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What changed in WORTHINGTON ENTERPRISES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WORTHINGTON ENTERPRISES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+419 added−355 removedSource: 10-K (2023-07-31) vs 10-K (2022-08-01)

Top changes in WORTHINGTON ENTERPRISES, INC.'s 2023 10-K

419 paragraphs added · 355 removed · 239 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+35 added−24 removed17 unchanged
Biggest changeWe use the registered trademark Balloon Time® to market helium-filled balloon kits; the registered trademark Bernzomatic® to market certain fuel cylinders and handheld torches; the trademark Worthington Pro Grade™ to market certain LPG cylinders, hand torches and camping fuel cylinders; the licensed registered trademark Coleman® to market certain camping fuel cylinders; the registered trademark Mag-Torch® to market certain handheld torches; the registered trademarks General®, Garden-Weasel®, Pactool International® and Level5® to market certain tools.
Biggest changeWe use the registered trademarks described above to market certain products such as helium-filled balloon kits, fuel cylinders, handheld torches, LPG cylinders, camping fuel cylinders, and other tools.
Accordingly, our investment is reflected on a single line in our 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. Equity income is included in the measurement of segment profit as set forth in the table below.
Accordingly, our investment is reflected on a single line on our 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. Equity income is included in the measurement of segment profit as set forth in the table below.
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 ("Workhorse"), 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.
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 (“Workhorse”), 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.
Human Capital Management Culture In line with our people-first philosophy, our employees have always been, and will always be, our most important asset. We operate 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.
In line with our people-first philosophy, our employees have always been, and will always be, our most important asset. We operate 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.
Historically, sales have generally been weaker in our fiscal third quarter, primarily due to reduced seasonal activity in the building and construction industry, as well as customer plant shutdowns due to holidays, particularly in the automotive industry. We do not believe backlog is a significant indicator of our business.
Historically, sales have generally been weaker in our third fiscal quarter, primarily due to reduced seasonal activity in the building products and construction industry, as well as customer plant shutdowns due to holidays, particularly in the automotive industry. We do not believe backlog is a significant indicator of our business.
Workhorse 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 North American manufacturers of ceiling suspension systems for concealed and lay-in panel ceilings used in commercial and residential ceiling markets.
Workhorse operates six manufacturing facilities, one each in Brazil, South Dakota and Tennessee and three in Minnesota. • Worthington Armstrong Venture (“WAVE”), a 50%-owned joint venture with a subsidiary of Armstrong World Industries, Inc., is the largest of the four North American manufacturers of ceiling suspension systems for concealed and lay-in panel ceilings used in commercial and residential ceiling markets.
Consumer Products Consumer Products consists of products in the tools, outdoor living and celebrations end markets sold under market-leading brands that include Coleman® (licensed), Bernzomatic®, Balloon Time®, Mag-Torch®, General®, Garden-Weasel®, Pactool International®, Hawkeye™, Worthington Pro Grade™ and Level5®.
Consumer Products Consumer Products consists of products in the tools, outdoor living and celebrations end markets sold under brands that include the following: Coleman® (licensed), Bernzomatic®, Balloon Time®, Mag-Torch®, General®, Garden-Weasel®, Pactool International®, Hawkeye™, Worthington Pro Grade™ and Level5®.
These products cannot typically be supplied as efficiently by steel mills to the end-users of these products. Steel Processing, including Spartan, TWB, Samuel, and WSP, operates 29 manufacturing facilities located in Ohio (9), Michigan (5), Tennessee (2), Kentucky (2), Indiana (1), Illinois (1), New York (1), Canada (2), China (1), India (1) and Mexico (4).
These products cannot typically be supplied as efficiently by steel mills to the end-users of these products. Steel Processing, including Samuel, Spartan and TWB, operates 28 manufacturing facilities located in Ohio (9), Michigan (4), Tennessee (2), Kentucky (2), Indiana (1), Illinois (1), New York (1), Canada (2), China (1), India (1) and Mexico (4).
Our manufactured products include: pressure cylinders for liquefied petroleum gas (“LPG”), compressed natural gas (“CNG”), hydrogen, 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; specialized hand tools and instruments; and drywall tools and related accessories; 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.
Our manufactured products include: pressure cylinders for liquefied petroleum gas (“LPG”), compressed natural gas (“CNG”), hydrogen, 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; specialized hand tools and instruments; and drywall tools and related accessories; and, through our joint ventures, complete ceiling grid solutions; laser welded blanks; light gauge steel framing for commercial and residential construction; engineered cabs, operator stations and cab components.
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 our overall costs and capital expenditures and, accordingly, are not anticipated to have a material effect on our financial position, results of operations, cash flows or the competitive position.
The cost of such activities, compliance or capital expenditures for environmental control facilities necessary to meet regulatory requirements are not estimable, but have not and are not anticipated to be material when compared with our overall costs and capital expenditures and, accordingly, are not anticipated to have a material effect on our financial position, results of operations, cash flows or the competitive position.
Our fiscal year ends each May 31, with “fiscal 2020” ended May 31, 2020, “fiscal 2021” ended May 31, 2021, and “fiscal 2022” ended May 31, 2022. Our fiscal quarters end on the final day of each August, November, February and May. We are headquartered at 200 Old Wilson Bridge Road, Columbus, Ohio 43085, telephone (614) 438-3210.
Our fiscal year ends each May 31, with “fiscal 2021” ended May 31, 2021, “fiscal 2022” ended May 31, 2022, and “fiscal 2023” ended May 31, 2023. Our fiscal quarters end on the final day of each August, November, February and May. We are headquartered at 200 West Old Wilson Bridge Road, Columbus, Ohio 43085, telephone (614) 438-3210.
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.
ClarkDietrich operates 14 manufacturing facilities, one each in Connecticut, Georgia, Illinois, Maryland, Missouri and Canada 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.
Suppliers The primary raw material we purchase 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.
The primary raw material we purchase is steel. We purchase steel in large quantities at regular intervals from major steel mills, both U.S. domestic and foreign. The amount purchased from any supplier varies from year to year depending on a number of factors including market conditions, then current relationships and prices and terms offered.
For fiscal 2022, fiscal 2021 and fiscal 2020, the percentage of our consolidated net sales generated by Steel Processing was approximately 75.0%, 64.9% and 60.8%, respectively. Steel Processing is one of the largest independent intermediate processors of flat-rolled steel in the U.S. It occupies a niche in the steel industry by focusing on products requiring exact specifications.
For fiscal 2023, fiscal 2022 and fiscal 2021, the percentage of our consolidated net sales generated by Steel Processing was approximately 71.1%, 75.0% and 64.9%, respectively. Steel Processing is one of the largest independent intermediate processors of carbon flat-rolled steel in the U.S. It occupies a niche in the steel industry by focusing on products requiring exact specifications.
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.
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.
International operations accounted for approximately 6% of our consolidated net sales during fiscal 2022 and were comprised primarily of sales to customers in Europe. Sales to one customer in the automotive industry accounted for 13% of our consolidated net sales in fiscal 2022.
International operations accounted for approximately 13% of our consolidated net sales during fiscal 2023 and were comprised primarily of sales to customers in Europe. Sales to one customer in the automotive industry accounted for 11.9% of our consolidated net sales in fiscal 2023.
Founded in 1955, we are an industrial manufacturing company, focused on value-added steel processing and manufactured consumer, building and sustainable mobility products.
Founded in 1955, we are an industrial manufacturing company, focused on value-added steel processing, laser welded solutions, electrical steel laminations and manufactured consumer, building and sustainable mobility products.
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 2022, we purchased approximately 2.66 million tons of steel (66.9% hot-rolled, 19.3% cold-rolled and 13.8% galvanized) on a consolidated basis.
In nearly all market conditions, steel is available from a few suppliers and generally any supplier relationship or contract can and has been replaced with little or no significant interruption to our business. During fiscal 2023, we purchased approximately 2.67 million tons of steel (66.1% hot-rolled, 20.2% cold-rolled and 13.7% galvanized) on a consolidated basis.
Our operations are managed principally on a products and services basis and are comprised of four primary operating segments which correspond with our reportable business segments: “Steel Processing,” “Consumer Products,” “Building Products,” and “Sustainable Energy Solutions.” We hold equity positions in nine joint ventures, which are further discussed in the Joint Ventures section below. Of these, Spartan Steel Coating, L.L.C.
Our operations are managed and reported principally on a products and services basis and are comprised of four operating segments: “Steel Processing,” “Consumer Products,” “Building Products,” and “Sustainable Energy Solutions.” We hold equity positions in seven operating joint ventures, which are further discussed in the Our Joint Ventures section below. Of these, Spartan Steel Coating, L.L.C. (“Spartan”), TWB Company L.L.C.
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” and, collectively with the subsidiaries of Worthington Industries, “we,” “our,” “Worthington” or the “Company”).
Item 1. — Business General Overview Worthington Industries, is a corporation formed under the laws of the State of Ohio (collectively with the subsidiaries of Worthington Industries, “we,” “our,” “us,” “Worthington” or the “Company”).
Building Products is a leading supplier to the European market for low-pressure non-refillable cylinders. Building Products 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 segments, competition is based upon price, service and quality.
Building Products 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 segments, competition is based upon price, service and quality.
Supply contracts are also entered into, some of which have fixed pricing and some of which are indexed (monthly or quarterly). During fiscal 2022, 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”).
Supply contracts are also entered into, some of which have fixed pricing and some of which are indexed (monthly or quarterly). During fiscal 2023, we purchased steel from the following major suppliers, in alphabetical order: AM-NS Calvert LLC; Cleveland-Cliffs Steel Inc.; NLMK Indiana; North Star BlueScope Steel, LLC; and Nucor Corporation.
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, 2022, we participated in four consolidated and five unconsolidated joint ventures.
Our 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, 2023, we participated in seven operating joint ventures and one non-operating joint venture.
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. 6 Table of Contents Seasonality and Backlog Demand for most of our products remained strong throughout fiscal 2022, but sales are generally strongest in our fiscal fourth quarter as our businesses are generally operating at seasonal peaks.
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 Sales for most of our products are generally strongest in our fourth fiscal quarter when our facilities generally operate at seasonal peaks.
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 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 allows us to earn a fee for services without incurring inventory costs.
We believe 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.
Of the aggregate of those groups, approximately 12% of those individuals are represented by collective bargaining units. We believe 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.
Sustainable Energy Solutions Sustainable Energy Solutions, includes onboard fueling systems and services, as well as gas containment solutions and services for storage, transport and distribution of industrial gases operated out of three manufacturing facilities located in Austria, Germany, and Poland.
Sustainable Energy Solutions Sustainable Energy Solutions, which is primarily based in Europe, sells onboard fueling systems and related services, as well as gas containment solutions and services for the storage, transport and distribution of industrial gases. Sustainable Energy Solutions operates three manufacturing facilities located in Austria, Germany, and Poland.
Refer to the following segment descriptions and “ Note P – Segment Data ” for a full description of our reportable business segments. Steel Processing Steel Processing is a value-added processor of carbon flat-rolled steel, a producer of laser welded solutions, and provider of electrical steel laminations. The segment includes our four consolidated joint ventures, Samuel, Spartan, TWB, and WSP.
Refer to the following segment descriptions and “Note P – Segment Data” for a full description of our reportable segments. Steel Processing Steel Processing is a value-added processor of carbon flat-rolled steel, a producer of laser welded solutions, and a provider of electrical steel laminations.
These pillars serve as a foundation for continually building and fostering an inclusive culture. We have also established certain employee resource groups (“ERGs”) that each have executive sponsors, and are working to establish additional ERGs.
