Worthington Industries(WOR) - 2022 Q4 - Annual Report

Part I Business Worthington Industries is an industrial manufacturing company focused on value-added steel processing and manufactured consumer, building, and sustainable mobility products - The company is an industrial manufacturer with two main focus areas: value-added steel processing and manufactured products for consumer, building, and sustainable mobility markets[13] - Effective June 1, 2021, the company reorganized its legacy Pressure Cylinders segment into three new reportable segments: Consumer Products, Building Products, and Sustainable Energy Solutions[16] - Key acquisitions in fiscal 2022 include certain assets of Shiloh Industries' U.S. BlankLight® business for approximately $104.5 million and Tempel Steel Company for approximately $272.2 million, both bolstering the Steel Processing segment[16][19] FY2022 Net Sales by Segment | Segment | Net Sales Percentage | | :--- | :--- | | Steel Processing | 75.0% | | Consumer Products | 12.1% | | Building Products | 10.3% | | Sustainable Energy Solutions | 2.5% | - The automotive industry is the largest end market for the Steel Processing segment, and one automotive customer accounted for 13% of the company's consolidated net sales in fiscal 2022[22][24] Risk Factors The company identifies numerous risks, including macroeconomic and geopolitical factors, supply chain disruptions, and commodity price volatility - The COVID-19 pandemic continues to pose risks through potential volatility in product demand, supply chain disruptions, and operational closures[66] - The Russia-Ukraine conflict may adversely affect business, particularly European operations, through market disruptions, commodity price volatility, and supply chain interruptions[69][71] - A significant portion of net sales is tied to the automotive and construction industries, making the company vulnerable to downturns in these cyclical markets[72] - Operating results are significantly affected by fluctuations in raw material prices, particularly steel, and the company may not be able to pass on cost increases or avoid inventory write-downs[75][76] - Approximately 50% of the Steel Processing segment's net sales are to automotive-related customers, with a significant portion tied to the Detroit Three automakers, posing risk from production reductions[83] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[126] Properties The company operates over 10 million square feet of manufacturing space, primarily owned, and considers its facilities well-maintained and sufficient for current needs - As of May 31, 2022, the company and its joint ventures operate from over 10,000,000 square feet of owned or leased space, primarily for manufacturing[126] Facility Ownership Summary (Excluding JVs) | Operating Segment | Number of Facilities | Leased | Owned | | :--- | :--- | :--- | :--- | | Steel Processing | 14 | 2 | 12 | | Consumer Products | 5 | 2 | 3 | | Building Products | 6 | 0 | 6 | | Sustainable Energy Solutions | 3 | 0 | 3 | | Total | 28 | 4 | 24 | Legal Proceedings The company is involved in various ordinary course legal proceedings but does not expect any to have a material adverse effect on its financial condition or operations - The company does not expect any ongoing legal proceedings to have a material adverse effect on its financial condition or results[131] Mine Safety Disclosures This item is not applicable to the company Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Worthington Industries' common shares trade on the NYSE, and the company repurchased 1,000,000 shares for $52.4 million in Q4 FY2022, with 6,065,000 shares remaining for repurchase - The company's common shares are traded on the New York Stock Exchange under the ticker symbol WOR[144] Share Repurchases (Quarter Ended May 31, 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 2022 | 300,000 | $52.08 | | April 2022 | 700,000 | $52.64 | | May 2022 | 0 | - | | Total | 1,000,000 | $52.39 | - As of May 31, 2022, there were 6,065,000 common shares remaining for repurchase under the company's publicly announced plans[150] Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2022, net sales increased by 65.3% to $5.24 billion due to higher steel prices, while net earnings decreased to $379.4 million from $723.8 million due to a prior-year gain, and operating cash flow declined due to increased working capital Fiscal 2022 vs. 2021 Performance Summary | Metric (in millions, except EPS) | Fiscal 2022 | Fiscal 2021 | Change | | :--- | :--- | :--- | :--- | | 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 | | Diluted EPS | $7.44 | $13.40 | -$5.96 | - The significant increase in FY2022 net sales was primarily driven by higher average selling prices in the Steel Processing segment, reflecting a sharp rise in market steel prices, with the average price per ton of hot-rolled steel at $1,588 in FY2022 compared to $869 in FY2021[176][167][168] - The decrease in net earnings for FY2022 is attributable to the prior year (FY2021) including a $655.1 million pre-tax gain on the investment in Nikola Corporation[187] - Net cash provided by operating activities decreased to $70.1 million in FY2022 from $274.4 million in FY2021, mainly due to a $179.8 million increase in operating working capital requirements driven by higher average steel prices[229] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rates, foreign currency, and commodity prices using derivative financial instruments for hedging purposes, not speculation - The company manages interest rate risk using a combination of fixed and variable rate debt and has used interest rate swaps in conjunction with the issuance of its 2026 and 2032 senior notes[260][261][262] - Foreign currency exchange risk is managed using forward contracts to hedge exposure on certain intercompany loans and transactions denominated in non-local currencies[263] - Commodity price risk for materials such as steel, natural gas, copper, and zinc is managed through the use of derivative financial instruments to hedge against price fluctuations[265] Fair Value of Outstanding Derivative Positions | (in millions) | Fair Value at May 31, 2022 | Fair Value at May 31, 2021 | | :--- | :--- | :--- | | Foreign currency exchange contracts | $(0.3) | $(0.5) | | Commodity contracts | $3.9 | $63.5 | | Total | $3.6 | $63.0 | Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal year 2022, including balance sheets, statements of earnings, cash flows, and detailed notes - The independent auditor, KPMG LLP, issued an unqualified opinion on the consolidated financial statements and on the effectiveness of the company's internal control over financial reporting[273][274] Consolidated Balance Sheet Highlights (in thousands) | Account | May 31, 2022 | May 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $1,785,653 | $1,967,992 | | Total Assets | $3,643,023 | $3,373,245 | | Total Current Liabilities | $932,261 | $787,901 | | Total Liabilities | $2,029,061 | $1,821,550 | | Total Equity | $1,613,962 | $1,551,695 | Consolidated Statement of Earnings Highlights (in thousands) | Account | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net Sales | $5,242,219 | $3,171,429 | $3,059,119 | | Gross Margin | $714,816 | $639,078 | $443,337 | | Operating Income | $329,268 | $167,473 | $22,489 | | Net Earnings Attributable to Controlling Interest | $379,386 | $723,795 | $78,796 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company Controls and Procedures Management concluded disclosure controls were effective as of May 31, 2022, with internal control assessment excluding recently acquired businesses, and no material changes occurred in Q4 - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective at a reasonable assurance level as of May 31, 2022[588] - Management's assessment of internal control over financial reporting excluded the operations of Shiloh's U.S. BlankLight® business and Tempel, both acquired in fiscal 2022[592] - The independent registered public accounting firm, KPMG LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of May 31, 2022[594][597] Other Information The company reports no other information for this item - None[605] Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 Proxy Statement - Information concerning directors and nominees is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting[607] - Information about executive officers is located in the 'Supplemental Item – Information about our Executive Officers' section in Part I of this Form 10-K[608] Executive Compensation Detailed information regarding executive compensation is incorporated by reference from the company's 2022 Proxy Statement - All information required by this item is incorporated by reference from the 2022 Proxy Statement[613][614] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners, management, and equity compensation plans is incorporated by reference from the company's 2022 Proxy Statement - Information on security ownership and equity compensation plans is incorporated by reference from the 2022 Proxy Statement[615][616] Certain Relationships and Related Transactions, and Director Independence Information concerning certain relationships, related person transactions, and director independence is incorporated by reference from the company's 2022 Proxy Statement - Details on related party transactions and director independence are incorporated by reference from the 2022 Proxy Statement[617][618] Principal Accountant Fees and Services Information regarding fees paid to and services provided by KPMG LLP is incorporated by reference from the company's 2022 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement[619] Part IV Exhibits and Financial Statement Schedules This section lists all documents filed as part of the Form 10-K, including financial statements, schedules, and a comprehensive index of exhibits - This section contains the list of all financial statements, schedules, and exhibits filed with the Form 10-K[621][622] Form 10-K Summary This item is not applicable to the company