WORTHINGTON INDUSTRIES INC (Form: 10-Q, Received: 04/09/2019 15:19:52)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2019

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 001-08399

WORTHINGTON INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


Ohio		31-1189815
(State or other jurisdiction of incorporation or organization)		(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, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. On April 1, 2019, the number of Common Shares, without par value, issued and outstanding was 57,312,254.

TABLE OF CONTENTS

Safe Harbor Statement			ii

Part I. Financial Information

	Item 1.	Financial Statements (Unaudited)

		Consolidated Balance Sheets –February 28, 2019 and May 31, 2018	1

		Consolidated Statements of Earnings –Three and Nine Months Ended February 28, 2019 and 2018	2

		Consolidated Statements of Comprehensive Income –Three and Nine Months Ended February 28, 2019 and 2018	3

		Consolidated Statements of Cash Flows –Three and Nine Months Ended February 28, 2019 and 2018	4

		Notes to Consolidated Financial Statements	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

	Item 4.	Controls and Procedures	37

Part II. Other Information

	Item 1.	Legal Proceedings	37

	Item 1A.	Risk Factors	37

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

	Item 3.	Defaults Upon Senior Securities (Not applicable)	38

	Item 4.	Mine Safety Disclosures (Not applicable)	38

	Item 5.	Other Information (Not applicable)	38

	Item 6.	Exhibits	39

Signatures			40

Safe Harbor Statement

Selected statements contained in this Quarterly Report on Form 10-Q, including, without limitation, in “PART I – Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements reflect our current expectations, estimates or projections concerning future results or events. These statements are often identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “intend,” “estimate,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. These forward-looking statements include, without limitation, statements relating to:

•

outlook, strategy or business plans;

•

future or expected growth, growth potential, forward momentum, performance, competitive position, sales, volumes, cash flows, earnings, margins, balance sheet strengths, debt, financial condition or other financial measures;

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pricing trends for raw materials and finished goods and the impact of pricing changes;

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the ability to improve or maintain margins;

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expected demand or demand trends for us or our markets;

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additions to product lines and opportunities to participate in new markets;

•

expected benefits from Transformation and innovation efforts;

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the ability to improve performance and competitive position at our operations;

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anticipated working capital needs, capital expenditures and asset sales;

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anticipated improvements and efficiencies in costs, operations, sales, inventory management, sourcing and the supply chain and the results thereof;

•

projected profitability potential;

•

the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, newly-created joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations;

•

the successful sale of the WAVE international business;

•

projected capacity and the alignment of operations with demand;

•

the ability to operate profitably and generate cash in down markets;

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the ability to capture and maintain market share and to develop or take advantage of future opportunities, customer initiatives, new businesses, new products and new markets;

•

expectations for Company and customer inventories, jobs and orders;

•

expectations for the economy and markets or improvements therein;

•

expectations for generating improving and sustainable earnings, earnings potential, margins or shareholder value;

•

effects of judicial rulings; and

•

other non-historical matters .

Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation , those that follow :

•

the effect of national, regional and global economic conditions generally and within major product markets, including a recurrent slowing economy;

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the effect of conditions in national and worldwide financial markets;

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the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships;

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lower oil prices as a factor in demand for products;

•

product demand and pricing;

•

changes in product mix, product substitution and market acceptance of our products;

•

fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities and other items required by operations;

•

the outcome of adverse claims experience with respect to workers’ compensation, product recalls or product liability, casualty events or other matters;

•

effects of facility closures and the consolidation of operations;

•

the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction, oil and gas, and other industries in which we participate;

•

failure to maintain appropriate levels of inventories;

•

financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom we do business;

•

the ability to realize targeted expense reductions from headcount reductions, faci lity closures and other cost reduction efforts;

•

the ability to realize cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from Transformation initiatives, on a timely basis;

•

the overall success of, and the ability to integrate, newly-acquired businesses and joint ventures, maintain and develop their customers, and achieve synergies and other expected benefits and cost savings therefrom;

•

capacity levels and efficiencies, within facilities, within major product markets and within the industries as a whole;

•

the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, interruption in utility services, civil unrest, international conflicts, terrorist activities or other causes;

•

changes in customer demand, inventories, spending patterns, product choices, and supplier choices;

•

risks associated with doing business internationally, including economic, political and social instability, foreign currency exchange rate exposure and the acceptance of our products in global markets;

•

the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment;

•

deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies;

•

level of imports and import prices in our markets;

•

the impact of judicial rulings and governmental regulations, both in the United States and abroad, including those adopted by the United States Securities and Exchange Commission and other governmental agencies as contemplated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010;

•

the effect of healthcare laws in the United States and potential changes for such laws which may increase our healthcare and other costs and negatively impact our operations and financial results;

•

cyber security risks;

•

the effects of privacy and information security laws and standards; and

•

other risks described from time to time in the filings of Worthington Industries, Inc. with the United States Securities and Exchange Commission, including those described in “PART I – Item 1A. — Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended May 31, 2018 and in “PART II – Item 1A. – Risk Factors” of this Quarterly Report on Form 10-Q.

We note these factors for investors as contemplated by the Act. It is impossible to predict or identify all potential risk factors. Consequently, you should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Any forward-looking statements in this Quarterly Report on Form 10-Q are based on current information as of the date of this Quarterly Report on Form 10-Q, and we assume no obligation to correct or update any such statements in the future, except as required by applicable law.

iii

PART I. FINANC IAL INFORMATION

Item 1. – Financial Statements

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	February 28,		May 31,
	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	113,116	$	121,967
Receivables, less allowances of $859 and $632 at February 28, 2019
and May 31, 2018, respectively		512,739		572,689
Inventories:
Raw materials		269,733		237,471
Work in process		110,326		122,977
Finished products		106,015		93,579
Total inventories		486,074		454,027
Income taxes receivable		17,534		1,650
Assets held for sale		7,568		30,655
Prepaid expenses and other current assets		68,082		60,134
Total current assets		1,205,113		1,241,122
Investments in unconsolidated affiliates		222,865		216,010
Goodwill		335,311		345,183
Other intangible assets, net of accumulated amortization of $86,370 and
$74,922 at February 28, 2019 and May 31, 2018, respectively		201,588		214,026
Other assets		21,475		20,476
Property, plant and equipment:
Land		24,018		24,229
Buildings and improvements		309,141		300,542
Machinery and equipment		1,050,372		1,030,720
Construction in progress		49,314		32,282
Total property, plant and equipment		1,432,845		1,387,773
Less: accumulated depreciation		851,904		802,803
Total property, plant and equipment, net		580,941		584,970
Total assets	$	2,567,293	$	2,621,787

Liabilities and equity
Current liabilities:
Accounts payable	$	424,480	$	473,485
Accrued compensation, contributions to employee benefit plans and
related taxes		58,160		96,487
Dividends payable		14,380		13,731
Other accrued items		67,045		57,125
Income taxes payable		106		4,593
Current maturities of long-term debt		1,167		1,474
Total current liabilities		565,338		646,895
Other liabilities		72,396		74,237
Distributions in excess of investment in unconsolidated affiliate		124,198		55,198
Long-term debt		748,319		748,894
Deferred income taxes, net		80,034		60,188
Total liabilities		1,590,285		1,585,412
Shareholders' equity - controlling interest		856,622		918,769
Noncontrolling interests		120,386		117,606
Total equity		977,008		1,036,375
Total liabilities and equity	$	2,567,293	$	2,621,787

See notes to consolidated financial statements.

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended February 28,						Nine Months Ended February 28,
	2019			2018			2019			2018
Net sales	$	874,381		$	841,657		$	2,820,714		$	2,561,160
Cost of goods sold		784,360			714,603			2,466,762			2,161,249
Gross margin		90,021			127,054			353,952			399,911
Selling, general and administrative expense		75,220			84,294			250,529			261,968
Impairment of goodwill and long-lived assets		-			-			2,381			8,289
Restructuring and other income, net		(11,176	)		(3	)		(11,710	)		(7,393	)
Operating income		25,977			42,763			112,752			137,047
Other income (expense):
Miscellaneous income, net		525			1,500			2,222			3,169
Interest expense		(9,341	)		(9,775	)		(28,541	)		(28,620	)
Equity in net income of unconsolidated affiliates		20,802			19,770			71,897			63,521
Earnings before income taxes		37,963			54,258			158,330			175,117
Income tax expense (benefit)		8,415			(24,039	)		34,032			7,124
Net earnings		29,548			78,297			124,298			167,993
Net earnings (loss) attributable to noncontrolling interests		2,775			(791	)		8,581			3,968
Net earnings attributable to controlling interest	$	26,773		$	79,088		$	115,717		$	164,025

Basic
Average common shares outstanding		56,478			60,383			57,650			61,451
Earnings per share attributable to controlling interest	$	0.47		$	1.31		$	2.01		$	2.67

Diluted
Average common shares outstanding		57,974			62,345			59,389			63,507
Earnings per share attributable to controlling interest	$	0.46		$	1.27		$	1.95		$	2.58

Common shares outstanding at end of period		56,181			59,802			56,181			59,802

Cash dividends declared per share	$	0.23		$	0.21		$	0.69		$	0.63

See notes to consolidated financial statements.

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended February 28,						Nine Months Ended February 28,
	2019			2018			2019			2018
Net earnings	$	29,548		$	78,297		$	124,298		$	167,993
Other comprehensive income (loss):
Foreign currency translation		1,476			9,542			(8,857	)		26,925
Pension liability adjustment, net of tax		37			251			(60	)		245
Cash flow hedges, net of tax		(596	)		(556	)		(7,228	)		(879	)
Other comprehensive income (loss)		917			9,237			(16,145	)		26,291
Comprehensive income		30,465			87,534			108,153			194,284
Comprehensive income (loss) attributable to noncontrolling interests		2,803			(680	)		8,537			4,438
Comprehensive income attributable to controlling interest	$	27,662		$	88,214		$	99,616		$	189,846

See notes to consolidated financial statements.

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended February 28,						Nine Months Ended February 28,
	2019			2018			2019			2018
Operating activities:
Net earnings	$	29,548		$	78,297		$	124,298		$	167,993
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		23,625			25,338			71,643			76,986
Impairment of goodwill and long-lived assets		-			-			2,381			8,289
Provision for (benefit from) deferred income taxes		(730	)		(27,373	)		21,493			(20,022	)
Bad debt (income) expense		201			17			454			(4	)
Equity in net income of unconsolidated affiliates, net of distributions		(865	)		2,835			3,298			(1,968	)
Net gain on assets		(12,606	)		(1,437	)		(10,203	)		(10,692	)
Stock-based compensation		1,143			2,882			7,755			10,076
Changes in assets and liabilities, net of impact of acquisitions:
Receivables		1,546			4,071			55,793			20,652
Inventories		(1,054	)		(15,398	)		(38,525	)		(40,223	)
Prepaid expenses and other current assets		(4,276	)		(4,914	)		(25,944	)		(149	)
Other assets		79			(2,069	)		(1,181	)		(3,045	)
Accounts payable and accrued expenses		14,963			35,564			(85,533	)		(12,804	)
Other liabilities		464			2,107			1,458			7,568
Net cash provided by operating activities		52,038			99,920			127,187			202,657

Investing activities:
Investment in property, plant and equipment		(19,379	)		(13,628	)		(60,554	)		(55,319	)
Acquisitions, net of cash acquired		-			-			-			(285,028	)
Distributions from unconsolidated affiliate		1,492			-			56,693			-
Proceeds from sale of assets		27,843			3			48,290			16,742
Net cash provided (used) by investing activities		9,956			(13,625	)		44,429			(323,605	)

Financing activities:
Net repayments of short-term borrowings, net of issuance costs		-			(1,108	)		-			(508	)
Proceeds from long-term debt, net of issuance costs		-			-			-			197,685
Principal payments on long-term debt		(303	)		(374	)		(1,104	)		(813	)
Proceeds from issuance of common shares, net of tax withholdings		104			581			(4,645	)		(3,415	)
Payments to noncontrolling interests		-			-			(6,327	)		(3,916	)
Repurchase of common shares		(28,587	)		(47,418	)		(129,020	)		(159,942	)
Dividends paid		(13,119	)		(12,766	)		(39,371	)		(38,800	)
Net cash used by financing activities		(41,905	)		(61,085	)		(180,467	)		(9,709	)

Increase (decrease) in cash and cash equivalents		20,089			25,210			(8,851	)		(130,657	)
Cash and cash equivalents at beginning of period		93,027			122,214			121,967			278,081
Cash and cash equivalents at end of period	$	113,116		$	147,424		$	113,116		$	147,424

See notes to consolidated financial statements.

WORTHINGTON INDUSTRIES, INC.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A – Basis of Presentation

The consolidated financial statements include the accounts of Worthington Industries, Inc. and consolidated subsidiaries (collectively, “we,” “our,” “Worthington,” or the “Company”). Investments in unconsolidated affiliates are accounted for using the equity method. Significant intercompany accounts and transactions are eliminated.

The Company owns controlling interests in the following three joint ventures: Spartan Steel Coating, LLC (“Spartan”) (52%), TWB Company, L.L.C. (“TWB”) (55%), and Worthington Specialty Processing (“WSP”) (51%). These joint ventures are consolidated with the equity owned by the other joint venture members shown as noncontrolling interests in our consolidated balance sheets, and their portions of net earnings and other comprehensive income (“OCI”) shown as net earnings or comprehensive income (loss) attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively.

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, which are of a normal and recurring nature except those which have been disclosed elsewhere in this Quarterly Report on Form 10-Q, necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included . Operating results for the three and nine months ended February 28, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2019 (“fiscal 2019”). For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended May 31, 2018 (“fiscal 2018”) of Worthington Industries, Inc. (the “2018 Form 10-K”).

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recently Adopted Accounting Standards

On June 1, 2018, the Company adopted new accounting guidance that replaces most existing revenue recognition guidance under U.S. GAAP. See “NOTE B – Revenue Recognition” for further explanation related to this adoption, including newly-required disclosures.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532; 34-83875, “Disclosure Update and Simplification,” adopting amendments to certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded, in light of other SEC disclosure requirements, GAAP or changes in the information environment. In addition, the amendments expanded the disclosure requirements relating to the analysis of shareholders’ equity for interim financial statements. Under the amendments, an analysis of the changes in each caption of shareholders’ equity and noncontrolling interests presented in the balance sheet must be provided in a note or separate statement. The analysis must present a reconciliation of the beginning balance to the ending balance of each period for which a statement of earnings is required to be filed. The final rule was effective on November 5, 2018. The Company adopted the final rule effective for the second quarter of fiscal 2019. The adoption of the final rule did not have a significant impact on the Company’s consolidated financial position or results of operations. See “NOTE J – Changes in Equity” for the newly-required disclosures related to this adoption.

Recently Issued Accounting Standards

and agreements to identify items that may meet the definition of a lease under the new accounting guidance. We have procured a third-party software to track and manage our leases and are getting ready to start the process of importing lease data into the software . While we are in the process of evaluating the effect this new accounting guidance will have on the presentation of our consolidated financial statements and related disclosures, the adoption is anticipated to have a material impact on the Company’s consolidated balance sheets with the addition of right-of-use assets, offset by the associate d liabilities ; however, we do not expect it to have a material impact on the consolidated statements of earnings .

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. The amended accounting guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are in the process of evaluating the effect this amended accounting guidance will have on our consolidated financial position and results of operations; however, we do not expect the amended accounting guidance to have a material impact on our ongoing financial reporting.

