2008, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2008 (SEC File No. 1-8399)

 

 

 

 

 

10.40

Amendment No. 5 to Receivables Purchase Agreement, dated as of January 22, 2009, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2009 (SEC File No. 1-8399)

 

 

 

 

 

 

114


Exhibit

 

Description of Exhibit

 

Location

10.41

Amendment No. 6 to Receivables Purchase Agreement, dated as of April 30, 2009, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009 (SEC File No. 1-8399)

 

 

 

 

 

10.42

Amendment No. 7 to Receivables Purchase Agreement, dated as of January 21, 2010, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2010 (SEC File No. 1-8399)

 

 

 

 

 

10.43

Amendment No. 8 to Receivables Purchase Agreement, dated as of April 16, 2010, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2010 (SEC File No. 1-8399)

 

 

 

 

 

10.44

Amendment No. 9 to Receivables Purchase Agreement, dated as of January 20, 2011, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.45

Amendment No. 10 to Receivables Purchase Agreement, dated as of February 28, 2011, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2011 (SEC File No. 1-8399)

 

 

 

 

 

 

115


Exhibit

 

Description of Exhibit

 

Location

10.46

Amendment No. 11 to Receivables Purchase Agreement, dated as of May 6, 2011, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.47

Amendment No. 12 to Receivables Purchase Agreement, dated as of January 19, 2012, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2012 (SEC File No. 1-8399)

 

 

 

 

 

10.48

Amendment No. 13 to Receivables Purchase Agreement, dated as of January 18, 2013, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2013 (SEC File No. 1-8399)

 

 

 

 

 

10.49

Amendment No. 14 to Receivables Purchase Agreement, dated as of July 15, 2013, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.48 to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2013 (SEC File No. 1-8399)

 

 

 

 

 

10.50

Amendment No. 15 to Receivables Purchase Agreement, dated as of October 11, 2013, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.57 to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2015 (SEC File No. 1-8399)

 

 

 

 

 

 

116


Exhibit

 

Description of Exhibit

 

Location

10.51

Amendment No. 16 to Receivables Purchase Agreement, dated as of May 23, 2014, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.58 to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2015 (SEC File No. 1-8399)

 

 

 

 

 

10.52

Amendment No. 17 to Receivables Purchase Agreement, dated as of January 16, 2015, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2015 (SEC File No. 1-8399)

 

 

 

 

 

10.53

Amendment No. 18 to Receivables Purchase Agreement, dated as of January 16, 2018, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2018 (SEC File No. 1-8399)

 

 

 

 

10.54

Amendment No. 19 to Receivables Purchase Agreement dated as of November 30, 2018, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

,

Incorporated herein by reference to Exhibit 10.58 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2019 (SEC File No. 1-8399)

 

 

 

 

10.55

Amendment No. 20 to Receivables Purchase Agreement, dated as of January 14, 2019, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2019 (SEC File No. 1-8399)

 

 

 

 

 

117


Exhibit

 

Description of Exhibit

 

Location

10.56

Amendment No. 21 to Receivables Purchase Agreement, dated as of January 13, 2020, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank National Associations, as Administrator [NOTE: The Receivables Purchase Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2020 (SEC File No. 1-8399)

 

 

 

 

10.57

Purchase and Sale Agreement, dated as of November 30, 2000, between the various originators listed therein and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10(h)(iii) to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2001 (SEC File No. 1-8399)

 

 

 

 

 

10.58

Amendment No. 1, dated as of May 18, 2001, to Purchase and Sale Agreement, dated as of November 30, 2000, between the various originators listed therein and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10(h)(iv) to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 2001 (SEC File No. 1-8399)

 

 

 

 

 

10.59

Amendment No. 2, dated as of August 25, 2006, to Purchase and Sale Agreement, dated as of November 30, 2000, between the various originators listed therein and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2006 (SEC File No. 1-8399)

 

 

 

 

 

10.60

Amendment No. 3, dated as of October 1, 2008, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various originators listed therein, Worthington Taylor, Inc. and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.61

Amendment No. 4, dated as of February 28, 2011, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various originators listed therein, Dietrich Industries, Inc. and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.62

Amendment No. 5, dated as of May 6, 2011, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various originators listed therein, The Gerstenslager Company and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.42 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.63

Amendment No. 6, dated as of January 19, 2012, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various originators listed therein and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2012 (SEC File No. 1-8399)

 

 

 

 

 

 

118


Exhibit

 

Description of Exhibit

 

Location

10.64

Amendment No. 7, dated as of January 16, 2015, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various originators listed therein, Advanced Component Technologies, Inc., Worthington Cylinders Mississippi, LLC, The Worthington Steel Company (North Carolina), Worthington Steel of Kentucky, L.L.C. and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2015 (SEC File No. 1-8399)

