UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

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

For the quarterly period ended ~~November 30, 2016~~August 31, 2017

ORor

☐	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~~ file number001-08399

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~~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~~Yes ☒ NONo ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

~~YES~~Yes ☒ NONo ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, ~~or a~~ smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	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 inRule 12b-2 of the Exchange Act).

~~YES~~Yes ☐ NONo ☒

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~~issuer’s classes of common stock, as of the latest practicable date. On ~~December 30, 2016,~~September 29, 2017, the number of Common Shares, without par value, issued and outstanding was ~~63,673,654.~~62,970,687.

TABLE OF CONTENTS


Safe Harbor Statement		ii

Part I. Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets – ~~November 30, 2016~~August 31, 2017 and May 31, ~~2016~~2017	1

	Consolidated Statements of Earnings – Three ~~and Six~~ Months Ended ~~November 30,~~August 31, 2017 and 2016 ~~and 2015~~	2

	Consolidated Statements of Comprehensive Income – Three ~~and Six~~ Months Ended ~~November 30,~~August 31, 2017 and 2016 ~~and 2015~~	3

	Consolidated Statements of Cash Flows – Three ~~and Six~~ Months Ended ~~November 30,~~August 31, 2017 and 2016 ~~and 2015~~	4

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2321

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3932

Item 4.	Controls and Procedures	4032

Part II. Other Information

Item 1.	Legal Proceedings	4033

Item 1A.	Risk Factors	4033

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4133

Item 3.	Defaults Upon Senior Securities (Not applicable)	4134

Item 4.	Mine Safety Disclosures (Not applicable)	4134

Item 5.	Other Information (Not applicable)	4134

Item 6.	Exhibits	4235

Signatures		43

~~Index to Exhibits~~		4437

SAFE HARBOR STATEMENT

Selected statements contained in this Quarterly Report on Form10-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;

•

~~the ability to correct performance issues at operations;~~

•

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

•

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

•

demand trends for us or our markets;

•

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

•

expected benefits from Transformation ~~efforts;~~and innovation efforts and the ability to improve performance and competitive position at our operations;

•

anticipated working capital needs, capital expenditures and asset sales;

•

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

•

projected profitability ~~potential, capacity and working capital needs;~~potential;

•

•the ability to successfully integrate AMTROL and the expected benefits, costs and results from the acquisition of AMTROL;

•

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;

•

projected capacity and the alignment of operations with demand;

•

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

•

the ability to maintain margins and 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 ~~increasing volatility or~~generating improving and ~~sustaining~~sustainable earnings, earnings potential, margins or shareholder value;

•

effects of judicial rulings; and

•

othernon-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 ~~global~~ economy;

•

the effect of conditions in national and worldwide financial markets;

•

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;

•

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, facility closures and other cost reduction efforts;

•

the ability to realize ~~other~~ 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 ~~in which we participate~~ 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, civil unrest, international conflicts, or 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 ~~these~~global markets;

•

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

•

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

•

deviation of actual results from estimates and/or assumptions used by us in the application of our ~~significant~~critical 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 ~~changes to~~ 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; and

•

other risks described from time to time in ~~our~~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 Form10-K for the fiscal year ended May 31, ~~2016.~~2017.

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 Form10-Q are based on current information as of the date of this Quarterly Report on Form10-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. FINANCIAL INFORMATION

Item 1. – Financial Statements

WORTHINGTON INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	November 30, 2016		May 31, 2016		August 31, 2017		May 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	175,180	$	84,188	$	195,855	$	278,081
Receivables, less allowances of $3,499 and $4,579 at November 30, 2016 and May 31, 2016, respectively		429,011		439,688
Receivables, less allowances of $3,789 and $3,444 at August 31, 2017 and May 31, 2017, respectively						465,113		486,730
Inventories:
Raw materials		168,586		162,427		232,571		185,001
Work in process		85,933		86,892		102,875		95,630
Finished products		83,339		70,016		90,433		73,303

Total inventories		337,858		319,335		425,879		353,934
Income taxes receivable		7,997		10,535		2,105		7,164
Assets held for sale		10,050		10,079		9,358		9,654
Prepaid expenses and other current assets		47,385		51,290		62,855		55,406

Total current assets		1,007,481		915,115		1,161,165		1,190,969
Investments in unconsolidated affiliates		203,508		191,826		212,670		208,591
Goodwill		243,918		246,067		355,455		247,673
Other intangible assets, net of accumulated amortization of $56,220 and $49,532 at November 30, 2016 and May 31, 2016, respectively		88,588		96,164
Other intangible assets, net of accumulated amortization of $68,245 and $63,134 at August 31, 2017 and May 31, 2017, respectively						247,757		82,781
Other assets		27,914		29,254		27,917		24,841
Property, plant and equipment:
Land		18,397		18,537		27,374		22,077
Buildings and improvements		257,950		256,973		304,705		297,951
Machinery and equipment		973,941		945,951		1,024,498		961,542
Construction in progress		34,732		48,156		30,174		27,616

Total property, plant and equipment		1,285,020		1,269,617		1,386,751		1,309,186
Less: accumulated depreciation		713,705		686,779		761,161		738,697

Total property, plant and equipment, net		571,315		582,838		625,590		570,489

Total assets	$	2,142,724	$	2,061,264	$	2,630,554	$	2,325,344


Liabilities and equity
Current liabilities:
Accounts payable	$	278,192	$	290,432	$	384,486	$	368,071
Short-term borrowings		497		2,651		421		123
Accrued compensation, contributions to employee benefit plans and related taxes		65,308		75,105		73,040		86,201
Dividends payable		14,182		13,471		14,148		13,698
Other accrued items		41,815		45,056		55,332		41,551
Income taxes payable		3,364		2,501		7,485		4,448
Current maturities of long-term debt		873		862		7,072		6,691

Total current liabilities		404,231		430,078		541,984		520,783
Other liabilities		63,910		63,487		66,093		61,498
Distributions in excess of investment in unconsolidated affiliate		67,516		52,983		58,371		63,038
Long-term debt		576,038		577,491		773,090		571,796
Deferred income taxes, net		20,267		17,379		108,289		34,300

Total liabilities		1,131,962		1,141,418		1,547,827		1,251,415
Shareholders’ equity—controlling interest		884,940		793,371		958,174		951,635
Noncontrolling interests		125,822		126,475		124,553		122,294

Total equity		1,010,762		919,846		1,082,727		1,073,929

Total liabilities and equity	$	2,142,724	$	2,061,264	$	2,630,554	$	2,325,344

See notes to consolidated financial statements.

WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)


	Three Months Ended August 31,
	2017				2016
Net sales	$	848,237			$	737,549
Cost of goods sold		715,459				590,267

Gross margin		132,778				147,282
Selling, general and administrative expense		88,249				81,056
Restructuring and other expense		2,304				1,328

Operating income		42,225				64,898
Other income (expense):
Miscellaneous income, net		348				863
Interest expense		(8,807	)			(7,870	)
Equity in net income of unconsolidated affiliates		27,306				34,544

Earnings before income taxes		61,072				92,435
Income tax expense		12,998				23,899

Net earnings		48,074				68,536
Net earnings attributable to noncontrolling interests		2,540				2,969

Net earnings attributable to controlling interest	$	45,534		��	$	65,567


Basic
Average common shares outstanding		62,444				61,885

Earnings per share attributable to controlling interest	$	0.73			$	1.06


Diluted
Average common shares outstanding		64,590				64,337

Earnings per share attributable to controlling interest	$	0.70			$	1.02


Common shares outstanding at end of period		62,144				62,179

Cash dividends declared per share	$	0.21			$	0.20

See notes to consolidated financial statements.

WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)


	Three Months Ended August 31,
	2017			2016
Net earnings	$	48,074		$	68,536
Other comprehensive income (loss):
Foreign currency translation		15,872			(665	)
Pension liability adjustment, net of tax		(6	)		—
Cash flow hedges, net of tax		1,887			625

Other comprehensive income (loss)		17,753			(40	)

Comprehensive income		65,827			68,496
Comprehensive income attributable to noncontrolling interests		2,979			2,973

Comprehensive income attributable to controlling interest	$	62,848		$	65,523

See notes to consolidated financial statements.

WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


	Three Months Ended August 31,
	2017			2016
Operating activities:
Net earnings	$	48,074		$	68,536
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		25,365			21,831
Provision for deferred income taxes		7,934			20
Bad debt income		(62	)		(81	)
Equity in net income of unconsolidated affiliates, net of distributions		(7,755	)		3,898
Net loss on assets		1,425			4,396
Stock-based compensation		3,407			3,136
Changes in assets and liabilities, net of impact of acquisitions:
Receivables		62,678			16,954
Inventories		(34,696	)		(50,398	)
Prepaid expenses and other current assets		1,143			7,162
Other assets		(350	)		1,246
Accounts payable and accrued expenses		(26,791	)		43,061
Other liabilities		2,983			1,144

Net cash provided by operating activities		83,355			120,905


Investing activities:
Investment in property, plant and equipment		(18,013	)		(16,316	)
Acquisitions, net of cash acquired		(284,505	)		—
Proceeds from sale of assets		427			157

Net cash used by investing activities		(302,091	)		(16,159	)


Financing activities:
Net proceeds from (repayments of) short-term borrowings		298			(1,117	)
Proceeds from long-term debt, net of issuance costs		198,279			—
Principal payments on long-term debt		(219	)		(219	)
Proceeds from issuance of common shares, net of tax withholdings		(3,274	)		5,821
Payments to noncontrolling interests		(720	)		—
Repurchase of common shares		(45,076	)		—
Dividends paid		(12,778	)		(11,894	)

Net cash provided (used) by financing activities		136,510			(7,409	)


Increase (decrease) in cash and cash equivalents		(82,226	)		97,337
Cash and cash equivalents at beginning of period		278,081			84,188

Cash and cash equivalents at end of period	$	195,855		$	181,525

See notes to consolidated financial statements.

WORTHINGTON INDUSTRIES, INC.

~~CONSOLIDATED STATEMENTS OF EARNINGS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

   Three Months Ended
November 30, Six Months Ended
November 30,
   2016 2015 2016 2015
Net sales
   $ 727,780    $ 699,816    $ 1,465,329    $ 1,457,963
Cost of goods sold
   604,977    590,637    1,195,244    1,235,768


Gross margin
   122,803    109,179    270,085    222,195
Selling, general and administrative expense
   76,487    72,722    157,543    148,673
Impairment of long-lived assets
   —      22,962    —      25,962
Restructuring and other expense
   3,272    1,523    4,600    4,592


Operating income
   43,044    11,972    107,942    42,968
Other income (expense):

Miscellaneous income, net
   872    996    1,735    418
Interest expense
   (7,658 ) (7,799 ) (15,528 ) (15,653 )
Equity in net income of unconsolidated affiliates
   27,124    29,247    61,668    55,828


Earnings before income taxes
   63,382    34,416    155,817    83,561
Income tax expense
   13,515    8,665    37,414    22,815


Net earnings
   49,867    25,751    118,403    60,746
Net earnings attributable to noncontrolling interests
   3,302    2,375    6,271    5,402


Net earnings attributable to controlling interest
   $ 46,565    $ 23,376    $ 112,132    $ 55,344


Basic

Average common shares outstanding
   62,348    62,676    62,115    63,338


Earnings per share attributable to controlling interest
   $ 0.75    $ 0.37    $ 1.81    $ 0.87


Diluted

Average common shares outstanding
   64,725    64,663    64,599    65,350


Earnings per share attributable to controlling interest
   $ 0.72    $ 0.36    $ 1.74    $ 0.85


Common shares outstanding at end of period
   62,562    62,101    62,562    62,101
Cash dividends declared per share
   $ 0.20    $ 0.19    $ 0.40    $ 0.38
~~See notes to consolidated financial statements.~~
~~WORTHINGTON INDUSTRIES, INC.~~
~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~
~~(In thousands)~~
~~(Unaudited)~~

   Three Months Ended
November 30, Six Months Ended
November 30,
   2016 2015 2016 2015
Net earnings
   $ 49,867    $ 25,751    $ 118,403    $ 60,746
Other comprehensive income (loss):

Foreign currency translation
   (7,517 ) (9,214 ) (8,182 ) (7,391 )
Pension liability adjustment, net of tax
   —      —      —      (8 )
Cash flow hedges, net of tax
   1,652    (2,523 ) 2,277    (1,893 )


Other comprehensive loss
   (5,865 ) (11,737 ) (5,905 ) (9,292 )


Comprehensive income
   44,002    14,014    112,498    51,454
Comprehensive income attributable to noncontrolling interests
   3,155    1,760    6,128    4,731


Comprehensive income attributable to controlling interest
   $ 40,847    $ 12,254    $ 106,370    $ 46,723


~~See notes to consolidated financial statements.~~
~~WORTHINGTON INDUSTRIES, INC.~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~(In thousands)~~
~~(Unaudited)~~