These pillars serve as a foundation for continually building and fostering an inclusive culture. We have also established certain employee resource groups (“ERGs”) that each have executive sponsors, and are working to establish additional ERGs. These ERGs are not only being tasked with raising awareness, but also with offering mentoring and development opportunities to their members. 8 Table of Contents
Major suppliers of aluminum in fiscal 2022 were, in alphabetical order: Arconic Inc.; Horizon; Meyer Aluminum; Norsk Hydro; Novelis Corporation; and Penn Aluminum International. Major suppliers of zinc to Steel Processing in fiscal 2022 were, in alphabetical order: Considar Metal Marketing Inc. (a/k/a HudBay); Glencore Ltd; Teck Resources Limited; and Trafigura Trading LLC.
Major suppliers of zinc to Steel Processing in fiscal 2023 were, in alphabetical order: Concord Resources Limited; Glencore Ltd; Nexa Resources US Inc.; and Teck Resources Limited. Major suppliers of aluminum in fiscal 2023 were, in alphabetical order: Arconic Inc.; Meyer Aluminum Blanks, Inc.; Norsk Hydro ASA; Novelis Corporation; and Penn Aluminum International LLC.
Steel is primarily purchased and processed by Steel Processing based on specific customer orders, while Consumer Products, Building Products, and Sustainable Energy Solutions purchase steel to meet production schedules. For certain raw materials, for example, helium and zinc, there are limited suppliers and our purchases are generally at market prices.
Steel is primarily purchased and processed by Steel Processing based on specific customer orders, while Consumer Products, Building Products, and Sustainable Energy Solutions purchase steel to meet production schedules. Raw materials are generally purchased in the open market on a negotiated basis.
It competes with the other North American manufacturers and numerous regional manufacturers. WAVE operates six manufacturing facilities, one each in Georgia, Maryland, Michigan, and Nevada and two in California.
It competes with the other North American manufacturers and numerous regional manufacturers. WAVE operates seven manufacturing facilities, one each in Georgia, Michigan, and Nevada and two each in California and Maryland. See “Note D – Investments in Unconsolidated Affiliates” for additional information about our unconsolidated joint ventures.
Building Products has one principal domestic competitor in the low-pressure LPG cylinder market, and there are a number of foreign competitors in both of the LPG cylinder and the non-refillable refrigerant markets. We believe that this business has the largest market share in the domestic low-pressure cylinder market. In the other cylinder markets, there are several competitors.
We believe that this business has the largest market share in the domestic low-pressure cylinder market. In the other cylinder markets, there are several competitors. Building Products is a leading supplier to the European market for low-pressure non-refillable cylinders.
Located in 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 joint venture with a subsidiary of Baoshan Iron & Steel Co., Ltd.
Consolidated • Samuel is a 63%-owned joint venture with Samuel Manu-Tach Pickling Inc., that operates two pickling facilities in Ohio. • Spartan is a 52%-owned joint venture that 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.
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 U.S.
Steel Processing Consumer Products Building Products Sustainable Energy Solutions Other Serviacero Worthington N/A WAVE N/A Workhorse ClarkDietrich 6 Table of Contents • 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 U.S.
Steel Processing serviced approximately 1,300 customers during fiscal 2022 in many end markets including automotive, aerospace, agricultural, appliance, construction, container, energy, 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.
Steel Processing serviced approximately 1,300 customers during fiscal 2023 in many end markets including automotive, heavy truck, agriculture, construction, and energy. The automotive industry is one of the largest consumers of flat-rolled steel, and thus the largest end market for Steel Processing. During fiscal 2023, Steel Processing’s top three customers represented approximately 31.0% of the operating segment’s total net sales.
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.
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. 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.
On June 9, 2021, our consolidated joint venture, Worthington Specialty Processing (“WSP”), sold the remaining assets of its Canton, Michigan, facility for approximately $20 million, resulting in a pre-tax gain of $12.2 million within restructuring and other income, net.
Refer to “Note A – Summary of Significant Accounting Policies” for additional information. • On October 31, 2022, our consolidated joint venture, Worthington Specialty Processing (“WSP”), sold its remaining manufacturing facility, located in Jackson, Michigan, for net proceeds of approximately $21.3 million, resulting in a pre-tax gain of $3.9 million within restructuring and other (income) expense, net.
See “ Note D – Investments in Unconsolidated Affiliates ” for additional information about our unconsolidated joint ventures. 8 Table of Contents 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.
Environmental Matters Our manufacturing facilities, like 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.
Twenty-eight of these facilities are operated by our wholly-owned and consolidated subsidiaries. The remaining 48 facilities are operated by our consolidated (15) and unconsolidated joint ventures (33).
Segments We, together with our consolidated and unconsolidated affiliates, operate 72 manufacturing facilities in 21 states and 10 countries. Twenty-eight of these facilities are operated by our wholly-owned, consolidated subsidiaries. The remaining 44 facilities are operated by our consolidated joint ventures (14) and unconsolidated joint ventures (30).
Other Other consists of divested businesses historically reported within our legacy Pressure Cylinders segment but no longer included in our management structure and are presented within the “Other” category, on a historical basis, through the date of disposal.
Other Divested businesses historically reported within our legacy Pressure Cylinders segment, but no longer included in our management structure are presented within the “Other” category and include the following through the date of disposition: Structural Composites Industries, LLC (“SCI”) (until March 2021); Oil & Gas Equipment (until January 2021); and Cryogenic Storage and Cryo-Science (until October 2020).
The purchase price was approximately $55.0 million, subject to post-closing adjustments, with a potential earnout payment of up to $25.0 million based on performance through 2024.
The total purchase price was approximately $56.1 million, with a potential earnout based on performance through calendar year 2024.
For fiscal 2022, Steel Processing’s top three customers represented approximately 27% of the operating segment’s total net sales. 2 Table of Contents 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.
With the acquisition of Tempel Steel Company (“Tempel”) in fiscal 2022, our geographic operations expanded to include the Asia Pacific region. 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.
It includes high pressure and acetylene cylinders for life support systems and alternative fuel cylinders used to hold CNG and hydrogen for automobiles, buses, and light-duty trucks. Sustainable Energy Solutions generated approximately 2.5%, 4.3% and 4.0% of our consolidated net sales in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. Sustainable Energy Solutions serviced approximately 500 customers during fiscal 2022.
Sustainable Energy Solutions generated approximately 3.0%, 2.5% and 4.3% of our consolidated net sales in fiscal 2023, fiscal 2022 and fiscal 2021, respectively. Sustainable Energy Solutions serviced approximately 300 customers during fiscal 2023.
Consumer Products generated approximately 12.1%, 16.5% and 14.7% of our consolidated net sales in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. Consumer Products serviced approximately 1,700 customers during fiscal 2022. Sales to the top customer represented approximately 22% of net sales for Consumer Products during fiscal 2022.
We intend to continue using the trade names and trademarks described above and to timely renew each of our registered trademarks that remains in use. Consumer Products generated approximately 14.0%, 12.1% and 16.5% of our consolidated net sales in fiscal 2023, fiscal 2022 and fiscal 2021, respectively. Consumer Products serviced approximately 2,000 customers during fiscal 2023.
Outside the U.S. 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, the American Society of Mechanical Engineers and UL Solutions.
For sales in the U.S. and Canada, our manufactured building products are designed to comply with U.S. Department of Transportation and Transport Canada specifications. Outside the U.S. and Canada, cylinders are manufactured according to European norm specifications, as well as various other international standards.
Building Products serviced approximately 1,600 customers during fiscal 2022. Building Products operates six manufacturing facilities located in Kentucky, Maryland, Ohio (2), Rhode Island, and Portugal. 4 Table of Contents For sales in the U.S. and Canada, cylinders are primarily manufactured in accordance with U.S. Department of Transportation and Transport Canada specifications.
Building Products generated approximately 11.9%, 10.3% and 12.7% of our consolidated net sales in fiscal 2023, fiscal 2022 and fiscal 2021, respectively. Building Products serviced approximately 1,700 customers during fiscal 2023. Building Products operates six manufacturing facilities located in Kentucky, Maryland, Ohio (2), Rhode Island, and Portugal.
Well water tanks and expansion tanks are used in the residential market with the latter also sold into commercial markets. Specialty products include a variety of fire suppression and chemical tanks. Building Products generated approximately 10.3%, 12.7% and 12.5% of our consolidated net sales in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.
Well water tanks and expansion tanks are used primarily in the residential market with certain products also sold to commercial markets. Specialty products include a variety of fire suppression tanks, chemical tanks, and foam and adhesive tanks. This segment also includes two unconsolidated joint ventures, WAVE and ClarkDietrich (see the Our Joint Ventures section below).
WSP’s services include slitting, blanking, cutting-to-length, laser blanking, and warehousing. 7 Table of Contents 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.
Steel, became a non-operating joint venture on October 31, 2022, when WSP sold the remaining net assets of the joint venture. Unconsolidated Since we do not control the following four joint ventures, they are unconsolidated, and their results have been accounted for using the equity method.
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.
In addition to providing incremental coating capacity, this joint venture has served to expand our coating capabilities to included aluminized steel to serve new markets. • TWB is a 55%-owned joint venture that supplies laser welded blanks, tailor welded aluminum blanks, laser welded coils and other laser welded products across North America for use primarily in the automotive industry for products such as inner-door panels, frame rails and pillars. • WSP, a 51%-owned joint venture with a subsidiary of U.S.
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).
Our manufacturing facilities further benefit from the flexibility to scale between direct versus tolling services based on demand throughout the year. 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.
These ERGs are not only being tasked with raising awareness, but also with offering mentoring and development opportunities to their members. 9 Table of Contents 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.
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.
Approximately 45.51 million pounds of zinc and 3.57 million pounds of aluminum were purchased in fiscal 2022. We believe our supplier relationships are generally favorable. Technical Services We employ a staff of engineers and other technical personnel, and we maintain fully-equipped laboratories to support operations.
Approximately 41.30 million pounds of zinc and 4.22 million pounds of aluminum were purchased in fiscal 2023. We believe our supplier relationships are generally favorable. 5 Table of Contents Technical Services We recognize the importance of the metallurgical and technical aspects of our value-added steel products.
We intend to continue using the trade names and trademarks described above and to timely renew each of our registered trademarks that remains in use. Building Products Building Products sells refrigerant and LPG cylinders, well water and expansion tanks, and other specialty products, which are generally sold to gas producers, and distributors.
Sales to the top customer represented approximately 21.0% of net sales for Consumer Products during fiscal 2023. Consumer Products operates five manufacturing facilities located in Kansas (2), New Jersey, Ohio, and Wisconsin. Building Products Building Products sells refrigerant and LPG cylinders, well water and expansion tanks, and other specialty products, which are generally sold to gas producers, and distributors.
(“Spartan”), TWB, Worthington Samuel Coil Processing LLC ("Samuel") and WSP are consolidated with their operating results reported within Steel Processing. During fiscal 2022, Steel Processing, Consumer Products, Building Products and Sustainable Energy Solutions served approximately 1,300, 1,700, 1,600, and 500 customers, respectively, located primarily in the United States and Europe.
See “Note F – Restructuring and Other (Income) Expense, Net” for additional information. 2 Table of Contents During fiscal 2023, Steel Processing, Consumer Products, Building Products and Sustainable Energy Solutions served approximately 1,300, 2,000, 1,700, and 300 customers, respectively, located primarily in North America and Europe.
Removed
Recent Developments Effective June 1, 2021, the start of fiscal 2022, our legacy Pressure Cylinders segment was divided into three new reportable segments: Consumer Products, Building Products and Sustainable Energy Solutions. On June 8, 2021, we acquired certain assets of the Shiloh Industries’ (“Shiloh”) U.S. BlankLight® business, a provider of laser welded solutions, for approximately $104.5 million.
Added
Separation of the Steel Processing Business On September 29, 2022, we announced our intention to complete the Separation, resulting in Worthington Steel becoming a stand-alone publicly traded company, through a generally tax-free pro rata distribution of 100% of the common shares of Worthington Steel to Worthington Industries’ shareholders.
