Segment Data

12 Months Ended

May 31, 2020

Note O – Segment Data

Our operations are managed principally on a products and services basis and include two reportable business segments: Steel Processing and Pressure Cylinders, each of which is comprised of a similar group of products and services. Factors used to identify reportable business segments include the nature of the products and services provided by each business, the management reporting structure, similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance. A discussion of each of our reportable business segments is outlined below.

Steel Processing: The Steel Processing reportable segment consists of the Worthington Steel business unit and four consolidated joint ventures: Samuel, Spartan, TWB and WSP. Spartan operates a cold-rolled, hot-dipped galvanizing line and TWB operates a laser welded blanking business. WSP serves primarily as a toll processor for United States Steel Corporation and others. Its services include slitting, blanking, cutting-to-length, laser blanking, laser welding, tension leveling and warehousing. Samuel operates steel pickling facilities in Ohio. Worthington Steel is an intermediate processor of flat-rolled steel. This operating segment’s processing capabilities include cold reducing, configured blanking, coil fed laser blanking, cutting-to-length, dry-lube, hot-dipped galvanizing, hydrogen annealing, laser welding, pickling, slitting, oscillate slitting, temper rolling, tension leveling, and non-metallic coating, including acrylic and paint coating. Worthington Steel sells to customers principally in the automotive, aerospace, agricultural, appliance, construction, container, hardware, heavy-truck, HVAC, lawn and garden, leisure and recreation, office furniture and office equipment markets. Worthington Steel also toll processes steel for steel mills, large end-users, service centers and other processors. Toll processing is different from typical steel processing in that the mill, end-user or other party retains title to the steel and has the responsibility for selling the end product. The percentage of our consolidated net sales generated by the Steel Processing reportable segment was approximately 61%, 65% and 63%, in fiscal 2020, fiscal 2019 and fiscal 2018, respectively.

Pressure Cylinders: The Pressure Cylinders reportable segment consists of the Worthington Cylinders business unit. The percentage of our consolidated net sales generated by the Pressure Cylinders reportable segment was approximately 37%, 32% and 34% in fiscal 2020, fiscal 2019 and fiscal 2018, respectively. We acquired AMTROL on June 2, 2017, which has been included in the Pressure Cylinders reportable segment since that date, and accounted for approximately 8% of our consolidated net sales in both fiscal 2020 and fiscal 2019.

The Pressure Cylinders reportable segment manufactures and sells filled and unfilled pressure cylinders, tanks, hand torches, well water and expansion tanks, and oil and gas equipment along with various accessories and related products for diversified end-use market applications. The following is a description of these markets:

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Industrial Products: This market sector includes high pressure and acetylene cylinders for industrial gases, refrigerant and certain propane gas (LPG) cylinders, alternative fuel cylinders, cryogenic equipment, and systems and services for handling liquid gases, and other specialty products. Cylinders in this market sector are generally sold to gas producers, cylinder exchangers and industrial distributors. Industrial gas cylinders hold fuel for uses such as cutting, brazing and soldering, semiconductor production, and beverage delivery. Refrigerant gas cylinders are used to hold refrigerant gases for commercial, residential and automotive air conditioning and refrigeration systems. LPG cylinders hold fuel for barbeque grills, recreational vehicle equipment, residential and light commercial heating systems, industrial forklifts and commercial/residential cooking (the latter, generally outside North America). Alternative fuel cylinders includes composite and steel cylinders used to hold CNG and hydrogen for automobiles, buses, and light-duty trucks, and to hold propane/autogas for automobiles and light- and medium-duty trucks. Cryogenic equipment and systems include liquid nitrogen storage freezers and shipping containers for organic specimens in healthcare and animal husbandry markets, and storage tanks and trailers for liquefied nitrogen, oxygen, argon, carbon dioxide, and hydrogen. Specialty products include a variety of fire suppression, life support and chemical tanks.