   Three Months Ended
November 30, Six Months Ended
November 30,
   2016 2015 2016 2015
Operating activities:

Net earnings
   $ 49,867    $ 25,751    $ 118,403    $ 60,746
Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization
   21,645    20,547    43,476    41,987
Impairment of long-lived assets
   —      22,962    —      25,962
Provision for (benefit from) deferred income taxes
   2,316    (9,851 ) 2,336    (15,391 )
Bad debt (income) expense
   232    (2 ) 151    8
Equity in net income of unconsolidated affiliates, net of distributions
   (2,824 ) (10,389 ) 1,074    (15,902 )
Net (gain) loss on sale of assets
   (2,912 ) (5,854 ) 1,484    (4,248 )
Stock-based compensation
   3,824    3,880    6,960    7,657
Changes in assets and liabilities, net of impact of acquisitions:

Receivables
   (7,156 ) 23,474    9,798    66,103
Inventories
   31,875    31,645    (18,523 ) 23,821
Prepaid expenses and other current assets
   (1,737 ) 17,467    5,425    28,633
Other assets
   1,165    (3,245 ) 2,411    (2,803 )
Accounts payable and accrued expenses
   (65,946 ) (72,846 ) (22,885 ) (31,220 )
Other liabilities
   950    7,487    2,094    4,300


Net cash provided by operating activities
   31,299    51,026    152,204    189,653


Investing activities:

Investment in property, plant and equipment
   (14,730 ) (21,995 ) (31,046 ) (60,492 )
Acquisitions, net of cash acquired
   —      (2,950 ) —      (2,950 )
Investments in unconsolidated affiliates
   —      (226 ) —      (1,913 )
Proceeds from sale of assets
   799    9,325    956    9,456


Net cash used by investing activities
   (13,931 ) (15,846 ) (30,090 ) (55,899 )


Financing activities:

Net proceeds from (repayments of) short-term borrowings
   (1,037 ) 27,499    (2,154 ) (41,012 )
Proceeds from long-term debt
   —      —      —      921
Principal payments on long-term debt
   (218 ) (220 ) (437 ) (428 )
Proceeds from issuance of common shares, net of tax withholdings
   (2,849 ) 3,666    2,972    3,064
Payments to noncontrolling interests
   (6,781 ) (1,564 ) (6,781 ) (4,900 )
Repurchase of common shares
   —      (43,914 ) —      (71,496 )
Dividends paid
   (12,828 ) (12,065 ) (24,722 ) (23,616 )


Net cash used by financing activities
   (23,713 ) (26,598 ) (31,122 ) (137,467 )


Increase (decrease) in cash and cash equivalents
   (6,345 ) 8,582    90,992    (3,713 )
Cash and cash equivalents at beginning of period
   181,525    18,772    84,188    31,067


Cash and cash equivalents at end of period
   $ 175,180    $ 27,354    $ 175,180    $ 27,354


~~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.
~~We own~~The Company owns controlling interests in the following ~~six~~five joint ventures: ~~dHybrid Systems, LLC (“dHybrid”) (79.59%),~~ Spartan Steel Coating, LLC (“Spartan”) (52%), TWB Company, L.L.C. (“TWB”) (55%), Worthington Ar1~~taş Bas~~1~~nçl~~1Aritaş Basinçli Kaplar Sanayi (“Worthington Aritas”) (75%), Worthington Energy Innovations, LLC (“WEI”) (75%), 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 ~~loss~~income (loss) (“OCI”) shown as net earnings or comprehensive income 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 Form10-Q and Article 10 of RegulationS-X of the Securities and Exchange Commission (“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 onForm 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 six~~ months ended ~~November 30, 2016~~August 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, ~~2017~~2018 (“fiscal ~~2017”~~2018”). For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form10-K for the fiscal year ended May 31, ~~2016~~2017 (“fiscal ~~2016”~~2017”) of Worthington Industries, Inc. (the ~~“2016~~“2017 Form10-K”).
The preparation of 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
In ~~February~~July 2015, amended accounting guidance was issued ~~that revised consolidation requirements in order to provide financial statement users with a more useful presentation~~regarding the measurement of ~~an entity’s economic and operational results.~~inventory. The amended guidance ~~revises~~requires that inventory accounted for under the ~~consolidation requirements~~first-in,first-out (FIFO) or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amended guidance has no impact on inventory accounted for ~~limited partnerships,~~under the ~~considerations surrounding the primary beneficiary determination and the consolidation of certain investment funds.~~last-in,first-out (LIFO) or retail inventory methods. The Company adopted this amended guidance on a prospective basis effective June 1, ~~2016.~~2017. The adoption of this guidance did not impact our consolidated financial position or results of operations.
In April 2015, amended accounting guidance was issued that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability itself. The amended guidance does not apply to line-of-credit arrangements. Accordingly, issuance costs related to line-of-credit arrangements will continue to be presented as an asset and amortized ratably over the term of the arrangement. The Company adopted this guidance on a retrospective basis effective June 1, 2016. As a result, debt issuance costs totaling $2,319,000 and $2,491,000 as of November 30, 2016 and May 31, 2016, respectively, have been presented as a component of the carrying amount of long-term debt reported in our consolidated balance sheets. These amounts were previously capitalized and reported within other assets.
In September 2015, amended accounting guidance was issued regarding adjustments to provisional amounts recorded in conjunction with a business combination. The amended guidance requires the acquirer to recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which such adjustments are identified, rather than retrospectively adjusting previously reported amounts. The Company adopted this amended guidance on a prospective basis effective June 1, 2016. The adoption of this guidance did not impact our consolidated financial position or results of operations.
In March 2016, amended accounting guidance was issued that simplifies the accounting for share-based payments. The amended guidance impacts several aspects of the accounting for share-based payment transactions, including the income tax consequences, forfeitures, statutory withholding requirements, and classification in the statement of cash flows. The Company early adopted this guidance during the fourth quarter of fiscal 2016. As required for early adoption in an interim period, all adjustments have been reflected as of the beginning of fiscal 2016. Accordingly, income tax expense for the three and six months ended November 30, 2015 has been restated to reflect excess tax benefits associated with share-based payments totaling $136,000 and $694,000, respectively, in current income tax expense, rather than in paid-in capital.
Recently Issued Accounting Standards
In May 2014, ~~amended~~new accounting guidance was issued that replaces most existing revenue recognition guidance under U.S. GAAP. The ~~amended~~new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Subsequently, additional guidance was issued on several areas including guidance intended to improve the operability and understandability of the implementation of principal versus agent considerations and clarifications on the identification of performance obligations and implementation of guidance related to licensing. The ~~amended~~new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The ~~amended~~ guidance permits the use of either the retrospective or cumulative effect transition method. We are in the process of evaluating the effect this guidance will have on the presentation of our consolidated financial statements and related disclosures. ~~Our~~While we have not yet identified any material changes in the timing of revenue recognition, our evaluation is ongoing and not complete. ~~However, we currently do not anticipate a material impact on our revenue recognition practices.~~ We ~~expect~~plan to ~~make a determination as to~~adopt the ~~timing and method of adoption~~new guidance in the ~~second half~~first quarter of fiscal ~~2017.~~2019. The Company will continue to monitor any modifications, clarifications, and interpretations by the FASB that may impact its conclusions.
In July 2015, amended accounting guidance was issued regarding the measurement of inventory. The amended guidance requires that inventory accounted for under the first-in, first-out (FIFO) or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amended guidance has no impact on inventory accounted for under the last-in, first-out (LIFO) or retail inventory methods. The amended guidance is effective prospectively for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted as of the beginning of an interim or annual reporting period. We do not expect the adoption of this amended accounting guidance to have a material impact on our consolidated financial position or results of operations.
In February 2016, ~~amended~~new accounting guidance was issued that replaces most existing lease accounting guidance under U.S. GAAP. Among other changes, the ~~amended~~new guidance requires that lease assets and liabilities be recognized on the balance sheet by lessees for those leases classified as operating leases under previous guidance. The ~~amended~~new 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. We are in the process of evaluating the effect this guidance will have on our consolidated financial position, results of operations and cash flows, and we have not determined the effect of the ~~amended~~new guidance on our ongoing financial reporting.
In March 2016, amended accounting guidance was issued regarding derivative instruments designated as hedging instruments. The amended guidance clarifies that a change in the counterparty to such a hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The amended guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, and the change may be applied either prospectively or retrospectively. We do not expect the adoption of this amended accounting guidance to have a material impact on our consolidated financial position or results of operations.
In June 2016, ~~amended~~new accounting guidance was issued related to the measurement of credit losses on financial instruments. The ~~amended~~new guidance changes the impairment model for most financial assets to require measurement and recognition of expected credit losses for financial assets held. The ~~amended~~new 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 guidance will have on our consolidated financial position and results of operations, and we have not determined the effect of the ~~amended~~new guidance on our ongoing financial reporting.
In August 2016, amended accounting guidance was issued to clarify the proper cash flow presentation of certain specific types of cash payments and cash receipts. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the effect this guidance will have on our consolidated financial position, results of operations and cash flows, and we have not determined the effect of the amended guidance on our ongoing financial reporting.
In October 2016, amended accounting guidance was issued that requires the income tax consequences of an intra-entity transfer of an asset other than inventory to be recognized when the transfer occurs. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the effect this guidance will have on our consolidated financial position, results of operations and cash flows, and have not determined the effect of the amended guidance on our ongoing financial reporting.
In November 2016, amended accounting guidance was issued that requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts shown on the statement of cash flows. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material impact on our consolidated cash flows.
In January 2017, amended accounting guidance was issued to clarify the definition of a business to provide additional guidance to assist in evaluating whether transactions should be accounted for as an acquisition (or disposal) of either an asset or business. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material impact on our consolidated financial position or results of operations.
In January 2017, amended accounting guidance was issued to simplify the goodwill impairment calculation, by removing Step 2 of the goodwill impairment test. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill. The amended guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the effect this guidance will have on our consolidated financial position and results of operations, and have not determined the effect on our ongoing financial reporting.
In March 2017, amended accounting guidance was issued that requires an employer to report the service cost component of pension and postretirement benefits in the same line as other current employee compensation costs. Additionally, other components of net benefit cost are to be presented in the income statement separately from the service cost component and outside of income from operations. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are in the process of evaluating the effect this guidance will have on our consolidated financial position and results of operations, and have not determined the effect on our ongoing financial reporting.
In May 2017, amended accounting guidance was issued to provide guidance about which changes to the terms or conditions of a share-based payment award require application of modification accounting. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material impact on our consolidated financial position or results of operations.
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 guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the effect this guidance will have on our consolidated financial position and results of operations, and have not determined the effect on our ongoing financial reporting.
NOTE B – Investments in Unconsolidated Affiliates
~~Our investments~~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”) (50%), Worthington Armstrong Venture (“WAVE”) (50%), and Zhejiang Nisshin Worthington Precision Specialty Steel Co., Ltd. (10%).
We received distributions from unconsolidated affiliates totaling ~~$62,742,000~~$19,551,000 during the ~~six~~three months ended ~~November 30, 2016.~~August 31, 2017. We have received cumulative distributions from WAVE in excess of our investment balance, ~~totaling $67,516,000~~which resulted in an amount recorded within other liabilities on our consolidated balance sheets of $58,371,000 at ~~November 30, 2016.~~August 31, 2017. In accordance with the applicable accounting guidance, ~~these excess distributions are~~we reclassified the negative 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 it becomes positive, it will again be shown as an asset on our consolidated balance sheet. If it becomes ~~obvious~~probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any 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.
Combined financial information for our unconsolidated affiliates is summarized as follows:

(in thousands)    November 30,
2016    May 31,
2016
Cash
   $ 59,751       $ 112,122
Other current assets
   523,625       446,796
Noncurrent assets
   352,117       352,370




Total assets
   $ 935,493       $ 911,288




Current liabilities
   $ 141,808       $ 112,491
Short-term borrowings
   9,210       11,398
Current maturities of long-term debt
   2,807       3,297
Long-term debt
   263,646       266,942
Other noncurrent liabilities
   19,834       21,034
Equity
   498,188       496,126




Total liabilities and equity
   $ 935,493       $ 911,288




   Three Months Ended
November 30,    Six Months Ended
November 30,
(in thousands)    2016    2015    2016    2015
Net sales
   $ 387,192       $ 389,185       $ 804,307       $ 793,648
Gross margin
   96,541       84,767       220,738       173,785
Operating income
   67,365       55,810       161,762       117,057
Depreciation and amortization
   6,973       8,068       13,793       16,165
Interest expense
   2,151       2,136       4,299       4,295
Income tax expense
   3,545       2,164       11,063       4,723
Net earnings
   63,444       71,144       149,511       134,070
The financial results of WSP have been included in the amounts presented in the tables above through March 1, 2016. Effective March 1, 2016, the Company obtained effective control over the operations of WSP. As a result, WSP’s results have been consolidated within the financial results of Steel Processing since that date with the minority member’s portion of earnings eliminated within earnings attributable to noncontrolling interests.
(in thousands)    August 31,
2017    May 31,
2017
Cash
   $ 40,943    $ 55,541
Other current assets
   591,345    559,021
Noncurrent assets
   366,877    361,106