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The acquisition included three facilities that expand the capacity and capabilities of our consolidated joint venture, TWB Company, L.L.C. (“TWB”) and its laser welded products business and an additional blanking facility that supports the core operations of our Steel Processing segment.
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The remaining company (“New Worthington”) is expected to be comprised of our Consumer Products, Building Products and Sustainable Energy Solutions operating segments.
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Additionally, on May 2, 2022, we purchased the non-controlling 49% interest in Worthington Taylor, LLC (“Worthington Taylor”), the entity which owned the assets of WSP’s former Taylor, Michigan facility, for approximately $6.8 million. Worthington Taylor is now one of our wholly-owned subsidiaries. WSP continues to operate one location in Jackson, Michigan.
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While we currently intend to effect the distribution, subject to satisfaction of certain conditions, we have no obligation to pursue or consummate any disposition of our ownership interest in Worthington Steel, including through the distribution, by any specified date or at all.
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On August 20, 2021, we amended and restated our existing multi-year, revolving credit facility, extending the final maturity to August 20, 2026.
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The distribution is subject to various conditions, including final approval by the Board; the completion of the transfer of assets and liabilities to Worthington Steel in accordance with the separation agreement; due execution and delivery of the agreements relating to the Separation; no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition in effect preventing the consummation of the Separation, the distribution or any of the related transactions; acceptance for listing on the NYSE of the common shares of Worthington Steel to be distributed, subject to official notice of distribution; completion of financing, and no other event or development having occurred or being in existence that, in the judgment of the Board, in its sole discretion, makes it inadvisable to effect the Separation, the distribution or the other related transactions. 1 Table of Contents Recent Business Developments • On June 2, 2022, we acquired Level 5 Tools, LLC (“Level5”), a leading provider of drywall tools and related accessories.
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The aggregate commitments available under the amended and restated revolving credit facility remained at $500 million. 1 Table of Contents On December 1, 2021, we acquired all of the issued and outstanding capital stock of Tempel Steel Company (“Tempel”), a leading global manufacturer of precision motor and transformer laminations for the electrical steel market.
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Refer to “Note Q – Acquisitions” for additional information. • On August 3, 2022, we sold our 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (“ArtiFlex”) to the unaffiliated joint venture member for net proceeds of approximately $41.8 million, after adjustments for closing debt and final net working capital.
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The purchase price consisted of cash consideration of approximately $272.2 million, net of cash acquired, plus the assumption of certain long-term liabilities. Tempel, which operates as part of our Steel Processing business segment, employs approximately 1,500 people, and is headquartered in Chicago, Illinois, with additional manufacturing locations in Burlington, Canada, Changzhou, China, Chennai, India and Monterrey, Mexico.
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Approximately $6.0 million of the total cash proceeds were attributed to real property in Wooster, Ohio, with a net book value of $6.3 million. This real property was owned by us and leased to ArtiFlex prior to closing of the transaction.
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On May 19, 2022, we established a revolving trade accounts receivable securitization facility allowing us to borrow up to $175.0 million. Refer to “ Note I - Debt and Receivables Securitization ” for additional information. On June 2, 2022, we acquired Level5 Tools, LLC (“Level5 Tools”), a leading provider of drywall tools and related accessories.
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During fiscal 2023, we recognized a pre-tax loss of $16.1 million in equity income related to the sale. • On September 29, 2022, we announced that the Board approved a plan to pursue the Separation of our Steel Processing business which we expect to complete by early 2024.
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On June 22, 2022, the Board of Directors of Worthington Industries (the “Board”) declared a quarterly dividend of $0.31 per share payable on September 29, 2022 to shareholders of record on September 15, 2022, an increase of $0.03 per share. Segments We, together with our unconsolidated affiliates, operate 76 manufacturing facilities in 21 states and 10 countries.
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This plan is referred to as “Worthington 2024.” Worthington 2024 will result in two independent, publicly-traded companies that are more specialized and fit-for purpose, with enhanced prospects for growth and value creation.
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Computer-aided processing capabilities include, among others: • aluminum die casting, which injects molten aluminum into electrical motor components to improve motor efficiency; • progressive stamping and notching, a process used to convert steel coils into electrical motor laminates; • transformer core winding and blank sheet stacking, processes used to convert steel coils into electrical transformer cores; • 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; • 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; • 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. 3 Table of Contents Steel Processing also toll processes steel for steel mills, large end-users, service centers and other processors.
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We plan to effect the Separation via a distribution of the common shares of Worthington Steel, which is expected to be tax-free to shareholders of Worthington Industries for U.S. federal income tax purposes.
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Toll processing allows us to earn a fee for services without incurring inventory costs while enhancing Steel Processing'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.
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Refer to “Note F – Restructuring and Other (Income) Expense, Net” for additional information. • On January 5, 2023, we announced the implementation of a Board transition plan, pursuant to which John H. McConnell II was appointed as a member of the Board, effective on January 4, 2023. As previously disclosed on January 4, 2023, John P.
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Consumer Products operates five manufacturing facilities located in Kansas (2), New Jersey, Ohio, and Wisconsin.
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McConnell, Executive Chairman of Worthington Industries, notified the Board that he intended to step down from the Board in June 2023. On June 28, 2023, John P. McConnell notified the Board that he intends to defer his retirement and will remain on the Board to continue providing leadership to Worthington and the Board in preparation for the planned Separation.
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For the periods presented, these include the following: Structural Composites Industries, LLC ("SCI") (until March 2021); Oil & Gas Equipment (until January 2021); and Cryogenic Storage and Cryo-Science (until October 2020).
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McConnell’s retirement has not been fixed. • On February 2, 2023, we announced the senior leadership teams for New Worthington and Worthington Steel, which will be effective upon the completion of the planned Separation. • On June 28, 2023, the Board declared a quarterly dividend of $0.32 per common share payable on September 29, 2023, to Worthington Industries’ shareholders of record on September 15, 2023. • On June 29, 2023, we terminated our revolving trade accounts receivable securitization facility allowing us to borrow up to $175.0 million (the “AR Facility”).
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The Other category also includes the results of our former Engineered Cabs operating segment, on a historical basis, through the date of disposition (November 1, 2019) as well as certain income and expense items not allocated to our operating segments. 5 Table of Contents Segment Financial Data Financial information for the reportable business segments is provided in “ Note P – Segment Data ”.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

72 edited+46 added−11 removed94 unchanged
Biggest changeFor 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.
Biggest changeFor example, because they are joint ventures, we do not have full control of every aspect of the joint venture’s business and/or certain significant decisions concerning the joint venture, which may require certain approvals from the other members in our joint ventures, and the other members in our joint ventures may take action contrary to our policies or objectives with respect to our investments, or may otherwise be unable or unwilling to support actions that we believe are in the best interests of the respective joint venture, each of which could have an adverse effect on that joint venture and our financial results. 14 Table of Contents Acquisitions We may be unable to successfully consummate, manage or integrate our acquisitions or our acquisitions may not meet our expectations.
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 any of those relationships were disrupted, it could have an adverse effect on delivery times and the overall cost, quality and availability 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.
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. Claims and Insurance Adverse claims experience, to the extent not covered by insurance, may have an adverse effect on our financial results.
An adverse ruling or settlement or an unfavorable change in laws, rules or regulations could have a material adverse effect on our financial condition, results of operations or liquidity. Claims and Insurance Adverse claims experience, to the extent not covered by insurance, may have an adverse effect on our financial results.
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.
Although we currently have cash reserves, as well as adequate 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.
Although we experienced consistently strong demand for many of our products in each quarter of fiscal 2022, 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 weakest 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.
Although we experienced consistently strong demand for many of our products in each quarter of fiscal 2023, our sales are generally strongest in the fourth quarter of the fiscal year when all of our operating segments are normally operating at seasonal peaks, and our sales are generally weakest 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.
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.
Depending on a variety of factors, including raw material, energy, labor and capital costs, freight availability, 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.
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.
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 affect the U.S. economy or specific portions thereof.
Our businesses depend on the transfer of data between our affiliated entities, to and from our business partners, and with third-party service provider, which may be subject to global data privacy laws and cross-border transfer restrictions.
Our businesses depend on the transfer of data between our affiliated entities, to and from our business partners, and with third-party service providers, which may be subject to global data privacy laws and cross-border transfer restrictions.
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. 11 Table of Contents 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.
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.
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.
The demand for our products is directly related to, and quickly impacted by, customer demand in our end markets, 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.
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, international conflicts (such as the war in Ukraine), 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.
Business disruptions, including materials resulting from 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, international conflicts (such as the war in Ukraine), labor disruptions, the idling of facilities due to reduced demand (resulting from a downturn in economic activity or otherwise), pandemic disease such as COVID-19, or other events (such as required maintenance shutdowns), could cause interruptions to our businesses as well as the operations of our customers and suppliers.
Failing to realize the benefits could have a material adverse effect on our financial condition and results of operations. 15 Table of Contents Capital Expenditures and Capital Resources 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.
Failing to realize the benefits could have a material adverse effect on our financial condition and results of operations. Capital Expenditures and Capital Resources 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.
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. 12 Table of Contents The closing or relocation of customer facilities could adversely affect us.
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 certain of our products. The closing or relocation of customer facilities could adversely affect us.
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. 17 Table of Contents Environmental, Health and Safety We may incur additional costs related to environmental and health and safety matters.
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.
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.
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 and, therefore, adversely impact us.
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.
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 continued volatility in steel prices.
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.
Risks Related to Our Business 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.
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 any resurgence of COVID-19, 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 to what extent normal economic and operating conditions resume.
Despite our efforts to manage the impacts, the degree to which the COVID-19 pandemic or future public health emergencies 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 any resurgence of COVID-19, the actions taken to contain COVID-19 or future public health emergencies and mitigate their public health effects, the impact on the U.S. and global economies and demand for our products, and to what extent normal economic and operating conditions resume.
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. Approximately 50% of the net sales of our Steel Processing operating segment and a significant amount of the net sales of certain joint ventures are to automotive-related customers.
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. Approximately 52% of the fiscal 2023 net sales of our Steel Processing operating segment and a significant amount of the net sales of certain joint ventures are to automotive-related customers.
While we undertake mitigating activities to counter these risks, a system failure could negatively impact our operations and financial results and cyberattacks could threaten the integrity of our trade secrets and sensitive intellectual property. Business Disruptions Disruptions to our business or the business of our customers or suppliers could adversely impact our operations and financial results .
While we undertake mitigating activities to counter these risks, a system or human failure could negatively impact our operations and financial results and cyberattacks could threaten the integrity of our trade secrets and sensitive intellectual property. 13 Table of Contents Business Disruptions Disruptions to our business or the business of our customers or suppliers could adversely impact our operations and financial results .
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.
Many of our key end markets, such as automotive and construction, are cyclical and can be impacted by both market demand and raw material supply, particularly with respect to steel.
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.
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. 10 Table of Contents Many of our key end markets, such as automotive and construction, are cyclical in nature.
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. The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.
Future disruption to the global economy, as well as to the end markets our business serves, could result in material adverse effects on our business, financial position, results of operations and cash flows. The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.
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.
Over the years, we 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.
The following discussion, as well as other sections of this Form 10-K, including “PART II—Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe certain business risks.
The following discussion, as well as other sections of this Form 10-K, including “PART II—Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe certain risks to our business, our results, our strategies and the common shares.
Consideration should be given to the risk factors described below as well as those in the Safe Harbor Statement at the beginning of this Form 10-K, in conjunction with reviewing the forward-looking statements and other information contained in this Form 10-K. The risks described below are not the only risks we face.
Consideration should be given to the risk factors described below as well as those in the Safe Harbor Statement at the beginning of this Form 10-K, in conjunction with reviewing the forward-looking statements and other information contained in this Form 10-K.