In August 2017, amended accounting guidance was issued that modifies hedge accounting by making more hedge strategies eligible for hedge accounting, amending presentation and disclosure requirements, and changing how companies assess effectiveness. The intent is to simplify application of hedge accounting and increase transparency of information about an entity’s risk management activities. The amended accounting guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. It is to be applied using a modified retrospective transition approach for cash flow and net investment hedges existing at the date of adoption. The presentation and disclosure guidance is only required prospectively. Early adoption is permitted. We are in the process of evaluating the effect this amended accounting guidance will have on our consolidated financial position and results of operations; however, we do not expect the amended accounting guidance to have a material impact on our ongoing financial reporting.

NOTE B – Revenue Recognition

Through fiscal 2018, in accordance with our historical accounting policies for revenue recognition, we recognized revenue upon transfer of title and risk of loss, or in the case of toll processing revenue, upon delivery of the goods, provided persuasive evidence of an arrangement existed, pricing was fixed or determinable and collectability was reasonably assured. Through charges to net sales, provisions were made for returns & allowances, customer rebates and sales discounts based on past experience, specific agreements, and anticipated levels of customer activity.

On June 1, 2018, we adopted new accounting guidance that replaces most existing revenue recognition accounting guidance under U.S. GAAP, Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”). The new accounting guidance was adopted using the modified retrospective approach as applied to customer contracts that were not complete at the date of adoption, with the cumulative effect recognized in retained earnings. Comparative financial information for reporting periods beginning prior to June 1, 2018, has not been restated and continues to be reported under the previous accounting guidance. The cumulative effect adjustment resulted from a change in the pattern of recognition for our toll processing revenue stream and certain contracts within the oil & gas equipment revenue stream, which previously were accounted for as point in time and now will be accounted for over time.

The following table outlines the cumulative effect of adopting the new revenue recognition guidance:

(in thousands)	May 31, 2018 (As Reported)		Cumulative Effect of Topic 606 Adoption			June 1, 2018 (As Adjusted)
Consolidated Balance Sheet
Assets
Receivables	$	572,689	$	4,706		$	577,395
Total inventories		454,027		(3,452	)		450,575
Prepaid expenses and other current assets		60,134		944			61,078
Liabilities and equity
Deferred income taxes, net		60,188		454			60,642
Retained earnings		637,757		1,174			638,931
Noncontrolling interests		117,606		570			118,176

Under the new accounting guidance, we recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive for those goods or services, including any variable consideration.

Shipping and handling costs charged to customers are treated as fulfillment activities and are recorded in both net sales and cost of goods sold at the time control is transferred to the customer. Due to the short-term nature of our contracts with customers, we have

elected to apply the practical expedient s under Topic 606 to : (1) expense as incurred, incremental costs of obtaining a contract ; and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one y ear or less. When we satisf y (or partially satisf y ) a performance obligation, prior to being able to invoice the customer, we recognize an unbilled receivable when the right to consideration is unconditional and a contract asset when the right to consider ation is conditional . Unbilled receivables and contract assets are included in receivables and prepaid and other current assets, respectively, on the consolidated balance sheets. Additionally, we do not maintain contract liability balances, as performanc e obligations are satisfied prior to customer payment for product. Payments from customers are generally due within 30 to 60 days of invoicing, which generally occurs upon shipment or delivery of the goods.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that we collect from a customer, are excluded from revenue.

Certain contracts with customers include warranties associated with the delivered goods or services. These warranties are not considered to be separate performance obligations, and accordingly, we record an estimated liability for potential warranty costs as the goods or services are transferred.

With the exception of the toll processing revenue stream and certain contracts within the oil & gas equipment revenue stream, we recognize revenue at the point in time the performance obligation is satisfied and control of the product is transferred to the customer upon shipment or delivery. Generally, we receive and acknowledge purchase orders from our customers, which define the quantity, pricing, payment and other applicable terms and conditions. In some cases, we receive a blanket purchase order from our customers, which includes pricing, payment and other terms and conditions, with quantities defined at the time each customer subsequently issues periodic releases against the blanket purchase order.

For the toll processing revenue stream and certain contracts within the oil & gas equipment revenue stream, we recognize revenue over time. Revenue is primarily measured using the cost-to-cost method, which we believe best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Revenues are recorded proportionally as costs are incurred. We have elected to not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

Certain contracts contain variable consideration, which is not constrained, and primarily include estimated sales returns, customer rebates, and sales discounts which are recorded on an expected value basis. These estimates are based on historical returns, analysis of credit memo data and other known factors. We account for rebates by recording reductions to revenue for rebates in the same period the related revenue is recorded. The amount of these reductions is based upon the terms agreed to with the customer. We do not exercise significant judgments in determining the timing of satisfaction of performance obligations or the transaction price.

The following tables summarize net sales by product class and by timing of revenue recognition for the three month and nine month periods ended February 28, 2019:

(in thousands)	Reportable Segments
Three months ended February 28, 2019	Steel Processing		Pressure Cylinders		Engineered Cabs		Other		Total
Product class:
Steel Processing
Direct	$	527,970	$	-	$	-	$	-	$	527,970
Toll		27,901		-		-		-		27,901
Pressure Cylinders
Industrial products		-		148,018		-		-		148,018
Consumer products		-		118,006		-		-		118,006
Oil & gas equipment		-		24,666		-		-		24,666
Engineered Cabs		-		-		27,817		-		27,817
Other		-		-		-		3		3
Total	$	555,871	$	290,690	$	27,817	$	3	$	874,381

Timing of revenue recognition:
Goods transferred at a point in time	$	527,970	$	270,131	$	27,817	$	3	$	825,921
Goods and services transferred over time		27,901		20,559		-		-		48,460
Total	$	555,871	$	290,690	$	27,817	$	3	$	874,381

(in thousands)	Reportable Segments
Nine months ended February 28, 2019	Steel Processing		Pressure Cylinders		Engineered Cabs		Other		Total
Product class:
Steel Processing
Direct	$	1,756,842	$	-	$	-	$	-	$	1,756,842
Toll		94,559		-		-		-		94,559
Pressure Cylinders
Industrial products		-		452,883		-		-		452,883
Consumer products		-		352,023		-		-		352,023
Oil & gas equipment		-		80,584		-		-		80,584
Engineered Cabs		-		-		83,798		-		83,798
Other		-		-		-		25		25
Total	$	1,851,401	$	885,490	$	83,798	$	25	$	2,820,714

Timing of revenue recognition:
Goods transferred at a point in time	$	1,756,842	$	836,130	$	83,798	$	25	$	2,676,795
Goods and services transferred over time		94,559		49,360		-		-		143,919
Total	$	1,851,401	$	885,490	$	83,798	$	25	$	2,820,714

The following tables show the adjustments that would be required to be made to our fiscal 2019 consolidated financial statements to reflect the balances that would have been recorded if we continued to follow our accounting policies under the previous revenue recognition guidance.

	February 28, 2019
(in thousands)	As Currently Reported		Topic 606 Adjustments			Balances Without Adoption of Topic 606
Consolidated Balance Sheet
Assets
Receivables	$	512,739	$	(4,785	)	$	507,954
Total inventories		486,074		6,207			492,281
Prepaid expenses and other current assets		68,082		(4,057	)		64,025
Liabilities and equity
Income taxes payable		106		(41	)		65
Deferred income taxes, net		80,034		(454	)		79,580
Shareholders' equity - controlling interest		856,622		(1,489	)		855,133
Noncontrolling interests		120,386		(651	)		119,735

	Three months ended February 28, 2019							Nine months ended February 28, 2019
(in thousands)	As Currently Reported		Topic 606 Adjustments			Balances Without Adoption of Topic 606		As Currently Reported		Topic 606 Adjustments			Balances Without Adoption of Topic 606
Consolidated Statements of Earnings
Net sales	$	874,381	$	464		$	874,845	$	2,820,714	$	(3,193	)	$	2,817,521
Cost of goods sold		784,360		170			784,530		2,466,762		(2,755	)		2,464,007
Income tax expense		8,415		65			8,480		34,032		(41	)		33,991
Net earnings		29,548		229			29,777		124,298		(397	)		123,901
Net earnings attributable to noncontrolling interests		2,775		(34	)		2,741		8,581		(82	)		8,499
Net earnings attributable to controlling interest		26,773		263			27,036		115,717		(315	)		115,402

NOTE C – Investments in Unconsolidated Affiliates

Investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity method. These include ArtiFlex Manufacturing, LLC (“ArtiFlex”) (50%), Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”) (25%), Samuel Steel Pickling Company (31.25%), Serviacero Planos, S. de R. L. de C.V. (“Serviacero Worthington”) (50%), Worthington Armstrong Venture (“WAVE”) (50%), and Zhejiang Nisshin Worthington Precision Specialty Steel Co., Ltd. (10%).

We received distributions from unconsolidated affiliates totaling $131,888,000 during the nine months ended February 28, 2019, including $60,000,000 of one-time special distributions from WAVE, comprised of $35,000,000 related to the pending sale of the international operations and $25,000,000 in connection with a financing transaction. We have received cumulative distributions from WAVE in excess of our investment balance, which resulted in an amount recorded within other liabilities on our consolidated balance sheets of $124,198,000 at February 28, 2019. In accordance with the applicable accounting guidance, we reclassified the negative investment balance to the liabilities section of our consolidated balance sheet. We will continue to record our equity in the net income of WAVE as a debit to the investment account, and if the investment balance becomes positive, it will again be shown as an asset on our consolidated balance sheet. If it becomes probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any negative investment balance classified as a liability as income immediately.

We use the “cumulative earnings” approach for determining cash flow presentation of distributions from our unconsolidated joint ventures. Distributions received are included in our consolidated statements of cash flows as operating activities, unless the cumulative distributions received, less distributions received in prior periods that were determined to be returns of investment, exceed our portion of the cumulative equity in the net earnings of the joint venture, in which case the excess distributions are deemed to be returns of the investment and are classified as investing activities in our consolidated statements of cash flows. We received excess distributions from WAVE of $56,693,000 during the nine months ended February 28, 2019.

The following tables summarize combined financial information for our unconsolidated affiliates as of the dates , and for the periods presented:

	February 28,		May 31,
(in thousands)	2019		2018
Cash	$	41,087	$	52,812
Other current assets		595,417		590,578
Current assets for discontinued operations		35,609		37,640
Noncurrent assets		363,992		358,927
Total assets	$	1,036,105	$	1,039,957

Current liabilities	$	234,230	$	166,493
Current liabilities for discontinued operations		8,744		7,142
Short-term borrowings		21,983		26,599
Current maturities of long-term debt		23,216		23,243
Long-term debt		322,306		259,588
Other noncurrent liabilities		18,734		17,536
Equity		406,892		539,356
Total liabilities and equity	$	1,036,105	$	1,039,957

	Three Months Ended February 28,					Nine Months Ended February 28,
(in thousands)	2019		2018			2019		2018
Net sales	$	454,579	$	403,426		$	1,433,840	$	1,258,667
Gross margin		77,706		72,828			257,033		230,185
Operating income		47,392		41,546			164,360		133,313
Depreciation and amortization		6,310		5,406			19,368		18,534
Interest expense		3,529		2,564			9,836		7,517
Income tax expense (benefit)		1,877		(1,095	)		9,970		2,069
Net earnings from continuing operations		40,196		36,058			141,613		118,995
Net earnings from discontinued operations		1,001		1,805			4,713		1,532
Net earnings		41,197		37,863			146,326		120,527

The amounts presented within the discontinued operations captions in the tables above reflect the international operations of our WAVE joint venture, which are being sold as part of a broader transaction between the joint venture partner, Armstrong World Industries, Inc. (“AWI”), and Knauf Group, a family-owned manufacturer of building materials headquartered in Germany. WAVE’s portion of the total sales proceeds is expected to be approximately $90,000,000 ($45,000,000 attributed to Worthington). The transaction is subject to regulatory approvals and other customary closing conditions. During the first quarter of fiscal 2019, the parties agreed to extend the date by which certain competition clearance conditions were to be satisfied per the original purchase agreement. In exchange, Knauf Group irrevocably agreed to fund the purchase price which was received by AWI in two distributions, the first on August 1, 2018, and the balance on September 15, 2018. In September 2018, we received a cash distribution of $35,000,000 from WAVE related to the pending sale of the international operations. We will receive the remaining proceeds at closing, subject to certain adjustments as provided in the purchase agreement, including those related to the economic impact of any required regulatory remedies and a working capital adjustment. Despite receiving a portion of the sales proceeds, there has been no change in control of the international operations of WAVE; therefore, the gain to be realized from this transaction has not been reflected in WAVE’s statement of earnings. The closing is expected to occur by June 30, 2019.

NOTE D – Impairment of Goodwill and Long-Lived Assets

During the first quarter of fiscal 2019, changes in the facts and circumstances related to the planned sale of our cryogenics business in Turkey, Worthington Aritas, resulted in our lowering the estimate of fair value less cost to sell to $7,000,000 which generated an impairment charge of $2,381,000. Fair value was determined using observable (Level 2) inputs.

During the second quarter of fiscal 2018, the Company determined that indicators of impairment were present with regard to the goodwill and intangible assets of the WEI reporting unit. As a result, these assets were written down to their estimated fair value resulting in an impairment charge of $7,325,000. During the second quarter of fiscal 2018, the Company also identified the presence of impairment indicators with regard to vacant land at the oil & gas equipment facility in Bremen, Ohio, resulting in an impairment charge of $964,000 to write the vacant land down to its estimated fair market value.

NOTE E – Restructuring and Other Income , N et

We consider restructuring activities to be programs whereby we fundamentally change our operations, such as closing and consolidating manufacturing facilities or moving manufacturing of a product to another location. Restructuring activities may also involve substantial realignment of the management structure of a business unit in response to changing market conditions.

A progression of the liabilities associated with our restructuring activities, combined with a reconciliation to the restructuring and other income, net financial statement caption, in our consolidated statement of earnings is summarized below for the period presented:

	Balance, as of		Expense									Balance, as of
(in thousands)	May 31, 2018		(income)			Payments			Adjustments			February 28, 2019
Early retirement and severance	$	1,116	$	1,379		$	(1,522	)	$	(58	)	$	915
Facility exit and other costs		-		306			(278	)		8			36
	$	1,116		1,685		$	(1,800	)	$	(50	)	$	951
Net gain on sale of assets				(13,395	)
Restructuring and other income, net			$	(11,710	)

During the nine months ended February 28, 2019, the following actions were taken related to the Company’s restructuring activities:

•

In connection with the ongoing consolidation of the Company’s industrial gas operations in Portugal following the acquisition of AMTROL in fiscal 2018, the Company recognized severance expense of $1,086,000 and facility exit costs of $315,000.

•

Within the Pressure Cylinders business, the Company sold two oil & gas manufacturing facilities resulting in a net gain on disposal of $1,962,000.

•

In connection with the sale of the operating assets and real property related to the solder business and certain brazing assets within the Pressure Cylinders business, the Company recognized severance expense of $89,000 and a net gain on disposal of $11,433,000.

•

In connection with other non-significant restructuring activities, the Company recognized severance expense of $204,000 and a reduction to facility exit costs of $9,000.

The total liability associated with our restructuring activities as of February 28, 2019 is expected to be paid in the next twelve months.

NOTE F – Contingent Liabilities and Commitments

Legal Proceedings

We are defendants in certain legal actions. In the opinion of management, the outcome of these actions, which is not clearly determinable at the present time, would not significantly affect our consolidated financial position or future results of operations. We also believe that environmental issues will not have a material effect on our capital expenditures, consolidated financial position or future results of operations.

