Results of Operations

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 8-K   CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 29, 2022 WORTHINGTON INDUSTRIES, INC. (Exact Name of Registrant as Specified in its Charter)   Ohio   1-8399   31-1189815 (State or Other Jurisdiction of Incorporation)   (Commission File Number)   (I.R.S. Employer Identification No.)   200 Old Wilson Bridge Road , Columbus , Ohio 43085 (Address of Principal Executive Offices) (Zip Code) ( 614 ) 438-3210 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:   ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))   Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Shares, without par value WOR NYSE   Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b‑2 of the Securities Exchange Act of 1934 (§240.12b‑2 of this chapter). Emerging growth company   ☐       If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐             Item 2.02. Results of Operations and Financial Condition .   Worthington Industries, Inc. (the “Registrant”) conducted a conference call on September 29, 2022, beginning at approximately 8:30 a.m., Eastern Daylight Time, to discuss the Registrant’s unaudited financial results for the first quarter of fiscal 2023 (the fiscal quarter ended August 31, 2022). Additionally, the Registrant addressed certain issues related to the outlook for the Registrant and its subsidiaries and their respective markets for the coming months. A copy of the transcript of the conference call is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Form 8-K”) and is incorporated herein by reference.   The information contained in this Item 2.02 and in Exhibit 99.1 furnished with this Form 8-K is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, unless the Registrant specifically states that the information is to be considered “filed” under the Exchange Act or incorporates the information by reference into a filing under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”).   In the conference call, the Registrant referred to adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), on a consolidated basis, for the Registrant’s three months ended August 31, 2022 and August 31, 2021 and the twelve months ended August 31, 2022. These are non-GAAP financial measures and are used by management as measures of operating performance. EBITDA is calculated by adding or subtracting, as appropriate, interest expense, income tax expense and depreciation and amortization to net earnings attributable to controlling interest. Adjusted EBITDA is calculated by adding or subtracting, as appropriate, certain items that the Registrant believes are not necessarily indicative of its operating performance, such as incremental expenses related to the Level5 earnout, the impairment of long-lived assets, the restructuring and other income, net, the pension settlement charge and the loss on sale of investment in ArtiFlex Manufacturing, LLC (each pre-tax) to/from EBITDA. The table below illustrates the differences between GAAP net earnings attributable to controlling interest and the non-GAAP financial measures adjusted EBIT and adjusted EBITDA for the three months ended August 31, 2022 and August 31, 2021 and the twelve months ended August 31, 2022.       First     Fourth     Third     Second     First       Quarter     Quarter     Quarter     Quarter     Quarter   (In thousands)   2023     2022     2022     2022     2022                                   Net earnings attributable to controlling interest   $ 64,082     $ 80,252     $ 56,342     $ 110,301     $ 132,491   Interest expense     8,598       8,167       8,140       7,312       7,718   Income tax expense     19,498       24,963       18,683       31,226       40,150   Earnings before interest and taxes (EBIT)     92,178       113,382       83,165       148,839       180,359   Incremental expense related to Level5 earnout (pre-tax)     525       -             -       -   Impairment of long-lived assets (pre-tax) 1     197       -       1,938       -       -   Restructuring and other income, net (pre-tax)  1     (1,100 )     (2,418 )     (504 )     (1,923 )     (6,328 ) Pension settlement charge (pre-tax)     4,774       -       -       -       -   Loss on sale of investment in ArtiFlex (pre-tax)     15,759       -       -       -       -   Adjusted earnings before interest and taxes (Adjusted EBIT) 1   $ 112,333     $ 110,964     $ 84,599     $ 146,916     $ 174,031   Depreciation and amortization     28,001       28,248       27,425       21,090       22,064   Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) 1   $ 140,334     $ 139,212     $ 112,024     $ 168,006     $ 196,095                                   Trailing twelve months adjusted EBITDA 1   $ 559,576                                                           1  Excludes the impact of the noncontrolling interests.                                 