Total assets
   $ 999,165    $ 975,668




Current liabilities
   $ 157,932    $ 156,947
Short-term borrowings
   11,063    8,172
Current maturities of long-term debt
   4,367    5,827
Long-term debt
   268,867    268,711
Other noncurrent liabilities
   24,816    21,380
Equity
   532,120    514,631




Total liabilities and equity
   $ 999,165    $ 975,668




   Three Months Ended
August 31,
(in thousands)    2017    2016
Net sales
   $ 442,624    $ 417,115
Gross margin
   86,235    124,197
Operating income
   57,163    94,397
Depreciation and amortization
   7,193    6,820
Interest expense
   2,492    2,148
Income tax expense
   1,348    7,518
Net earnings
   52,474    86,067
NOTE C ~~– Impairment of Long-Lived Assets~~
We review the carrying value of our long-lived assets, including intangible assets with definite useful lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.
Impairment testing of long-lived assets with definite useful lives involves a comparison of the sum of the undiscounted future cash flows of the asset or asset group to its respective carrying amount. If the sum of the undiscounted future cash flows exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the sum of the undiscounted future cash flows, then a second step is performed to determine the amount of impairment, which would be recorded as an impairment charge in our consolidated statement of earnings.
~~No impairment charges were recognized during the six months ended November 30, 2016.~~
Impairment charges during the six months ended November 30, 2015, consisted of $3,000,000 related to the then remaining long-lived assets of the Company’s Engineered Cabs facility in Florence, South Carolina, which ceased operations on September 30, 2015, and $22,962,000 for the impairment of the long-lived assets of two oil & gas equipment facilities triggered by a significant decrease in the long-term cash flow projections of that business. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s 2016 Form 10-K.
~~NOTE D~~ – Restructuring and Other Expense
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, and rationalizing headcount.~~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 expense financial statement caption, in our consolidated statement of earnings for the ~~six~~three months ended ~~November 30, 2016~~August 31, 2017 is summarized ~~as follows:~~below:

(in thousands)    Beginning
Balance    Expense    Payments Adjustments    Ending
Balance    Beginning
Balance    Expense    Payments Adjustments    Ending
Balance
Early retirement and severance
   $ 1,831       $ 1,572       $ (2,707 ) $ 39       $ 735       $ 253    $ 1,877    $ (182 ) $ 127    $ 2,075
Facility exit and other costs
   653       2,019       (1,295 ) -       1,377       536    284    (950 ) 131    �� 1
















   $ 2,484       3,591       $ (4,002 ) $ 39       $ 2,112       $ 789    2,161    $ (1,132 ) $ 258    $ 2,076












Net loss on sale of assets
      1,009                143





Restructuring and other expense
      $ 4,600                $ 2,304





During the ~~six~~three months ended ~~November 30, 2016,~~August 31, 2017, the following ~~activities~~actions were taken related to the Company’s restructuring activities:

The Company announced certain organizational changes impacting its Pressure Cylinders operating segment, including the consolidation of the Cryogenics business unit into the Industrial Products business unit. In connection with ~~this matter,~~the acquisition of Amtrol on June 2, 2017, the Company recognized severance expense of ~~$1,356,000~~$1,877,000 related to ~~permanent headcount reductions.~~corporate management positions at Amtrol that were eliminated.

In connection with the closure of the Company’s stainless steel business, Precision Specialty Metals, Inc. (“PSM”), the Company recognized ~~$1,264,000 of~~ facility exit ~~costs.~~costs of $279,000.

In connection with ~~the closure of the Engineered Cabs facility in Florence, South Carolina,~~othernon-significant restructuring activities, the Company recognized facility exit costs of ~~$307,000. The Company also recognized a net loss of $101,000 related to the disposal of assets.~~
In connection with the consolidation of the Company’s existing cryogenics facility in Istanbul, Turkey, to its Greenfield facility in Bandirma, Turkey, the Company recognized facility exit costs of $421,000 and severance expense of $309,000. The consolidation is expected to be complete in the second half of fiscal 2017.
The Company sold the remaining real estate of the legacy Advanced Component Technologies, Inc. (“ACT”) business within Engineered Cabs for cash proceeds of $700,000, resulting in a loss of $822,000.
~~In connection with other non-significant restructuring activities, the Company recognized a credit to severance expense of $93,000 and facility exit costs totaling $27,000.~~$5,000. The Company also recognized a net loss on disposal of assets of ~~$86,000.~~$143,000.
The total liability associated with our restructuring activities as of ~~November 30, 2016~~August 31, 2017 is expected to be paid in the next twelve months.
NOTE ED – Contingent Liabilities and Commitments
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~~have a material adverse effect on our consolidated financial position or future results of operations or cash flows. We believe that environmental issues will not have a material effect on our capital expenditures, consolidated financial position or future results of operations or cash flows.
NOTE FE – 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 ~~November 30, 2016,~~August 31, 2017, 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 ~~$9,883,000~~$9,049,000 at ~~November 30, 2016.~~August 31, 2017. 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 $15,662,000 of outstandingstand-by letters of credit issued to third-party service providers at August 31, 2017. The fair value of these guarantee instruments, based on premiums paid, was not material and no amounts were drawn against them at August 31, 2017.
NOTE GF – Debt and Receivables Securitization
On July 28, 2017, we issued $200,000,000 aggregate principal amount of senior unsecured notes due August 1, 2032 (the “2032 Notes”). The 2032 Notes bear interest at a rate of 4.30%. The 2032 Notes were sold to the public at 99.901% of the principal amount thereof, to yield 4.309% to maturity. We used a portion of the net proceeds from the offering to repay amounts then outstanding under our multi-year revolving credit facility and amounts then outstanding under our revolving trade accounts receivable securitization facility, both of which are described in more detail below. We entered into an interest rate swap in June 2017, in anticipation of the issuance of the 2032 Notes. The interest rate swap had a notional amount of $150,000,000 to hedge the risk of changes in the semi-annual interest rate payments attributable to changes in the benchmark interest rate during the several days leading up to the issuance of the 2032 Notes. Upon pricing of the 2032 Notes, the derivative instrument was settled resulting in a gain of approximately $3,098,000, which was reflected in accumulated other comprehensive income (“AOCI”). Approximately $2,114,000 and $198,000 were allocated to debt issuance costs and the debt discount. The debt issuance costs and the debt discount were recorded on the consolidated balance sheet within long-term debt as a contra-liability. The unamortized portion of the debt issuance costs and debt discount was $2,103,000 and $197,000, respectively, at August 31, 2017.
We maintain a $500,000,000 multi-year revolving credit facility (the “Credit Facility”) with a group of lenders that matures in April 2020. Borrowings under the Credit Facility typically have maturities of less than one year. However, we can extend the term of amounts borrowed by renewing these borrowings for the term of the Credit Facility. We have the option to borrow at rates equal to an applicable margin over the LIBOR, Prime rate or Fed Funds rate. The applicable margin is determined by our credit rating. There were no borrowings outstanding under the Credit Facility at ~~November 30, 2016.~~
~~We had~~August 31, 2017. As discussed in “NOTE E – Guarantees,” we provided $15,662,000 in letters of credit ~~totaling $15,266,000 outstanding~~for third-party beneficiaries as of ~~November 30, 2016. These letters of credit have been issued to third parties and had no amounts drawn against them at November 30, 2016.~~August 31, 2017. While not drawn against at ~~November 30, 2016, $13,600,000~~August 31, 2017, $14,050,000 of these letters of credit were issued against availability under the Credit Facility, leaving ~~$486,400,000~~$485,950,000 available under the Credit Facility at ~~November 30, 2016.~~August 31, 2017.
We also maintain a $100,000,000 revolving trade accounts receivable securitization facility (the “AR Facility”) ~~which expires~~that matures in January 2018. 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 $100,000,000 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 ~~November 30, 2016,~~August 31, 2017, no undivided ownership interests in this pool of accounts receivable had been sold.
NOTE HG – Other Comprehensive Income
The following table summarizes the tax effects on each component of OCI for the three months ended ~~November 30:~~August 31:

   2016 2015
   Before-Tax Tax Net-of-Tax Before-Tax Tax    Net-of-Tax
(in thousands)
Foreign currency translation
   $ (7,517 ) $ -    $ (7,517 ) $ (9,214 ) $ -       $ (9,214 )
Pension liability adjustment
   -    -    -    -    -       -
Cash flow hedges
   2,047    (395 ) 1,652    (3,805 ) 1,282       (2,523 )




Other comprehensive loss
   $ (5,470 ) $ (395 ) $ (5,865 ) $ (13,019 ) $ 1,282       $ (11,737 )




~~The following table summarizes the tax effects on each component of OCI for the six months ended November 30:~~

   2016 2015
   Before-Tax Tax Net-of-Tax Before-Tax Tax    Net-of-Tax
(in thousands)
Foreign currency translation
   $ (8,182 ) $ -    $ (8,182 ) $ (7,391 ) $ -       $ (7,391 )
Pension liability adjustment
   -    -    -    (8 ) -       (8 )
Cash flow hedges
   3,135    (858 ) 2,277    (2,567 ) 674       (1,893 )




Other comprehensive loss
   $ (5,047 ) $ (858 ) $ (5,905 ) $ (9,966 ) $ 674       $ (9,292 )




   2017 2016
   Before-Tax    Tax Net-of-Tax Before-Tax Tax Net-of-Tax
(in thousands)
Foreign currency translation
   $ 15,872    $ - $ 15,872 $ (665 ) $ - $ (665 )
Pension liability adjustment
   -    (6 ) (6 ) - - -
Cash flow hedges
   2,993    (1,106 ) 1,887 1,088 (463 ) 625




Other comprehensive income (loss)
   $ 18,865    $ (1,112 ) $ 17,753 $ 423 $ (463 ) $ (40 )




NOTE IH – Changes in Equity
The following table provides a summary of the changes in total equity, shareholders’ equity attributable to controlling interest, and equity attributable to noncontrolling interests for the ~~six~~three months ended ~~November 30, 2016:~~August 31, 2017:

   Controlling Interest    Controlling Interest
(in thousands)    Additional
Paid-in
Capital    Accumulated
Other
Comprehensive
Loss, Net of
Tax Retained
Earnings Total Non-
controlling
Interests Total    Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Loss, Net of
Tax Retained
Earnings Total Non
controlling
Interests Total
Balance at May 31, 2016
   $ 298,984       $ (28,565 ) $ 522,952    $ 793,371    $ 126,475    $ 919,846
Balance at May 31, 2017
   $ 303,391 $ (27,775 ) $ 676,019 $ 951,635 $ 122,294 $ 1,073,929
Net earnings
   -       -    112,132    112,132    6,271    118,403       - - 45,534 45,534 2,540 48,074
Other comprehensive loss
   -       (5,762 ) -    (5,762 ) (143 ) (5,905 )
Other comprehensive income
   - 17,314 - 17,314 439 17,753
Common shares issued, net of withholding tax
   2,972       -    -    2,972    -    2,972       (3,274 ) - - (3,274 ) - (3,274 )
Common shares in NQ plans
   948       -    -    948    -    948       536 - - 536 - 536
Stock-based compensation
   7,040       -    -    7,040    -    7,040       4,822 - - 4,822 - 4,822
Purchases and retirement of common shares
   (4,235 ) - (40,841 ) (45,076 ) - (45,076 )
Cash dividends declared
   -       -    (25,761 ) (25,761 ) -    (25,761 )    - - (13,317 ) (13,317 ) - (13,317 )
Dividends to noncontrolling interest
   -       -    -    -    (6,781 ) (6,781 )    - - - - (720 ) (720 )






Balance at November 30, 2016
   $ 309,944       $ (34,327 ) $ 609,323    $ 884,940    $ 125,822    $ 1,010,762
Balance at August 31, 2017
   $ 301,240 $ (10,461 ) $ 667,395 $ 958,174 $ 124,553 $ 1,082,727






The components of the changes in accumulated other comprehensive loss were as follows:

(in thousands)    Foreign
Currency
Translation Pension
Liability
Adjustment Cash
Flow
Hedges Accumulated
Other
Comprehensive
Loss    Foreign
Currency
Translation Pension
Liability
Adjustment Cash
Flow
Hedges Accumulated
Other
Comprehensive
Loss
Balance as of May 31, 2016
   $ (18,728 ) $ (17,061 ) $ 7,224    $ (28,565 )
Other comprehensive income (loss) before reclassifications
   (8,039 ) -    8,050    11
Balance as of May 31, 2017
   $ (17,358 ) $ (14,819 ) $ 4,402 $ (27,775 )
Other comprehensive income before reclassifications
   15,433 - 6,798 22,231
Reclassification adjustments to income (a)
   -    -    (4,915 ) (4,915 )    - - (3,805 ) (3,805 )
Income taxes
   -    -    (858 ) (858 )    - (6 ) (1,106 ) (1,112 )