For the five-year period ended May 31, 2022, our total capital expenditures, including acquisitions and investment activity, were approximately $1.3 billion. Additionally, as of May 31, 2022, we were obligated to make aggregate operating and financing lease payments of $123.5 million and $6.2 million, respectively, under lease agreements. Our businesses also require expenditures for maintenance of our facilities.
For the five-year period ended May 31, 2023, our total capital expenditures, including acquisitions and investment activity, were approximately $1.0 billion. Additionally, as of May 31, 2023, we were obligated to make aggregate operating and financing lease payments of $125.0 million and $6.0 million, respectively, under lease agreements. Our businesses also require expenditures for maintenance of our facilities.
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.
Further impacts of the COVID-19 pandemic or other future public health emergencies may 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 volatility in the financial and commodity markets, including volatility in raw material and other input costs.
However, if steel prices or other raw material prices 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.
If steel prices or other raw material prices were to decrease, competitive conditions or contractual obligations 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, which results in inventory holding losses.
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. 14 Table of Contents Foreign Operations Economic, political and other risks associated with foreign operations could adversely affect our international financial results.
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.
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 (such as the continued semi-conductor shortage), has negatively impacted and could continue to negatively impact our business.
A reduction in sales for any of the Detroit Three automakers, as well as additional or prolonged idling of production facilities in response to supply chain constraints, has negatively impacted and could continue to negatively impact 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 and our financial results.
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 and our financial results . We have been successful in the development and operation of various joint ventures.
Item 1A. — Risk Factors Future results and the market price for the common shares are subject to numerous risks, many of which are driven by factors that cannot be controlled or predicted.
Item 1A. — Risk Factors Our future results and the market price for the common shares are subject to numerous risks, many of which are driven by factors that we cannot control or predict.
Although the substantial majority of our business activity takes place in the U.S., 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.
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 U.S., 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.
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.
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.
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.
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.
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 us, our customers, or 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.
In particular, there is no guarantee that the credit markets or liquidity will not once again be restricted. Stricter lending standards may make it more difficult and costly for some firms to access the credit markets.
Lack of, or limited access to, capital would adversely affect our suppliers to produce the materials we need for our operations and our customers’ ability to purchase our products or, in some cases, to pay for our products on a timely basis. 18 Table of Contents Tax Laws and Regulations Tax increases or changes in tax laws or regulations could adversely affect our financial results.
Lack of, or limited access to, capital would adversely affect our suppliers to produce the materials we need for our operations and our customers’ ability to purchase our products or, in some cases, to pay for our products on a timely basis.
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.
Decreasing steel prices could also require us to write-down the value of our inventory to reflect current net realizable value. 9 Table of Contents 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 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.
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. If we lose senior management or other key employees, our business may be adversely affected.
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.
The other members in our joint ventures may also, as a result of financial or other reasons, be unable or unwilling to support actions that we believe are in the best interests of the respective joint ventures. In addition, joint ventures necessarily involve special risks.
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.
However, should our suppliers increase the 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 or contractual obligations may impact how much of the price increases we can pass on to our customers.
For example, President Biden has previously proposed to increase the federal corporate income tax rate and if any such proposal were to be adopted, then the increase in the federal corporate income tax rate would adversely affect our results of operations in future periods.
For example, President Biden has previously proposed to increase the federal corporate income tax rate and, if any such proposal were to be adopted, then the increase in the federal corporate income tax rate would adversely affect our results of operations in future periods. 20 Table of Contents 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.
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. 19 Table of Contents 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.
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.
Over the past couple of years, steel prices have increased due to supplier consolidation, tight mill orders due to the COVID-19 pandemic, the war in Ukraine and tariffs on foreign steel.
Over the past three years, steel prices have increased significantly due to supplier consolidation, tight mill orders due to the COVID-19 pandemic, the war in Ukraine and tariffs on foreign steel. More recently, the volatility in the steel market resulted in steel prices rapidly decreasing before increasing again.
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.
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 the documents governing our indebtedness.
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, the war in Ukraine, or otherwise, challenging financial conditions.
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 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.
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 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.
If increased government mileage and/or emissions standards for automobiles result in the substitution of other materials for steel, or electric motors for internal combustion engines, demand for our products could be negatively impacted, which could have an adverse effect on our financial results.
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, international conflict or otherwise, may adversely affect our results of operations as we may not be able to pass such cost increases on to our customers.
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, international conflict or otherwise, may adversely affect our results of operations as we may not be able to pass such cost increases on to our customers. 12 Table of Contents The COVID-19 Pandemic and Other Public Health Emergencies The novel coronavirus (COVID-19) pandemic, as well as similar epidemics and other public health emergencies in the future, could have a material adverse effect on our business financial position, results of operations and cash flows.
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.
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, which previously contributed to increased raw material prices, but did not have a significant or recurring impact on our business.
GAAP”), we are required to make certain estimates and assumptions that affect the accounting for and recognition of assets, liabilities, revenues and expenses.
In preparing our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”), we are required to make certain estimates and assumptions that affect the accounting for and recognition of assets, liabilities, revenues and expenses.
It has and could continue to cause significant market and other disruptions (particularly for our operations in Europe), including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, and increases in cyberattacks and espionage. 10 Table of Contents Further, the broader consequences of the current conflict between Russia and Ukraine may also have the effect of heightening many other risks disclosed in our public filings, any of which could materially and adversely affect our business and results of operations.
It has and could continue to cause significant market and other disruptions (particularly for our operations in Europe), including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, and increases in cyberattacks and espionage.
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.
If certain of our operating 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.
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.
In addition, security breaches of our information systems could result in unauthorized disclosure or destruction of confidential or proprietary information, misappropriation of our assets, and/or loss of the functionality of our systems. These risks may be exacerbated by a partially remote workforce.
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.
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. 16 Table of Contents 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.
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.
Freight and Energy Increasing freight and energy costs could increase our operating costs or the costs of our suppliers, 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.
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, the war in Ukraine and inflationary pressures, continue to present risks to us, our customers or our suppliers.
These factors caused diminished availability of credit and other capital in our end markets, and for participants in, and the customers of, those markets. The effects of the financial crisis, recent bank failures, concerns over the economic impact of COVID-19, the war in Ukraine and inflationary pressures, continue to present risks to us, our customers or our suppliers.
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 Worthington Steel is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. 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.
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.
The extent to which the COVID-19 pandemic, or other public health emergencies, impact our business will depend on future developments, which cannot be predicted and are highly uncertain.
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. 16 Table of Contents Principal Shareholder The principal shareholder of Worthington Industries 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.
Our internal controls could be negatively impacted if a portion of our workforce continues to work remotely, as 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.
Due to government requirements that manufacturers increase the fuel efficiency of automobiles, the automobile industry is exploring alternative materials to steel to decrease weight.
Due to government requirements that manufacturers increase the fuel efficiency of automobiles, the automobile industry is exploring alternative materials to steel in order to decrease weight and increase mileage. In addition, in an effort to reduce emissions, the automobile industry is also shifting toward products that rely on electric motors instead of internal combustion engines.
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.
We believe an important element in the success of any joint venture is a solid relationship between the members of that joint venture.
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.
The occurrence of significant claims (including claims not covered by insurance or well in excess of insurance limits), 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. 15 Table of Contents 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.
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.
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.
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.
Our businesses may be negatively impacted by a variety of new or proposed legislation or regulations.
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.
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.
In addition, anti-dumping actions we may pursue to counter government subsidies 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.
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.
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 prices of our critical raw materials, we may not have alternative sources of supply.
This volatility, as well as any increases in raw material costs, could significantly affect our steel costs and adversely impact our financial results. To manage our exposure to market risk, where possible, we match our customer pricing terms to the pricing terms offered to us by our suppliers in order to minimize the impact of market fluctuations on our margins.
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.
Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.
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.
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. 11 Table of Contents Material or Component 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.
The substitution of lighter weight material for steel in automobiles could adversely affect prices of and demand for our steel products. 13 Table of Contents Freight and Energy Increasing freight and energy costs could increase our operating costs or the costs of our suppliers, which could have an adverse effect on our financial results.
Although our product offerings include certain light weighting solutions and electric motor components, the substitution of lighter weight material for steel and/or electric motors for internal combustion engines in automobiles could adversely affect prices of and demand for our steel products.
Removed
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.
Added
The risks described below are those that we have identified as material but are not the only risks and uncertainties facing us.
Removed
It is also uncertain what the impact of various legislation and other responses being taken in the U.S. and other countries will have on the economy, international trade, our industries, our businesses and the businesses of our customers and suppliers.
Added
Our business is also subject to general risks and uncertainties that affect many other companies, such as market conditions, economic conditions, geopolitical events, changes in laws, rules, regulations or accounting rules, fluctuations in interest rates, terrorism, war or conflicts, major health concerns, natural disasters or other disruptions of expected business conditions.
Removed
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 may in the future cause, business shutdowns or slowdowns and significant disruption in the global economy.
Added
In past years, some customers have experienced, and some continue to experience, whether due to the COVID-19 pandemic, the war in Ukraine, inflationary pressures, or otherwise, challenging financial conditions.
Removed
Although there has been an increase in vaccinations and boosters throughout the U.S. as of the end of fiscal 2022, vaccinations internationally have progressed at a slower rate.
Added
The higher cost of steel relative to certain other materials may make material substitution more attractive for certain uses.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOperating Segments Operating Segment Type Location Number of facilities Leased Owned Steel Processing Manufacturing Illinois, Indiana, Kentucky, Mexico, Michigan, Ohio (5), New York, Canada, China, India 14 2 12 Consumer Products Manufacturing Kansas (2), New Jersey, Ohio, Wisconsin 5 2 3 Building Products Manufacturing Kentucky, Maryland, Ohio (2), Rhode Island, Portugal 6 - 6 Sustainable Energy Solutions Manufacturing Austria, Germany, Poland 3 - 3 Total 28 4 24 Consolidated Joint Ventures Joint Venture Type Location Number of facilities Leased Owned Samuel Manufacturing Ohio (2) 2 1 1 Spartan Manufacturing Michigan 1 - 1 TWB Manufacturing Kentucky, Michigan (2), Ohio (2), Tennessee (2), Canada, Mexico (3) 11 10 1 WSP Manufacturing Michigan 1 - 1 Total 15 11 4 20 Table of Contents Unconsolidated Joint Ventures Joint Venture Type Location Number of facilities Leased Owned ArtiFlex Manufacturing Michigan (3), Ohio (2) 5 2 3 ClarkDietrich Manufacturing California (2), Connecticut, Georgia, Illinois, Maryland, Missouri , Florida (2), Ohio (2), Texas (2) 13 11 2 Serviacero Worthington Manufacturing Mexico (3) 3 - 3 WAVE Manufacturing California (2), Georgia, Maryland, Michigan, Nevada 6 4 2 Workhorse Manufacturing Minnesota (3), South Dakota, Tennessee, Brazil 6 6 - Total 33 23 10
Biggest changeOperating Segments Operating Segment Type Location Number of facilities Leased Owned Steel Processing Manufacturing Illinois, Indiana, Kentucky, Michigan, Ohio (5), New York, Canada, China, India, Mexico 14 2 12 Consumer Products Manufacturing Kansas (2), New Jersey, Ohio, Wisconsin 5 2 3 Building Products Manufacturing Kentucky, Maryland, Ohio (2), Rhode Island, Portugal 6 - 6 Sustainable Energy Solutions Manufacturing Austria, Germany, Poland 3 - 3 Total 28 4 24 Consolidated Joint Ventures Joint Venture Type Location Number of facilities Leased Owned Samuel Manufacturing Ohio (2) 2 1 1 Spartan Manufacturing Michigan 1 - 1 TWB Manufacturing Kentucky, Michigan (2), Ohio (2), Tennessee (2), Canada, Mexico (3) 11 10 1 Total 14 11 3 Unconsolidated Joint Ventures Joint Venture Type Location Number of facilities Leased Owned ClarkDietrich Manufacturing California (2), Connecticut, Georgia, Illinois, Maryland, Missouri, Florida (2), Ohio (2), Texas (2), Canada 14 12 2 Serviacero Worthington Manufacturing Mexico (3) 3 - 3 WAVE Manufacturing California (2), Georgia, Maryland (2), Michigan, Nevada 7 5 2 Workhorse Manufacturing Minnesota (3), South Dakota, Tennessee, Brazil 6 6 - Total 30 23 7
Item 2. — P roperties. Our principal corporate offices are located in an owned building in Columbus, Ohio, which also houses the principal corporate offices of our reportable segments, other than Steel Processing, which has its corporate offices in an office building next to the principal corporate offices where we lease office space.