 

 

 

 

 

10.65

Amendment No. 8, dated as of February 18, 2015, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various originators listed therein and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2015 (SEC File No. 1-8399)

 

 

 

 

 

10.66

Amendment No. 9, dated as of November 30, 2018, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various originators listed therein, Worthington Torch, LLC and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2018 (SEC File No. 1-8399)

 

 

 

 

 

10.67

Amendment No. 10, dated as of January 14, 2019, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various Remaining Originators listed therein, Worthington Industries Engineered Cabs, Inc., Worthington Industries Engineered Cabs, LLC, AMTROL Inc., Westerman, Inc. and Worthington Receivables Corporation [NOTE: The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2019 (SEC File No. 1-8399)

 

 

 

 

10.68

Amendment No. 11, dated as of January 13, 2020, to Purchase and Sale Agreement, dates as of November 30, 2000, among the various Remaining Originators listed therein, Structural Composites Industries LLC and Worthington Receivables Corporation [NOTE:  The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2020 (SEC File No. 1-8399)

 

 

 

 

10.69

Summary of Annual Base Salaries Approved for Named Executive Officers of Worthington Industries, Inc.*

 

Filed herewith

 

 

 

 

 

10.70

Summary of Annual Cash Performance Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Shares granted in Fiscal 2012 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.47 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2011 (SEC File No. 1-8399)

 

 

 

 

 

10.71

Summary of Annual Cash Performance Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Shares granted in Fiscal 2013 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.56 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2012 (SEC File No. 1-8399)

 

 

 

 

 

10.72

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2014 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.62 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2013 (SEC File No. 1-8399)

 

 

 

 

 

119


 

Exhibit

 

Description of Exhibit

 

Location

10.73

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2015 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.71 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2014 (SEC File No. 1-8399)

 

 

 

 

 

10.74

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2016 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.74 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2015 (SEC File No. 1-8399)

 

 

 

 

 

10.75

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2017 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.71 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2016 (SEC File No. 1-8399)

 

 

 

 

 

10.76

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2018 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.74 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017 (SEC File No. 1-8399)

 

 

 

 

 

10.77

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2019 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.74 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2018 (SEC File No. 1-8399)

 

 

 

 

10.78

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2020 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.80 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2019 (SEC File No. 1-8399)

 

 

 

 

10.79

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2021 for then Named Executive Officers*

 

Incorporated herein by reference to Exhibit 10.77 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2020 (SEC File No. 1-8399)

 

10.80

 

 

 

Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2022 for Named Executive Officers *

 

 

 

 

Filed herewith

10.81

Retirement and Non-Competition Agreement – Mark A. Russell, made and entered between Mark A. Russell and Worthington Industries, Inc. (executed on August 27, 2018)*

 

Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2018 (SEC File No. 1-8399)

 

 

 

 

10.82

Restricted Stock Award Agreement entered into by Worthington Industries, Inc. with B. Andrew Rose in order to evidence the grant, effective as of September 26, 2018, of 175,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan*

 

Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2018 (SEC File No. 1-8399)

 

 

 

 

 

120


Exhibit

 

Description of Exhibit

 

Location

10.83

Restricted Stock Award Agreement entered into by Worthington Industries, Inc. with Geoffrey G. Gilmore in order to evidence the grant, effective as of September 26, 2018, of 50,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan*

 

Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2018 (SEC File No. 1-8399)

 

 

 

 

10.84

Form of Indemnification Agreement entered into between Worthington Industries, Inc. and each executive officer of Worthington Industries, Inc. *

 

Incorporated herein by reference to Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2008 (SEC File No. 1-8399)

 

 

 

 

 

10.85

 

 

 

 

10.86

 

 

 

 

 

 

 

10.87

 

 

 

 

 

 

10.88

Form of Indemnification Agreement entered into between Worthington Industries, Inc. and each non-employee director of Worthington Industries, Inc. *

 

 

Restricted Stock Award Agreement entered into by and between Worthington Industries, Inc. and Geoffrey G. Gilmore in order to evidence the grant, effective as of June 25, 2020, of 25,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan*

 

Restricted Stock Award Agreement entered into by and between Worthington Industries, Inc. and Jeff Klingler in order to evidence the grant, effective as of June 25, 2020, of 10,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan*

 

Restricted Stock Award Agreement entered into by and between Worthington Industries, Inc. and Eric M. Smolenski in order to evidence the grant, effective as of June 25, 2020, of 10,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan*

 

 

 

Incorporated herein by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended May 31, 2008 (SEC File No. 1-8399)

 

Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2020 (SEC File No. 1-8399)

 

 

 

 

Incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2020 (SEC File No. 1-8399)

 

 

 

Incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2020 (SEC File No. 1-8399)

 

 

 

 

 

21

Subsidiaries of Worthington Industries, Inc.