Balance as of November 30, 2016
   $ (26,767 ) $ (17,061 ) $ 9,501    $ (34,327 )
Balance as of August 31, 2017
   $ (1,925 ) $ (14,825 ) $ 6,289 $ (10,461 )




(a)
The statement of earnings classification of amounts reclassified to income for cash flow hedges is disclosed in “NOTE N – Derivative Instruments and Hedging Activities.”
NOTE JI – Stock-Based Compensation
Non-Qualified Stock Options
During the ~~six~~three months ended ~~November 30, 2016,~~August 31, 2017, we grantednon-qualified stock options covering a total of ~~111,000~~90,200 common shares under our stock-based compensation plans. The option price of ~~$42.30~~$47.76 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 ~~$11.60~~$14.99 per share. The calculatedpre-tax stock-based compensation expense for these stock options, after an estimate for forfeitures, is ~~$1,146,000~~$1,203,000 and will be recognized on a straight-line basis over the three-year vesting period. The following assumptions were used to value these stock options:

Dividend yield
   ~~2.59~~1.81 %
Expected volatility
   ~~36.86~~36.65 %
Risk-free interest rate
   ~~1.15~~1.98 %
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 United States 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 ~~six~~three months ended ~~November 30, 2016,~~August 31, 2017, we granted an aggregate of ~~513,300~~122,400 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 ~~date~~respective dates of grant, or ~~$42.13~~$47.81 per share. The calculatedpre-tax stock-based compensation expense for these restricted common shares, after an estimate for forfeitures, is ~~$19,347,000~~$5,208,000 and will be recognized on a straight-line basis over the three-year service-based vesting period.
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, ~~2017,~~ 2018, 2019 and ~~2019.~~2020. 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 ~~their~~the respective grant dates of the performance shares and thepre-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 ~~six~~three months ended ~~November 30, 2016,~~August 31, 2017, we granted performance share awards covering an aggregate of ~~67,000~~54,700 common shares (at target levels). The calculatedpre-tax stock-based compensation expense for these performance shares is ~~$3,009,000~~$2,768,000 and will be recognized over the three-year performance period.
NOTE KJ – Income Taxes
Income tax expense for the ~~six~~three months ended ~~November 30,~~August 31, 2017 and 2016 ~~and November 30, 2015~~ reflected estimated annual effective income tax rates of ~~28.5%~~30.5% and ~~30.9%~~31.2%, 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, Worthington Aritas, 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 Worthington Aritas (a foreign corporation), and 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 annualpre-tax income for domestic and foreign operations. Our actual effective income tax rate for fiscal ~~2017~~2018 could be materially different from the forecasted rate as of ~~November 30, 2016.~~August 31, 2017.
NOTE LK – Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share attributable to controlling interest for the three ~~and six~~ months ended ~~November 30, 2016~~August 31, 2017 and ~~2015:~~2016:

   Three Months Ended
November 30,    Six Months Ended
November 30,    Three Months Ended
August 31,
(in thousands, except per share amounts)    2016    2015    2016    2015    2017    2016
Numerator (basic & diluted):

Net earnings attributable to controlling interest-income available to common shareholders
   $ 46,565       $ 23,376       $ 112,132       $ 55,344
Net earnings attributable to controlling interest -income available to common shareholders
   $ 45,534    $ 65,567
Denominator:

Denominator for basic earnings per share attributable to controlling interest—weighted average common shares
   62,348       62,676       62,115       63,338       62,444    61,885
Effect of dilutive securities
   2,377       1,987       2,484       2,012       2,146    2,452












Denominator for diluted earnings per share attributable to controlling interest—adjusted weighted average common shares
   64,725       64,663       64,599       65,350       64,590    64,337












Basic earnings per share attributable to controlling interest
   $ 0.75       $ 0.37       $ 1.81       $ 0.87       $ 0.73    $ 1.06
Diluted earnings per share attributable to controlling interest
   $ 0.72       $ 0.36       $ 1.74       $ 0.85       $ 0.70    $ 1.02
Stock options ~~and restricted~~covering 161,429 common shares covering 110,354 and 367,094 common shares for the three months ended November 30, 2016 and 2015, respectively, and 92,923 and 346,557 common shares for the six months ended November 30, 2016 and 2015, respectively, have been excluded from the computation of diluted earnings per share for the three months ended August 31, 2016 because the effect of their inclusion would have been ~~“anti-dilutive.”~~“anti-dilutive” for that period.
NOTE ML – Segment Operations
Summarized financial information for our reportable segments is shown in the following table:

   Three Months Ended
November 30,    Six Months Ended
November 30,    Three Months Ended
August 31,
(in thousands)    2016    2015    2016    2015    2017    2016
Net sales

Steel Processing
   $ 508,806       $ 467,812       $ 1,014,480       $ 958,612       $ 543,491    $ 505,674
Pressure Cylinders
   194,661       201,173       399,870       425,567       269,811    205,209
Engineered Cabs
   22,463       28,699       48,044       67,316       31,946    25,581
Other
   1,850       2,132       2,935       6,468       2,989    1,085












Total net sales
   $ 727,780       $ 699,816       $ 1,465,329       $ 1,457,963       $ 848,237    $ 737,549












Operating income (loss)

Steel Processing
   $ 35,448       $ 26,642       $ 90,230       $ 50,280       $ 32,872    $ 54,782
Pressure Cylinders
   11,304       (10,309 )    25,409       6,510       10,458    14,105
Engineered Cabs
   (3,381 )    (4,290 )    (5,224 )    (13,581 )    (361 )    (1,843 )
Other
   (327 )    (71 )    (2,473 )    (241 )    (744 )    (2,146 )












Total operating income
   $ 43,044       $ 11,972       $ 107,942       $ 42,968       $ 42,225    $ 64,898












Impairment of long-lived assets

Steel Processing
   $ -       $ -       $ -       $ -
Pressure Cylinders
   -       22,962       -       22,962
Engineered Cabs
   -       -       -       3,000
Other
   -       -       -       -








Total impairment of long-lived assets
   $ -       $ 22,962       $ -       $ 25,962








Restructuring and other expense (income)

Restructuring and other expense

Steel Processing
   $ 318       $ 2,258       $ 1,284       $ 2,720       $ 279    $ 966
Pressure Cylinders
   1,963       (16 )    2,109       715       1,877    146
Engineered Cabs
   1,004       765       1,210       2,643       4    206
Other
   (13 )    (1,484 )    (3 )    (1,486 )    144    10












Total restructuring and other expense
   $ 3,272       $ 1,523       $ 4,600       $ 4,592       $ 2,304    $ 1,328












(in thousands)    August 31,
2017    May 31,
2017
Total assets

Steel Processing
   $ 882,161    $ 882,863
Pressure Cylinders
   1,176,298    766,611
Engineered Cabs
   68,738    62,141
Other
   503,357    613,729




Total assets
   $ 2,630,554    $ 2,325,344




Effective June 1, 2017, we made certain organizational changes impacting the internal reporting and management structure of Packaging Solutions. As a result of these organizational changes, management responsibilities and internal reporting were realigned, moving Packaging Solutions from the Steel Processing operating segment to the Engineered Cabs operating segment. Previously reported results have not been restated and are immaterial for all periods presented.
NOTE M – Acquisitions
On June 2, 2017, the Company acquired Amtrol, a leading manufacturer of pressure cylinders and water system tanks with operations in the U.S. and Europe. The total purchase price was $291,921,000 after adjusting for excess working capital and was funded primarily with cash on hand. The net assets became part of the Pressure Cylinders operating segment at closing, with the well water and expansion tank operations aligning under the consumer products business and the refrigerant, liquid propane and industrial and specialty gas operations aligning under the industrial products business. Total acquisition-related expenses were $3,568,000 of which $1,568,000 was incurred during the three months ended August 31, 2017.
The information included herein has been prepared based on the preliminary allocation of the purchase price using estimates of the fair value and useful lives of the assets acquired and liabilities assumed. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets acquired and liabilities assumed are fully evaluated by the Company, including but not limited to, the fair value accounting, legal and tax matters, obligations, and deferred taxes.
The assets acquired and liabilities assumed were recognized at their preliminary acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition, we identified and valued the following identifiable intangible assets:

(in thousands)    November 30,
2016    May 31,
2016
Total assets

Steel Processing
   $ 836,265       $ 819,853
Pressure Cylinders
   763,716       787,786
Engineered Cabs
   65,273       75,124
Other
   477,470       378,501




Total assets
   $ 2,142,724       $ 2,061,264




(in thousands)    Amount    Useful Life
(Years)
Category

Customer relationships
   $ 90,800    14-17
Trade names
   62,200    Indefinite
Technology
   13,000    15-16



Total acquired identifiable intangible assets
   $ 166,000



The purchase price includes the fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g., assembled workforce) or of immaterial value. The purchase price also includes a going-concern element that represents our ability to earn a higher rate of return on this group of assets than would be expected on the separate assets as determined during the valuation process. This additional investment value resulted in goodwill, which is not expected to be deductible for income tax purposes.
The following table summarizes the consideration transferred for the assets of Amtrol and the preliminary fair value assigned to the assets acquired and liabilities assumed at the acquisition date:
(in thousands)
Cash
   $ 6,893
Accounts receivable
   40,212
Inventories
   37,249
Prepaid expenses
   981
Other assets
   2,550
Intangible assets
   166,000
Property, plant and equipment
   52,870


Total assets
   306,755
Accounts payable
   25,945
Accrued liabilities
   21,016
Long-term debt including current maturities
   2,287
Other accrued items
   3,993
Deferred income taxes, net
   64,495


Net identifiable assets
   189,019
Goodwill
   102,902


Purchase price
   $ 291,921
Less: excess working capital
   (523 )


Cash paid at closing
   $ 291,398


The Company’s results of operations for the three months ended August 31, 2017 included the operating results of Amtrol since the date of acquisition. Net sales and operating loss of Amtrol were $57,346,000 and $2,611,000, respectively, for the three months ended August 31, 2017. The following unaudited pro forma information presents consolidated financial information as if Amtrol had been acquired at the beginning of fiscal 2017. Depreciation and amortization expense included in the pro forma results reflect the preliminary acquisition-date fair values assigned to the definite-lived intangible assets and fixed assets of Amtrol assuming a June 1, 2016 acquisition date. Adjustment has also been made for acquisition-related costs incurred in each period presented. Pro forma results for the three months ended August 31, 2017, have also been adjusted to remove the impact of the acquisition-date fair value adjustments to inventories and accrued severance costs related to headcount reductions at Amtrol initiated during the current period, as discussed in “NOTE C – Restructuring and Other Expense.” The pro forma adjustments noted above have been adjusted for the applicable income tax impact. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at such time.
   Three months ended
August 31,
(in thousands, except per share amounts)    2017    2016
Net sales
   $ 848,237    $ 795,544
Net earnings attributable to controlling interest
   $ 49,471    $ 70,357
Diluted earnings per share attributable to controlling interest
   $ 0.77    $ 1.09
NOTE N – 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 to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.
Foreign Currency ~~Rate~~Exchange 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 United States dollars also subjects us to exposure related to fluctuating ~~foreign~~ 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. ~~At November 30, 2016, we had posted total cash collateral of $154,000 to our margin accounts.~~ 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 O – 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 ~~financial statement caption~~line in which they were recorded in ~~our~~the consolidated balance sheet at ~~November 30, 2016:~~August 31, 2017:

   Asset Derivatives    Liability Derivatives    Asset Derivatives    Liability Derivatives
(in thousands)    Balance
Sheet
Location    Fair
Value    Balance
Sheet
Location    Fair
Value    Balance
Sheet
Location    Fair
Value    Balance
Sheet Location    Fair
Value
Derivatives designated as hedging instruments:

Commodity contracts
   Receivables    $ 15,807       Accounts payable    $ 489       Receivables    $ 6,282    Accounts payable    $ -
   Other assets    101       Other liabilities    -       Other assets    257    Other liabilities    -








      15,908          489          6,539       -








Interest rate contracts
   Receivables    -       Accounts payable    141       Receivables    -    Accounts payable    150
   Other assets    -       Other liabilities    195       Other assets    -    Other liabilities    150








      -          336          -       300








Totals
      $ 15,908          $ 825          $ 6,539       $ 300








Derivatives not designated as hedging instruments:

Commodity contracts
   Receivables    $ 4,149       Accounts payable    $ 131       Receivables    $ 2,508    Accounts payable    $ 37
   Other assets    41       Other liabilities    -       Other assets    32    Other liabilities    -








      4,190          131          2,540       37








Foreign currency contracts
   Receivables    514       Accounts payable    -
Foreign exchange contracts
   Receivables    -    Accounts payable    5