Voluntary Tank Replacement Program

In February 2019, our Structural Composites Industries, LLC subsidiary (“SCI”) agreed to participate in a tank replacement program for specific design sizes of its composite hydrogen fuel tanks, which are integrated into a customer’s hydrogen fuel cells used to fuel material handling equipment, primarily rider pallet jacks in warehouses. The tanks being replaced were sold mainly between 2012 and 2015, and were designed to meet specified ISO-standards. These tanks successfully passed a number of ISO-certification tests; however, because it was mistakenly determined these tanks would qualify as a “child” of a similar fully-tested tank, not all tests for full standalone ISO-certification were completed. Since the identical carbon fiber used to manufacture most of these tanks is no longer commercially available, SCI cannot manufacture new units to retroactively complete this testing. The tanks were supplied to a single customer. The replacement program is underway and is expected to take approximately six months to complete. In connection with this matter, we recorded a $13,000,000 charge to costs of goods sold during the third quarter of fiscal 2019 to reflect our estimated costs of replacing these tanks. The actual cost incurred by the Company related to this matter may vary from the initial estimate.

A progression of the liabilities recorded in connection with this matter during fiscal 2019 is summarized in the following table:

	Beginning						Ending
(in thousands)	Balance		Payments		Adjustments		Balance
Tank replacement costs	$	13,000	$	2,000	$	-	$	11,000

We believe these liabilities are sufficient to absorb our remaining direct costs related to the replacement program, which are expected to be paid in the next six months.

NOTE G – Guarantees

We do not have guarantees that we believe are reasonably likely to have a material current or future effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. However, as of February 28, 2019, we were party to an operating lease for an aircraft in which we have guaranteed a residual value at the termination of the lease. The maximum obligation under the terms of this guarantee was approximately $7,642,000 at February 28, 2019. Based on current facts and circumstances, we have estimated the likelihood of payment pursuant to this guarantee is not probable and, therefore, no amount has been recognized in our consolidated financial statements.

We also had in place $15,366,000 of outstanding stand-by letters of credit issued to third-party service providers at February 28, 2019. No amounts were drawn against them at February 28, 2019.

NOTE H – Debt and Receivables Securitization

We maintain a $500,000,000 multi-year revolving credit facility (the “Credit Facility”) with a group of lenders which matures in February 2023. Borrowings under the Credit Facility have maturities of up to one year. We have the option to borrow at rates equal to an applicable margin over the LIBOR, Prime Rate or Overnight Bank Funding Rate. The applicable margin is determined by our credit rating. There were no borrowings outstanding under the Credit Facility at February 28, 2019. As discussed in “ NOTE G – Guarantees,” we provided $15,366,000 in letters of credit for third-party beneficiaries as of February 28, 2019. While not drawn against at February 28, 2019, $1,950,000 of these letters of credit were issued against availability under the Credit Facility, leaving $498,050,000 available at February 28, 2019.

We also maintain a $50,000,000 revolving trade accounts receivable securitization facility (the “AR Facility”). On January 15, 2019, the Company extended the maturity of the AR Facility by one year to January 2020. Pursuant to the terms of the AR Facility, certain of our subsidiaries sell their accounts receivable without recourse, on a revolving basis, to Worthington Receivables Corporation (“WRC”), a wholly-owned, consolidated, bankruptcy-remote subsidiary. In turn, WRC may sell without recourse, on a revolving basis, up to $50,000,000 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. Because the amount eligible to be sold excludes receivables more than 90 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. As of February 28, 2019, no undivided ownership interests in this pool of accounts receivable had been sold.

NOTE I – Other Comprehensive Income

The following table summarizes the tax effects on each component of OCI for the periods presented:

	Three months ended February 28,
	2019									2018
	Before-Tax			Tax			Net-of-Tax			Before-Tax			Tax		Net-of-Tax
(in thousands)
Foreign currency translation	$	1,476		$	-		$	1,476		$	9,542		$	-	$	9,542
Pension liability adjustment		48			(11	)		37			230			21		251
Cash flow hedges		(844	)		248			(596	)		(711	)		155		(556	)
Other comprehensive income	$	680		$	237		$	917		$	9,061		$	176	$	9,237

	Nine months ended February 28,
	2019									2018
	Before-Tax			Tax			Net-of-Tax			Before-Tax			Tax		Net-of-Tax
(in thousands)
Foreign currency translation	$	(8,857	)	$	-		$	(8,857	)	$	26,925		$	-	$	26,925
Pension liability adjustment		48			(108	)		(60	)		230			15		245
Cash flow hedges		(9,437	)		2,209			(7,228	)		(1,213	)		334		(879	)
Other comprehensive income (loss)	$	(18,246	)	$	2,101		$	(16,145	)	$	25,942		$	349	$	26,291

NOTE J – Changes in Equity

The following tables summarize the changes in equity by component and in total for the periods presented:

	Controlling Interest
				Accumulated
				Other
	Additional			Comprehensive									Non-
	Paid-in			Loss,			Retained						controlling
(in thousands)	Capital			Net of Tax			Earnings			Total			Interests			Total
Balance at May 31, 2018	$	295,592		$	(14,580	)	$	637,757		$	918,769		$	117,606		$	1,036,375
Net earnings		-			-			54,942			54,942			2,016			56,958
Other comprehensive loss		-			(5,745	)		-			(5,745	)		(17	)		(5,762	)
Common shares issued, net of withholding tax		(4,091	)		-			-			(4,091	)		-			(4,091	)
Common shares in NQ plans		152			-			-			152			-			152
Stock-based compensation		4,838			-			-			4,838			-			4,838
ASC 606 transition adjustment		-			-			1,174			1,174			570			1,744
Purchases and retirement of common shares		(4,003	)		-			(32,849	)		(36,852	)		-			(36,852	)
Cash dividends declared		-			-			(13,668	)		(13,668	)		-			(13,668	)
Dividends to noncontrolling interest		-			-			-			-			(2,320	)		(2,320	)
Balance at August 31, 2018	$	292,488		$	(20,325	)	$	647,356		$	919,519		$	117,855		$	1,037,374
Net earnings		-			-			34,002			34,002			3,790			37,792
Other comprehensive loss		-			(11,245	)		-			(11,245	)		(55	)		(11,300	)
Common shares issued, net of withholding tax		(658	)		-			-			(658	)		-			(658	)
Common shares in NQ plans		306			-			-			306			-			306
Stock-based compensation		3,730			-			-			3,730			-			3,730
Purchases and retirement of common shares		(7,540	)		-			(56,041	)		(63,581	)		-			(63,581	)
Cash dividends declared		-			-			(13,401	)		(13,401	)		-			(13,401	)
Dividends to noncontrolling interest		-			-			-			-			(4,007	)		(4,007	)
Balance at November 30, 2018	$	288,326		$	(31,570	)	$	611,916		$	868,672		$	117,583		$	986,255
Net earnings		-			-			26,773			26,773			2,775			29,548
Other comprehensive income		-			889			-			889			28			917
Common shares issued, net of withholding tax		104			-			-			104			-			104
Common shares in NQ plans		80			-			-			80			-			80
Stock-based compensation		1,947			-			-			1,947			-			1,947
Purchases and retirement of common shares		(4,061	)		-			(24,526	)		(28,587	)		-			(28,587	)
Cash dividends declared		-			-			(13,256	)		(13,256	)		-			(13,256	)
Balance at February 28, 2019	$	286,396		$	(30,681	)	$	600,907		$	856,622		$	120,386		$	977,008

	Controlling Interest
				Accumulated
				Other
	Additional			Comprehensive									Non-
	Paid-in			Loss,			Retained						controlling
(in thousands)	Capital			Net of Tax			Earnings			Total			Interests			Total
Balance at May 31, 2017	$	303,391		$	(27,775	)	$	676,019		$	951,635		$	122,294		$	1,073,929
Net earnings		-			-			45,534			45,534			2,540			48,074
Other comprehensive income		-			17,314			-			17,314			439			17,753
Common shares issued, net of withholding tax		(3,274	)		-			-			(3,274	)		-			(3,274	)
Common shares in NQ plans		536			-			-			536			-			536
Stock-based compensation		4,822			-			-			4,822			-			4,822
Purchases and retirement of common shares		(4,235	)		-			(40,841	)		(45,076	)		-			(45,076	)
Cash dividends declared		-			-			(13,317	)		(13,317	)		-			(13,317	)
Dividends to noncontrolling interest		-			-			-			-			(720	)		(720	)
Balance at August 31, 2017	$	301,240		$	(10,461	)	$	667,395		$	958,174		$	124,553		$	1,082,727
Net earnings		-			-			39,403			39,403			2,219			41,622
Other comprehensive loss		-			(619	)		-			(619	)		(80	)		(699	)
Common shares issued, net of withholding tax		(722	)		-			-			(722	)		-			(722	)
Common shares in NQ plans		350			-			-			350			-			350
Stock-based compensation		3,169			-			-			3,169			-			3,169
Purchases and retirement of common shares		(7,245	)		-			(60,203	)		(67,448	)		-			(67,448	)
Cash dividends declared		-			-			(13,020	)		(13,020	)		-			(13,020	)
Dividends to noncontrolling interest		-			-			-			-			(3,196	)		(3,196	)
Balance at November 30, 2017	$	296,792		$	(11,080	)	$	633,575		$	919,287		$	123,496		$	1,042,783
Net earnings		-			-			79,088			79,088			(791	)		78,297
Other comprehensive income		-			9,126			-			9,126			111			9,237
Common shares issued, net of withholding tax		581			-			-			581			-			581
Common shares in NQ plans		117			-			-			117			-			117
Stock-based compensation		3,212			-			-			3,212			-			3,212
Purchases and retirement of common shares		(4,831	)		-			(42,587	)		(47,418	)		-			(47,418	)
Cash dividends declared		-			-			(12,822	)		(12,822	)		-			(12,822	)
Balance at February 28. 2018	$	295,871		$	(1,954	)	$	657,254		$	951,171		$	122,816		$	1,073,987

The following table summarizes the changes in accumulated other comprehensive loss for the period presented:

										Accumulated
	Foreign			Pension						Other
	Currency			Liability			Cash Flow			Comprehensive
	Translation			Adjustment			Hedges			Loss
(in thousands)
Balance as of May 31, 2018	$	(4,987	)	$	(16,071	)	$	6,478		$	(14,580	)
Other comprehensive income (loss) before reclassifications		(8,813	)		48			(4,495	)		(13,260	)
Reclassification adjustments to income (a)		-			-			(4,942	)		(4,942	)
Income taxes		-			(108	)		2,209			2,101
Balance as of February 28, 2019	$	(13,800	)	$	(16,131	)	$	(750	)	$	(30,681	)

(a)

The statement of earnings classification of amounts reclassified to income for cash flow hedges is disclosed in “NOTE O – Derivative Instruments and Hedging Activities.”

NOTE K – Stock-Based Compensation

Non-Qualified Stock Options

During the nine months ended February 28, 2019, we granted non-qualified stock options covering a total of 95,600 common shares under our stock-based compensation plans. The weighted average option price of $42.86 per share was equal to the market price of the underlying common shares at the grant date. The fair value of these stock options, based on the Black-Scholes option-

pricing model, calculated at the grant date, was $ 1 2.55 per share. The calculated pre-tax stock-based compensation exp ense for these stock options is $ 1,200 ,000 and will be recognized on a straight-line basis over the three-year vesting period , net of any forfeitures . The following assumptions were used to value these stock options:

Dividend yield	2.01% - 2.16%
Expected volatility	33.04% - 33.60%
Risk-free interest rate	2.77% - 2.96%
Expected term (years)		6.0

Expected volatility is based on the historical volatility of our common shares and the risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the stock options. The expected term was developed using historical exercise experience.

Service-Based Restricted Common Shares

During the nine months ended February 28, 2019 , we granted an aggregate of 360,175 service-based restricted common shares under our stock-based compensation plans. The fair value of these restricted common shares was equal to the weighted average closing market price of the underlying common shares on the respective dates of grant, or $41.10 per share. The calculated pre-tax stock-based compensation expense for these restricted common shares is $14,802,000 and will be recognized on a straight-line basis over the three-year service-based vesting period, net of any forfeitures.

Market-Based Restricted Common Shares

On September 28, 2018, we granted an aggregate of 225,000 restricted common shares to two key employees under our stock-based compensation plans. Vesting of these restricted common share awards is contingent upon the price of our common shares reaching $65.00 per share and remaining at or above that price for 90 consecutive days during the five-year period following the date of grant and the completion of a five-year service vesting period. The grant-date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $23.38 per share. The following assumptions were used to determine the grant-date fair value and the derived service period for these restricted common shares:

Dividend yield	2.16	%
Expected volatility	33.60	%
Risk-free interest rate	2.96	%

The calculated pre-tax stock-based compensation expense for these restricted common shares is $5,261,000 and will be recognized on a straight-line basis over the five-year service vesting period, net of any forfeitures.

Performance Share Awards

We have awarded performance shares to certain key employees under our stock-based compensation plans. These performance shares are earned based on the level of achievement with respect to corporate targets for cumulative corporate economic value added, earnings per share growth and, in the case of business unit executives, business unit operating income targets for the three-year periods ending May 31, 2019, 2020 and 2021. These performance share awards will be paid, to the extent earned, in common shares of the Company in the fiscal quarter following the end of the applicable three-year performance period. The fair values of our performance shares are determined by the closing market prices of the underlying common shares at the respective grant dates of the performance shares and the pre-tax stock-based compensation expense is based on our periodic assessment of the probability of the targets being achieved and our estimate of the number of common shares that will ultimately be issued. During the nine months ended February 28, 2019 , we granted performance share awards covering an aggregate of 58,200 common shares (at target levels). The calculated pre-tax stock-based compensation expense for these performance shares is $2,494,000. The ultimate pre-tax stock-based compensation expense to be recognized over the three-year performance period will vary based on our periodic assessment of the probability of the targets being achieved.

NOTE L – Income Taxes

Income tax expense for the nine months ended February 28, 2019 and 2018 reflected estimated annual effective income tax rates of 23.3% and 10.3%, respectively. The annual effective income tax rates exclude any impact from the inclusion of net earnings attributable to noncontrolling interests in our consolidated statements of earnings. Net earnings attributable to noncontrolling interests are primarily a result of our WSP, Spartan, and TWB consolidated joint ventures. The earnings attributable to the noncontrolling interests in WSP, Spartan and TWB’s U.S. operations do not generate tax expense to Worthington since the investors in WSP, Spartan and TWB’s U.S. operations are taxed directly based on the earnings attributable to them. The tax expense of TWB’s wholly-owned foreign corporations is reported in our consolidated tax expense. Management is required to estimate the annual effective income tax

rate based upon its forecast of annual pre-tax income for domestic and foreign operations. Our actual effective income tax rate for fiscal 2019 could be materially di fferent from the forecasted rate as of February 28 , 201 9 .

On December 22, 2017, the U.S. government enacted tax reform, the Tax Cuts and Jobs Act (the “TCJA”), which made comprehensive changes to U.S. federal income tax laws by moving from a global to a modified territorial tax regime. The TCJA lowered the U.S. corporate income tax rate from 35% to 21% in calendar year 2018 along with the elimination of certain deductions and credits, and a one-time “deemed repatriation” of accumulated foreign earnings. We recognized a provisional income tax benefit of $38,200,000 related to the re-measurement of deferred tax assets and liabilities and a provisional income tax expense of $6,900,000 for the one-time mandatory deemed repatriation tax during fiscal 2018. During the second quarter of fiscal 2019, we finalized the accounting for the TCJA and we made no material adjustments to these provisional amounts.