Item 2. — P roperties. Our principal corporate offices are located in an owned building in Columbus, Ohio, which also houses the principal corporate offices of our reportable segments, other than the Steel Processing operating segment, which has its corporate offices 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. At May 31, 2022, including our consolidated and unconsolidated joint ventures, we owned or leased more than 10,000,000 square feet of space for our operations, most of which is dedicated to manufacturing facilities. More details on these facilities is contained in the table below.
We also own three facilities in Columbus, Ohio used for administrative and medical purposes. At May 31, 2023, including our consolidated and unconsolidated joint ventures, we owned or leased more than 10,000,000 square feet of space for our operations, most of which is dedicated to manufacturing facilities. More details on these facilities are contained in the table below.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

14 edited+0 added−0 removed9 unchanged
Biggest changeNo arrangements or understandings exist pursuant to which any individual has been, or is to be, selected as an executive officer of Worthington Industries. 22 Table of Contents PAR T II
Biggest changeMcConnell II, a member of the Board and our Vice President, Global Business Development, Sustainable Energy Solutions, otherwise, 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. PAR T II
Hayek served as Worthington Industries’ Vice President – Mergers & Acquisitions and Corporate Development. Prior to joining us, 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.
Hayek served as Worthington Industries’ Vice President – Mergers & Acquisitions and Corporate Development. Prior to joining us, 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.
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 us, Mr.
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 (WIRED) program from June 2016 to May 2018. Prior to joining us, Mr.
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 for the consumer products business unit from July 2014 to May 2019. Mr. Caravati joined us in 2005 and served in numerous sales capacities from 2005 to 2014. Catherine M.
Caravati served as General Manager of Worthington Cylinder Corporation’s consumer products business unit from June 2019 to May 2021 and Director of Sales for the consumer products business unit from July 2014 to May 2019. Mr. Caravati joined us in 2005 and served in numerous sales capacities from 2005 to 2014. Catherine M.
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.
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. Klingler 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.
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 since September 1996. Mr. McConnell also serves as the Chair of the Executive Committee of the Board. Mr.
McConnell has served as Worthington Industries’ Executive Chairman since September 2020, as a director of Worthington Industries since 1990, and as Chairman of the Board since September 1996. Mr. McConnell also serves as the Chair of the Executive Committee of the Board. Mr.
Smolenski joined us 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 Industries’ Consumer Products reportable segment since June of 2021.
Smolenski joined us 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 Industries’ Consumer Products operating segment since June 2021. 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.
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. 23 Table of Contents Eric M.
Smolenski has served as President of Worthington Industries’ 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 has served as President of Worthington Industries’ Building Products and Sustainable Energy Solutions operating segments since June 2021. Mr. Smolenski served as President of Worthington Cylinder Corporation from May 2019 to May 2021. Mr.
Item 4. — Mine S afety 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 August 1, 2022. Name Age Position(s) with the Registrant Present Office Held Since John P.
Item 4. — Mine S afety Disclosures Not Applicable 22 Table of Contents 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 31, 2023. Name Age Position(s) with the Registrant Present Office Held Since John P.
Klingler 50 President – Steel Processing 2019 Eric M. Smolenski 52 President – Building Products and Sustainable Energy Solutions 2021 Steven M. Caravati Catherine M. Lyttle 40 63 President – Consumer Products Senior Vice President and Chief Human Resources Officer 2021 2018 Steven R. Witt 53 Corporate Controller 2022 John P.
Klingler 51 President – Steel Processing 2019 Eric M. Smolenski 53 President – Building Products and Sustainable Energy Solutions 2021 Steven M. Caravati 41 President – Consumer Products 2021 Catherine M. Lyttle 64 Senior Vice President and Chief Human Resources Officer 2018 Steven R. Witt 54 Corporate Controller 2022 John P.
McConnell served as CEO of Worthington Industries from June 1993 to August 2020 and in various other positions with us from 1975 to June 1993. 21 Table of Contents B. Andrew (‘Andy’) Rose has served as CEO of Worthington Industries since September 2020 and President since August 2018. Mr.
McConnell served as Chief Executive Officer of Worthington Industries from June 1993 to August 2020 and in various other positions with us from 1975 to June 1993. B. Andrew (“Andy”) Rose has served as Chief Executive Officer of Worthington Industries since September 2020 and President since August 2018. Mr.
McConnell 68 Executive Chairman; a Director 2020 B. Andrew Rose 52 President and CEO 2020 Geoffrey G. Gilmore 50 Executive Vice President and Chief Operating Officer 2018 Joseph B. Hayek 50 Vice President and Chief Financial Officer 2018 Patrick J. Kennedy 41 Vice President - General Counsel and Secretary 2021 Jeff R.
McConnell 69 Executive Chairman and Director 2020 B. Andrew Rose 53 President and Chief Executive Officer 2020 Geoffrey G. Gilmore 51 Executive Vice President and Chief Operating Officer 2018 Joseph B. Hayek 51 Vice President and Chief Financial Officer 2018 Patrick J. Kennedy 42 Vice President – General Counsel and Secretary 2021 Jeff R.
Witt joined us in April 2003 and served in numerous accounting roles from 2003 to 2009. Executive officers serve at the pleasure of the Board. There are no family relationships among any of Worthington Industries’ executive officers or directors.
Witt joined us in April 2003 and served in numerous accounting roles from 2003 to 2009. Executive officers serve at the pleasure of the Board. John P. McConnell is the father of John H.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+4 added−2 removed3 unchanged
Biggest changeFor additional information on the authorization by the Board with respect to the repurchase of the common shares, please see “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Result of Operations – Financing Activities.” 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, 2022 300,000 $ 52.08 300,000 6,765,000 April 1-30, 2022 700,000 $ 52.64 700,000 6,065,000 May 1-31, 2022 - $ - - 6,065,000 Total 1,000,000 $ 52.39 1,000,000 (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.
Biggest changeTotal 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 (2) Plans or Programs (1) March 1-31, 2023 17 $ 58.11 - 6,065,000 April 1-30, 2023 552 59.77 - 6,065,000 May 1-31, 2023 - - - 6,065,000 Total 569 $ 59.21 - (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.
At May 31, 2022, 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: ATI, Inc.; 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; and Warrior Met Coal, Inc.
At May 31, 2023, 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: ATI, Inc.; 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; and Warrior Met Coal, Inc.
Copyright© 2022, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved. Used with permission . 23 Table of Contents 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 our largest line of business.
Copyright© 2023, 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 our largest line of business.
Item 5. – Market for Registrant's Common Equity, Related St ockholder Matters and Issuer Purchases of Equity Securities Common Shares Information The common shares trade on the NYSE under the symbol WOR. As of July 23, 2022, Worthington Industries had 6,389 registered shareholders.
Item 5. – Market for Registrant's Common Equity, Related St ockholder Matters and Issuer Purchases of Equity Securities Common Shares Information The common shares trade on the NYSE under the symbol WOR. As of July 25, 2023, Worthington Industries had 6,619 registered shareholders.
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 Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or Regulation 14C under 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.
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 Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or Regulation 14C under 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. 24 Table of Contents The following graph compares the five-year cumulative return on the 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, 2017, in the common shares and each index. 5/17 5/18 5/19 5/20 5/21 5/22 Worthington Industries, Inc. $ 100.00 $ 116.35 $ 84.68 $ 76.38 $ 173.22 $ 124.18 S&P Midcap 400 Index $ 100.00 $ 114.86 $ 108.61 $ 107.73 $ 168.89 $ 157.88 S&P 1500 Steel Composite Index $ 100.00 $ 131.29 $ 85.84 $ 78.42 $ 188.13 $ 230.44 Data and graph provided by Zacks Investment Research, Inc.
The graph assumes that $100 was invested at May 31, 2018, in the common shares and each index. 5/18 5/19 5/20 5/21 5/22 5/23 Worthington Industries, Inc. $ 100.00 $ 72.78 $ 65.65 $ 148.88 $ 106.73 $ 131.59 S&P Midcap 400 Index $ 100.00 $ 94.56 $ 93.80 $ 147.04 $ 137.45 $ 133.84 S&P 1500 Steel Composite Index $ 100.00 $ 65.38 $ 59.73 $ 143.29 $ 175.51 $ 177.57 Data and graph provided by Zacks Investment Research, Inc.
On March 20, 2019, the Board authorized the repurchase of up to 6,600,000 of the common shares. On March 24, 2021, the Board authorized the repurchase of an additional 5,618,464 common shares. A total of 3,935,000 common shares have been repurchased since the latest authorization, leaving 6,065,000 common shares available for repurchase at May 31, 2022.
On March 20, 2019, the Board authorized the repurchase of up to 6.6 million of the common shares. On March 24, 2021, the Board authorized the repurchase of up to an additional 5.6 million of the common shares, increasing the total number of common shares then authorized for repurchase to 10.0 million.
Removed
The following graph compares the five-year cumulative return on the common shares, the S&P Midcap 400 Index and the S&P 1500 Steel Composite Index.
Added
Unregistered Sales of Equity Securities There were no equity securities of Worthington Industries sold by Worthington Industries during fiscal 2023 that were not registered under the Securities Act of 1933, as amended. 25 Table of Contents Issuer Purchases of Equity Securities Common shares of Worthington Industries withheld to cover tax withholding obligations in connection with the vesting of restricted common shares are treated as common share repurchases.
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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 the common shares during each month of the fiscal quarter ended May 31, 2022.
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Those withheld common shares are not considered common share repurchases under an authorized common share repurchase plan. The table below provides information regarding common shares withheld from Worthington employees to satisfy minimum statutory tax withholding obligations arising from the vesting of restricted common shares.
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A total of 3.9 million common shares have been repurchased since the latest authorization, leaving 6.1 million common shares available for repurchase under these authorizations at May 31, 2023.
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(2) There were no common shares purchased during the fourth fiscal quarter of 2023 as part of publicly announced plans or programs. It em 6. – [Reserved] 26 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

78 edited+95 added−78 removed15 unchanged
Biggest changeFiscal Year Ended May 31, % of Adjusted % of Adjusted Increase/ (In millions) 2022 EBIT 2021 EBIT (Decrease) Steel Processing $ 203.3 39.4 % $ 208.2 52.6 % $ (4.9 ) Consumer Products 94.3 18.3 % 74.9 18.9 % 19.4 Building Products 216.6 41.9 % 117.9 29.8 % 98.7 Sustainable Energy Solutions (6.3 ) (1.2 %) 5.0 1.3 % (11.3 ) Other 8.6 1.7 % (10.5 ) (2.7 %) 19.1 Total Adjusted EBIT $ 516.5 100.0 % $ 395.5 100.0 % $ 121.0 • Steel Processing – Adjusted EBIT was down $4.9 million from fiscal 2021 to $203.3 million, as the favorable impact of acquisitions and higher average selling prices was more than offset by lower inventory holding gains, down an estimated $53.1 million from fiscal 2021. • Consumer Products – Adjusted EBIT was up $19.4 million over fiscal 2021 to $94.3 million on improved volume and higher selling prices, slightly offset by higher manufacturing expenses. • Building Products – Adjusted EBIT of $216.6 million was $98.7 million more than fiscal 2021, due primarily to higher equity earnings at ClarkDietrich and WAVE, up a combined $73.0 million on strong volume and the favorable impact of higher steel prices, partially offset by an increase in labor and material costs. • Sustainable Energy Solutions – Adjusted EBIT reflected a loss of $6.3 million, unfavorable by $11.3 million when compared to fiscal 2021, on the combined impact of lower volume, and an unfavorable product mix.