Totals
      $ 4,704          $ 131          $ 2,540       $ 42








Total derivative instruments
      $ 20,612          $ 956          $ 9,079       $ 342








The amounts in the table above reflect the fair value of the Company’s derivative ~~instruments~~contracts on a net basis. Had these amounts been recognized on a gross basis, the ~~aggregate~~ impact would have been a ~~$100,000~~$42,000 increase in receivables with a corresponding increase in accounts payable.
The following table summarizes the fair value of our derivative instruments and the ~~financial statement caption~~respective line in which they were recorded in the consolidated balance sheet at May 31, ~~2016:~~2017:

   Asset Derivatives    Liability Derivatives    Asset Derivatives    Liability Derivatives
(in thousands)    Balance
Sheet
Location    Fair
Value    Balance
Sheet
Location    Fair
Value    Balance
Sheet
Location    Fair
Value    Balance
Sheet
Location    Fair
Value
Derivatives designated as hedging instruments:

Commodity contracts

Receivables
      $ 13,224
Accounts payable
   $ 696       Receivables    $ 7,148    Accounts payable    $ 111
   Other assets       3,589
Other liabilities
   80       Other assets    6    Other liabilities    159








      16,813          776          7,154       270








Interest rate contracts

Receivables
      -
Accounts payable
   155       Receivables    -    Accounts payable    141
   Other assets       -
Other liabilities
   306       Other assets    -    Other liabilities    160








      -          461          -       301








Totals
      $ 16,813          $ 1,237          $ 7,154       $ 571








Derivatives not designated as hedging instruments:

Commodity contracts

Receivables
      $ 4,660
Accounts payable
   $ 761       Receivables    $ 1,110    Accounts payable    $ 570
   Other assets       317
Other liabilities
   -       Other assets    -    Other liabilities    1








      4,977          761          1,110       571








Foreign currency contracts

Receivables
      -
Accounts payable
   15




      -          15




Foreign exchange contracts
   Receivables    62    Accounts payable    -
Totals
      $ 4,977          $ 776          $ 1,172       $ 571








Total derivative instruments
      $ 21,790          $ 2,013          $ 8,326       $ 1,142








The amounts in the table above reflect the fair value of the Company’s derivative ~~instruments~~contracts on a net basis. Had these amounts been recognized on a gross basis, the ~~aggregate~~ impact would have been a ~~$300,000 decrease~~$100,000 increase in receivables with a corresponding ~~decrease~~increase in accounts payable.
Cash Flow Hedges
We enter into derivative instruments to hedge our exposure to changes in cash flows attributable to interest ~~rates~~rate and 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 OCI and reclassified into earnings in the same ~~financial statement caption~~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 ~~November 30, 2016:~~August 31, 2017:

(in thousands)    Notional
Amount    Maturity Date    Notional
Amount    Maturity Date
Commodity contracts
   $ 49,224       December 2016 - December 2018    $ 25,372    September 2017 - June 2019
Interest rate contracts
   16,201       September 2019    18,221    September 2019
The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from ~~accumulated OCI~~AOCI into earnings for derivative instruments designated as cash flow hedges during the three months ended ~~November 30, 2016~~August 31, 2017 and ~~2015:~~2016:

   Location of    Location of
   Gain (Loss)    Gain (Loss) Gain    Gain
   Reclassified    Reclassified (Ineffective    (Ineffective
   Gain (Loss) from    from Portion)    Portion)
   Recognized Accumulated    Accumulated and Excluded    and Excluded
   in OCI OCI    OCI from    from
   (Effective (Effective    (Effective Effectiveness    Effectiveness
(in thousands)    Portion)
Portion)
   Portion)
Testing
   Testing
For the three months ended November 30, 2016:

Commodity contracts
   $ 7,157    Cost of goods sold    $ 5,737    Cost of goods sold    $ -
Interest rate contracts
   160    Interest expense    (467 ) Interest expense    -






Totals
   $ 7,317       $ 5,270       $ -






For the three months ended November 30, 2015:

Commodity contracts
   $ (10,210 ) Cost of goods sold    $ (6,460 ) Cost of goods sold    $ -
Interest rate contracts
   (201 ) Interest expense    (146 ) Interest expense    -






Totals
   (10,411 )    (6,606 )    -






The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from accumulated OCI into earnings for derivative instruments designated as cash flow hedges during the six months ended November 30, 2016 and 2015:

   Location of    Location of
   Gain (Loss)    Gain (Loss) Gain    Gain
   Reclassified    Reclassified (Ineffective    (Ineffective
   Gain (Loss) from    from Portion)    Portion)
   Recognized Accumulated    Accumulated and Excluded    and Excluded
   in OCI OCI    OCI from    from
   (Effective (Effective    (Effective Effectiveness    Effectiveness
(in thousands)    Portion)
Portion)
   Portion)
Testing
   Testing
For the six months ended November 30, 2016:

Interest rate contracts
   $ 7,926    Interest expense    $ 5,485    Interest expense    $ -
Commodity contracts
   124    Cost of goods sold    (570 ) Cost of goods sold    -






Totals
   $ 8,050       $ 4,915       $ -






For the six months ended November 30, 2015:

Interest rate contracts
   $ (167 ) Interest expense    $ (285 ) Interest expense    $ -
Commodity contracts
   (18,336 ) Cost of goods sold    (15,647 ) Cost of goods sold    -
Foreign currency contracts
   -    Miscellaneous income, net    (4 ) Miscellaneous income, net    -






Totals
   $ (18,503 )    $ (15,936 )    $ -






   Location of    Location of
   Gain (Loss)    Gain (Loss) Gain    Gain
   Reclassified    Reclassified (Ineffective    (Ineffective
   Gain (Loss) from    from Portion)    Portion)
   Recognized Accumulated    Accumulated and Excluded    and Excluded
   in OCI OCI    OCI from    from
   (Effective (Effective    (Effective Effectiveness    Effectiveness
(in thousands)    Portion)
Portion)
   Portion)
Testing
   Testing
For the three months ended August 31, 2017:

Commodity contracts
   $ 3,734 Cost of goods sold    $ 4,168 Cost of goods sold    $ -
Interest rate contracts
   3,064 Interest expense    (363 ) Interest expense    -






Totals
   $ 6,798    $ 3,805    $ -






For the three months ended August 31, 2016:

Commodity contracts
   $ 769 Cost of goods sold    $ (252 ) Cost of goods sold    $ -
Interest rate contracts
   (36 ) Interest expense    (103 ) Interest expense    -






Totals
   $ 733    $ (355 )    $ -






The estimated net amount of the losses recognized in ~~accumulated OCI~~AOCI at ~~November 30, 2016~~August 31, 2017 expected to be reclassified into net earnings within the succeeding twelve months is ~~$11,131,000~~$5,666,000 (net of tax of ~~$6,147,000)~~$3,425,000). This amount was computed using the fair value of the cash flow hedges at ~~November 30, 2016,~~August 31, 2017, and will change before actual reclassification from ~~OCI~~other comprehensive income to net earnings during the fiscal years ending May 31, ~~2017~~2018 and ~~2018.~~May 31, 2019.
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 ~~November 30, 2016:~~August 31, 2017:

(in thousands)    Notional
Amount    Maturity Date(s)    Notional
Amount    Maturity Date(s)
Commodity contracts
   $ 22,389       December 2016 - August 2018    $ 20,346    September 2017 - February 2019
Foreign currency contracts
   14,149       December 2016 - August 2017
Foreign exchange contracts
   4,921    September 2017
The following table summarizes the gain (loss) recognized in earnings for economic(non-designated) derivative financial instruments during the three months ended ~~November 30, 2016~~August 31, 2017 and ~~2015:~~2016:

      Gain (Loss) Recognized
      in Earnings for the
   Location of Gain (Loss)    Three Months Ended
November 30,
(in thousands)    Recognized in Earnings    2016 2015
Commodity contracts
   Cost of goods sold       $ 2,003    $ (5,390 )
Foreign currency contracts
   Miscellaneous income, net       (599 ) 70


Total
      $ 1,404    $ (5,320 )


~~The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments during the six months ended November 30, 2016 and 2015:~~
      Gain (Loss) Recognized
      Gain (Loss) Recognized       In Earnings for the
      in Earnings for the       Three Months Ended
   Location of Gain (Loss)    Six Months Ended
November 30,    Location of Gain (Loss)    August 31,
(in thousands)    Recognized in Earnings    2016 2015    Recognized in Earnings    2017 2016
Commodity contracts
   Cost of goods sold       $ 4,911    $ (8,145 )    Cost of goods sold    $ 2,334 $ 2,908
Foreign currency contracts
   Miscellaneous income, net       (665 ) 70
Foreign exchange contracts
   Miscellaneous income, net    (208 ) (66 )




Total
      $ 4,246    $ (8,075 )       $ 2,126 $ 2,842




The gain (loss) on the foreign currency exchange contracts derivatives significantly offsets the gain (loss) on the hedged item.
NOTE O – 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 Measurements
At ~~November 30, 2016,~~August 31, 2017, our assets and liabilities measured at fair value on a recurring basis were as follows:

(in thousands)    Quoted Prices
in Active
Markets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)    Totals    Quoted Prices
in Active
Markets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)    Totals
Assets

Derivative instruments (1)
   $ -       $ 20,612       $ -       $ 20,612
Derivative contracts (1)
   $ -    $ 9,079    $ -    $ 9,079
















Total assets
   $ -       $ 20,612       $ -       $ 20,612       $ -    $ 9,079    $ -    $ 9,079
















Liabilities

Derivative instruments (1)
   $ -       $ 956       $ -       $ 956
Derivative contracts (1)
   $ -    $ 342    $ -    $ 342
Contingent consideration obligation (2)
   -       -       4,549       4,549       -    -    593    593
















Total liabilities
   $ -       $ 956       $ 4,549       $ 5,505       $ -    $ 342    $ 593    $ 935
















At May 31, ~~2016,~~2017, our assets and liabilities measured at fair value on a recurring basis were as follows:

(in thousands)    Quoted Prices
in Active
Markets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)    Totals    Quoted Prices
in Active
Markets
(Level 1)    Significant
Other
Observable
Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3)    Totals
Assets

Derivative instruments (1)
   $ -       $ 21,790       $ -       $ 21,790
Derivative contracts (1)
   $ -    $ 8,326    $ -    $ 8,326
















Total assets
   $ -       $ 21,790       $ -       $ 21,790       $ -    $ 8,326    $ -    $ 8,326
















Liabilities

Derivative instruments (1)
   $ -       $ 2,013       $ -       $ 2,013
Contingent consideration obligations (2)
   -       -       4,519       4,519
Derivative contracts (1)
   $ -    $ 1,142    $ -    $ 1,142
Contingent consideration obligation (2)
   -    -    585    585
















Total liabilities
   $ -       $ 2,013       $ 4,519       $ 6,532       $ -    $ 1,142    $ 585    $ 1,727
















(1)
The fair value of our derivative instruments is based on the present value of the expected future cash flows considering the risks involved, includingnon-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 N – Derivative Instruments and Hedging Activities” for additional information regarding our use of derivative instruments.