In the conference call, the Registrant referred to adjusted earnings before interest and taxes (adjusted EBIT) and adjusted EBIT margin for its Consumer Products and Building Products business segments, which are non-GAAP financial measures used by the Registrant as measures of operating performance. Adjusted EBIT is calculated in the same manner as adjusted EBITDA above (before the impact of depreciation and amortization) and adjusted EBIT margin is calculated by dividing adjusted EBIT by sales. A reconciliation of adjusted EBIT to the most comparable GAAP measure, which is operating income (loss) for purposes of measuring segment profit, for the three months ended August 31, 2022 and August 31, 2021, is outlined below.         Three Months Ended August 31, 2022   (In thousands) Steel Processing     Consumer Products     Building Products     Sustainable Energy Solutions     Other     Consolidated   Sales $ 1,038,880     $ 188,703     $ 150,323     $ 30,759     n/a     $ 1,408,665                                       Operating income (loss) $ 33,846     $ 20,444     $ 8,646     $ (1,307 )   $ 5,085     $ 66,714   Incremental expenses related to Level5 earnout   -       525       -       -       -       525   Impairment of long-lived assets   312       -       -       -       -       312   Restructuring and other expense (income), net   78       -       -       -       (1,178 )     (1,100 ) Adjusted operating income (loss)   34,236       20,969       8,646       (1,307 )     3,907       66,451   Miscellaneous income (expense), net (1)   184       (35 )     222       (86 )     (597 )     (312 ) Equity in net income of unconsolidated affiliates (2)   1,770       -       43,866       -       1,835       47,471   Less: Net earnings attributable to noncontrolling interests (3)   1,277       -       -       -       -       1,277   Adjusted EBIT $ 34,913     $ 20,934     $ 52,734     $ (1,393 )   $ 5,145     $ 112,333                                       Adjusted EBIT margin   3.4 %     11.1 %     35.1 %     -4.5 %   NM       8.0 %                                       Three Months Ended August 31, 2021     Steel Processing     Consumer Products     Building Products     Sustainable Energy Solutions     Other     Consolidated   Sales $ 822,810     $ 147,783     $ 114,743     $ 25,482     n/a     $ 1,110,818                                       Operating income (loss) $ 113,482     $ 20,506     $ 5,834     $ (2,352 )   $ (1,673 )   $ 135,797   Restructuring and other income, net   (12,131 )     -       -       (143 )     -       (12,274 ) Adjusted operating income (loss)   101,351       20,506       5,834       (2,495 )     (1,673 )     123,523   Miscellaneous income (expense), net   30       49       (73 )     (59 )     683       630   Equity in net income of unconsolidated affiliates   9,349       -       42,993       -       574       52,916   Less: Net earnings attributable to noncontrolling interests (3)   3,038       -       -       -       -       3,038   Adjusted EBIT $ 107,692     $ 20,555     $ 48,754     $ (2,554 )   $ (416 )   $ 174,031                                       Adjusted EBIT margin   13.1 %     13.9 %     42.5 %     -10.0 %   NM       15.7 %                                     (1)  Excludes within Other a non-cash settlement charge of $4,774 to accelerate a portion of deferred pension cost resulting from a pension lift-out transaction to transfer a portion of the total projected benefit obligation of The Gerstenslager Company Bargaining Unit Employees' Pension Plan to a third-party insurance company during the three months ended August 31, 2022.   (2)  Excludes within Other a loss of $15,759 within Other related to the sale of the Company's 50% noncontrolling equity investment in ArtiFlex Manufacturing, LLC effective August 3, 2022.   (3)  Excludes within Steel Processing the noncontrolling interest portion of impairment of long-lived assets of $(115) and restructuring gains of $5,946 for the three months ended August 31, 2022 and August 31, 2021, respectively.     In the conference call, the Registrant referred to free cash flow for the three months and the six months ended August 31, 2022. Free cash flow is a non-GAAP financial metric that management believes measures the Registrant’s ability to generate cash beyond what is required for its business operations and capital expenditures. The following provides a reconciliation of free cash flow from net cash provided by operating activities for the three months and the six months ended August 31, 2022.       