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): December 21, 2022     WORTHINGTON INDUSTRIES, INC. (Exact name of Registrant as Specified in Its Charter)     Ohio 001-08399 31-1189815 (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)           200 Old Wilson Bridge Road   Columbus , Ohio   43085 (Address of Principal Executive Offices)   (Zip Code)   Registrant’s Telephone Number, Including Area Code: 614 438-3210   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   The New York Stock Exchange 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 December 21, 2022, beginning at approximately 8:30 a.m., Eastern Time, to discuss the Registrant’s unaudited financial results for the second quarter of fiscal 2023 (the fiscal quarter ended November 30, 2022). Additionally, the Registrant addressed certain issues related to the outlook for the Registrant and the Registrant's 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”).   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 November 30, 2022 and November 30, 2021 and the twelve months ended November 30, 2022. These represent 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/from 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 the Registrant's operating performance, such as incremental expenses related to the Level5 earnout, the impairment of long-lived assets, the restructuring and other income, net, the separation costs, 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 (see further disclosure below regarding adjusted EBIT) and adjusted EBITDA for the three months ended November 30, 2022, and November 30, 2021, and the twelve months ended November 30, 2022.       Second     First     Fourth     Third     Second       Quarter     Quarter     Quarter     Quarter     Quarter   (In thousands)   2023     2023     2022     2022     2022                                   Net earnings attributable to controlling interest   $ 16,218     $ 64,082     $ 80,252     $ 56,342     $ 110,301   Interest expense     7,612       8,598       8,167       8,140       7,312   Income tax expense     4,131       19,498       24,963       18,683       31,226   Earnings before interest and taxes (EBIT)     27,961       92,178       113,382       83,165       148,839   Incremental expense related to Level5 earnout (pre-tax)     525       525       -       -       -   Impairment of long-lived assets (pre-tax) 1     -       197       -       1,938       -   Restructuring and other income, net (pre-tax) 1     (2,432 )     (1,100 )     (2,418 )     (504 )     (1,923 ) Separation costs (pre-tax)     9,246       -       -       -       -   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   $ 35,300     $ 112,333     $ 110,964     $ 84,599     $ 146,916   Depreciation and amortization     28,354       28,001       28,248       27,425       21,090   Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) 1   $ 63,654     $ 140,334     $ 139,212     $ 112,024     $ 168,006                                   Trailing twelve months adjusted EBITDA 1   $ 455,224                                                           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 the Registrant's 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 net sales. A reconciliation of adjusted EBIT to the most comparable GAAP measure, which is operating income (loss) for purposes of measuring segment profit/loss, for the three months ended November 30, 2022, and November 30, 2021, is outlined below.     Three Months Ended November 30, 2022   (In thousands) Steel Processing     Consumer Products     Building Products     Sustainable Energy Solutions     Other     Consolidated   Net sales $ 841,947     $ 153,795     $ 141,671     $ 38,128     n/a     $ 1,175,541                                       Operating (loss) income $ (14,286 )   $ 12,995     $ 6,041     $ 1,001     $ (12,765 )   $ (7,014 ) Incremental expenses related to Level5 earnout (pre-tax)   -       525       -       -       -       525   Restructuring and other income, net (pre-tax)   (4,282 )     -       -       -       -       (4,282 ) Separation costs (pre-tax) (1)   -       -       -       -       9,246       9,246   Adjusted operating (loss) income   (18,568 )     13,520       6,041       1,001       (3,519 )     (1,525 ) Miscellaneous income (expense), net   850       (47 )     76       142       384       1,405   Equity in net income of unconsolidated affiliates   1,906       -       35,107       -       (156 )     36,857   Less: Net earnings attributable to noncontrolling interests (2)   1,437       -       -       -       -       1,437   Adjusted EBIT $ (17,249 )   $ 13,473     $ 41,224     $ 1,143     $ (3,291 )   $ 35,300                                       Adjusted EBIT margin   -2.0 %     8.8 %     29.1 %     3.0 %   NM       3.0 %                                     (1)  Separation costs reflect direct and incremental costs incurred in connection with the anticipated tax-free spin-off of the Company's Steel Processing business, including audit, advisory, and legal costs.   (2)  Excludes the noncontrolling interest portion of the restructuring gains within Steel Processing of $1,850.         