(2)
The fair value of the contingent consideration ~~obligations~~obligation is determined using a probability weighted cash flow approach based on management’s projections of future cash flows of the acquired ~~businesses.~~business. The fair value measurement was based on Level 3 inputs not observable in the market.
The fair value ofnon-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables, notes receivable, income taxes receivable, other assets, accounts payable, short-term borrowings, 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 ~~$593,821,000~~$835,414,000 and ~~$609,245,000~~$618,059,000 at ~~November 30, 2016~~August 31, 2017 and May 31, ~~2016,~~2017, respectively. The carrying amount of long-term debt, including current maturities, was ~~$576,911,000~~$780,162,000 and ~~$578,353,000~~$578,487,000 at ~~November 30, 2016~~August 31, 2017 and May 31, ~~2016,~~2017, respectively.
Item 2. – Management’s Discussion and Analysis of 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 Form10-Q and “Part I—Item 1A.—Risk Factors” of our Annual Report on Form10-K for the fiscal year ended May 31, ~~2016.~~2017.
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 our “Company”), should be read in conjunction with our consolidated financial statements and notes thereto included in “Item 1. ~~– Financial~~–Financial Statements” of this Quarterly Report on Form10-Q. Our Annual Report on Form10-K for the fiscal year ended May 31, ~~2016~~2017 (“fiscal ~~2016”~~2017”) includes additional information about Worthington, our operations and our consolidated financial position and should be read in conjunction with this Quarterly Report on Form10-Q.
As of ~~November 30, 2016,~~August 31, 2017, excluding our joint ventures, we operated 2934 manufacturing facilities worldwide, principally in three operating segments, which correspond with our reportable business segments: Steel Processing, Pressure Cylinders and Engineered Cabs. ~~Our remaining operating segment consists of~~The Worthington Energy Innovations (“WEI”)~~, which~~ operating segment does not meet the applicable aggregation criteria or quantitative thresholds for separate disclosure, and therefore is combined and reported in the “Other” category.
~~We also~~As of August 31, 2017, we held equity positions in ~~12 active~~11 joint ventures, which operated 5051 manufacturing facilities ~~worldwide, as of November 30, 2016. Six~~worldwide. Five 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 ~~portion~~portions of net earnings and other comprehensive ~~loss~~income (loss) shown as net earnings or comprehensive income 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
The ~~Company’s performance during the second quarter of fiscal 2017 was highlighted by near record earnings at Steel Processing and steady contributions from joint ventures. The~~ Company delivered overall sales growth of ~~4% driven primarily by~~15% for the first quarter of fiscal 2018 over the comparable period of fiscal 2017, on contributions from the acquisition of Amtrol on June 2, 2017, as discussed below underRecent Business Developments, and higher average ~~direct~~ selling prices in Steel Processing ~~due~~.Net earnings declined from the record levels achieved in the prior year quarter, when rising steel prices led to ~~recent increases~~record direct spreads at Steel Processing. By comparison, steel prices were relatively stable during the first quarter of fiscal 2018 resulting in ~~flat-rolled steel pricing and~~small inventory holding losses. Pressure Cylinders’ results were down from the prior year quarter as contributions from ~~the consolidation of the WSP joint venture effective March 1, 2016. Margins also improved during the quarter on a favorable pricing spread in Steel Processing, primarily related to coated products,~~Amtrol and ~~strength in the consumer products business and improvement in the alternative fuels business within Pressure Cylinders. Weakness~~improvements in the oil & gas equipment business ~~within Pressure Cylinders business continues to weigh on our results. We have reduced costs~~were more than offset by incremental expense directly associated with the Amtrol acquisition and declines in ~~an attempt to match demand in this market while maintaining capacity to respond to an eventual market upturn.~~the alternative fuels business.
Equity in net income of unconsolidated affiliates (“equity income”) decreased ~~$2.1~~$7.2 million from the prior year quarter ondue primarily to lower contributions from ~~ClarkDietrich. However,~~ClarkDietrich, partially offset by minor increases at WAVE and Serviacero. ClarkDietrich’s contribution to equity income ~~actually improved after adjusting for $4.0~~was $7.9 million ~~of litigation gains recognized in~~lower than the prior ~~year. The contribution from Serviacero was also up on~~year quarter as higher steel ~~pricing. Strong automotive and construction markets in the U.S. are benefiting these businesses.~~prices compressed margins. We received distributions from unconsolidated joint ventures of ~~$24.3~~$19.6 million during the ~~second~~first quarter of fiscal ~~2017.~~2018.
Recent Business Developments

On June 2, 2017, the Company acquired Amtrol, a leading manufacturer of pressure cylinders and water system tanks with operations in the U.S. and Europe. The total purchase price was $291.9 million after adjusting for excess working capital and was funded primarily with cash on hand. The net assets became part of the Pressure Cylinders operating segment at closing, with the well water and expansion tank operations aligning under the consumer products business and the refrigerant, liquid propane and industrial and specialty gas operations aligning under the industrial products business. Refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE M – Acquisitions.”
On July 28, 2017, the Company completed the ~~exit~~public offering of $200.0 million aggregate principal amount of senior unsecured notes. The notes bear interest at a rate of 4.30% and mature on August 1, 2032. Refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE F – Debt and Receivables Securitization.”
Effective June 1, 2017, the ~~businesses within~~Company changed the internal reporting and management structure of its ~~former Construction Services operating segment during~~Packaging Solutions business. As a result, management responsibilities and internal reporting were realigned, moving from Steel Processing to Engineered Cabs. Previously reported results have not been restated and are immaterial for all periods presented.
During the first quarter of fiscal ~~2017.~~
~~The Company’s laser blanking joint venture, TWB Company, L.L.C. (“TWB”), commissioned two new production lines in Mexico during the second quarter of fiscal 2017.~~
~~During the second quarter of fiscal 2017,~~2018, the Company ~~announced certain organizational changes impacting its Pressure Cylinders operating segment, including the consolidation~~repurchased a total of ~~the Cryogenics business unit into the Industrial Products business unit.~~875,000 common shares for $45.1 million at an average price of $51.52 per share.

On ~~December 20, 2016,~~September 27, 2017, the Board of Directors of Worthington Industries, Inc. (the “Board”) declared a quarterly dividend of ~~$0.20~~$0.21 per share payable on ~~March~~December 29, 2017, to shareholders of record on ~~March~~December 15, 2017.
On September 27, 2017, the Board authorized the repurchase of up to an additional 6,828,855 of the Company’s common shares, increasing the total number of common 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 our net sales by end market for the ~~second~~first quarter of each of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 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 ~~64%~~58% of ~~the~~Steel Processing’s net sales ~~of our Steel Processing operating segment~~ 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 end market.
Approximately ~~12%~~14% of the net sales of our Steel Processing operating segment and 48% 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 unconsolidated 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 ~~24%~~28% and 52% of the net sales of our Steel Processing and Engineered Cabs operating segments, respectively, are to other markets such as consumer products, industrial, 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 ~~operating segments.~~businesses.
We use the following information to monitor our costs and demand in our major end markets:

   Three Months Ended
November 30, Six Months Ended
November 30,    Three Months Ended August 31,
   2016 2015 Inc / (Dec) 2016 2015 Inc / (Dec)    2017 2016 Inc  /  (Dec)
U.S. GDP (% growth year-over-year)¹
   1.7 % 1.0 % 0.7 % 1.6 % 1.2 % 0.4 %    2.0 % 1.5 % 0.5 %
Hot-Rolled Steel ($ per ton)²
   $ 544    $ 419    $ 125    $ 581    $ 440    $ 141       $ 604 $ 617 $ (13 )
Detroit Three Auto Build (000’s vehicles)³
   2,388    2,495    (107 ) 4,768    4,814    (46 )    2,124 2,330 (206 )
No. America Auto Build (000’s vehicles)³
   4,619    4,619    -    9,182    9,012    170       4,197 4,648 (451 )
Zinc ($ per pound)⁴
   $ 0.83    $ 0.75    $ 0.08    $ 0.83    $ 0.82    $ 0.01       $ 1.22 $ 0.98 $ 0.24
Natural Gas ($ per mcf)⁵
   $ 1.90    $ 2.59    $ (0.69 ) $ 1.90    $ 2.69    $ (0.79 )    $ 2.95 $ 2.69 $ 0.26
On-Highway Diesel Fuel Prices ($ per gallon)⁶
   $ 2.78    $ 2.50    $ 0.28    $ 2.59    $ 2.63    $ (0.04 )    $ 2.54 $ 2.39 $ 0.15
Crude Oil—WTI ($ per barrel)⁶
   $ 53.00    $ 44.71    $ 8.29    $ 49.52    $ 47.96    $ 1.56       $ 46.67 $ 46.04 $ 0.63

¹
~~2015 figures based on revised actuals~~² ~~CRU~~
¹ 2016 figures based on revised actuals² CRUHot-Rolled Index; period average³ IHS Global⁴ LME Zinc; period average⁵ NYMEX Henry Hub Natural Gas; period average⁶ 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 selling, general and administrative (“SG&A”) expense.
The market price ofhot-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 ofhot-rolled steel during fiscal ~~2017~~2018 (first ~~and second quarters)~~quarter), fiscal ~~2016~~2017 and fiscal ~~2015:~~2016:

(Dollars per ton¹)          (Dollars per ton¹)
   Fiscal Year    Fiscal Year
   2017    2016    2015    2018    2017    2016
1st Quarter
   $ 617       $ 461       $ 673       $ 604    $ 617    $ 461
2nd Quarter
   $ 544       $ 419       $ 651       N/A    $ 544    $ 419
3rd Quarter
   N/A       $ 383       $ 578       N/A    $ 608    $ 381
4th Quarter
   N/A       $ 507       $ 464       N/A    $ 636    $ 486
Annual Avg.
   $ 581       $ 443       $ 592       $ 604    $ 601    $ 437

¹
~~CRU~~
¹CRUHot-Rolled Index, period average
No single customer contributed more than 10% of our consolidated net sales during the ~~second quarter~~first quarters of fiscal 2018 or fiscal 2017. 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 ~~second~~first quarter of fiscal ~~2017, overall~~2018, vehicle production for the Detroit Three automakers was down 4%9%, while North American vehicle production as a whole was ~~flat.~~down 10%.
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 ~~plant~~manufacturing operations and indirectly through transportation and freight expense.
Results of Operations
~~Second~~First Quarter – Fiscal ~~2017~~2018 Compared to Fiscal ~~2016~~2017
Consolidated Operations
The following table presents consolidated operating results for the periods indicated:

Three Months Ended November 30,    Three Months Ended August 31,
% of % of Increase/       % of    % of Increase/
(In millions) 2016 Net sales 2015 Net sales (Decrease)    2017    Net sales 2016    Net sales (Decrease)
Net sales
$ 727.8    100.0 % $ 699.9    100.0 % $ 27.9       $ 848.2    100.0 % $ 737.5    100.0 % $ 110.7
Cost of goods sold
605.0    83.1 % 590.7    84.4 % 14.3       715.5    84.4 % 590.2    80.0 % 125.3







Gross margin
122.8    16.9 % 109.2    15.6 % 13.6       132.7    15.6 % 147.3    20.0 % (14.6 )
Selling, general and administrative expense
76.5    10.5 % 72.7    10.4 % 3.8       88.2    10.4 % 81.1    11.0 % 7.1
Impairment of long-lived assets
—      0.0 % 23.0    3.3 % (23.0 )
Restructuring and other expense
3.3    0.5 % 1.5    0.2 % 1.8       2.3    0.3 % 1.3    0.2 % 1.0







Operating income
43.0    5.9 % 12.0    1.7 % 31.0       42.2    5.0 % 64.9    8.8 % (22.7 )
Miscellaneous income, net
0.9    0.1 % 1.0    0.1 % (0.1 )    0.3    0.0 % 0.9    0.1 % (0.6 )
Interest expense
(7.6 ) -1.0 % (7.8 ) -1.1 % (0.2 )    (8.8 )    -1.0 % (7.9 )    -1.1 % 0.9
Equity in net income of unconsolidated affiliates (1)
27.1    3.7 % 29.2    4.2 % (2.1 )    27.3    3.2 % 34.5    4.7 % (7.2 )
Income tax expense
(13.5 ) -1.9 % (8.6 ) -1.2 % 4.9       (13.0 )    -1.5 % (23.9 )    -3.2 % (10.9 )







Net earnings
49.9    6.9 % 25.8    3.7 % 24.1       48.0    5.7 % 68.5    9.3 % (20.5 )
Net earnings attributable to noncontrolling interests
3.3    0.5 % 2.4    0.3 % 0.9       2.5    0.3 % 2.9    0.4 % (0.4 )







Net earnings attributable to controlling interest
$ 46.6    6.4 % $ 23.4    3.3 % $ 23.2       $ 45.5    5.4 % $ 65.6    8.9 % $ (20.1 )







(1) Equity income by unconsolidated affiliate

WAVE
$ 18.7    $ 19.1    $ (0.4 )    $ 22.2    $ 20.7    $ 1.5
ClarkDietrich
4.3    6.4    (2.1 )    0.7    8.6    (7.9 )
Serviacero
2.0    0.4    1.6       3.0    2.0    1.0
ArtiFlex
2.1    2.6    (0.5 )    1.5    2.9    (1.4 )
WSP
—      0.7    (0.7 )
Other
—      —      —         (0.1 )    0.3    (0.4 )







Total
$ 27.1    $ 29.2    $ (2.1 )    $ 27.3    $ 34.5    $ (7.2 )







Net earnings attributable to controlling interest for the three months ended ~~November 30, 2016 increased $23.2~~August 31, 2017 decreased $20.1 million from the comparable period in the prior year. Net sales and operating highlights were as follows:

Net sales increased ~~$27.9~~$110.7 million ~~from~~over the comparable period in the prior year. The increase was driven ~~primarily~~ by contributions from the acquisition of Amtrol, which totaled $57.3 million, and higher average ~~direct~~ selling prices in Steel Processing, ~~partially offset by lower volumes in Engineered Cabs and certain Pressure Cylinders businesses.~~up $43.2 million over the prior year. The ~~net impact~~balance of ~~these factors increased consolidated net sales by $17.0 million. The remaining~~the increase was primarily ~~due to higher tolling volumes in Steel Processing, driven by~~ the ~~consolidation~~result of ~~the WSP joint venture effective March 1, 2016.~~increased volume at Pressure Cylinders and Engineered Cabs.

Gross margin ~~increased $13.6~~decreased $14.6 million from the comparable period in the prior year. ~~The improvement was driven primarily~~Contributions from the acquisition of Amtrol were more than offset by ~~a favorable pricing spread~~lower spreads in Steel Processing, ~~which increased gross margin by $21.1~~down approximately $23.4 million ~~partially offset by higher manufacturing expenses, which negatively impacted gross margin by $5.8 million due in part~~from the prior year quarter when rising steel prices led to ~~production/start-up costs associated with new production lines at our TWB joint venture.~~significant inventory holding gains.