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Consumer Products: This market sector includes propane-filled cylinders for torches, camping stoves and other applications, hand-held torches, Balloon Time® helium-filled balloon kits, plumbing tools, well water tanks and expansion tanks. These products are sold primarily to mass merchandisers, retailers and distributors.

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Oil & Gas Equipment: This market sector includes steel storage tanks, separation equipment, processing equipment and other products primarily used in the oil and gas markets.

Other: Effective November 1, 2019, the Company deconsolidated substantially all of the net assets of the Engineered Cabs business, which had historically been treated as a separate reporting segment. The deconsolidated net assets included its two primary manufacturing facilities located in Greeneville, Tennessee and Watertown, South Dakota. The remaining non-core assets of the Engineered Cabs business, including the fabricated products facility in Stow, Ohio, and the steel packaging facility in Greensburg, Indiana, were retained. The retained Engineered Cabs assets, which are in the process of being closed, no longer qualify as a separate operating or reportable segment. Accordingly, the activity related to our former Engineered Cabs operating segment has been reported in the “Other” category. Segment information reported in previous periods has been restated to conform to this new presentation.

Certain income and expense items not allocated to our operating segments are included in Other, including product liability and healthcare reserves. The Other category also included the former WEI operating segment, through March 31, 2018 when we disposed of 65% of our 75% stake in the business effective March 31, 2018.

The accounting policies of the reportable business segments and other operating segments are described in “Note A – Summary of Significant Accounting Policies.” We evaluate operating segment performance based on operating income (loss). Inter-segment sales are not material.

The following table presents summarized financial information for our reportable business segments as of, and for the fiscal years ended, May 31:

(in thousands)	2020			2019			2018
Net sales
Steel Processing	$	1,859,670		$	2,435,818		$	2,252,771
Pressure Cylinders		1,148,424			1,207,798			1,206,183
Other		51,025			115,940			122,666
Total net sales	$	3,059,119		$	3,759,556		$	3,581,620

Operating income (loss)
Steel Processing	$	40,564		$	89,761		$	152,690
Pressure Cylinders		38,903			69,872			23,396
Other		(56,978	)		(14,869	)		(34,476	)
Total operating income	$	22,489		$	144,764		$	141,610

Depreciation and amortization
Steel Processing	$	40,819		$	40,374		$	43,331
Pressure Cylinders		42,565			42,403			46,691
Other		9,294			12,825			13,337
Total depreciation and amortization	$	92,678		$	95,602		$	103,359

Impairment of goodwill and long-lived assets
Steel Processing	$	1,839		$	3,269		$	-
Pressure Cylinders		37,153			4,548			53,883
Other		43,698			-			7,325
Total impairment of goodwill and long-lived assets	$	82,690		$	7,817		$	61,208

Restructuring and other expense (income), net
Steel Processing	$	3,501		$	(9	)	$	(10,087	)
Pressure Cylinders		5,282			(11,009	)		2,365
Other		1,265			-			301
Total restructuring and other expense (income), net	$	10,048		$	(11,018	)	$	(7,421	)

Total assets
Steel Processing	$	821,657		$	924,966		$	999,238
Pressure Cylinders		1,104,603			1,123,115			1,147,268
Other		405,255			462,715			475,281
Total assets	$	2,331,515		$	2,510,796		$	2,621,787

Capital expenditures
Steel Processing	$	40,588		$	39,114		$	31,966
Pressure Cylinders		41,484			37,558			32,697
Other		13,431			7,827			11,425
Total capital expenditures	$	95,503		$	84,499		$	76,088

The following table presents net sales by geographic region for the fiscal years ended May 31:

(in thousands)	2020		2019		2018
North America	$	2,912,777	$	3,559,650	$	3,275,090
International		146,342		199,906		306,530
Total	$	3,059,119	$	3,759,556	$	3,581,620

The following table presents property, plant and equipment, net, by geographic region as of May 31:

(in thousands)	2020		2019
North America	$	503,393	$	514,519
International		69,251		64,145
Total	$	572,644	$	578,664