Biggest changeOur portion of this gain, which is recorded in equity income, was $2.1 million. 35 Table of Contents The following table provides a summary of adjusted EBIT by reportable segment, along with the respective percentage of the total of each reportable segment. % of Adjusted % of Adjusted Increase/ (In millions) 2023 EBIT 2022 EBIT (Decrease) Steel Processing 121.7 30.3 % 203.3 39.4 % $ (81.6 ) Consumer Products 78.0 19.4 % 94.3 18.3 % (16.3 ) Building Products 204.6 50.9 % 216.6 41.9 % (12.0 ) Sustainable Energy Solutions 0.9 0.2 % (6.3 ) (1.2 %) 7.2 Other (3.1 ) (0.8 %) 8.6 1.7 % (11.7 ) Total Adjusted EBIT 402.1 100.0 % $ 516.5 100.0 % $ (114.4 ) • Steel Processing – Adjusted EBIT was down $81.6 million from fiscal 2022 to $121.7 million in fiscal 2023, due to a $75.4 million decline in operating income and a $22.1 million decline in equity income from Serviacero Worthington, as lower average steel prices reduced spreads.
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.
We assess acquisition opportunities as they arise, and any such opportunities may require additional financing. However, there can be no assurance 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.
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.
The asset and liability method requires the recognition of deferred tax assets and deferred tax 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.
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.
In accordance with accounting literature related to uncertainty in income taxes, tax benefits from uncertain tax positions that are recognized in our consolidated financial statements are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
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.
Should we seek 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.
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.
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 our consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
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 of Definite-Lived Long-Lived Assets : Critical estimate : 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.
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.
Business Combinations: Critical estimate : 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.
Item 7. – Management’s Discussion and Analysis o f 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 PSLRA.
Item 7. – Management’s Discussion and Analysis o f 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” (“MD&A”) constitute forward-looking statements, as that term is used in the PSLRA.
These include propane-filled cylinders for torches, camping stoves and other applications, certain LPG cylinders, handheld torches, helium-filled balloon kits, and specialized hand tools sold primarily to mass merchandisers, retailers and distributors. LPG cylinders, which hold fuel for barbeque grills and recreational vehicle equipment, are also sold through cylinder exchangers.
These include propane-filled cylinders for torches, camping stoves and other applications, certain LPG cylinders, handheld torches, helium-filled balloon kits, specialized hand tools and instruments, and drywall tools and accessories sold primarily to mass merchandisers, retailers and distributors. LPG cylinders, which hold fuel for barbeque grills and recreational vehicle equipment, are also sold through cylinder exchangers.
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.
Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
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.
While the market price of steel significantly impacts these businesses, there are other key indicators that are meaningful in analyzing construction market demand, including the U.S. gross domestic product (“U.S. GDP”), the Dodge Index of construction contracts and, in the case of ClarkDietrich, trends in the relative prices of framing lumber and steel.
LPG cylinders hold fuel for residential and light commercial heating systems, industrial forklifts and commercial/residential cooking (the latter, generally outside North America). Well water tanks and expansion tanks are used in the residential market with the latter also sold into commercial markets. Specialty products include a variety of fire suppression, chemical tanks, and foam and adhesives.
LPG cylinders hold fuel for residential and light commercial heating systems, industrial forklifts and commercial/residential cooking (the latter, generally outside North America). Well water tanks and expansion tanks are used primarily in the residential market with certain products also sold to commercial markets. Specialty products include a variety of fire suppression tanks, chemical tanks, and foam and adhesive tanks.
We have the option to borrow at rates equal to an applicable margin over the Daily LIBOR, the Prime Rate of PNC Bank, National Association, or the 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, 2022.
We have the option to borrow at rates equal to an applicable margin over the Simple SOFR, the Prime Rate of PNC Bank, National Association, or the 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, 2023.
In turn, WRC sells, on a revolving basis, up to $175.0 million of undivided ownership interests in this pool of accounts receivable to a third-party bank. We retain an undivided interest in this pool and are subject to risk of loss based on the collectability of the receivables from this retained interest.
In turn, WRC was to sell, on a revolving basis, up to $175.0 million of undivided ownership interests in this pool of accounts receivable to a third-party bank. We were to retain an undivided interest in this pool and were to be subject to risk of loss based on the collectability of the receivables from this retained interest.
Because the amount eligible to be sold excludes receivables more than 120 days past due, receivables offset by an allowance for doubtful accounts due to bankruptcy or other cause, concentrations over certain limits with specific customers and certain reserve amounts, we believe additional risk of loss is minimal.
Because the amount eligible to be sold was to exclude receivables more than 120 days past due, receivables offset by an allowance for doubtful accounts due to bankruptcy or other cause, concentrations over certain limits with specific customers and certain reserve amounts, we believed additional risk of loss would be minimal.
Our long-term debt agreements do not include ratings triggers or material adverse change provisions. 38 Table of Contents Short-term borrowings – Our short-term debt agreements do not include ratings triggers or material adverse change provisions. As of May 31, 2022, we were in compliance with the covenants in our short-term debt agreements.
As of May 31, 2023, we were in compliance with the covenants in our long-term debt agreements. Our long-term debt agreements do not include ratings triggers or material adverse change provisions. Short-term borrowings – Our short-term debt agreements do not include ratings triggers or material adverse change provisions.
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.
The following accounting estimates are considered to be 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.
As discussed in “ Note H – Guarantees ,” we had in place $16.6 million in outstanding letters of credit for third-party beneficiaries as of May 31, 2022. No amounts were drawn against at May 31, 2022, and the fair value of these guarantee instruments, based on premiums paid, was not material.
As discussed in “Note H – Guarantees,” we had in place $14.1 million in outstanding letters of credit for third-party beneficiaries as of May 31, 2023. No amounts were drawn against these outstanding letters of credit at May 31, 2023, and the fair value of these guarantee instruments, based on premiums paid, was not material.
The breakdown of our net sales by end market for fiscal 2022 and fiscal 2021 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.
The breakdown of our net sales by end market for fiscal 2023 and fiscal 2022 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 52% of Steel Processing’s net sales are to the automotive market.
With the exception of Steel Processing, 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.
With the exception of Steel Processing, 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. Steel Processing is comprised of three reporting units: Flat Rolled Steel Processing, Electrical Steel and Laser Welding.
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.
Given the many different products that make up these remaining 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.
Fiscal Year Ended May 31, (in millions) 2022 2021 2020 Net cash provided by operating activities $ 70.1 $ 274.4 $ 336.7 Net cash provided (used) by investing activities (438.2 ) 468.5 (116.2 ) Net cash used by financing activities (237.7 ) (249.8 ) (165.7 ) Increase (decrease) in cash and cash equivalents (605.8 ) 493.1 54.8 Cash and cash equivalents at beginning of period 640.3 147.2 92.4 Cash and cash equivalents at end of period $ 34.5 $ 640.3 $ 147.2 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, for at least 12 months and for the foreseeable future thereafter.
(In millions) 2023 2022 2021 Net cash provided by operating activities $ 625.4 $ 70.1 $ 274.4 Net cash provided (used) by investing activities (71.8 ) (438.2 ) 468.5 Net cash used by financing activities (133.1 ) (237.7 ) (249.8 ) Increase (decrease) in cash and cash equivalents 420.5 (605.8 ) 493.1 Cash and cash equivalents at beginning of period 34.5 640.3 147.2 Cash and cash equivalents at end of period $ 455.0 $ 34.5 $ 640.3 36 Table of Contents 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, for at least 12 months and for the foreseeable future thereafter.
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.
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.
We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure.
We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. We are also in the process of evaluating our post-Separation capital structure.
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) 2022 2021 2020 Steel Processing $ 35.9 $ 28.3 $ 40.6 Consumer Products 13.4 13.3 8.1 Building Products 31.1 22.7 17.9 Sustainable Energy Solutions 6.4 8.7 13.8 Other 7.8 9.2 15.1 Total capital expenditures $ 94.6 $ 82.2 $ 95.5 Investment activities are largely discretionary and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant.
BlankLight ® business on June 8, 2021, for $104.5 million and Tempel on December 1, 2021 for $272.2 million, and capital expenditures of $94.6 million. 37 Table of Contents Capital expenditures reflect cash used for investment in property, plant and equipment and is presented below by reportable segment (this information excludes cash flows related to acquisition and divestiture activity) for each of the prior three fiscal years: (In millions) 2023 2022 2021 Steel Processing $ 45.1 $ 35.9 $ 28.3 Consumer Products 13.6 13.4 13.3 Building Products 17.8 31.1 22.7 Sustainable Energy Solutions 6.5 6.4 8.7 Other 3.4 7.8 9.2 Total Capital Expenditures $ 86.4 $ 94.6 $ 82.2 Investment activities are largely discretionary and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant.
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.
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. Changes in existing tax laws or rates could significantly impact the estimate of our tax liabilities.
We maintain a $500.0 million multi-year revolving credit facility (the “Credit Facility”) with a group of lenders that matures in August 2026. Borrowings under the Credit Facility have maturities of up to one year.
As of May 31, 2023, we were in compliance with the covenants in our short-term debt agreements. We maintain a $500.0 million multi-year revolving credit facility (the “Credit Facility”) with a group of lenders that matures in August 2026. Borrowings under the Credit Facility have maturities of up to one year.
These resources include cash and cash equivalents and unused committed lines of credit. These committed lines of credit had a total of $518.6 million of borrowing capacity available to be drawn as of July 29, 2022.
These resources include cash and cash equivalents and unused committed lines of credit. These committed lines of credit had a total of $500 million of borrowing capacity available to be drawn as of May 31, 2023.
A discussion of each of these new reportable operating segments is included below: Reportable Segments Description Consumer Products This segment consists of products in the tools, outdoor living and celebrations end markets with brands that include Coleman®, Bernzomatic®, Balloon Time®, Mag Torch®, General®, Garden-Weasel®, Pactool International®, Hawkeye™, and Worthington Pro Grade™.
Consumer Products This segment consists of products in the tools, outdoor living and celebrations end markets with owned and licensed brands that include Coleman®, Bernzomatic®, Balloon Time®, Mag-Torch®, General®, Garden-Weasel®, Pactool International®, Hawkeye™, Worthington Pro Grade™ and Level5®.
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.
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 2023, vehicle production for the Detroit Three automakers was up 12%, while overall North American vehicle production was up 13%.
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 our consolidated statements of comprehensive income, respectively.
The net assets and operating results of these four joint ventures are consolidated with the equity owned by the minority joint venture member shown as “noncontrolling interests” in our consolidated balance sheets, and the noncontrolling interest in net earnings and other comprehensive income (loss) (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively.
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.
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.
Approximately 50% of the net sales of our Steel Processing operating segment are to the automotive market. North American vehicle production, primarily by the Detroit Three automakers, has a considerable impact on the activity within this operating segment.
North American vehicle production, primarily by the Detroit Three automakers, has a considerable impact on the activity within the Steel Processing operating segment. The majority of the net sales of one of our unconsolidated joint ventures, Serviacero Worthington, is also to the automotive market.