NOTE M – Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share attributable to controlling interest for the periods presented:

	Three Months Ended February 28,				Nine Months Ended February 28,
(in thousands, except per share amounts)	2019		2018		2019		2018
Numerator (basic & diluted):
Net earnings attributable to controlling interest -
income available to common shareholders	$	26,773	$	79,088	$	115,717	$	164,025
Denominator:
Denominator for basic earnings per share attributable to
controlling interest - weighted average common shares		56,478		60,383		57,650		61,451
Effect of dilutive securities		1,496		1,962		1,739		2,056
Denominator for diluted earnings per share attributable to
controlling interest - adjusted weighted average common shares		57,974		62,345		59,389		63,507

Basic earnings per share attributable to controlling interest	$	0.47	$	1.31	$	2.01	$	2.67
Diluted earnings per share attributable to controlling interest	$	0.46	$	1.27	$	1.95	$	2.58

Stock options covering 309,133 and 91,933 common shares for the three months ended February 28, 2019 and 2018, respectively, and 316,079 and 81,087 common shares for the nine months ended February 28, 2019 and 2018, respectively, have been excluded from the computation of diluted earnings per share because the effect of their inclusion would have been “anti-dilutive” for those periods.

NOTE N – Segment Operations

The following table presents summarized financial information for our reportable segments as of the dates, and for the periods presented:

	Three Months Ended February 28,						Nine Months Ended February 28,
(in thousands)	2019			2018			2019			2018
Net sales
Steel Processing	$	555,871		$	518,113		$	1,851,401		$	1,599,994
Pressure Cylinders		290,690			295,506			885,490			866,179
Engineered Cabs		27,817			27,055			83,798			89,405
Other		3			983			25			5,582
Total net sales	$	874,381		$	841,657		$	2,820,714		$	2,561,160

Operating income (loss)
Steel Processing	$	10,166		$	31,125		$	74,842		$	105,127
Pressure Cylinders		18,953			17,530			48,444			52,663
Engineered Cabs		(3,787	)		(4,083	)		(11,469	)		(6,031	)
Other		645			(1,809	)		935			(14,712	)
Total operating income	$	25,977		$	42,763		$	112,752		$	137,047

Impairment of goodwill and long-lived assets
Steel Processing	$	-		$	-		$	-		$	-
Pressure Cylinders		-			-			2,381			964
Engineered Cabs		-			-			-			-
Other		-			-			-			7,325
Total impairment of goodwill and long-lived assets	$	-		$	-		$	2,381		$	8,289

Restructuring and other expense (income), net
Steel Processing	$	-		$	(3	)	$	(9	)	$	(10,059	)
Pressure Cylinders		(11,176	)		-			(11,701	)		2,365
Engineered Cabs		-			-			-			(78	)
Other		-			-			-			379
Total restructuring and other income, net	$	(11,176	)	$	(3	)	$	(11,710	)	$	(7,393	)

	February 28,		May 31,
(in thousands)	2019		2018
Total assets
Steel Processing	$	949,265	$	999,238
Pressure Cylinders		1,117,303		1,147,268
Engineered Cabs		66,934		66,456
Other		433,791		408,825
Total assets	$	2,567,293	$	2,621,787

NOTE O – Derivative Instruments and Hedging Activities

We utilize derivative financial instruments to manage exposure to certain risks related to our ongoing operations. The primary risks managed through the use of derivative instruments include interest rate risk, foreign currency exchange rate risk and commodity price risk. While certain of our derivative instruments are designated as hedging instruments, we also enter into derivative instruments that are designed to hedge a risk, but are not designated as hedging instruments and, therefore, do not qualify for hedge accounting. These derivative instruments are adjusted to current fair value through earnings at the end of each period.

Interest Rate Risk Management – We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities along with both fixed-

rate and variable-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps and treasury locks to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.

Foreign Currency Exchange Rate Risk Management – We conduct business in several major international currencies and are, therefore, subject to risks associated with changing foreign currency exchange rates. We enter into various contracts that change in value as foreign currency exchange rates change to manage this exposure. Such contracts limit exposure to both favorable and unfavorable currency exchange rate fluctuations. The translation of foreign currencies into U.S. dollars also subjects us to exposure related to fluctuating currency exchange rates; however, derivative instruments are not used to manage this risk.

Commodity Price Risk Management – We are exposed to changes in the price of certain commodities, including steel, natural gas, zinc and other raw materials, and our utility requirements. Our objective is to reduce earnings and cash flow volatility associated with forecasted purchases and sales of these commodities to allow management to focus its attention on business operations. Accordingly, we enter into derivative contracts to manage the associated price risk.

We are exposed to counterparty credit risk on all of our derivative instruments. Accordingly, we have established and maintain strict counterparty credit guidelines. We have credit support agreements in place with certain counterparties to limit our credit exposure. These agreements require either party to post cash collateral if its cumulative market position exceeds a predefined liability threshold. Amounts posted to the margin accounts accrue interest at market rates and are required to be refunded in the period in which the cumulative market position falls below the required threshold. We do not have significant exposure to any one counterparty, and management believes the risk of loss is remote and, in any event, would not be material.

Refer to "NOTE P – Fair Value" for additional information regarding the accounting treatment for our derivative instruments, as well as how fair value is determined.

The following table summarizes the fair value of our derivative instruments and the respective lines in which they were recorded in the consolidated balance sheet at February 28, 2019:

	Asset Derivatives			Liability Derivatives
	Balance			Balance
	Sheet	Fair		Sheet	Fair
(in thousands)	Location	Value		Location	Value
Derivatives designated as hedging instruments:
Commodity contracts	Receivables	$	57	Accounts payable	$	1,679
	Other assets		6	Other liabilities		-
Totals		$	63		$	1,679

Derivatives not designated as hedging instruments:
Commodity contracts	Receivables	$	789	Accounts payable	$	933
	Other assets		74	Other liabilities		-
			863			933
Foreign currency exchange contracts	Receivables		-	Accounts payable		15
Totals		$	863		$	948
Total derivative instruments		$	926		$	2,627

The amounts in the table above reflect the fair value of the Company’s derivative instruments on a net basis. Had these amounts been recognized on a gross basis, the impact would have been a $938,000 increase in receivables with a corresponding increase in accounts payable.

The following table summarizes the fair value of our derivative instruments and the respective line s in which they were recorded in the consolidated balance sheet at May 31, 2018 :

	Asset Derivatives			Liability Derivatives
	Balance			Balance
	Sheet	Fair		Sheet	Fair
(in thousands)	Location	Value		Location	Value
Derivatives designated as hedging instruments:
Commodity contracts	Receivables	$	6,385	Accounts payable	$	-
	Other assets		68	Other liabilities		-
Totals		$	6,453		$	-

Derivatives not designated as hedging instruments:
Commodity contracts	Receivables	$	4,749	Accounts payable	$	613
	Other assets		221	Other liabilities		158
			4,970			771
Foreign currency exchange contracts	Receivables		-	Accounts payable		75
Totals		$	4,970		$	846
Total derivative instruments		$	11,423		$	846

The amounts in the table above reflect the fair value of the Company’s derivative instruments on a net basis. Had these amounts been recognized on a gross basis, the impact would have been a $351,000 increase in receivables with a corresponding increase in accounts payable.

Cash Flow Hedges

We enter into derivative instruments to hedge our exposure to changes in cash flows attributable to commodity price fluctuations associated with certain forecasted transactions. These derivative instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into earnings in the same line associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument is recognized in earnings immediately.

The following table summarizes our cash flow hedges outstanding at February 28, 2019:

	Notional
(in thousands)	Amount		Maturity Date
Commodity contracts	$	22,760	March 2019 - June 2020

The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from AOCI into earnings for derivative instruments designated as cash flow hedges for the periods presented:

								Location of
				Location of				Gain	Gain
				Gain (Loss)	Gain (Loss)			(Ineffective	(Ineffective
	Gain (Loss)			Reclassified	Reclassified			Portion)	Portion)
	Recognized			from	from			and Excluded	and Excluded
	in OCI			AOCI	AOCI			from	from
	(Effective			(Effective	(Effective			Effectiveness	Effectiveness
(in thousands)	Portion)			Portion)	Portion)			Testing	Testing
For the three months
ended February 28, 2019:
Commodity contracts	$	35		Cost of goods sold	$	931		Cost of goods sold	$	-
Interest rate contracts		-		Interest expense		(41	)	Interest expense		-
Foreign currency exchange contracts		-		Miscellaneous income, net		(11	)	Miscellaneous income, net		-
Totals	$	35			$	879			$	-

For the three months
ended February 28, 2018:
Commodity contracts	$	2,429		Cost of goods sold	$	3,195		Cost of goods sold	$	-
Interest rate contracts		21		Interest expense		(34	)	Interest expense		-
Totals	$	2,450			$	3,161			$	-

For the nine months
ended February 28, 2019:
Commodity contracts	$	(4,495	)	Cost of goods sold	$	5,039		Cost of goods sold	$	-
Interest rate contracts		-		Interest expense		(122	)	Interest expense		-
Foreign currency exchange contracts		-		Miscellaneous income, net		25		Miscellaneous income, net		-
Totals	$	(4,495	)		$	4,942			$	-

For the nine months
ended February 28, 2018:
Commodity contracts	$	8,243		Cost of goods sold	$	13,000		Cost of goods sold	$	-
Interest rate contracts		3,119		Interest expense		(425	)	Interest expense		-
Totals	$	11,362			$	12,575			$	-

The estimated net amount of the losses recognized in AOCI at February 28, 2019 expected to be reclassified into net earnings within the succeeding twelve months is $1,486,000 (net of tax of $484,000). This amount was computed using the fair value of the cash flow hedges at February 28, 2019, and will change before actual reclassification from OCI to net earnings during the fiscal years ending May 31, 2019 and May 31, 2020.

Economic (Non-designated) Hedges

We enter into foreign currency exchange contracts to manage our foreign currency exchange rate exposure related to inter-company and financing transactions that do not meet the requirements for hedge accounting treatment. We also enter into certain commodity contracts that do not qualify for hedge accounting treatment. Accordingly, these derivative instruments are adjusted to current market value at the end of each period through earnings.

The following table summarizes our economic (non-designated) derivative instruments outstanding at February 28, 2019 :

	Notional
(in thousands)	Amount		Maturity Date(s)
Commodity contracts	$	14,567	March 2019 - June 2020
Foreign currency exchange contracts		6,255	March 2019 - May 2019

The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments for the periods presented:

		Gain (Loss) Recognized
		In Earnings for the
	Location of Gain (Loss)	Three Months Ended February 28,
(in thousands)	Recognized in Earnings	2019			2018
Commodity contracts	Cost of goods sold	$	73		$	1,787
Foreign currency exchange contracts	Miscellaneous income, net		(455	)		32
Total		$	(382	)	$	1,819

		Gain (Loss) Recognized
		in Earnings for the
	Location of Gain (Loss)	Nine Months Ended February 28,
(in thousands)	Recognized in Earnings	2019			2018
Commodity contracts	Cost of goods sold	$	(2,861	)	$	4,035
Foreign currency exchange contracts	Miscellaneous income, net		(3,144	)		(157	)
Total		$	(6,005	)	$	3,878

The gain (loss) on the foreign currency exchange contract derivatives significantly offsets the gain (loss) on the hedged item.

NOTE P – Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willing market participants and is required to be based on assumptions that market participants would use in pricing an asset or a liability. Current accounting guidance establishes a three-tier fair value hierarchy as a basis for considering such assumptions and for classifying the inputs used in the valuation methodologies. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

Level 1 – Observable prices in active markets for identical assets and liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

Recurring Fair Value Mea surements

At February 28, 2019, our assets and liabilities measured at fair value on a recurring basis were as follows:

			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative instruments (1)	$	-	$	926	$	-	$	926
Total assets	$	-	$	926	$	-	$	926

Liabilities
Derivative instruments (1)	$	-	$	2,627	$	-	$	2,627
Total liabilities	$	-	$	2,627	$	-	$	2,627

At May 31, 2018, our assets and liabilities measured at fair value on a recurring basis were as follows:

			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative instruments (1)	$	-	$	11,423	$	-	$	11,423
Total assets	$	-	$	11,423	$	-	$	11,423

Liabilities
Derivative instruments (1)	$	-	$	846	$	-	$	846
Total liabilities	$	-	$	846	$	-	$	846

(1)

The fair value of our derivative instruments is based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows. Refer to “ NOTE O – Derivative Instruments and Hedging Activities ” for additional information regarding our use of derivative instruments.

Non-Recurring Fair Value Measurements

At February 28, 2019, there were no assets or liabilities measured at fair value on a non-recurring basis on our consolidated balance sheet.

At May 31, 2018, our assets measured at fair value on a non-recurring basis were as follows:

			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Long-lived assets held for sale (1)	$	-	$	30,000	$	-	$	30,000
Total assets	$	-	$	30,000	$	-	$	30,000

During the fourth quarter of fiscal 2018, management committed to a plan to sell the Company’s cryogenics business in Turkey, Worthington Aritas, and certain underperforming oil & gas equipment assets within Pressure Cylinders. In accordance with the applicable accounting guidance, the net assets in each asset group were recorded at the lower of net book value or fair value less costs to sell. The book value of Worthington Aritas exceeded its fair market value of $9,000,000, resulting in an impairment charge of $42,422,000. The book value of the oil & gas equipment asset group also exceeded its estimated fair market value of $21,000,000, resulting in an impairment charge of $10,497,000.

During the first quarter of fiscal 2019, the Company completed the sale of the oil & gas equipment assets described above. In addition, the Company lowered its estimate of the fair value of Worthington Aritas to $7,000,000, resulting in an impairment charge of $2,381,000.

The fair value of non-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables, notes receivable, income taxes receivable, other assets, accounts payable, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities approximate carrying value due to their short-term nature. The fair value of long-term debt, including current maturities, based upon models utilizing market observable (Level 2) inputs and credit risk, was $751,354,000 and $757,069,000 at February 28, 2019 and May 31, 2018, respectively. The carrying amount of long-term debt, including current maturities, was $749,486,000 and $750,368,000 at February 28, 2019 and May 31, 2018, respectively.

NOTE Q – Subsequent Events

On March 20, 2019, the Board of Directors of Worthington Industries, Inc. authorized the repurchase of up to an additional 6,600,000 of the Company’s common shares, increasing the total number of shares available for repurchase to 10,000,000.

Item 2. – Management’s Discussion and Analysis o f Financial Condition and Results of Operations

Selected statements contained in this “Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” constitute “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Safe Harbor Statement” in the beginning of this Quarterly Report on Form 10-Q, “Part I – Item 1A. – Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended May 31, 2018 and “PART II – Item 1A. – Risk Factors” of this Quarterly Report on Form 10-Q.

Introduction

The following discussion and analysis of market and industry trends, business developments, and the results of operations and financial position of Worthington Industries, Inc., together with its subsidiaries (collectively, “we,” “our,” “Worthington,” or the “Company”), should be read in conjunction with our consolidated financial statements and notes thereto included in “Item 1. – Financial Statements” of this Quarterly Report on Form 10-Q. Our Annual Report on Form 10-K for the fiscal year ended May 31, 2018 (“fiscal 2018”) includes additional information about Worthington, our operations and our consolidated financial position and should be read in conjunction with this Quarterly Report on Form 10-Q.