SG&A expense increased ~~$3.8~~$7.1 million over the comparable period in the prior ~~year period~~year. The increase was driven ~~primarily~~ by ~~the consolidation of WSP and~~ the impact of ~~prior year acquisitions in Pressure Cylinders.~~the Amtrol acquisition, partially offset by lower profit sharing and bonus expense. Overall, SG&A expense ~~is trending in line with the prior year quarter at 10.5%~~was 10.4% of consolidated net ~~sales.~~sales compared to 11.0% in the comparable period of the prior year.
~~Impairment charges of $23.0~~Restructuring and other expense totaled $2.3 million in the ~~prior year~~current period and consisted primarily of severance accruals at Pressure Cylinders related to ~~the impairment of certain long-lived assets in our oil & gas equipment business.~~corporate management positions at Amtrol that were eliminated. For additional information regarding the Company’s restructuring activities, refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE C – ~~Impairment of Long-Lived Assets” of this Quarterly Report on Form 10-Q.~~Restructuring and Other Expense.”
•
~~Restructuring and other expense of $3.3 million in the current period related primarily to severance associated with the organizational changes within Pressure Cylinders described above under~~~~Recent Business Developments~~ and a $0.8 million loss related to the disposal of legacy real estate in Engineered Cabs. For additional financial information regarding the Company’s restructuring activities, refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE D – Restructuring and Other Expense” of this Quarterly Report on Form 10-Q.

Interest expense increased $0.9 million over the comparable period in the prior year. The increase was primarily due to the issuance of $200.0 million of aggregate principal amount senior unsecured notes due August 1, 2032. Refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE F – Debt and Receivables Securitization.”
Equity income decreased ~~$0.2~~$7.2 million from the comparable period in the prior year due primarily to ~~lower short-term borrowings.~~
~~Equity income decreased $2.1 million from the comparable period in the prior year on~~ lower contributions from ~~ClarkDietrich. However,~~ClarkDietrich, partially offset by minor increases at WAVE and Serviacero. ClarkDietrich’s contribution to equity income ~~actually improved after adjusting for $4.0~~was $7.9 million ~~of litigation gains recognized in~~lower than the prior ~~year. The contribution from Serviacero was also up on~~year quarter as higher steel ~~pricing.~~prices compressed margins. We received distributions of ~~$24.3~~$19.6 million from our unconsolidated affiliates during the quarter. For additional ~~financial~~information regarding our unconsolidated affiliates, refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE B – Investments in Unconsolidated ~~Affiliates” of this Quarterly Report on Form 10-Q.~~Affiliates.”

Income tax expense ~~increased $4.9~~decreased $10.9 million from the comparable period in the prior year due primarily to ~~higher~~lower earnings. ~~The increase in tax expense was partially offset by a $6.3 million tax benefit associated with share-based payment awards.~~ The current quarter expense was calculated using an estimated annual effective income tax rate of ~~28.5%~~30.5% versus ~~30.9%~~31.2% in the prior year quarter. Discrete items in the current quarter reduced income tax expense by $6.2 million, including a net benefit of $3.8 million related to the acquisition of Amtrol. Discrete items in the prior year quarter reduced income tax expense by $5.8 million. Refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE KJ – Income Taxes” ~~of this Quarterly Report on Form 10-Q~~ for more information on our tax rates.
Segment Operations
Steel Processing
The following table presents a summary of operating results for our Steel Processing operating segment for the periods indicated:

   Three Months Ended November 30,    Three Months Ended August 31,
      % of    % of Increase/       % of    % of Increase/
(Dollars in millions)    2016    Net sales 2015    Net sales (Decrease)    2017    Net sales 2016    Net sales (Decrease)
Net sales
   $ 508.8       100.0 % $ 467.8       100.0 % $ 41.0       $ 543.5    100.0 % $ 505.7    100.0 % $ 37.8
Cost of goods sold
   437.2       85.9 % 406.0       86.8 % 31.2       473.8    87.2 % 413.0    81.7 % 60.8












Gross margin
   71.6       14.1 % 61.8       13.2 % 9.8       69.7    12.8 % 92.7    18.3 % (23.0 )
Selling, general and administrative expense
   35.8       7.0 % 32.9       7.0 % 2.9       36.5    6.7 % 36.9    7.3 % (0.4 )
Restructuring and other expense
   0.3       0.1 % 2.3       0.5 % (2.0 )    0.3    0.1 % 1.0    0.2 % (0.7 )












Operating income
   $ 35.5       7.0 % $ 26.6       5.7 % $ 8.9       $ 32.9    6.1 % $ 54.8    10.8 % $ (21.9 )












Material cost
   $ 339.0       $ 322.5       $ 16.5       $ 379.2    $ 312.7    $ 66.5
Tons shipped (in thousands)
   1,021       828       193       968    1,032    (64 )
Net sales and operating highlights were as follows:

Net sales increased ~~$41.0~~$37.8 million ~~from~~over the comparable period in the prior year driven ~~primarily~~ by higher average direct selling prices, which increased net sales by ~~$30.9 million. The remaining increase was due to higher tolling volume driven~~$43.2 million, partially offset by ~~the consolidation of the WSP joint venture effective March 1, 2016.~~lower toll volume. The mix of direct versus toll tons processed was ~~49%~~56% to ~~51%~~44% compared to ~~62%~~52% to ~~38%~~48% in the prior year quarter. ~~The change in mix was primarily the result of the consolidation of the WSP joint venture.~~

Operating income ~~increased $8.9~~decreased $21.9 million from the comparable period in the prior year ondue to a ~~favorable pricing~~lower spread ~~which increased gross margin by $12.9~~between average selling prices and material costs, down approximately $23.4 million ~~partially offset by higher manufacturing expenses, which negatively impacted gross margin by $4.4 million due in part~~from the prior year quarter when rising steel prices led to production/start-up costs associated with new production lines at our TWB joint venture. SG&A expense increased $2.9 million driven by the consolidation of WSP and an increase in corporate allocated costs. Restructuring and other expense in the current quarter consisted primarily of costs related to the closure of Precision Specialty Metals, Inc. (“PSM”).significant inventory holding gains.
Pressure Cylinders
The following table presents a summary of operating results for our Pressure Cylinders operating segment for the periods indicated:

Three Months Ended November 30, Three Months Ended August 31,
   % of    % of Increase/ % of % of Increase/
(Dollars in millions) 2016    Net sales 2015    Net sales (Decrease) 2017 Net sales 2016 Net sales (Decrease)
Net sales
$ 194.7       100.0 % $ 201.2       100.0 % $ (6.5 ) $ 269.8 100.0 % $ 205.2 100.0 % $ 64.6
Cost of goods sold
145.9       74.9 % 154.6       76.8 % (8.7 ) 212.0 78.6 % 154.0 75.0 % 58.0





Gross margin
48.8       25.1 % 46.6       23.2 % 2.2    57.8 21.4 % 51.2 25.0 % 6.6
Selling, general and administrative expense
35.5       18.2 % 33.9       16.8 % 1.6    45.4 16.8 % 37.0 18.0 % 8.4
Impairment of long-lived assets
—         0.0 % 23.0       11.4 % (23.0 )
Restructuring and other expense
2.0       1.0 % —         0.0 % 2.0    1.9 0.7 % 0.1 0.0 % 1.8





Operating income (loss)
$ 11.3       5.8 % $ (10.3 )    -5.1 % $ 21.6
Operating income
$ 10.5 3.9 % $ 14.1 6.9 % $ (3.6 )





Material cost
$ 76.3       $ 85.5       $ (9.2 ) $ 120.6 $ 82.9 $ 37.7
Net sales by principal class of products:

Consumer products
$ 55.4       $ 49.5       $ 5.9    $ 108.7 $ 81.8 $ 26.9
Industrial products
98.9       102.7       (3.8 ) 113.0 79.1 33.9
Alternative fuels
29.2       24.0       5.2    23.7 29.8 (6.1 )
Oil & gas equipment
11.2       25.0       (13.8 ) 24.4 14.5 9.9





Total Pressure Cylinders
$ 194.7       $ 201.2       $ (6.5 ) $ 269.8 $ 205.2 $ 64.6





Units shipped by principal class of products:

Consumer products
10,383,747       10,523,692       (139,945 ) 16,354,427 16,146,717 207,710
Industrial products
5,790,436       5,990,875       (200,439 ) 3,976,290 2,632,343 1,343,947
Alternative fuels
134,190       107,121       27,069    109,856 136,062 (26,206 )
Oil & gas equipment
434       1,044       (610 ) 703 756 (53 )





Total Pressure Cylinders
16,308,807       16,622,732       (313,925 ) 20,441,276 18,915,878 1,525,398





Net sales and operating highlights were as follows:

Net sales increased $64.6 million over the comparable period in the prior year due to contributions from the Amtrol acquisition, which totaled $57.3 million, and higher volumes in the oil & gas equipment business, partially offset by lower volumes in the alternative fuels business.
Operating income decreased ~~$6.5~~$3.6 million from the comparable period in the prior year. The decrease was driven by ~~lower volumes~~incremental items directly associated with the Amtrol acquisition, which resulted in a net operating loss of $2.6 million for the acquired business. This included $2.6 million of additional expense within cost of goods sold for thewrite-up of inventory to fair value that was subsequently sold, $1.6 million of acquisition-related costs within SG&A expense and a $1.9 million severance accrual within restructuring expense. Improvements in the oil & gas equipment business and ~~industrial products~~lower SG&A spend for the legacy cylinder businesses ~~partially~~was largely offset by improvements in consumer products and alternative fuels. The most significant decline was in oil & gas equipment, where net sales decreased 55%, or $13.8 million, on weak demand. Net sales in the industrial products business were down $3.8 million on lower volume due to weak demand across our refillable propane cylinder products, as well as softness for high pressure industrial cylinders in Europe. An improved product mix in the consumer products business led to higher net sales despite an overall decline in units shipped. Net sales were also updeclines in the alternative fuels ~~business on higher volume.~~
Operating income increased $21.6 million from the comparable period in the prior year on lower impairment and restructuring charges, which declined a combined $21.0 million. Improvements in the consumer products and alternative fuels businesses were largely offset by continued declines 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:

   Three Months Ended November 30,    Three Months Ended August 31,
(In millions)    2016    % of
Net sales 2015    % of
Net sales Increase/
(Decrease)    2017    % of
Net sales 2016    % of
Net sales Increase/
(Decrease)
Net sales
   $ 22.5       100.0 % $ 28.7       100.0 % $ (6.2 )    $ 31.9    100.0 % $ 25.6    100.0 % $ 6.3
Cost of goods sold
   21.2       94.2 % 27.4       95.5 % (6.2 )    28.0    87.8 % 23.3    91.0 % 4.7












Gross margin
   1.3       5.8 % 1.3       4.5 % -       3.9    12.2 % 2.3    9.0 % 1.6
Selling, general and administrative expense
   3.7       16.4 % 4.9       17.1 % (1.2 )    4.3    13.5 % 3.9    15.2 % 0.4
Restructuring and other expense
   1.0       4.4 % 0.7       2.4 % 0.3       -    0.0 % 0.2    0.8 % (0.2 )












Operating loss
   $ (3.4 )    -15.1 % $ (4.3 )    -15.0 % $ 0.9       $ (0.4 )    -1.3 % $ (1.8 )    -7.0 % $ 1.4












Material cost
   $ 10.2       $ 13.4       $ (3.2 )    $ 14.2    $ 11.2    $ 3.0
Net sales and operating highlights were as follows:

Net sales ~~decreased $6.2~~increased $6.3 million ~~from~~over the comparable period in the prior year on ~~lower volume due to declines in market demand.~~higher volume.