GDP (% growth year-over-year) 1 6.2 % (1.7 %) 2.8 % 7.9 % (4.5 %) Hot-Rolled Steel ($ per ton) 2 $ 1,588 $ 869 $ 547 $ 719 $ 322 Detroit Three Auto Build (000's vehicles) 3 6,178 6,808 6,425 (630 ) 383 No.
GDP (% growth year-over-year) (1) 1.7 % 5.4 % 2.8 % (3.7 %) 2.6 % Hot-Rolled Steel ($ per ton) (2) $ 889 $ 1,588 $ 869 $ (699 ) $ 719 Detroit Three Auto Build (000's vehicles) (3) 6,906 6,164 6,808 742 (644 ) No.
We use the following information to monitor our costs and demand in our major end markets: Fiscal Year Ended May 31, 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 U.S.
We use the following information from the past three fiscal years to monitor our costs and demand in our major end markets: 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 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 is generally indicative of a stronger economy, which generally increases demand and pricing for our products. Conversely, declining U.S. GDP growth rates generally indicate a weaker economy, which generally decreases demand and pricing for our products. Changes in U.S.
The majority of the net sales of our Serviacero Worthington and ArtiFlex joint ventures are also to the automotive end market. 26 Table of Contents 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 our WAVE and ClarkDietrich unconsolidated joint ventures.
Approximately 13% of the net sales in our Steel Processing operating segment are to the construction market. The construction market is also the predominant end market for our unconsolidated joint ventures within the Building Products operating segment, WAVE and ClarkDietrich.
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.
See “Note A – Summary of Significant Accounting Policies” to our consolidated financial statements for further information on our significant accounting policies. 39 Table of Contents Impairment of Indefinite-Lived Long-Lived Assets: Critical estimate : Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, during the fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that impairment may be present.
During fiscal 2022, vehicle production for the Detroit Three automakers and the North American vehicle production were down 9% and 10%, respectively. 27 Table of Contents 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.
Certain other commodities, such as copper, zinc, natural gas, helium 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.
Rising steel prices during the first half of the fiscal year led to a $257.6 million increase in operating working capital (accounts receivable, inventory and accounts payable) during fiscal 2022. Net cash provided by operating activities was $70.1 million during fiscal 2022 compared to $274.4 million in fiscal 2021.
Falling steel prices during fiscal 2023 led to a $152.8 million decrease in operating working capital (accounts receivable, inventory and accounts payable) at May 31, 2023. Net cash provided by operating activities was $625.4 million during fiscal 2023 compared to $70.1 million in fiscal 2022, an increase of $555.3 million.
The adoption of this new accounting standard update in fiscal 2021 did not have a material impact on our 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.
Additionally, there have been no changes to our significant accounting policies as disclosed in this 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.
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.
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.
Adjusted EBIT excludes impairment and restructuring charges (gains), but may also exclude other items that management believes are not reflective of, and thus should not be included when evaluating, the performance of our ongoing operations.
EBIT, a non-GAAP financial measure, is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest. Adjusted EBIT excludes impairment and restructuring expense (income), but may also exclude other items, as described below, that management believes are not reflective of, and thus should not be included when evaluating the performance of our ongoing operations.
America Auto Build (000's vehicles) 3 13,366 14,813 13,312 (1,447 ) 1,501 Zinc ($ per pound) 4 $ 1.56 $ 1.15 $ 1.03 $ 0.41 $ 0.12 Natural Gas ($ per mcf) 5 $ 4.92 $ 2.49 $ 2.15 $ 2.43 $ 0.34 On-Highway Diesel Fuel Prices ($ per gallon) 6 $ 3.99 $ 2.68 $ 3.17 $ 1.31 $ (0.49 ) 1 2021/2020 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.
America Auto Build (000's vehicles) (3) 14,910 13,225 14,813 1,685 (1,588 ) Zinc ($ per pound) (4) $ 1.40 $ 1.56 $ 1.15 $ (0.16 ) $ 0.41 Natural Gas ($ per mcf) (5) $ 5.22 $ 4.92 $ 2.49 $ 0.30 $ 2.43 On-Highway Diesel Fuel Prices ($ per gallon) (6) $ 4.80 $ 3.99 $ 3.17 $ 0.81 $ 0.82 (1) 2022 and 2021 figures based on revised actuals (2) CRU Hot-Rolled Index; period average (3) IHS Global (S&P) (4) LME Zinc; period average (5) NYMEX Henry Hub Natural Gas; period average (6) Energy Information Administration; period average Sales to one Steel Processing customer in the automotive industry represented 11.9% and 13.2% of our consolidated net sales during fiscal 2023 and fiscal 2022, respectively.
Selling, General and Administrative Expense Fiscal Year Ended May 31, % of % of Increase/ (In millions) 2022 Net sales 2021 Net sales (Decrease) Selling, general and administrative expense $ 399.6 7.6 % $ 351.1 11.1 % $ 48.5 • SG&A expense increased $48.5 million over fiscal 2021 due primarily to the impact of acquisitions, and to a lesser extent, higher profit sharing and bonus expense to correspond with the increases in operating income and equity income over fiscal 2021.
Selling, General and Administrative Expense % of % of Increase/ (In millions) 2023 Net sales 2022 Net sales (Decrease) Selling, general and administrative expense $ 428.9 8.7 % $ 399.6 7.6 % $ 29.3 • SG&A expense increased $29.3 million over fiscal 2022 due primarily to the impact of acquisitions and higher wages and benefits driven by continued inflationary pressures, partially offset by lower profit sharing and bonus expense to correspond with the decreases in operating income and equity income from fiscal 2022.
During fiscal 2022, we established a revolving trade accounts receivable securitization facility (the “AR Facility”) allowing us to borrow up to $175.0 million. Pursuant to the terms or the AR Facility, certain of our subsidiaries sell their accounts receivable without recourse, on a revolving basis, to Worthington Receivables Company ("WRC"), a wholly-owned, consolidated, bankruptcy-remote indirect subsidiary.
Pursuant to the terms of the AR Facility, certain of our subsidiaries were to sell or contribute all of their eligible accounts receivable and other related assets without recourse, on a revolving basis, to Worthington Receivables Company (“WRC”), a wholly-owned, consolidated, bankruptcy-remote indirect subsidiary.
Fiscal 2022 tax expense reflected an estimated annual effective income tax rate of 23.3% versus 19.6% in the prior year. For additional information regarding our income taxes, refer to “ Note N – Income Taxes ”.
Fiscal 2023 tax expense reflected an estimated annual effective income tax rate of 22.9% versus 23.3% in fiscal 2022. For additional information regarding our income taxes, refer to “Note N – Income Taxes.” Adjusted EBIT We evaluate operating performance on the basis of adjusted earnings before interest and taxes (“adjusted EBIT”).
On June 22, 2022, the Worthington Industries Board declared a quarterly dividend of $0.31 per common share for the first quarter of fiscal 2023. The dividend is payable on September 29, 2022 to shareholders of record on September 15, 2022. On March 20, 2019, the Board authorized the repurchase of up to 6,600,000 of the common shares.
Dividends paid on the common shares totaled $59.2 million in fiscal 2023 compared to $57.2 million during fiscal 2022. On June 28, 2023, the Board declared a quarterly dividend of $0.32 per common share for the first quarter of fiscal 2024. The dividend is payable on September 29, 2023 to shareholders of record on September 15, 2023.
On March 24, 2021, the Board authorized the repurchase of up to an additional 5,618,464 of the common shares. 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.
The total number of common shares available for repurchase under these authorizations at May 31, 2023 was 6.1 million. These common shares may be repurchased from time to time, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flows from operations, general economic conditions and other relevant considerations.
As of May 31, 2022, borrowings outstanding under the AR Facility totaled $43.5 million, leaving $131.5 million available for future use. Common shares – During fiscal 2022, we declared dividends totaling $1.12 per common share at a quarterly rate of $0.28 per common share.
Common shares – During fiscal 2023, we declared dividends totaling $1.24 per common share at a quarterly rate of $0.31 per common share. During fiscal 2022, we declared dividends totaling $1.12 per common share at a quarterly rate of $0.28 per common share.
Fiscal 2022 impairment charges related to the write down of certain production equipment at the Twinsburg, Ohio facility whose book value was determined to exceed fair market value less costs to sell. Fiscal 2021 impairment charges related primarily to divestitures of non-core businesses within our legacy Pressure Cylinders segment.
Impairment charges in fiscal 2022 related to the write-down of certain production equipment at our Samuel facility in Twinsburg, Ohio that was determined to be below fair market value.
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.
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. 41 Table of Contents Assumptions and judgements : Significant assumptions, which vary by the class of asset or liability are forward looking and could be affected by future economic and market conditions.
Dividend Policy We currently have no material contractual or regulatory restrictions on the payment of dividends. Dividends are declared at the discretion of the Board. The 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.
The 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.
Sustainable Energy Solutions This segment includes onboard fueling systems and services, as well as gas containment solutions and services for storage, transport and distribution of industrial gases. It includes high pressure and acetylene cylinders for life support systems and alternative fuel cylinders used to hold CNG and hydrogen for automobiles, buses, and light-duty trucks.
Sustainable Energy Solutions operates three manufacturing facilities located in Austria, Germany, and Poland. This segment’s products and services include high pressure and acetylene cylinders for life support systems and alternative fuel cylinders used to hold CNG and hydrogen for automobiles, buses, and light-duty trucks.
For Steel Processing, we have determined that Tempel and TWB are stand-alone reporting units. 40 Table of Contents 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.
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.
Financing Activities Net cash used by financing activities was $237.7 million in fiscal 2022 compared to $249.8 million in fiscal 2021. During fiscal 2022, we paid $180.2 million to repurchase 3,235,000 of the common shares, paid dividends of $57.2 million on the common shares and borrowed a total of $41.7 million under existing short-term credit facilities.
Financing Activities Net cash used by financing activities was $133.1 million in fiscal 2023 compared to $237.7 million in fiscal 2022. The change was primarily due to $45.2 million of net repayments of short-term borrowings in fiscal 2023 and the repurchase of 3.2 million of common shares at a cost of $180.2 million in fiscal 2022.
However, supply chain disruptions caused by the COVID-19 pandemic and softening 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.
However, the continuation of soft economic conditions and an uncertain interest rate environment could create volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so. During fiscal 2023, the financial markets experienced disruption due to certain bank failures.
Additionally, we acquired 3,235,000 of the common shares at a cost of $180.2 million and paid dividends of $57.2 million on the common shares. The following table summarizes our consolidated cash flows for the periods presented.
Additionally, we repaid $45.2 million of short-term borrowings and paid dividends of $59.2 million on the common shares. The following table summarizes our consolidated cash flows for each of the prior three fiscal years.
The improvement was driven by the divestiture of non-accretive assets in fiscal 2021. 31 Table of Contents Interest Expense Fiscal Year Ended May 31, Increase/ (In millions) 2022 2021 (Decrease) Interest Expense $ 31.3 $ 30.3 $ 1.0 • Interest expense was $31.3 million in fiscal 2022, up $1.0 million from fiscal 2021 due to the impact of higher average debt levels associated with short-term borrowings.
Interest Expense, Net Increase/ (In millions) 2023 2022 (Decrease) Interest expense, net $ 26.8 $ 31.3 $ (4.5 ) • Interest expense was $26.8 million in fiscal 2023, down $4.5 million from fiscal 2022 due to higher interest income, and to a lesser extent, the impact of lower average debt levels associated with short-term borrowings.
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, 2022, we were in compliance with the covenants in our long-term debt agreements.
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.
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.
Recently Adopted 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.