As of February 28, 2019, excluding our joint ventures, we operated 32 manufacturing facilities worldwide, principally in three operating segments, which correspond with our reportable business segments: Steel Processing, Pressure Cylinders and Engineered Cabs.

As of February 28, 2019, we held equity positions in nine joint ventures, which operated 49 manufacturing facilities worldwide. Three of these joint ventures are consolidated with the equity owned by the other joint venture member(s) shown as noncontrolling interests in our consolidated balance sheets, and their portions of net earnings and other comprehensive income shown as net earnings or comprehensive income (loss) attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively. The remaining six of these joint ventures are accounted for using the equity method.

Overview

Operating income for the current quarter was down $16.7 million, or 39% from the comparable prior year quarter, despite benefitting from a 4% increase in net sales and a net restructuring gain of $11.2 million. The Company’s results continued to be impacted by fluctuating steel prices that have resulted from the ongoing steel tariffs, which have increased selling prices in Steel Processing but have created short-term margin pressure across most of our businesses. The run-up in steel prices that began during the latter part of fiscal 2018 continued into the first quarter of fiscal 2019, reaching a peak of $918 per ton in July 2018, but have since receded to more normal levels. The recent decline in steel prices led to significant inventory holding losses in the current quarter and also contributed to lower direct volume as customers delayed orders. The steel tariffs have also resulted in lower scrap prices relative to the cost of steel, which also had a negative impact on direct spreads.

Higher material prices have also put pressure on margins in our Pressure Cylinders businesses as costs for both steel and helium increased during the quarter. However, margins have begun to improve as the result of recent increase to selling prices and other cost mitigation efforts undertaken by the Company. Pressure Cylinders results were also negatively impacted by a $13.0 million charge associated with a tank replacement program for certain composite hydrogen fuel tanks produced primarily between 2012 and 2015, as described further under Recent Business Developments .

Equity in net income of unconsolidated affiliates (“equity income”) for the current quarter increased $1.1 million over the comparable prior year quarter due primarily to higher contributions from WAVE, up $2.3 million, partially offset by declines at Serviacero Worthington and ArtiFlex. We received cash distributions from unconsolidated joint ventures of $21.4 million during the third quarter of fiscal 2019.

Recent Business Developments

•

During the third quarter of fiscal 2019, the Company repurchased a total of 800,000 common shares for $28.6 million at an average price of $35.72. During the first nine months of fiscal 2019, the Company repurchased a total of 3,100,000 common shares for $129.0 million.

•

On June 1, 2018, the Company announced certain organizational changes within Pressure Cylinders resulting in the consolidation of the alternative fuels business into the industrial products business unit.

•

On July 31, 2018, the Company sold the Garden City, Kansas and Dickinson, North Dakota oil & gas equip ment manufacturing facilities to Palmer Mfg . & Tank Inc. for $20. 3 million, net of selling costs resulting in a pre-tax restructuring gain of $2.0 million.

•

Following the retirement of Mark Russell, President and Chief Operating Officer (“COO”), and John Lamprinakos, President of Steel Processing, Andy Rose was named President and Geoff Gilmore was named Executive Vice President and COO. Geoff will oversee both the Pressure Cylinders and Steel Processing businesses. Joe Hayek replaced Any Rose as Chief Financial Officer.

•

In September 2018, the Company received a cash distribution of $35.0 million from WAVE representing the primary portion of its share of the proceeds received by Armstrong World Industries, Inc. (“AWI”) in connection with the pending sale of the combined international operations of WAVE and AWI. The Company expects to receive total proceeds of approximately $45.0 million in connection with the sale transaction, subject to certain closing adjustments provided in the purchase agreement. Refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE C – Investments in Unconsolidated Affiliates” for more information on this pending sale.

•

In October 2018, the Company received a $25.0 million one-time special cash distribution from WAVE in connection with a financing transaction completed by WAVE in October 2018.

•

On December 31, 2018, the Pressure Cylinders segment sold the operating assets and real property related to its solder business to an affiliate of Lincoln Electric Holdings, Inc. (“Lincoln”) for $26.5 million, and subsequently sold certain brazing assets to Lincoln for an additional $1.1 million, resulting in a pre-tax net restructuring gain of $11.3 million.

•

In February 2019, our Structural Composite Industries, LLC subsidiary (“SCI”) agreed to participate in a tank replacement program for specific composite hydrogen fuel tanks, and recorded a $13.0 million charge to costs of goods sold to reflect our estimated costs of replacing these tanks. Refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE F – Contingent Liabilities and Commitments” for more information on the tank replacement program.

•

On March 20, 2019, the Board of Directors of Worthington Industries, Inc. (the “Worthington Industries Board”) authorized the repurchase of up to an additional 6,600,000 of the Company’s common shares, increasing the total number of shares available for repurchase to 10,000,000.

Market & Industry Overview

We sell our products and services to a diverse customer base and a broad range of end markets. The breakdown of net sales by end market for the third quarter of each of fiscal 2019 and fiscal 2018 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 61% of Steel Processing’s net sales are to the automotive market. North American vehicle production, primarily by Ford, General Motors and FCA US (the “Detroit Three automakers”), has a considerable impact on the activity within this operating segment. The majority of the net sales of three of our unconsolidated joint ventures are also to the automotive market.

Appro ximately 1 1 % of the net sales of our Steel Processing operating segment and 3 3 % of the net sales of our Engineered Cabs operating segment are to the construction market. The construction market is also the predominant end market for two of our unconsolida ted joint ventures: WAVE and ClarkDietrich. 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.

Substantially all of the net sales of our Pressure Cylinders operating segment, and approximately 28% and 67% of the net sales of our Steel Processing and Engineered Cabs operating segments, respectively, are to other markets such as consumer products, industrial products, lawn and garden, agriculture, oil & gas equipment, heavy truck, mining, forestry and appliance. 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 these portions of our business. However, we believe that the trend in U.S. GDP growth is a good economic indicator for analyzing these businesses.

We use the following information to monitor costs and assess demand in our major end markets:

	Three Months Ended February 28,									Nine Months Ended February 28,
	2019			2018			Inc / (Dec)			2019			2018			Inc / (Dec)
U.S. GDP (% growth year-over-year) ¹		3.1	%		2.4	%		0.7	%		2.9	%		2.2	%		0.7	%
Hot-Rolled Steel ($ per ton) ²	$	725		$	674		$	51		$	820		$	629		$	191
Detroit Three Auto Build (000's vehicles) ³		1,973			2,050			(77	)		6,259			6,306			(47	)
No. America Auto Build (000's vehicles) ³		3,962			3,952			10			12,505			12,432			73
Zinc ($ per pound) ⁴	$	1.16		$	1.50		$	(0.34	)	$	1.20		$	1.40		$	(0.20	)
Natural Gas ($ per mcf) ⁵	$	3.27		$	2.86		$	0.41		$	3.17		$	2.93		$	0.24
On-Highway Diesel Fuel Prices ($ per gallon) ⁶	$	3.03		$	2.99		$	0.04		$	3.19		$	2.79		$	0.40
Crude Oil - WTI ($ per barrel) ⁶	$	51.96		$	61.33		$	(9.37	)	$	62.32		$	53.56		$	8.76

¹	2018 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. 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 can also signal changes in conversion costs related to production and in SG&A expense.

The market price of hot-rolled steel is one of the most significant factors impacting our selling prices and operating results. When steel prices fall, we typically have higher-priced material flowing through cost of goods sold, while selling prices compress to what the market will bear, negatively impacting our results. On the other hand, in a rising price environment, our results are generally favorably impacted, as lower-priced material purchased in previous periods flows through cost of goods sold, while our selling prices increase at a faster pace to cover current replacement costs.

The following table presents the average quarterly market price per ton of hot-rolled steel during fiscal 2019 (first, second, and third quarters), fiscal 2018 and fiscal 2017:

	Fiscal Year
(Dollars per ton ¹ )	2019		2018		2017
1st Quarter	$	900	$	604	$	617
2nd Quarter	$	836	$	608	$	511
3rd Quarter	$	725	$	674	$	608
4th Quarter	N/A		$	860	$	636
Annual Avg.	$	820	$	687	$	593

CRU Hot-Rolled Index, period average

No single customer contributed more than 10% of our consolidated net sales during the third quarter of fiscal 2019 or fiscal 2018. 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 the third quarter of fiscal 2019, vehicle production for the Detroit Three automakers was down 4%, while North American vehicle production as a whole was essentially flat relative to the comparable period in the prior year.

Certain other commodities, such as zinc, natural gas and diesel fuel, represent a significant portion of our cost of goods sold, both directly through our manufacturing operation s and indirectly through transportation and freight expense.

Results of Operations

Third Quarter – Fiscal 2019 Compared to Fiscal 2018

Consolidated Operations

The following table presents consolidated operating results for the periods presented:

	Three Months Ended February 28,
				% of						% of			Increase/
(In millions)	2019			Net sales			2018			Net sales			(Decrease)
Net sales	$	874.4			100.0	%	$	841.7			100.0	%	$	32.7
Cost of goods sold		784.4			89.7	%		714.7			84.9	%		69.7
Gross margin		90.0			10.3	%		127.0			15.1	%		(37.0	)
Selling, general and administrative expense		75.2			8.6	%		84.3			10.0	%		(9.1	)
Restructuring and other income, net		(11.2	)		-1.3	%		-			0.0	%		11.2
Operating income		26.0			3.0	%		42.7			5.1	%		(16.7	)
Miscellaneous income, net		0.5			0.1	%		1.6			0.2	%		(1.1	)
Interest expense		(9.3	)		-1.1	%		(9.8	)		-1.2	%		(0.5	)
Equity in net income of unconsolidated affiliates (1)		20.8			2.4	%		19.7			2.3	%		1.1
Income tax benefit (expense)		(8.4	)		-1.0	%		24.1			2.9	%		32.5
Net earnings		29.6			3.4	%		78.3			9.3	%		(48.7	)
Net earnings (loss) attributable to noncontrolling interests		2.8			0.3	%		(0.8	)		-0.1	%		3.6
Net earnings attributable to controlling interest	$	26.8			3.1	%	$	79.1			9.4	%	$	(52.3	)

(1) Equity in net income by unconsolidated affiliate
WAVE	$	18.8					$	16.5					$	2.3
ClarkDietrich		1.8						1.5						0.3
Serviacero Worthington		0.5						1.3						(0.8	)
ArtiFlex		(0.1	)					0.7						(0.8	)
Other		(0.2	)					(0.3	)					0.1
Total	$	20.8					$	19.7					$	1.1

Net earnings attributable to controlling interest for the three months ended February 28, 2019 decreased $52.3 million from the comparable period in the prior year. Net sales and operating highlights for the third quarter of fiscal 2019 were as follows:

•

Net sales increased $32.7 million over the comparable period in the prior year. The increase was driven by higher average direct selling prices in Steel Processing, partially offset by lower direct volume in Steel Processing and the impact of current year divestitures in Pressure Cylinders.

•

Gross margin decreased $37.0 million from the comparable period in the prior year. The decrease was primarily due to lower direct spreads in Steel Processing, down $21.2 million from the prior year, due in part to significant inventory holding losses over the prior year period, and a $13.0 million charge associated with the tank replacement program in Pressure Cylinders, as discussed in “Item 1. – Financial Statements – Notes to Consolidates Financial Statements – NOTE F – Contingent Liabilities and Commitments”.

•

Restructuring and other income, net totaled $11.2 million in the current period and resulted primarily from a net gain related to the sale of the solder business and certain brazing assets in our Pressure Cylinders business. For additional information regarding the Company’s restructuring activities, refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE E – Restructuring and Other Income, Net”.

•

SG&A expense decreased $9.1 million from the comparable period in the prior year. The decrease was due primarily to lower profit sharing and bonus accruals as a result of lower pre-tax earnings. Overall, SG&A expense was 8.6% of consolidated net sales compared to 10.0% in the comparable period of the prior year.

•

Interest expense decreased $0.5 million from the comparable period in the prior year. The decrease was due primarily to lower average debt levels .

•

Equity income increased $1.1 million over the comparable period in the prior year, due primarily to higher contributions from WAVE which were $2.3 million higher than the prior year quarter primarily due to price increases, partially offset by declines at Serviacero Worthington and ArtiFlex. We received cash distributions of $21.4 million from our unconsolidated affiliates during the quarter. For additional information regarding our unconsolidated affiliates, refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE C – Investments in Unconsolidated Affiliates”.

•

Income tax expense was $8.4 million in the current quarter versus an income tax benefit of $24.1 million in the comparable period in the prior year. The change was due primarily to the impact of the Tax Cuts and Jobs Act (“TCJA”) which resulted in a one-time tax benefit of $38.8 million. Discrete items in the current quarter reduced income tax expense by $1.2 million. The current quarter expense was calculated using an estimated annual effective income tax rate of 23.3% versus 10.3% in the prior year quarter. For additional information regarding the Company’s income taxes refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE L – Income Taxes”.

Segment Operations

Steel Processing

The following table presents a summary of operating results for our Steel Processing operating segment for the periods presented:

	Three Months Ended February 28,
			% of					% of			Increase/
(Dollars in millions)	2019		Net sales			2018		Net sales			(Decrease)
Net sales	$	555.9		100.0	%	$	518.1		100.0	%	$	37.8
Cost of goods sold		516.1		92.8	%		456.0		88.0	%		60.1
Gross margin		39.8		7.2	%		62.1		12.0	%		(22.3	)
Selling, general and administrative expense		29.6		5.3	%		31.0		6.0	%		(1.4	)
Operating income	$	10.2		1.8	%	$	31.1		6.0	%	$	(20.9	)

Material cost	$	430.8				$	365.4				$	65.4
Tons shipped (in thousands)		840					890					(50	)

Net sales and operating highlights for the third quarter of fiscal 2019 were as follows:

•

Net sales increased $37.8 million over the comparable period in the prior year, driven by higher average direct selling prices, which increased net sales by $67.1 million, partially offset by lower direct volume. The mix of direct versus toll tons processed was 57% to 43% in both the current and prior year quarters.

•

Operating income decreased $20.9 million from the comparable period in the prior year on lower direct spreads, down $21.2 million from the prior year, due in part to significant inventory holding losses, combined with lower direct volume. Direct spreads have also been negatively impacted by lower scrap prices relative to the cost of steel resulting from the steel tariffs.

Pressure Cylinders

The following table presents a summary of operating results for our Pressure Cylinders operating segment for the periods presented:

	Three Months Ended February 28,
				% of					% of			Increase/
(Dollars in millions)	2019			Net sales			2018		Net sales			(Decrease)
Net sales	$	290.7			100.0	%	$	295.5		100.0	%	$	(4.8	)
Cost of goods sold		240.4			82.7	%		231.4		78.3	%		9.0
Gross margin		50.3			17.3	%		64.1		21.7	%		(13.8	)
Selling, general and administrative expense		42.5			14.6	%		46.5		15.7	%		(4.0	)
Restructuring and other income, net		(11.2	)		-3.9	%		-		0.0	%		11.2
Operating income	$	19.0			6.5	%	$	17.6		6.0	%	$	1.4

Material cost	$	135.2					$	132.9				$	2.3

Net sales by principal class of products:
Consumer products	$	118.0					$	114.2				$	3.8
Industrial products		148.0						158.3					(10.3	)
Oil & gas equipment		24.7						23.0					1.7
Total Pressure Cylinders	$	290.7					$	295.5				$	(4.8	)

Units shipped by principal class of products:
Consumer products		17,718,604						17,684,889					33,715
Industrial products		3,576,129						4,254,510					(678,381	)
Oil & gas equipment		319						580					(261	)
Total Pressure Cylinders		21,295,052						21,939,979					(644,927	)

Net sales and operating highlights for the third quarter of fiscal 2019 were as follows:

•

Net sales decreased $4.8 million from the comparable period in the prior year, due primarily to the impact of divestitures of $11.7 million and lower volume in the industrial products business, partially offset by higher average selling prices and higher volumes in the consumer products business.