Three Months Ended       August 31,     May 31,   (In thousands)   2022     2022   Net cash provided by operating activities   $ 81,038     $ 164,838   Investment in property, plant and equipment     (21,477 )     (22,796 ) Free cash flow   $ 59,561     $ 142,042                 Trailing six months free cash flow   $ 201,603           In the conference call, the Registrant referred to net debt to trailing twelve months adjusted EBITDA, which is a non-GAAP financial metric that is used by the Registrant as a measure of leverage. Net debt to adjusted EBITDA is calculated by subtracting cash and cash equivalents from net debt (defined as the aggregate of short-term borrowings, current maturities of long-term debt and long-term debt) and dividing the sum by adjusted EBITDA. The calculation of net debt to adjusted EBITDA for the twelve months ended     August 31, 2022, along with a reconciliation of net cash provided by operating activities (the most comparable GAAP measure) to adjusted EBITDA for the same period, as mentioned in the conference call, is outlined below.       First     Fourth     Third     Second       Quarter     Quarter     Quarter     Quarter   (In thousands)   2023     2022     2022     2022                             Net cash provided by (used in) operating activities   $ 81,038     $ 164,838     $ 74,190     $ (119,104 ) Adjustments:                         Changes in assets and liabilities, net of impact of acquisitions     48,117       (73,397 )     11,177       227,501   Interest expense     8,598       8,167       8,140       7,312   Income tax expense     19,498       24,963       18,683       31,226   Impairment of long-lived assets     (312 )     -       (3,076 )     -   Benefit from (provision for) deferred income taxes     11,056       (5,839 )     (10,661 )     (1,309 ) Bad debt expense     (342 )     (63 )     (382 )     (335 ) Equity in net income of unconsolidated affiliates, net of distributions     (42,845 )     30,487       18,604       31,274   Net gain on loss of assets     769       2,320       628       496   Stock-based compensation     (4,236 )     (4,141 )     (4,408 )     (4,248 ) Less: non-controlling interest     (1,162 )     (5,705 )     (2,305 )     (2,884 ) EBITDA  1   $ 120,179     $ 141,630     $ 110,590     $ 169,929   Adjustments:                         Incremental expense related to Level5 earnout     525       -             -   Impairment of long-lived assets 1     197       -       1,938       -   Restructuring and other income  1     (1,100 )     (2,418 )     (504 )     (1,923 ) Pension settlement charge     4,774       -       -       -   Loss on sale of investment in ArtiFlex     15,759       -       -       -   Adjusted EBITDA  1   $ 140,334     $ 139,212     $ 112,024     $ 168,006                             Trailing twelve months adjusted EBITDA 1   $ 559,576                                               1  Excludes the impact of the noncontrolling interests.                                                                                 August 31,                     (In thousands)   2022                     Short-term borrowings   $ 15,554                     Current maturities of long-term debt     248                     Long-term debt     690,011                     Total debt   $ 705,813                     Less: cash and cash equivalents     (35,768 )                   Net debt   $ 670,045                                               Trailing twelve months adjusted EBITDA   $ 559,576                                               Net debt to adjusted EBITDA     1.2                       Additional non-GAAP financial measures referred to by the Registrant on the conference call, including reconciliations to the most comparable GAAP measures, are included in Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed on September 29, 2022. Such Exhibit 99.1 includes a copy of the Registrant’s news release issued on September 29, 2022 (the “Financial News Release”) reporting results for the three-month period ended August 31, 2022 (the fiscal 2023 first quarter). The Financial News Release was made available on the Registrant’s website during the conference call and will remain available on the Registrant’s website for at least one year.         Item 9.01. Financial Statements and Exhibits . (a) through (c): Not applicable. (d) Exhibits : The following exhibits are included with this Form 8‑K: Exhibit No.    Description       99.1   Transcript of Worthington Industries, Inc. Earnings Conference Call for First Quarter of Fiscal 2023 (Fiscal Quarter Ended August 31, 2022) held on September 29, 2022 104   Cover Page Interactive Data File (embedded within the Inline XBRL document)   SIGNATURE   Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.       WORTHINGTON INDUSTRIES, INC.           Date: October 5, 2022   By:   /s/ Patrick J. Kennedy         Patrick J. Kennedy, Vice President - General Counsel and Secretary