 

Filed herewith

 

 

 

 

 

23.1

Consent of Independent Registered Public Accounting Firm (KPMG LLP)

 

Filed herewith

 

 

 

 

 

23.2

Consent of Independent Auditors (KPMG LLP) with respect to consolidated financial statements of  Worthington Armstrong Venture

 

Filed herewith

 

 

 

 

 

24

Powers of Attorney of Directors and Certain Executive Officers of Worthington Industries, Inc.

 

Filed herewith

 

 

 

 

 

31.1

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

 

Filed herewith

 

 

 

 

 

31.2

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

 

Filed herewith

 

 

 

 

 

 

121


Exhibit

 

Description of Exhibit

 

Location

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

 

Furnished herewith

 

 

 

 

 

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

 

Furnished herewith

 

 

 

 

 

99.1

Worthington Armstrong Venture Consolidated Financial Statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018

 

Filed herewith

 

 

 

 

 

101.INS

Inline XBRL Instance Document

 

The instance document does not appear in the Interactive Date File because its XBRL tabs are imbedded within the Inline XBRL document.

 

 

 

 

 

101.SCH

Inline XBRL Taxonomy Extension Schema Document

 

Submitted electronically herewith #

 

 

 

 

 

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

Submitted electronically herewith #

 

 

 

 

 

101.DEF

Inline XBRL Taxonomy Definition Linkbase Document

 

Submitted electronically herewith #

 

 

 

 

 

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

 

Submitted electronically herewith #

 

 

 

 

 

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

Submitted electronically herewith #

 

 

 

 

104

Cover Page Interactive Date File

 

The cover page from this Annual Report on Form 10-K for the fiscal year ended May 31, 2020, formatted in Inline XBRL is included within the Exhibit 101 attachments

 

*

Indicates management contract or compensatory plan or arrangement.

#

Attached as Exhibit 101 to this Annual Report on Form 10-K for the fiscal year ended May 31, 2021 of Worthington Industries, Inc. are the following documents formatted in Inline XBRL (eXtensible Business Reporting Language):  

 

(i)

Consolidated Balance Sheets at May 31, 2021 and 2020;  

 

(ii)

Consolidated Statements of Earnings for the fiscal years ended May 31, 2021, 2020 and 2019;

 

(iii)

Consolidated Statements of Comprehensive Income for the fiscal years ended May 31, 2021, 2020 and 2019;

 

(iv)

Consolidated Statements of Equity for the fiscal years ended May 31, 2021, 2020 and 2019;

 

(v)

Consolidated Statements of Cash Flows for the fiscal years ended May 31, 2021, 2020 and 2019; and  

 

(vi)

Notes to Consolidated Financial Statements – fiscal years ended May 31, 2021, 2020 and 2019.

122


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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:   July 30, 2021

By:

 

/s/ B. Andrew Rose

 

 

 

B. Andrew Rose,

 

 

 

President and Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

 

SIGNATURE

 

DATE

 

TITLE

 

 

 

 

 

/s/ B. Andrew Rose

 

July 30, 2021

 

President and Chief Executive Officer

B. Andrew Rose

 

 

 

(Principal Executive Officer)

 

 

 

 

 

/s/ Joseph B. Hayek

 

July 30, 2021

 

Vice President and Chief Financial Officer

Joseph B. Hayek

 

 

 

(Principal Financial Officer)

 

 

 

 

 

/s/ Richard G. Welch

 

July 30, 2021

 

Controller

Richard G. Welch

 

 

 

(Principal Accounting Officer)

 

 

 

 

 

*

 

*

 

Executive Chairman and a Director

John P. McConnell

 

*

 

 

 

*

 

Director

Kerrii B. Anderson

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

David P. Blom

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

John B. Blystone

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

Mark C. Davis

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

Michael J. Endres

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

Ozey K. Horton, Jr.

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

Peter Karmanos, Jr.

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

Carl A. Nelson, Jr.

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

Sidney A. Ribeau

 

 

 

 

 

 

 

 

 

*

 

*

 

Director

Mary Schiavo

 

 

 

 

 

*

The undersigned, by signing his name hereto, does hereby sign this report on behalf of each of the above-identified directors of the Registrant pursuant to powers of attorney executed by such directors, which powers of attorney are filed with this report within Exhibit 24.

123


 

*By:

 

/s/ B. Andrew Rose

Date:  July 30, 2021

 

 

B. Andrew Rose

 

 

 

Attorney-In-Fact

 

 

124