•

Operating income of $19.0 million increased $1.4 million over the comparable period in the prior year. The increase was the result of an $11.2 million net restructuring gain, primarily related to the sale of the Company’s solder business and certain brazing assets, combined with improvements in the oil & gas business, which were almost offset by the $13.0 million charge for the tank replacement program and the impact of lower volumes in the industrial products business and increased input costs in the consumer products business.

Engineered Cabs

The following table presents a summary of operating results for our Engineered Cabs operating segment for the periods presented:

	Three Months Ended February 28,
				% of						% of			Increase/
(In millions)	2019			Net sales			2018			Net sales			(Decrease)
Net sales	$	27.8			100.0	%	$	27.0			100.0	%	$	0.8
Cost of goods sold		27.4			98.6	%		26.7			98.9	%		0.7
Gross margin		0.4			1.4	%		0.3			1.1	%		0.1
Selling, general and administrative expense		4.2			15.1	%		4.4			16.3	%		(0.2	)
Operating loss	$	(3.8	)		-13.7	%	$	(4.1	)		-15.2	%	$	0.3

Material cost	$	12.3					$	12.9					$	(0.6	)

Net sales and operating highlights for the third quarter of fiscal 2019 were as follows:

•

Net sales increased $0.8 million over the comparable period in the prior year on higher average selling prices partially offset by lower volume from the final exit of lower margin business.

•

Operating loss of $3.8 million was $0.3 million less than the comparable period in the prior year primarily due to lower profit sharing and bonus accruals.

Other

The Other category includes certain income and expense items not allocated to our operating segments, including costs associated with our captive insurance company. The Other category also includes the results of our former Worthington Energy Innovations, LLC (“WEI”) operating segment, on a historical basis, through March 31, 2018. The following table presents a summary of operating results for the Other Category for the periods indicated:

	Three Months Ended February 28,
				% of					% of			Increase/
(In millions)	2019			Net sales		2018			Net sales			(Decrease)
Net sales	$	-			-	$	1.0			100.0	%	$	(1.0	)
Cost of goods sold		0.5			-		0.4			40.0	%		0.1
Gross margin (loss)		(0.5	)		-		0.6			60.0	%		(1.1	)
Selling, general and administrative expense		(1.1	)		-		2.4			240.0	%		(3.5	)
Operating income (loss)	$	0.6			-	$	(1.8	)		-180.0	%	$	2.4

Operating highlights for the third quarter of fiscal 2019 were as follows:

•

Operating income of $0.6 million represented an improvement of $2.4 million from the $1.8 million operating loss for the comparable period in the prior year when there was higher SG&A expense due to an increase in non-allocated corporate costs.

Nine Months Year-to-Date – Fiscal 2019 Compared to Fiscal 2018

Consolidated Operations

The following table presents consolidated operating results for the periods indicated:

	Nine Months Ended February 28,
				% of						% of			Increase/
(In millions)	2019			Net sales			2018			Net sales			(Decrease)
Net sales	$	2,820.7			100.0	%	$	2,561.2			100.0	%	$	259.5
Cost of goods sold		2,466.7			87.4	%		2,161.3			84.4	%		305.4
Gross margin		354.0			12.6	%		399.9			15.6	%		(45.9	)
Selling, general and administrative expense		250.5			8.9	%		262.0			10.2	%		(11.5	)
Impairment of goodwill and long-lived assets		2.4			0.1	%		8.3			0.3	%		(5.9	)
Restructuring and other income, net		(11.7	)		-0.4	%		(7.4	)		-0.3	%		4.3
Operating income		112.8			4.0	%		137.0			5.3	%		(24.2	)
Miscellaneous income, net		2.1			0.1	%		3.2			0.1	%		(1.1	)
Interest expense		(28.5	)		-1.0	%		(28.6	)		-1.1	%		(0.1	)
Equity in net income of unconsolidated affiliates (1)		71.9			2.5	%		63.5			2.5	%		8.4
Income tax expense		(34.0	)		-1.2	%		(7.1	)		-0.3	%		26.9
Net earnings		124.3			4.4	%		168.0			6.6	%		(43.7	)
Net earnings attributable to noncontrolling interests		8.6			0.3	%		4.0			0.2	%		4.6
Net earnings attributable to controlling interest	$	115.7			4.1	%	$	164.0			6.4	%	$	(48.3	)

(1) Equity in net income by unconsolidated affiliate
WAVE	$	59.2					$	52.5					$	6.7
ClarkDietrich		4.8						2.6						2.2
Serviacero Worthington		6.8						5.8						1.0
ArtiFlex		1.1						3.0						(1.9	)
Other		-						(0.4	)					0.4
Total	$	71.9					$	63.5					$	8.4

Net earnings attributable to controlling interest for the nine months ended February 28, 2019 decreased $48.3 million from the comparable period in the prior year. Net sales and operating highlights for the nine months ended February 28, 2019 were as follows:

•

Net sales increased $259.5 million over the comparable period in the prior year. The increase was driven by higher average selling prices in Steel Processing, which increased net sales by $247.6 million. The remaining increase was driven primarily by the combination of higher average selling prices and a favorable product mix in Pressure Cylinders, partially offset by lower volume at both Pressure Cylinders and Engineered Cabs.

•

Gross margin decreased $45.9 million from the comparable period in the prior year. The decrease was primarily due to lower direct spreads in Steel Processing and a lower overall contribution from Pressure Cylinders as a result of costs associated with the tank replacement program, lower volume in the industrial products business and higher material and conversion costs in the consumer products business. Higher conversion costs and lower scrap prices relative to the price of steel, resulting from the ongoing steel tariffs, continued to have a negative impact on direct spreads.

•

SG&A expense decreased $11.5 million from the comparable prior year period. The decrease was driven by lower profit sharing and bonus accruals as a result of lower pre-tax earnings.

•

Impairment and restructuring activity combined to increase operating income by $10.2 million over the comparable period in the prior year. The increase was driven by the net restructuring gain realized in the current year, primarily as a result of the sale of the solder business and certain brazing assets within Pressure Cylinders, partially offset by lower impairment charges. Current year impairment charges of $2.4 million related to the Company’s cryogenics business in Turkey, which is in the process of being sold. Impairment charges in the prior year period related primarily to the former WEI operating segment, which was sold in fiscal 2018.

•

Equity income increased $8.4 million over the comparable period in the prior year due primarily to higher contributions from WAVE and ClarkDietrich. WAVE’s contribution to equity income was $6.7 million higher than the prior year period, which had included catch-up allocations related to a new cost-sharing agreement between Worthington and Armstrong and resulted

in a $3.6 million reduction in equity income. The remaining increase was the result of price increases, partially offset by low er volumes. Equity income at ClarkDietrich was $2.2 million higher than the comparable prior year period primarily as a result of price increases, partially offset by higher material and conversion costs. We received distributions of $131.9 million from our unconsolidated affiliates during the nine months ended February 28, 2019, including $60.0 million of one-time special distributions from WAVE. For additional information regarding our unconsolidated affiliates, refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – Note C – Investments in Unconsolidated Affiliates”.

•

Income tax expense increased $26.9 million from the comparable period in the prior year due primarily to the impact of discrete items, partially offset by lower earnings and a lower statutory federal corporate income tax rate associated with the TCJA. The TCJA lowered the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. The current period tax expense was calculated using an estimated annual effective income tax rate of 23.3% versus 10.3% in the prior year comparable period. Discrete items in the nine months ended February 28, 2019 decreased income tax expense by $3.3 million, including $2.4 million associated with share-based payment awards. Discrete items in the prior comparable period included (i) a provisional income tax benefit of $41.1 million for the re-measurement of deferred tax assets and liabilities and a provisional income tax expense of $6.8 million for the one-time mandatory deemed repatriation tax, both of which were associated with the TCJA, (ii) a net benefit of $3.8 million related to the AMTROL acquisition, and (iii) a $3.2 million benefit associated with share-based payment awards. For additional information regarding the Company’s income taxes refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE L – Income Taxes”.

Segment Operations

Steel Processing

The following table presents a summary of operating results for our Steel Processing operating segment for the periods indicated:

	Nine Months Ended February 28,
			% of						% of			Increase/
(Dollars in millions)	2019		Net sales			2018			Net sales			(Decrease)
Net sales	$	1,851.4		100.0	%	$	1,600.0			100.0	%	$	251.4
Cost of goods sold		1,672.9		90.4	%		1,403.9			87.7	%		269.0
Gross margin		178.5		9.6	%		196.1			12.3	%		(17.6	)
Selling, general and administrative expense		103.7		5.6	%		101.1			6.3	%		2.6
Restructuring and other income, net		-		0.0	%		(10.1	)		-0.6	%		(10.1	)
Operating income	$	74.8		4.0	%	$	105.1			6.6	%	$	(30.3	)

Material cost	$	1,391.8				$	1,124.9					$	266.9
Tons shipped (in thousands)		2,774					2,780						(6	)

Net sales and operating highlights for the nine months ended February 28, 2019 were as follows:

•

Net sales increased $251.4 million over the comparable period in the prior year driven by higher average selling prices, which increased net sales by $247.6 million, and higher tolling volume. The mix of direct versus toll tons processed was 57% to 43% in both the current and prior year periods.

•

Operating income decreased $30.3 million from the comparable period in the prior year when the sale of the Company’s former stainless steel business, Precision Specialty Metals, Inc. (“PSM”) real estate resulted in a net restructuring gain of $10.1 million. Excluding the restructuring gain, operating income was down $20.2 million from the comparable period in the prior year, driven primarily by lower direct spreads, down approximately $21.2 million due to higher freight and conversion costs as well as the impact of lower scrap prices relative to the price of steel as a result of the ongoing steel tariffs.

Pressure Cylinders

The following table presents a summary of operating results for our Pressure Cylinders operating segment for the periods indicated:

	Nine Months Ended February 28,
				% of					% of			Increase/
(Dollars in millions)	2019			Net sales			2018		Net sales			(Decrease)
Net sales	$	885.5			100.0	%	$	866.2		100.0	%	$	19.3
Cost of goods sold		712.3			80.4	%		671.9		77.6	%		40.4
Gross margin		173.2			19.6	%		194.3		22.4	%		(21.1	)
Selling, general and administrative expense		134.1			15.1	%		138.3		16.0	%		(4.2	)
Impairment of long-lived assets		2.4			0.3	%		1.0		0.1	%		1.4
Restructuring and other (income) expense, net		(11.7	)		-1.3	%		2.3		0.3	%		14.0
Operating income	$	48.4			5.5	%	$	52.7		6.1	%	$	(4.3	)

Material cost	$	407.4					$	383.5				$	23.9

Net sales by principal class of products:
Consumer products	$	352.0					$	346.1				$	5.9
Industrial products		452.9						447.4					5.5
Oil & gas equipment		80.6						72.7					7.9
Total Pressure Cylinders	$	885.5					$	866.2				$	19.3

Units shipped by principal class of products:
Consumer products		52,428,516						53,537,812					(1,109,296	)
Industrial products		10,807,688						12,163,264					(1,355,576	)
Oil & gas equipment		1,257						2,002					(745	)
Total Pressure Cylinders		63,237,461						65,703,078					(2,465,617	)

Net sales and operating highlights for the nine months ended February 28, 2019 were as follows:

•

Net sales increased $19.3 million over the comparable period in the prior year. The increase was driven by higher average selling prices and favorable product mix across all the businesses.

•

Operating income decreased $4.3 million from the comparable period in the prior year. The decrease was driven by the $13.0 million charge related to the tank replacement program, lower volumes and higher input costs in the industrial products business and higher input and conversion costs in the consumer products business, partially offset by a net restructuring gain of $11.7 million primarily related to the sale of the Company’s solder business and certain brazing assets and improvements in the oil & gas equipment business.

Engineered Cabs

The following table presents a summary of operating results for our Engineered Cabs operating segment for the periods indicated:

	Nine Months Ended February 28,
				% of						% of			Increase/
(In millions)	2019			Net sales			2018			Net sales			(Decrease)
Net sales	$	83.8			100.0	%	$	89.4			100.0	%	$	(5.6	)
Cost of goods sold		82.1			98.0	%		82.6			92.4	%		(0.5	)
Gross margin		1.7			2.0	%		6.8			7.6	%		(5.1	)
Selling, general and administrative expense		13.2			15.8	%		12.9			14.4	%		0.3
Restructuring and other income		-			0.0	%		(0.1	)		-0.1	%		0.1
Operating loss	$	(11.5	)		-13.7	%	$	(6.0	)		-6.7	%	$	(5.5	)

Material cost	$	37.2					$	42.1					$	(4.9	)

Net sales and operating highlights for the nine months ended February 28, 2019 were as follows:

•

Net sales decreased $5.6 million from the comparable period in the prior year on lower volume following the final exit of lower margin business, partially offset by higher average selling prices.

•

Operating loss increased $5.5 million over the comparable period in the prior year primarily due to lower volume following the final exit of lower margin business and start-up costs associated with a new fabricated products operation.

Other

The Other category includes certain income and expense items not allocated to our operating segments, including costs associated with our captive insurance company. The Other category also includes the results of our former WEI operating segment, on a historical basis, through March 31, 2018. The following table presents a summary of operating results for the Other Category for the periods indicated:

	Nine Months Ended February 28,
				% of					% of			Increase/
(In millions)	2019			Net sales		2018			Net sales			(Decrease)
Net sales	$	-			-	$	5.6			100.0	%	$	(5.6	)
Cost of goods sold		(0.6	)		-		2.9			51.8	%		(3.5	)
Gross margin		0.6			-		2.7			48.2	%		(2.1	)
Selling, general and administrative expense		(0.3	)		-		9.7			173.2	%		(10.0	)
Impairment of goodwill and long-lived assets		-			-		7.3			130.4	%		(7.3	)
Restructuring and other expense		-			-		0.4			7.1	%		(0.4	)
Operating income (loss)	$	0.9			-	$	(14.7	)		-262.5	%	$	15.6

Operating highlights for the nine months ended February 28, 2019 were as follows:

•

Operating income of $0.9 million represented an improvement of $15.6 million from the $14.7 million operating loss for the comparable period in the prior year when the Company recorded a $7.3 million impairment charge related to its former WEI business and had higher SG&A expense within the Other category due to an increase in non-allocated corporate costs.

Liquidity and Capital Resources

During the nine months ended February 28, 2019, we generated $127.2 million of cash from operating activities, received $48.3 million in proceeds from asset sales, net of selling costs, invested $60.6 million in property, plant and equipment, received $56.7 million in excess distributions from WAVE, and paid dividends of $39.4 million on our common shares. Additionally, we paid $129.0 million to repurchase 3,100,000 of our common shares. The following table summarizes our consolidated cash flows for the periods presented:

	Nine Months Ended February 28,
(in millions)	2019			2018
Net cash provided by operating activities	$	127.2		$	202.6
Net cash provided (used) by investing activities		44.4			(323.6	)
Net cash used by financing activities		(180.5	)		(9.7	)
Decrease in cash and cash equivalents		(8.9	)		(130.7	)
Cash and cash equivalents at beginning of period		122.0			278.1
Cash and cash equivalents at end of period	$	113.1		$	147.4

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. These resources include cash and cash equivalents, cash provided by operating activities and unused lines of credit. We also believe that we have adequate access to the financial markets to allow us to be in a position to sell long-term debt or equity securities. However, uncertainty and volatility in the financial markets may impact our ability to access capital and the terms under which we can do so.

