Worthington Industries Stock

Worthington Enterprises, Inc. operates as an industrial manufacturing company.

The company focuses on value-added steel processing, laser welded solutions, electrical steel laminations and manufactured consumer, building and sustainable mobility products. The company’s 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 its 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.

Recent Business Developments

On June 2, 2022, the company acquired Level 5 Tools, LLC (Level5), a leading provider of drywall tools and related accessories.

On August 3, 2022, the company sold its 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (ArtiFlex) to the unaffiliated joint venture member.

On October 31, 2022, the company’s consolidated joint venture, Worthington Specialty Processing (WSP), sold its remaining manufacturing facility, located in Jackson, Michigan.

Segments

The company operates through four segments: Steel Processing, Consumer Products, Building Products, and Sustainable Energy Solutions.

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. This segment includes the company’s three consolidated joint ventures, Samuel, Spartan, and TWB and one unconsolidated joint venture, Serviacero Worthington (Joint Ventures section). The company also owns a 51% controlling interest in WSP, which became a non-operating joint venture on October 31, 2022.

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. 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, Michigan, Tennessee, Kentucky, Indiana, Illinois, New York, Canada, China, India and Mexico.

Steel Processing serviced approximately 1,300 customers during fiscal 2023 in many end markets, including automotive, heavy truck, agriculture, construction, and energy. During fiscal 2023, Steel Processing’s top three customers represented approximately 31.0% of the operating segment’s total net sales. With the acquisition of Tempel Steel Company (Tempel) in fiscal 2022, the company’s 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. The company’s product lines and processing capabilities include:

Carbon Flat-Roll Steel Processing: The company performs a variety of value-added processes based on customer requirements including pickling, specialty re-rolling, hot dip galvanizing, blanking, slitting and cutting-to-length.

Electrical Steel Laminations: The company manufactures precision magnetic steel laminations for the automotive (including applications for electrified vehicles), industrial motor, generator, and transformer industries. The company delivers precision manufacturing (including stamping, heat treating, core assembly, die casting, bonding, etc.), material sourcing, metallurgical analysis, engineering, prototyping and product design, tooling, and value-added capabilities to customers via a global manufacturing footprint.

Tailor Welded Products: These products are used by North American automotive customers to reduce weight, lower cost, improve material utilization, and consolidate parts. The company’s highly engineered products allow for flexible part design and ensure the right material is used in the right place.

Tailor Welded Blanks are made from individual sheets of steel of different thickness, strength and coating which are joined together by laser welding.

Aluminum Tailor Welded Blanks are processed using friction stir welding technology. Friction stir offers the widest range of formable welded properties for all automotive aluminum alloys.

Steel Processing also toll processes steel for steel mills, large end-users, service centers and other processors. Toll processing is different from typical steel processing in that the mill, end-user or other party retains title to the steel and has the responsibility for selling the end product. Toll processing allows the company to earn a fee for services without incurring inventory costs. The company’s manufacturing facilities further benefit from the flexibility to scale between direct versus tolling services based on demand throughout the year.

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 include propane-filled cylinders for torches, camping stoves and other applications, 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.

The company uses the registered trademarks to market certain products, such as helium-filled balloon kits, fuel cylinders, handheld torches, LPG cylinders, camping fuel cylinders, and other tools. Each registered trademark has an original duration of 10 to 20 years, depending on the date it was registered and the country in which it is registered, and is subject to an indefinite number of renewals for a like period upon continued use and appropriate application.

Consumer Products generated approximately 14.0% of the company’s consolidated net sales in fiscal 2023. Consumer Products serviced approximately 2,000 customers during fiscal 2023. Sales to the top customer represented approximately 21.0% of net sales for Consumer Products during fiscal 2023.

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. Refrigerant gas cylinders are used to hold refrigerant gases for commercial, residential, and automotive air conditioning and refrigeration systems. 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. This segment also includes two unconsolidated joint ventures, WAVE and ClarkDietrich (Joint Ventures section).

Building Products generated approximately 11.9% of the company’s consolidated net sales in fiscal 2023. Building Products serviced approximately 1,700 customers during fiscal 2023.

For sales in the U.S. and Canada, the company’s manufactured building products are designed to comply with the 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. 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.

Building Products has one principal domestic competitor in the low-pressure LPG cylinder market, and there are a number of foreign competitors in the LPG cylinder, non-refillable refrigerant, and well water and expansion tank markets. Building Products is a leading supplier to the European market for low-pressure non-refillable cylinders.

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. This operating 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. Sustainable Energy Solutions has a number of foreign and domestic competitors in these markets.

Sustainable Energy Solutions generated approximately 3.0% of the company’s consolidated net sales in fiscal 2023. Sustainable Energy Solutions serviced approximately 300 customers during fiscal 2023.

The company owns a 51% controlling interest in WSP, which became a non-operating joint venture on October 31, 2022, when the remaining net assets of WSP were sold.

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. International operations accounted for approximately 13% of the company’s 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 the company’s consolidated net sales in fiscal 2023.

Sources and Availability of Raw Materials

During fiscal 2023, the company 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.

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. Approximately 41.30 million pounds of zinc and 4.22 million pounds of aluminum were purchased in fiscal 2023.

Technical Services

The company recognizes the importance of the metallurgical and technical aspects of its value-added steel products. The company is a leader in the flat rolled steel market for providing metallurgical and steel processing solutions to meet its customers’ customized material needs.

Seasonality

Sales for most of the company’s products are generally strongest in its fourth fiscal quarter when its facilities generally operate at seasonal peaks. Historically, sales have generally been weaker in the company’s 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.

Joint Ventures

The company’s strategy is to selectively develop new products, markets and technological capabilities; and to expand its international presence.

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. In addition to providing incremental coating capacity, this joint venture has served to expand the company’s 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. Steel, became a non-operating joint venture on October 31, 2022, when WSP sold the remaining net assets of the joint venture.

Unconsolidated

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. ClarkDietrich manufactures a full line of drywall studs and accessories, structural studs and joists, metal lath and accessories, shaft wall studs and track, vinyl and finishing products used primarily in residential and commercial construction.

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

Taxi Workhorse Holdings, LLC (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.

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.

Seasonality

Although the company experienced consistently strong demand for many of its products in each quarter of fiscal 2023, its sales are generally strongest in the fourth quarter of the fiscal year when all of its operating segments are normally operating at seasonal peaks, and its sales are generally weakest in the third quarter of the fiscal year (year ended May 31, 2023), 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.

History

Worthington Enterprises, Inc. was founded in 1955.