Equity Income Fiscal Year Ended May 31, Increase/ (In millions) 2022 2021 (Decrease) WAVE $ 87.4 $ 78.9 $ 8.5 ClarkDietrich 89.1 24.6 64.5 Serviacero Worthington 29.8 16.0 13.8 ArtiFlex 7.6 4.5 3.1 Workhorse (0.3 ) (0.7 ) 0.4 Total Equity Income $ 213.6 $ 123.3 $ 90.3 • Equity income increased $90.3 million over fiscal 2021 to $213.6 million on higher contributions across all of our unconsolidated joint ventures.
Equity Income Increase/ (In millions) 2023 2022 (Decrease) WAVE $ 85.9 $ 87.4 $ (1.5 ) ClarkDietrich 80.5 89.1 (8.6 ) Serviacero Worthington 7.7 29.8 (22.1 ) ArtiFlex (1) (13.7 ) 7.6 (21.3 ) Workhorse 0.5 (0.3 ) 0.8 Total Equity Income $ 160.9 $ 213.6 $ (52.7 ) (1) On August 3, 2022, we sold our 50% noncontrolling equity interest in ArtiFlex.
Refer to " Note E - Goodwill and Other Long-Lived Assets " for additional information. • Restructuring activity during fiscal 2022 resulted primarily from pre-tax gains from asset disposals within Steel Processing totaling $14.9 million.
Restructuring activity in fiscal 2022 resulted primarily from pre-tax gains from asset disposals with Steel Processing totaling $14.9 million. Refer to “Note F – Restructuring and Other (Income) Expense, Net” for additional information. • Separation costs of $24.0 million reflect direct and incremental costs incurred in connection with the planned Separation, including audit, advisory, and legal costs.
Results of Operations Fiscal 2022 Compared to Fiscal 2021 The following table presents consolidated operating results for the periods indicated: Fiscal Year Ended May 31, (In millions, except per share amounts) 2022 2021 Increase/ (Decrease) Net sales $ 5,242.2 $ 3,171.4 $ 2,070.8 Operating income 329.3 167.5 161.8 Equity income 213.6 123.3 90.3 Net earnings attributable to controlling interest 379.4 723.8 (344.4 ) Earnings per diluted share attributable to controlling interest 7.44 13.40 (5.96 ) Net Sales and Volume The following table provides a breakdown of consolidated net sales by reportable operating segment, along with the respective percentage of the total of each, for the periods presented.
(In millions, except per common share amounts) 2023 2022 Increase/ (Decrease) Net sales $ 4,916.4 $ 5,242.2 $ (325.8 ) Operating income 212.4 329.3 (116.9 ) Equity income 161.0 213.6 (52.6 ) Net earnings attributable to controlling interest 256.5 379.4 (122.9 ) Earnings per diluted common share attributable to controlling interest 5.19 7.44 (2.25 ) Net Sales and Volume The following table provides a breakdown of consolidated net sales by operating segment, along with the respective percentage of the total of each, for the past two fiscal years. % of % of Increase/ (In millions) 2023 Net sales 2022 Net sales (Decrease) Steel Processing $ 3,497.9 71.1 % $ 3,933.0 75.0 % $ (435.1 ) Consumer Products 686.3 14.0 % 636.5 12.1 % 49.8 Building Products 586.1 11.9 % 541.8 10.4 % 44.3 Sustainable Energy Solutions 146.1 3.0 % 130.9 2.5 % 15.2 Consolidated Net Sales $ 4,916.4 100.0 % $ 5,242.2 100.0 % $ (325.8 ) 32 Table of Contents The following table provides volume by operating segment for the past two fiscal years.
The increase was driven primarily by higher average selling prices, and, to a lesser extent, the impact of acquisitions completed in fiscal 2022. The mix of direct versus toll tons processed was 51% to 49% in fiscal 2022, compared to 48% to 52% in the prior fiscal year.
The mix of direct tons versus toll tons processed was 56% to 44% in fiscal 2023, compared to 51% to 49% in fiscal 2022.
Liquidity and Capital Resources During fiscal 2022, we generated $70.1 million of cash from operating activities, invested $94.6 million in property, plant and equipment, spent a combined $376.7 million to acquire Shiloh’s U.S. BlankLight® business and Tempel, and received $39.9 million in proceeds from assets sold.
Liquidity and Capital Resources During fiscal 2023, we generated $625.4 million of cash from operating activities, invested $86.4 million in property, plant and equipment, spent $56.1 million to acquire Level5, and generated net cash proceeds of $35.7 million from the sale of assets, as well as $35.8 million from the sale of our 50% noncontrolling equity interest in ArtiFlex.
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.
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.
The decrease was primarily due to a $179.8 million increase in operating working capital requirements over fiscal 2021, mainly driven by higher average steel prices. 37 Table of Contents Investing Activities Net cash used by investing activities was $438.2 million during fiscal 2022 compared to net cash provided by investing activities of $468.5 million in fiscal 2021.
Investing Activities Net cash used by investing activities was $71.8 million during fiscal 2023 compared to net cash used by investing activities of $438.2 million in fiscal 2022.
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.
Impact of Raw Material Prices The market price of hot-rolled steel is one of the most significant factors impacting our selling prices and operating results. 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.
The increase was driven by higher average selling prices, and to a lesser extent, higher volume. • Sustainable Energy Solutions – Net sales decreased $4.0 million, or 3.0%, from fiscal 2021 to $130.9 million.
The increase was driven by higher average selling prices, and, to a lesser extent, contributions from the June 2, 2022 acquisition of Level5.
The shift in mix towards direct tons was driven primarily by softness at the Samuel joint venture, and, to a lesser extent, direct tons shipped by acquired businesses in fiscal 2022. • Consumer Products – Net sales increased 21.5%, or $112.8 million, over fiscal 2021 to $636.5 million.
The shift in mix towards direct tons was driven primarily by lower tolling volume with our mill customers and the sale of WSP’s remaining manufacturing facility on October 31, 2022. • Consumer Products – Net sales increased 7.8%, or $49.8 million, over fiscal 2022 to $686.3 million in fiscal 2023.
The Other category also includes the results of our former Engineered Cabs operating segment, on a historical basis, through the date of disposition (November 1, 2019) as well as certain income and expense items not allocated to our operating segments.
Other also includes the results of our unconsolidated engineered cabs operating joint venture (Workhorse) as well as the results of ArtiFlex, on a historical basis, through its divestiture on August 3, 2022.
Substantially all of the net sales of our Consumer Products, Building Products and Sustainable Energy Solutions operating segments and approximately 32% 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.
Our remaining net sales are to other markets such as agricultural, appliance, container, energy, heavy-truck, HVAC, and, with the fiscal 2022 addition of Tempel, the industrial electric motor, generator, and transformer industries.
Net cash used by investing activities in fiscal 2022 resulted primarily from cash paid for acquired companies in fiscal 2022, partially offset by $39.9 million of proceeds from asset sales. During fiscal 2022, we spent $104.5 million to acquire the net assets of Shiloh’s U.S. BlankLight ® business and $272.2 million to acquire the outstanding equity interests in Tempel.
Net cash used by investing activities in fiscal 2022 resulted primarily from cash used to acquire certain assets of the Shiloh Industries’ (“Shiloh”) U.S.
The acquisition included three facilities that expand the capacity and capabilities of our consolidated joint venture, TWB and its laser welded products business and an additional blanking facility that supports the core operations of our Steel Processing segment. 25 Table of Contents • On June 9, 2021, our consolidated joint venture WSP, sold the remaining assets of its Canton, Michigan, facility for approximately $20 million, resulting in a pre-tax gain of $12.2 million within restructuring and other income, net.
Refer to “Note A – Summary of Significant Accounting Policies” for additional information. • On October 31, 2022, our consolidated joint venture, WSP, sold its remaining manufacturing facility, located in Jackson, Michigan, for net proceeds of approximately $21.3 million, resulting in a pre-tax gain of $3.9 million within restructuring and other (income) expense, net.
Market & Industry Overview We sell our products and services to a diverse customer base and a broad range of end markets.
Our 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 U.S. and abroad. General Economic and Market Conditions We sell our products and services to a diverse customer base and a broad range of end markets.
The following table presents the average quarterly market price per ton of hot-rolled steel during fiscal 2022, fiscal 2021 and fiscal 2020: Fiscal Year Ended May 31, (Dollars per ton 1 ) 2022 2021 2020 1st Quarter $ 1,762 $ 475 $ 564 2nd Quarter $ 1,888 $ 625 $ 526 3rd Quarter $ 1,421 $ 1,016 $ 571 4th Quarter $ 1,280 $ 1,358 $ 527 Annual Avg. $ 1,588 $ 869 $ 547 1 CRU Hot-Rolled Index Sales to one Steel Processing customer in the automotive industry represented 13.0% of our consolidated net sales during fiscal 2022.
(Dollars per ton) (1) 2023 2022 2021 1st Quarter $ 978 $ 1,762 $ 475 2nd Quarter $ 742 $ 1,888 $ 625 3rd Quarter $ 720 $ 1,421 $ 1,016 4th Quarter $ 1,116 $ 1,280 $ 1,358 Annual Avg. $ 889 $ 1,588 $ 869 (1) CRU Hot-Rolled Index No matter how efficient, our operations, which use steel as a raw material, create some amount of scrap.
Removed
Introduction As of May 31, 2022, excluding our joint ventures, we operated 28 manufacturing facilities worldwide, principally in four operating segments, which correspond with our reportable business segments: Steel Processing, Consumer Products, Building Products and Sustainable Energy Solutions. 24 Table of Contents We also held equity positions in nine joint ventures, which operated 48 manufacturing facilities worldwide, including 15 facilities which were operated by joint ventures in which we held a controlling interest as of May 31, 2022.
Added
This MD&A should be read in conjunction with our consolidated financial statements and the related Notes in this Form 10-K. This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations and to allow investors to view the Company from the perspective of management.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn 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.
Biggest changeItem 7A. – Quantitative and Qualita tive Disclosures About Market Risk 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.
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.
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) (“AOCI”) 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.
Such forward contracts limit exposure to both favorable and unfavorable foreign currency exchange rate fluctuations. At May 31, 2022, 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.
Such forward contracts limit exposure to both favorable and unfavorable foreign currency exchange rate fluctuations. At May 31, 2023, 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.
These contracts covered periods commensurate with known or expected exposures throughout fiscal 2022. The derivative financial instruments were executed with highly rated financial institutions. No credit loss is anticipated.
These contracts covered periods commensurate with known or expected exposures throughout fiscal 2023. The derivative financial instruments were executed with highly rated financial institutions. No credit loss is anticipated.
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.
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 fair values of our outstanding derivative positions as of May 31, 2022 and 2021 are summarized below. Fair values of these derivative financial instruments do not consider the offsetting impact of the underlying hedged item.
The fair values of our outstanding derivative positions at May 31, 2023 and 2022 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) 2022 2021 Foreign currency exchange contracts $ (0.3 ) $ (0.5 ) Commodity contracts 3.9 63.5 Total derivative financial instruments $ 3.6 $ 63.0 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.
(In millions) 2023 2022 Commodity contracts $ (13.2 ) $ 3.9 Foreign currency exchange contracts - (0.3 ) Total Derivative Financial Instruments $ (13.2 ) $ 3.6 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.
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.
These instruments are used primarily to mitigate market exposure. Refer to “Note R – Derivative Financial Instruments and Hedging Activities” in the accompanying audited financial statements 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.
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.
We entered into an interest rate swap in March 2014, in anticipation of the issuance of the 2026 Notes. Refer to “Note I – Debt and Receivables Securitization” for additional information regarding the 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.
On July 28, 2023, we redeemed the 2026 Notes in full and released the then remaining amount deferred in AOCI associated with this interest rate swap. Foreign Currency Exchange Risk The translation of foreign currencies into U.S. dollars subjects us to exposure related to fluctuating foreign currency exchange rates.
Removed
Item 7A. – Quantitative and Qualita tive 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.

Other WOR 10-K year-over-year comparisons