Operating Activities

Our business is cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic conditions. We rely on cash and short-term borrowings to meet cyclical increases in working capital needs. These needs generally rise during periods of increased economic activity or increasing raw material prices due to higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.

Net cash provided by operating activities was $127.2 million during the nine months ended February 28, 2019 compared to $202.6 million in the comparable period of fiscal 2018. The decrease was driven primarily by changes in working capital and the impact of lower earnings.

Investing Activities

Net cash provided by investing activities was $44.4 million during the nine months ended February 28, 2019 compared to a net cash outflow of $323.6 million in the comparable prior year period. The change from the prior year period was driven primarily by the acquisition of AMTROL on June 2, 2017, which reduced cash by $285.0 million, net of cash acquired. We received $48.3 million in proceeds from asset sales, net of selling costs, primarily from the sale of two oil & gas equipment manufacturing facilities and the solder business and certain brazing assets compared to $16.7 million in proceeds from asset sales, net of selling costs, in the comparable period in the prior year. We also received $56.7 million of excess distributions from WAVE during the first nine months of fiscal 2019 driven by a $35.0 million special distribution related to the pending sale of the international operations and a $25.0 million special distribution in connection with a financing transaction.

Investment activities are largely discretionary, and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant. We assess acquisition opportunities as they arise, and such opportunities may require additional financing. There can be no assurance, however, that any such opportunities will arise, that any such acquisitions will be consummated, or that any needed additional financing will be available on satisfactory terms when required.

Financing Activities

Net cash used by financing activities was $180.5 million during the nine months ended February 28, 2019 compared to $9.7 million in the comparable prior year period . The change from the prior year period was driven primarily by the issuance of $200.0 million aggregate principal amount of senior unsecured notes on July 28, 2017, partially offset by lower share repurchases in the current year.

Long-term debt and short-term borrowings – As of February 28, 2019, we were in compliance with our short-term and long-term financial debt covenants. Our debt agreements do not include credit rating triggers or material adverse change provisions. Our credit ratings at February 28, 2019 were unchanged from those reported as of May 31, 2018.

Common shares – The Worthington Industries Board declared a quarterly dividend of $0.23 per common share for the third quarter of fiscal 2019 compared to $0.21 per common share for the third quarter of fiscal 2018. Dividends paid on our common shares totaled $39.4 million and $38.8 million during the nine months ended February 28, 2019 and 2018, respectively. On March 20, 2019, the Worthington Industries Board declared a quarterly dividend of $0.23 per share payable on June 28, 2019, to shareholders of record on June 14, 2019.

On September 27, 2017, the Worthington Industries Board authorized the repurchase of up to 6,828,855 of the outstanding common shares of Worthington Industries, Inc. These 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. Repurchases may be made on the open market or through privately negotiated transactions. As of February 28, 2019, 3,400,000 shares remained available for repurchase. On March 20, 2019, the Worthington Industries Board authorized the repurchase of up to an additional 6,600,000 of the Company’s common shares, increasing the total number of shares available for repurchase to 10,000,000.

Dividend Policy

We currently have no material contractual or regulatory restrictions on the payment of dividends. Dividends are declared at the discretion of the Worthington Industries Board. The Worthington Industries Board reviews the dividend quarterly and establishes the dividend rate based upon our consolidated 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 will continue in the future.

Contractual Cash Obl igations and Other Commercial Commitments

Our contractual cash obligations and other commercial commitments have not changed significantly from those disclosed in “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Cash Obligations and Other Commercial Commitments” of our 2018 Form 10-K.

Off-Balance Sheet Arrangements

We do not have guarantees or other off-balance sheet financing arrangements that we believe are reasonably likely to have a material current or future effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. However, as of February 28, 2019, we were party to an operating lease for an aircraft in which we have guaranteed a residual value at the termination of the lease. The maximum obligation under the terms of this guarantee was approximately $7.6 million at February 28, 2019. Based on current facts and circumstances, we have estimated the likelihood of payment pursuant to this guarantee is not probable and, therefore, no amounts have been recognized in our consolidated financial statements.

Recently Issued Accounting Standards

In February 2016, new accounting guidance was issued that replaces most existing lease accounting guidance under U.S. GAAP. Among other changes, the new accounting guidance requires that leased assets and liabilities be recognized on the balance sheet by lessees for those leases classified as operating leases under previous accounting guidance. The new accounting guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, and the change is to be applied using a modified retrospective approach as of the beginning of the earliest period presented. In July 2018, the FASB issued additional accounting standard updates clarifying certain provisions, as well as providing for a second transition method allowing entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance sheet of retained earnings. The scoping and diagnostic phases of the implementation of this new accounting guidance have been completed. We are continuing to evaluate the components and criteria of existing leases and reviewing contracts and agreements to identify items that may meet the definition of a lease under the new accounting guidance. We have procured a third-party software to track and manage our leases and are getting ready to start the process of importing lease data into the software. While we are in the process of evaluating the effect this new accounting guidance will have on the presentation of our consolidated financial statements and related disclosures, the adoption is anticipated to have a material impact on the Company’s consolidated balance sheets with the addition of right-of-use assets, offset by the associated liabilities; however, we do not expect it to have a material impact on the consolidated statements of earnings..

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. 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. 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. 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. Although actual results historically have not deviated significantly from those determined using our estimates, our consolidated financial position or results of operations could be materially different if we were to report under different conditions or to use different assumptio ns in the application of such policies. Except for the accounting policy for revenue recognition that was updated as a result of adopting Topic 606 , our critical accounting policies have not significantly changed from those discussed in “ Part II – Item 7. – Management ’ s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies ” of our 2018 Form 10-K. For additional information on the adoption and impact of Topic 606 refer to “Item 1. – Financial Statements – N otes to Consolidated Financial Statements – NOTE B – Revenue Recognition ” o f this Quarterly Report on Form 10-Q.

As a result of changes in the facts and circumstances related to the planned sale of the Company’s cryogenics business in Turkey, Worthington Aritas, the Company lowered its estimate of fair value less cost to sell, to $7.0 million, resulting in an impairment charge of $2.4 million during the first quarter of fiscal 2019.

Item 3. – Quantitative and Qualitative Disclosures About Market Risk

Market risks have not changed significantly from those disclosed in “Part II – Item 7A. – Quantitative and Qualitative Disclosures About Market Risk” of our 2018 Form 10-K.

Item 4. – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures [as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)] that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management, with the participation of our principal executive officer and our principal financial officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q (the quarterly period ended February 28, 2019). Based on that evaluation, our principal executive officer and our principal financial officer have concluded that such disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes that occurred during the period covered by this Quarterly Report on Form 10-Q (the quarterly period ended February 28, 2019) in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. – Legal Proceedings

Various legal actions, which generally have arisen in the ordinary course of business, are pending against the Company. None of this pending litigation, individually or collectively, is expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A. – Risk Factors

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In “PART I – Item 1A. – Risk Factors” of our 2018 Form 10-K, as filed with the U.S. Securities and Exchange Commission on July 30, 2018, and available at www.sec.gov or at www.worthingtonindustries.com, we included a detailed discussion of our risk factors. Other than as noted below, our risk factors have not changed significantly from those disclosed in our 2018 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report on Form 10-Q. Any of the risks described in our 2018 Form 10-K could materially affect our business, consolidated financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. The risk factors described in our 2018 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, consolidated financial condition and/or future results.

Risks related to actions with respect to international trade by the U.S. government and foreign governments. The U.S. government alter ed its approach to international trade policy and in some cases has renegotiate d or is attempting to renegotiate , or potentially terminate, certain existing bilateral or multi-lateral trade agreements an d treaties with foreign countries, including the North American Free Trade Agreement (“NAFTA”). In addition, the U.S. government has initiated or is considering imposing tariffs on certain foreign goods, including steel. Related to this action, certain f oreign governments, including Canada, China, the European Union and Mexico have initiated or are considering imposing tariffs on certain U.S. goods. It remains unclear what additional actions the U.S. government or foreign governments will or will not tak e with respect to tariffs, NAFTA or other international trade agreements and policies. A trade war or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof and, thus, to adversely impact our businesses.

Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases made by, or on behalf of, Worthington Industries, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a) (3) under the Securities Exchange Act of 1934, as amended) of common shares of Worthington Industries, Inc. during each month of the quarterly period ended February 28, 2019:

					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)
December 1- 31, 2019		328,000	$	34.99		328,000		3,872,000
January 1- 31, 2019		472,000		36.22		472,000		3,400,000
February 1- 28, 2019		-		-		-		3,400,000
Total		800,000	$	35.72		800,000

(1)

On September 27, 2017, the Worthington Industries Board authorized the repurchase of up to 6,828,855 of the outstanding common shares of Worthington Industries, Inc. The numbers shown in this column represent, as of the end of each period, the maximum number of common shares that were available for repurchase under this authorization. A total of 3,428,855 common shares have been repurchased under this authorization, leaving 3,400,000 common shares available for repurchase at February 28, 2019. On March 20, 2019, the Worthington Industries Board authorized the repurchase of up to an additional 6,600,000 of the Company’s common shares, increasing the total number of shares available for repurchase to 10,000,000. Repurchases may be made on the open market or through privately negotiated transactions.

Item 3. – Defaults Upon Senior Securities

Not applicable.

Item 4. – Mine Safety Disclosures

Not applicable.

Item 5. – Other Information

Not applicable.

Item 6. – Exhibits

Exhibit No.		Description


3.1		Amended Articles of Incorporation of Worthington Industries, Inc., as filed with the Ohio Secretary of State on October 13, 1998 P (Incorporated herein by reference to Exhibit 3(a) to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 1998 (SEC File No. 0-4016))

3.2		Code of Regulations of Worthington Industries, Inc. (reflecting all amendments through the date of this Quarterly Report on Form 10-Q) [This document represents the Code of Regulations of Worthington Industries, Inc. in compiled form incorporating all amendments.] (Incorporated herein by reference to Exhibit 3(b) to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2000 (SEC File No. 1-8399))

10.1		Amendment No. 10, dated as of January 14, 2019, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various Remaining Originators listed therein, Worthington Industries Engineered Cabs, Inc., Worthington Industries Engineered Cabs, LLC, Amtrol Inc., Westerman, Inc. and Worthington Receivables Corporation *

10.2		Amendment No. 20 to Receivables Purchase Agreement, dated as of January 14, 2019, among Worthington Receivables Corporation, as Seller, Worthington Industries, Inc., as Servicer, the members of the various purchaser groups from time to time party to the Receivables Purchase Agreement and PNC Bank, National Association, as Administrator *

31.1		Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Executive Officer) *

31.2		Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Financial Officer) *

32.1		Certifications of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.2		Certifications of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

101.INS		XBRL Instance Document #

101.SCH		XBRL Taxonomy Extension Schema Document #

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document #

101.LAB		XBRL Taxonomy Extension Label Linkbase Document #

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document #

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document #

*	Filed herewith.

**	Furnished herewith.

#	Attached as Exhibit 101 to this Quarterly Report on Form 10-Q of Worthington Industries, Inc. are the following documents formatted in XBRL (Extensible Business Reporting Language):

(i)

Consolidated Balance Sheets at February 28, 2019 and May 31, 2018;

(ii)

Consolidated Statements of Earnings for the three and nine months ended February 28, 2019 and 2018;

(iii)

Consolidated Statements of Comprehensive Income for the three and nine months ended February 28, 2019 and 2018;

(iv)

Consolidated Statements of Cash Flows for the three and nine months ended February 28, 2019 and 2018; and

(v)

Notes to Consolidated Financial Statements.

Signat ures

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 thereunto duly authorized.

		WORTHINGTON INDUSTRIES, INC.

Date: April 9, 2019	By:	/s/ Joseph B. Hayek
		Joseph B. Hayek,
		Vice President and Chief Financial Officer
		(On behalf of the Registrant and as Principal
		Financial Officer)

Exhibit 10.1

EXECUTION VERSION

|| AMENDMENT NO. 10
Dated as of January 14, 2019
to
PURCHASE AND SALE AGREEMENT
Dated as of November 30, 2000

This AMENDMENT NO. 10 (this “ Amendment ”), dated as of January 14, 2019, is entered into among the VARIOUS ENTITIES LISTED ON SCHEDULE I HERETO AS REMAINING ORIGINATORS (each, a “ Remaining Originator ”; and collectively, the “ Remaining Originators ”), WORTHINGTON INDUSTRIES ENGINEERED CABS, INC. (F/K/A ANGUS INDUSTRIES, INC.), a Delaware corporation, and WORTHINGTON INDUSTRIES ENGINEERED CABS, LLC (F/K/A ANGUS-PALM, LLC), a Delaware limited liability company (each, a “ Released Originator ”; and collectively, the “ Released Originators ”), AMTROL INC., a Rhode Island corporation, and WESTERMAN, INC., an Ohio corporation (each, an “ Additional Originator ”; and collectively, the “ Additional Originators ”), and WORTHINGTON RECEIVABLES CORPORATION, a Delaware corporation (the “ Company ”).

RECITALS

WHEREAS, the Remaining Originators, the Released Originators and the Company have entered into that certain Purchase and Sale Agreement, dated as of November 30, 2000 (as amended, supplemented or otherwise modified through the date hereof, the “ Agreement ”);

WHEREAS, concurrently herewith, the Company, as the Seller, the Servicer, the Administrator and PNC are entering into that certain Amendment No. 20 to the Receivables Purchase Agreement, dated as of the date hereof (the “ Receivables Purchase Agreement Amendment ”);

WHEREAS, in connection with this Amendment, each of the Released Originators is being removed from the Agreement as a party thereto in the capacity of an “ Originator ”;

WHEREAS, in connection with this Amendment, each of the Additional Originators desires to join the Agreement as Originator thereunder on the date hereof; and

WHEREAS, the parties hereto wish to make certain changes to the Agreement as herein provided.

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein and in the Agreement, the parties hereto agree as follows:

SECTION 1. Definitions . All capitalized terms not otherwise defined herein are used as defined in the Agreement (including terms incorporated therein by reference).

SECTION 2. Amendments to Agreement . The Agreement is hereby amended as follows:

10 ^th Amendment to the

Purchase and Sale Agreement

(a) With respect to each Additional Originator, any reference in the Agreement to the “Closing Date” or “the date hereof” shall be deemed to be a reference to “ January 14 , 201 9 ”.

(b) With respect to each Additional Originator, any reference in the Agreement to the “Cut-off Date” shall be deemed to be a reference to “October 31, 2018”.

(c) The reference in Section 5.9(a) of the Agreement to “May 31, 2000” shall be deemed to be a reference to “November 30, 2018”.

(d) The Agreement is hereby amended to incorporate the changes shown on the marked pages of the Agreement attached hereto as Exhibit A .

SECTION 3. Release of Released Originators . The parties hereto hereby agree that upon the effectiveness of this Amendment, the Released Originators shall no longer (a) be party to the Agreement or any other Transaction Document and shall no longer have any obligations or rights thereunder (other than such obligations which by their express terms survive termination of the Agreement or such other Transaction Document, as applicable) and (b) sell any Receivables or Related Rights to the Company pursuant to the Agreement or otherwise.