Three Months Ended November 30, 2021   (In thousands) Steel Processing     Consumer Products     Building Products     Sustainable Energy Solutions     Other     Consolidated   Net sales $ 937,842     $ 140,793     $ 121,125     $ 33,101     n/a     $ 1,232,861                                       Operating income $ 66,070     $ 17,425     $ 4,606     $ 714     $ 1,650     $ 90,465   Restructuring and other income, net (pre-tax)   (182 )     -       -       -       (1,822 )     (2,004 ) Adjusted operating income (loss)   65,888       17,425       4,606       714       (172 )     88,461   Miscellaneous income, net   17       159       218       82       564       1,040   Equity in net income of unconsolidated affiliates   8,823       -       49,894       -       1,501       60,218   Less: Net earnings attributable to noncontrolling interests (3)   2,803       -       -       -       -       2,803   Adjusted EBIT $ 71,925     $ 17,584     $ 54,718     $ 796     $ 1,893     $ 146,916                                       Adjusted EBIT margin   7.7 %     12.5 %     45.2 %     2.4 %   NM       11.9 %                                     (3)  Excludes the noncontrolling interest portion of the restructuring gains within Steel Processing of $81.     In the conference call, the Registrant referred to free cash flow for the three and trailing twelve months ended November 30, 2022. Free cash flow is a non-GAAP financial measure that management believes measures the Registrant’s ability to generate cash beyond what is required for the Registrant's 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 twelve months ended November 30, 2022.       Second     First     Fourth     Third       Quarter     Quarter     Quarter     Quarter   (In thousands)   2023     2023     2022     2022   Net cash provided by operating activities   $ 132,941     $ 81,038     $ 164,838     $ 74,190   Investment in property, plant and equipment     (24,490 )     (21,477 )     (22,796 )     (23,645 ) Free cash flow   $ 108,451     $ 59,561     $ 142,042     $ 50,545                             Trailing twelve months free cash flow   $ 360,599                                                 In the conference call, the Registrant referred to net debt to trailing twelve months adjusted EBITDA, which is a non-GAAP financial measure 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 November 30, 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.       Second     First     Fourth     Third       Quarter     Quarter     Quarter     Quarter   (In thousands)   2023     2023     2022     2022                             Net cash provided by operating activities:   $ 132,941     $ 81,038     $ 164,838     $ 74,190   Adjustments:                         Changes in assets and liabilities, net of impact of acquisitions     (68,967 )     48,117       (73,397 )     11,177   Interest expense     7,612       8,598       8,167       8,140   Income tax expense     4,131       19,498       24,963       18,683   Impairment of long-lived assets     -       (312 )     -       (3,076 ) Benefit from (provision for) deferred income taxes     3,617       11,056       (5,839 )     (10,661 ) Bad debt expense     (1,098 )     (342 )     (63 )     (382 ) Equity in net income of unconsolidated affiliates, net of distributions     (18,352 )     (42,845 )     30,487       18,604   Net gain on sale of assets     4,265       769       2,320       628   Stock-based compensation     (4,547 )     (4,236 )     (4,141 )     (4,408 ) Less: non-controlling interest     (3,287 )     (1,162 )     (5,705 )     (2,305 ) EBITDA  1   $ 56,315     $ 120,179     $ 141,630     $ 110,590   Adjustments:                         Incremental expense related to Level5 earnout (pre-tax)     525       525       -         Impairment of long-lived assets (pre-tax) 1     -       197       -       1,938   Restructuring and other income, net (pre-tax) 1     (2,432 )     (1,100 )     (2,418 )     (504 ) Separation costs (pre-tax)     9,246       -       -       -   Pension settlement charge (pre-tax)     -       4,774       -       -   Loss on sale of investment in ArtiFlex (pre-tax)     -       15,759       -       -   Adjusted EBITDA  1   $ 63,654     $ 140,334     $ 139,212     $ 112,024                             Trailing twelve months adjusted EBITDA 1   $ 455,224                                               1  Excludes the impact of the noncontrolling interests.                                                                                 November 30,                     (In thousands)   2022                     Short-term borrowings   $ 4,935                     Current maturities of long-term debt     257                     Long-term debt     693,453                     Total debt   $ 698,645                     Less: cash and cash equivalents     (129,596 )                   Net debt   $ 569,049                                               Trailing twelve months adjusted EBITDA   $ 455,224                                               Net debt to adjusted EBITDA     1.25                       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 December 20, 2022. Such Exhibit 99.1 includes a copy of the Registrant’s news release issued on December 20, 2022 (the “Financial News Release”) reporting results for the three-month period ended November 30, 2022 (the fiscal 2023 second 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 Second Quarter of Fiscal 2023 (Fiscal Quarter Ended November 30, 2022) held on December 21, 2022   104   Cover Page Interactive Data File (embedded within the Inline XBRL document)     SIGNATURES 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: December 28, 2022 By: /s/ Patrick J. Kennedy       Patrick J. Kennedy, Vice President - General Counsel and Secretary