SECTION 4. Delegation and Assumption of Released Originators’ Obligations. Effective immediately prior to the removal of the Released Originators as parties to the Agreement pursuant to Section 3 above, the Released Originators hereby delegate to each of the Remaining Originators and the Additional Originators, and each of the Additional Originators and the Remaining Originators, jointly and severally, hereby assumes, all of the Released Originators’ duties, obligations and liabilities that have arisen or accrued prior to the date hereof under the Agreement and each of the other Transaction Documents.

SECTION 5. Cancellation of Company Notes . Each Released Originator represents and warrants to the other parties hereto that it (a) currently holds the Company Note made by the Company to such Released Originator (each, a “ Released Originator Note ”; and collectively, the “ Released Originator Notes ”) and (b) has not sold, pledged, assigned, or otherwise transferred any Released Originator Note or any interest therein. Each Released Originator hereby acknowledges and agrees that as of the date hereof, all the Company’s outstanding obligations (including, without limitation, any payment obligations) under its applicable Released Originator Note have been finally and fully paid and performed. Each of the Released Originator Notes is hereby cancelled and shall have no further force or effect.

SECTION 6. Joinder of Additional Originators . Each Additional Originator hereby agree that it shall be bound by all of the terms, conditions and provisions of, and shall be deemed to be a party to (as if it were an original signatory to), the Agreement and each of the other relevant Transaction Documents. From and after the later of the date hereof and the date that each Additional Originator has complied with all of the requirements of Section 1.7 of the Agreement, each Additional Originator shall be an Originator for all purposes of the Agreement and all other Transaction Documents. Each Additional Originator hereby acknowledges that it has received copies of the Agreement and the other Transaction Documents and that each of the Administrator

10 ^th Amendment to the

Purchase and Sale Agreement

and each Purchaser Agent hereby acknowledges that this Amendment shall be deemed to satisfy the requirements of Section 1.7 (b) of the Agreement.

SECTION 7. Authorization to File Financing Statements . Upon the effectiveness of this Amendment, (a) each of the Released Originators and the Company hereby authorizes the Administrator to file (at the expense of the Company) one or more UCC-3 amendments in the form of Exhibit B hereto and (b) each of the Additional Originators and the Company hereby authorizes the Administrator to file (at the expense of the Company) one or more UCC-1 financing statements in the form of Exhibit C hereto.

SECTION 8. Miscellaneous .

8.1 Representations and Warranties .

(a) Each of the Remaining Originators, the Additional Originators, the Released Originators and the Company hereby makes, with respect to itself, the following representations and warranties to the other parties hereto, the Administrator and each member of each Purchaser Group:

(i) Representations and Warranties . The representations and warranties contained in Article V of the Agreement of such “Originators” are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations and warranties were true and correct as of such earlier date);

(ii) Enforceability . The execution and delivery by such Person of this Amendment, and the performance of its obligations under this Amendment and the Agreement, as amended hereby, are within its organizational powers and have been duly authorized by all necessary organizational action on its part. This Amendment and the Agreement, as amended hereby, are its valid and legally binding obligations, enforceable in accordance with its terms; and

(iii) Termination Event . No Purchase and Sale Termination Event or Unmatured Purchase and Sale Termination Event has occurred and is continuing.

(b) The Company hereby represents and warrants to the other parties hereto, the Administrator and each member of each Purchaser Group, with respect to itself, that:

(i) Representations and Warranties . Its representations and warranties contained in Exhibit III of the Receivables Purchase Agreement are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date); and

10 ^th Amendment to the

Purchase and Sale Agreement

(ii) No Default . Immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event shall exist.

8.2 Effectiveness . This Amendment shall become effective as of the date hereof upon (a) receipt by the Company and the Administrator of counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the other parties hereto, (b) the effectiveness of the Receivables Purchase Agreement Amendment, (c) a copy of a separate Company Note in favor of each Additional Originator, duly executed by the Company, (d) confirmation of the return to the Company of the Released Originator Notes issued by the Company to each Released Originator, and the Administrator shall have received evidence that each Released Originator Note has been cancelled and (e) such other documents, instruments, agreements, certificates and lien searches reasonably requested by the Administrator prior to the date hereof.

8.3 References to Agreement . Upon the effectiveness of this Amendment, each reference in the Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import shall mean and be a reference to the Agreement as amended hereby, and each reference to the Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Agreement shall mean and be a reference to the Agreement as amended hereby.

8.4 Effect on the Agreement . Except as specifically amended above, the Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

8.5 No Waiver . The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any party under the Agreement or any other document, instrument or agreement executed in connection therewith, nor constitute a waiver of any provision contained therein, except as specifically set forth herein.

8.6 Governing Law . THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

8.7 Severability . Each provision of this Amendment shall be severable from every other provision of this Amendment for the purpose of determining the legal enforceability of any provision hereof, and the unenforceability of one or more provisions of this Amendment in one jurisdiction shall not have the effect of rendering such provision or provisions unenforceable in any other jurisdiction.

8.8 Successors and Assigns . This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

8.9 Headings . The Section headings in this Amendment are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Amendment or any provision hereof.

10 ^th Amendment to the

Purchase and Sale Agreement

8.10 Counterparts . This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

10 ^th Amendment to the

Purchase and Sale Agreement

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

WORTHINGTON RECEIVABLES CORPORATION

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

S-1

10 ^th Amendment to the

Purchase and Sale Agreement

REMAINING ORIGINATORS:

THE WORTHINGTON STEEL COMPANY,
a Delaware corporation

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

THE WORTHINGTON STEEL COMPANY,
an Ohio corporation

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

WORTHINGTON CYLINDERS CORPORATION

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

WORTHINGTON CYLINDERS WISCONSIN, LLC

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

WORTHINGTON STEEL COMPANY OF DECATUR, L.L.C.

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

WORTHINGTON STEEL OF MICHIGAN, INC.

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

S-2

10 ^th Amendment to the

Purchase and Sale Agreement

REMAINING ORIGINATORS:

WORTHINGTON CYLINDERS KANSAS, LLC

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

WORTHINGTON STEEL ROME, LLC

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

THE WORTHINGTON STEEL COMPANY, LLC

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

STRUCTURAL COMPOSITES INDUSTRIES LLC

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

S-3

10 ^th Amendment to the

Purchase and Sale Agreement

RELEASED ORIGINATORS:

WORTHINGTON INDUSTRIES ENGINEERED CABS, INC.

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

WORTHINGTON INDUSTRIES ENGINEERED CABS, LLC

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

S-4

10 ^th Amendment to the

Purchase and Sale Agreement

ADDITIONAL ORIGINATORS :

AMTROL INC.

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

WESTERMAN, INC.

By: /s/ Marcus Rogier

Name: Marcus Rogier

Title: Treasurer

S-5

10 ^th Amendment to the

Purchase and Sale Agreement

ACKNOWLEDGED AND AGREED:

PNC BANK, NATIONAL ASSOCIATION,

as Administrator

By: /s/ Michael Brown

Name: Michael Brown
Title: Senior Vice President

PNC BANK, NATIONAL ASSOCIATION,

as a Related Committed Purchaser

By: /s/ Michael Brown
Name: Michael Brown
Title: Senior Vice President

S-6

10 ^th Amendment to the

Purchase and Sale Agreement

Exhibit A

[Amendments to the Purchase and Sale Agreement]

Exhibit A-1

Purchase and Sale Agreement

Exhibit B

[UCC-3 Amendments to be filed]

Exhibit B-1

Purchase and Sale Agreement

Exhibit C

[UCC-1 Financing Statements to be filed]

Exhibit C-1

Purchase and Sale Agreement

Exhibit 10.2

EXECUTION VERSION

AMENDMENT NO. 20 TO RECEIVABLES PURCHASE AGREEMENT

THIS AMENDMENT NO. 20 TO RECEIVABLES PURCHASE AGREEMENT (this “ Amendment ”), dated as of January 14, 2019, is entered into among WORTHINGTON RECEIVABLES CORPORATION, a Delaware corporation, as Seller (the “ Seller ”), WORTHINGTON INDUSTRIES, INC., an Ohio corporation, as Servicer (the “ Servicer ”), THE MEMBERS OF THE VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY TO THE AGREEMENT (as defined below) (each, a “ Purchaser Group ” and collectively, the “ Purchaser Groups ”), and PNC BANK, NATIONAL ASSOCIATION, as Administrator (the “ Administrator ”).

RECITALS

WHEREAS , the Seller, the Servicer, each member of each of the Purchaser Groups and the Administrator are parties to the Receivables Purchase Agreement, dated as of November 30, 2000 (as amended, supplemented or otherwise modified through the date hereof, the “ Agreement ”);

WHEREAS , concurrently herewith, Worthington Industries Engineered Cabs, Inc. and Worthington Industries Engineered Cabs, LLC (each, a “ Released Originator ” and together the “ Released Originators ”), the Remaining Originators, AMTROL Inc. and Westerman, Inc. (each, a “ New Originator ” and together the “ New Originators ”), and the Seller are entering into that certain Amendment No. 10 to Purchase and Sale Agreement (the “ Sale Agreement Amendment ”), dated as of the date hereof;

WHEREAS , concurrently herewith, the Administrator, the Servicer, the Seller and JPMorgan Chase Bank, N.A. are entering into that certain Amendment No. 2 to Blocked Account Control Agreement (the “ Blocked Account Amendment ”), dated as of the date hereof;

WHEREAS , concurrently herewith, each of the Released Originators are entering into a separate Assignment Agreement with the Seller (each, an “ Assignment Agreement ” and collectively, the “ Assignment Agreements ”), dated as of the date hereof;

WHEREAS , concurrently herewith, the Seller, the Servicer, the Purchaser Agents and the Administrator are entering into that certain Eleventh Amended and Restated Fee Letter (the “ Fee Letter ”), dated as of the date hereof; and

WHEREAS , the parties hereto desire to amend the Agreement as hereinafter set forth.

NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Certain Defined Terms . Capitalized terms that are used herein without definition and that are defined in Exhibit I to the Agreement shall have the same meanings herein as therein defined.

2. Amendments to Agreement . The Agreement is hereby amended to reflect the marked pages of the Agreement attached hereto as Exhibit A .

3. Representations and Warranties . The Seller and the Servicer each hereby represents and warrants to the Administrator and each member of the various Purchaser Groups from time to time party to the Agreement as follows:

(a) Representations and Warranties . Its representations and warranties contained in Exhibit III of the Agreement are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date);

(b) Enforceability . The execution and delivery by each of the Seller and the Servicer of this Amendment, and the performance of each of its obligations under this Amendment and the Agreement, as amended hereby, are within each of its corporate powers and have been duly authorized by all necessary corporate action on each of its parts. This Amendment and the Agreement, as amended hereby, are each of the Seller’s and the Servicer’s valid and legally binding obligations, enforceable in accordance with its terms; and

(c) No Default . Immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist.

(d) Borrowing Base . Immediately after giving effect to this Amendment, the Sale Agreement Amendment and the Assignment Agreements, the Aggregate Investment plus the Total Reserves on the date hereof will not exceed the Net Receivables Pool Balance on the date hereof.

4. Consent . Each of the parties hereto hereby (i) consents to the execution, delivery and performance of the Sale Agreement Amendment, the Blocked Account Amendment, each Assignment Agreement and each of the other documents, instruments and agreements referenced in Section 6 of this Amendment and (ii) waives any notice requirement set forth in the Agreement or any other Transaction Document as a prerequisite or condition precedent to the effectiveness of any such document, instrument or agreement.

5. Effect of Amendment . All provisions of the Agreement, including as expressly amended and modified by this Amendment, shall remain in full force and effect and are hereby ratified. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to “this Agreement”, “hereof”, “herein” or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Agreement other than as set forth herein.

6. Effectiveness . This Amendment shall become effective as of the date hereof upon (a) receipt by the Administrator of counterparts of: (i) this Amendment, (ii) the Sale Agreement Amendment, (iii) the Fee Letter, (iv) the Blocked Account Amendment, (v) each Assignment Agreement, (vi) a pro forma Information Package prepared after giving effect to the Assignment


	2

Agreements and the joinders pursuant to the Sale Agreement Amendment , (vii) standard corporate and enforceability opinions (covering no-conf licts with material agreements) and a perfected security interest opinion with respect to each New Originator and (vii i ) such other documents, instruments and agreements reasonably requested by the Administrator prior to the date hereof and (b) payment of the “ Structuring Fee” (under and as defined in the Fee Letter) in accordance with the terms of the Fee Letter.

7. Counterparts . This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument.

8. Severability . Each provision of this Amendment shall be severable from every other provision of this Amendment for the purpose of determining the legal enforceability of any provision hereof, and the unenforceability of one or more provisions of this Amendment in one jurisdiction shall not have the effect of rendering such provision or provisions unenforceable in any other jurisdiction.

9. Governing Law . This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York (without regard to any otherwise applicable principles of conflicts of law other than Sections 5-1401 and 5-1402 of the New York General Obligations Law).

10. Section Headings . The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any provision hereof or thereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


	3

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

WORTHINGTON RECEIVABLES
CORPORATION , as Seller

By: /s/ Marcus Rogier
Name: Marcus Rogier
Title: Treasurer

WORTHINGTON INDUSTRIES, INC. ,
as Servicer

By: /s/ Marcus Rogier
Name: Marcus Rogier
Title: Treasurer

S-1

Amendment No. 20 to Receivables

Purchase Agreement (Worthington)

PNC BANK, NATIONAL ASSOCIATION ,

as Administrator

By: /s/ Michael Brown
Name: Michael Brown
Title: Senior Vice President

PNC BANK, NATIONAL ASSOCIATION ,

as a Purchaser Agent and a Related Committed Purchaser

By: /s/ Michael Brown
Name: Michael Brown
Title: Senior Vice President

S-2

Amendment No. 20 to Receivables

Purchase Agreement (Worthington)

Exhibit A

[Amendments to the Receivables Purchase Agreement]

Exhibit A

Amendment No. 20 to Receivables

Purchase Agreement (Worthington)

Exhibit 31.1

RULE 13a-14(a) / 15d-14(a)

CERTIFICATIONS (PRINCIPAL EXECUTIVE OFFICER)

CERTIFICATIONS

I, John P. McConnell, certify that:

I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2019 of Worthington Industries, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: April 9, 2019	By:	/s/ John P. McConnell
		John P. McConnell,
		Chairman of the Board and Chief Executive Officer

Exhibit 31.2

RULE 13a-14(a) / 15d-14(a)

CERTIFICATIONS (PRINCIPAL FINANCIAL OFFICER)

CERTIFICATIONS

I, Joseph B. Hayek, certify that:

I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2019 of Worthington Industries, Inc.;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: April 9, 2019	By:	/s/ Joseph B. Hayek
		Joseph B. Hayek,
		Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Quarterly Report of Worthington Industries, Inc. (the “Company”) on Form 10-Q for the quarterly period ended February 28, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John P. McConnell, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company and its subsidiaries.

			/s/ John P. McConnell
			Printed Name: John P. McConnell
			Title: Chairman of the Board and Chief Executive Officer
Date: April 9, 2019

*These certifications are being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. These certifications shall 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 that Worthington Industries, Inc. specifically incorporates these certifications by reference.

Exhibit 32.2

CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 *

In connection with the Quarterly Report of Worthington Industries, Inc. (the “Company”) on Form 10-Q for the quarterly period ended February 28, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph B. Hayek, Vice President and Chief Financial Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company and its subsidiaries.

			/s/ Joseph B. Hayek
			Printed Name: Joseph B. Hayek
			Title: Vice President and Chief Financial Officer
Date: April 9, 2019