Operating loss improved ~~$0.9~~$1.4 million to ~~$3.4~~$0.4 million. The improvement ~~resulted from successful cost reduction efforts, which led~~was due to athe favorable impact of higher ~~gross margin as a percentage of net sales and a 24% decline in SG&A expense.~~volumes.
Other
The Other category includes the WEI operating segment, which does not meet the quantitative thresholds for separate disclosure. Certain income and expense items not allocated to our operating segments are also included in the Other category, including costs associated with our captive insurance company. The following table presents a summary of operating results for the Other category for the periods indicated:

   Three Months Ended November 30,
(In millions)    2016    % of
Net sales 2015    % of
Net sales Increase/
(Decrease)
Net sales
   $ 1.9       100.0 % $ 2.2       100.0 % $ (0.3 )
Cost of goods sold
   0.7       36.8 % 2.7       122.7 % (2.0 )






Gross margin
   1.2       63.2 % (0.5 )    -22.7 % 1.7
Selling, general and administrative expense
   1.5       78.9 % 1.1       50.0 % 0.4
Restructuring and other income
   -       0.0 % (1.5 )    -68.2 % 1.5






Operating loss
   $ (0.3 )    -15.8 % $ (0.1 )    -4.5 % $ (0.2 )






~~Net sales and operating highlights were as follows:~~
~~Net sales decreased $0.3 million from the comparable period in the prior year due to declines at WEI.~~
~~Operating loss of $0.3 million in the current period was driven primarily by losses at WEI.~~
~~Six Months Year-to-Date – Fiscal 2017 Compared to Fiscal 2016~~
~~Consolidated Operations~~
~~The following table presents consolidated operating results for the periods indicated:~~

Six Months Ended November 30,
   % of    % of Increase/
(In millions) 2016    Net sales 2015    Net sales (Decrease)
Net sales
$ 1,465.3       100.0 % $ 1,458.0       100.0 % $ 7.3
Cost of goods sold
1,195.2       81.6 % 1,235.8       84.8 % (40.6 )





Gross margin
270.1       18.4 % 222.2       15.2 % 47.9
Selling, general and administrative expense
157.6       10.8 % 148.6       10.2 % 9.0
Impairment of long-lived assets
—         0.0 % 26.0       1.8 % (26.0 )
Restructuring and other expense
4.6       0.3 % 4.6       0.3 % —





Operating income
107.9       7.4 % 43.0       2.9 % 64.9
Miscellaneous income, net
1.7       0.1 % 0.5       0.0 % 1.2
Interest expense
(15.5 )    -1.1 % (15.7 )    -1.1 % (0.2 )
Equity in net income of unconsolidated affiliates (1)
61.7       4.2 % 55.8       3.8 % 5.9
Income tax expense
(37.4 )    -2.6 % (22.8 )    -1.6 % 14.6





Net earnings
118.4       8.1 % 60.8       4.2 % 57.6
Net earnings attributable to noncontrolling interests
6.3       0.4 % 5.4       0.4 % 0.9





Net earnings attributable to controlling interest
$ 112.1       7.7 % $ 55.4       3.8 % $ 56.7





(1) Equity income by unconsolidated affiliate

WAVE
$ 39.5       $ 41.2       $ (1.7 )
ClarkDietrich
12.9       9.0       3.9
Serviacero
4.0       1.2       2.8
ArtiFlex
5.0       4.2       0.8
WSP
—         1.5       (1.5 )
Other
0.3       (1.3 )    1.6





Total
$ 61.7       $ 55.8       $ 5.9





Net earnings attributable to controlling interest for the six months ended November 30, 2016 increased $56.7 million from the comparable period in the prior year. Net sales and operating highlights were as follows:
Net sales increased $7.3 million from the comparable period in the prior year. The increase was the result of higher average direct selling prices in Steel Processing, which favorably impacted net sales by $37.4 million, partially offset by lower volume in Engineered Cabs and certain Pressure Cylinders businesses. Higher tolling volumes in Steel Processing, driven by the consolidation of WSP, also contributed to the overall increase in net sales.
Gross margin increased $47.9 million from the comparable period in the prior year. A favorable pricing spread, primarily in Steel Processing and to a lesser extent in Pressure Cylinders, increased gross margin by $76.4 million. The favorable impact of higher spreads was partially offset by lower volume in certain Pressure Cylinders businesses and higher overall manufacturing expenses, which reduced gross margin by a combined $27.6 million.
SG&A expense increased $9.0 million over the comparable prior year period. The increase was primarily driven by the consolidation of WSP and the impact of prior year acquisitions in Pressure Cylinders, which increased SG&A expense by a combined $6.0 million. Higher profit sharing and bonus expense and a $1.5 million increase in accrued legal expense also contributed to the overall increase.
•
~~Restructuring and other expense of $4.6 million in the current period related primarily to severance associated with the organizational changes within Pressure Cylinders described above under~~~~Recent Business Developments~~ and facility exist costs related to the ongoing closures of PSM in Steel Processing and the Florence, South Carolina, facility in Engineered Cabs. For additional financial information regarding the Company’s restructuring activities, refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE D – Restructuring and Other Expense” of this Quarterly Report on Form 10-Q.
~~Interest expense decreased $0.2 million from the comparable period in the prior year on lower short-term borrowings.~~
Equity income increased $5.9 million from the comparable period in the prior year on higher contributions from ClarkDietrich and Serviacero. Equity income at ClarkDietrich was $3.9 million higher than the prior year period despite a $4.0 million favorable impact related to legal settlements in the prior year. The contribution from Serviacero was also up on higher steel pricing. Strong automotive and construction markets in the U.S. are benefiting these businesses. We received distributions of $62.7 million from our unconsolidated affiliates during the six months ended November 30, 2016. For additional financial regarding our unconsolidated affiliates, refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE B – Investments in Unconsolidated Affiliates” of this Quarterly Report on Form 10-Q.
Income tax expense increased $14.6 million from the comparable period in the prior year due to higher earnings. The increase in tax expense was partially offset by the following items recorded in the current year: (i) a $10.9 million tax benefit associated with share-based payment awards, and (ii) a $1.2 million tax benefit related to foreign tax credits. Tax expense of $37.4 million for the six months was calculated using an estimated annual effective rate of 28.5% versus 30.9% in the prior year comparable period. Refer to “Item 1. – Financial Statements – Notes to Consolidated Financial Statements – NOTE K – Income Taxes” of this Quarterly Report on Form 10-Q for more information on our tax rates.
~~Segment Operations~~
~~Steel Processing~~
~~The following table presents a summary of operating results for our Steel Processing operating segment for the periods indicated:~~
   Six Months Ended November 30,    Three Months Ended August 31,
      % of    % of Increase/       % of    % of Increase/
(Dollars in millions)    2016    Net sales 2015    Net sales (Decrease)
(In millions)    2017    Net sales 2016    Net sales (Decrease)
Net sales
   $ 1,014.5       100.0 % $ 958.6       100.0 % $ 55.9       $ 3.0    100.0 % $ 1.1    100.0 % $ 1.9
Cost of goods sold
   850.3       83.8 % 839.8       87.6 % 10.5       1.6    53.3 % -    0.0 % 1.6












Gross margin
   164.2       16.2 % 118.8       12.4 % 45.4       1.4    46.7 % 1.1    100.0 % 0.3
Selling, general and administrative expense
   72.7       7.2 % 65.8       6.9 % 6.9       2.0    66.7 % 3.2    290.9 % (1.2 )
Restructuring and other expense
   1.3       0.1 % 2.7       0.3 % (1.4 )    0.1    3.3 % -    0.0 % 0.1












Operating income
   $ 90.2       8.9 % $ 50.3       5.2 % $ 39.9
Operating loss
   $ (0.7 )    -23.3 % $ (2.1 )    -190.9 % $ 1.4












Material cost
   $ 651.7       $ 670.8       $ (19.1 )
Tons shipped (in thousands)
   2,051       1,695       356
Net sales and operating highlights were as follows:

Net sales increased ~~$55.9~~$1.9 million from the comparable period in the prior year driven primarily by higher average direct selling prices, which increased net sales by $37.4 million. The remaining increase was due to higher tolling volume driven by the consolidation of the WSP joint venture effective March 1, 2016. The mix of direct versus toll tons processed was 51% to 49% compared to 61% to 39% in the comparable period of fiscal 2016. The change in mix was primarily the result of the consolidation of the WSP joint venture.
~~Operating income increased $39.9 million from~~over the comparable period in the prior year on higher gross margin, partially offset by higher SG&A expense. Higher spreads between average selling prices and material costs increased gross margin by $56.5 million. The favorable impact of higher spreads was partially offset by higher manufacturing expenses, which negatively impacted gross margin by $12.2 million due to higher profit sharing and bonus expense and production/start-up costs associated with new production linesvolumes at our TWB joint venture. SG&A expense increased $6.9 million driven by an increase in corporate allocated costs, the consolidation of WSP and higher profit sharing and bonus expense. Restructuring and other expense in the current period consisted primarily of costs related to the closure of PSM.
~~Pressure Cylinders~~
~~The following table presents a summary of operating results for our Pressure Cylinders operating segment for the periods indicated:~~

Six Months Ended November 30,
% of % of Increase/
(Dollars in millions) 2016 Net sales 2015 Net sales (Decrease)
Net sales
$ 399.9    100.0 % $ 425.6    100.0 % $ (25.7 )
Cost of goods sold
299.9    75.0 % 324.6    76.3 % 24.7

Gross margin
100.0    25.0 % 101.0    23.7 % (1.0 )
Selling, general and administrative expense
72.5    18.1 % 70.8    16.6 % 1.7
Impairment of long-lived assets
—      0.0 % 23.0    5.4 % (23.0 )
Restructuring and other expense
2.1    0.5 % 0.7    0.2 % 1.4

Operating income
$ 25.4    6.4 % $ 6.5    1.5 % $ 18.9

Material cost
$ 159.2    $ 184.6    $ (25.4 )
Net sales by principal class of products:

Consumer products
$ 116.1    $ 104.5    $ 11.6
Industrial products
199.2    214.4    (15.2 )
Alternative fuels
58.9    48.8    10.1
Oil & gas equipment
25.7    57.9    (32.2 )

Total Pressure Cylinders
$ 399.9    $ 425.6    $ (25.7 )

Units shipped by principal class of products:

Consumer products
22,472,659    22,501,637    (28,978 )
Industrial products
12,480,584    13,227,314    (746,730 )
Alternative fuels
270,252    199,077    71,175
Oil & gas equipment
1,190    2,364    (1,174 )

Total Pressure Cylinders
35,224,685    35,930,392    (705,707 )

~~Net sales and operating highlights were as follows:~~
Net sales decreased $25.7 million from the comparable period in the prior year. The decrease was driven by lower volumes in the oil & gas equipment and industrial products businesses, partially offset by improvements in consumer products and alternative fuels. The most significant decline was in oil & gas equipment, where net sales decreased 56%, or $32.2 million, on weak demand. Net sales in the industrial products business were down $15.2 million on lower volume due to weak demand across our refillable propane cylinder products, as well as softness for high pressure industrial cylinders in Europe. An improved product mix in the consumer products business led to higher net sales despite an overall decline in units shipped. Net sales were also up in the alternative fuels business on higher volume.
Operating income increased $18.9 million from the comparable period in the prior year primarily on lower impairment and restructuring charges, which declined a combined $21.6 million. Improvements in the consumer products and alternative fuels businesses were largely offset by continued declines 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:~~

   Six Months Ended November 30,
      % of    % of Increase/
(In millions)    2016    Net sales 2015    Net sales (Decrease)
Net sales
   $ 48.0       100.0 % $ 67.3       100.0 % $ (19.3 )
Cost of goods sold
   44.4       92.5 % 65.0       96.6 % (20.6 )






Gross margin
   3.6       7.5 % 2.3       3.4 % 1.3
Selling, general and administrative expense
   7.6       15.8 % 10.3       15.3 % (2.7 )
Impairment of long-lived assets
   -       0.0 % 3.0       4.5 % (3.0 )
Restructuring and other expense
   1.2       2.5 % 2.6       3.9 % (1.4 )






Operating loss
   $ (5.2 )    -10.8 % $ (13.6 )    -20.2 % $ 8.4






Material cost
   $ 21.4       $ 31.4       $ (10.0 )
~~Net sales and operating highlights were as follows:~~
~~Net sales decreased $19.3 million from the comparable period in the prior year due to declines in market demand.~~
Operating loss improved $8.4 million to $5.2 million on lower impairment and restructuring charges and the impact of cost reduction efforts, which led to margin improvements and a 26% decline in SG&A expense.
~~Other~~
The Other category includes the WEI operating segment, which does not meet the quantitative thresholds for separate disclosure. Certain income and expense items not allocated to our operating segments are also included in the Other category, including costs associated with our captive insurance company. The following table presents a summary of operating results for the Other category for the periods indicated:

   Six Months Ended November 30,
      % of    % of Increase/
(In millions)    2016    Net sales 2015    Net sales (Decrease)
Net sales
   $ 2.9       100.0 % $ 6.5       100.0 % $ (3.6 )
Cost of goods sold
   0.7       24.1 % 6.4       98.5 % (5.7 )






Gross margin
   2.2       75.9 % 0.1       1.5 % 2.1
Selling, general and administrative expense
   4.7       162.1 % 1.8       27.7 % 2.9
Restructuring and other income
   -       0.0 % (1.5 )    -23.1 % 1.5






Operating loss
   $ (2.5 )    -86.2 % $ (0.2 )    -3.1 % $ (2.3 )






~~Net sales and operating highlights were as follows:~~
~~Net sales decreased $3.6 million from the comparable period in the prior year as the former Construction Services operating segment ceased operations during the first quarter of fiscal 2017.~~WEI.

Operating loss of ~~$2.5~~$0.7 million inrepresents a $1.4 million improvement over the ~~current period~~prior year period. The improvement was driven ~~primarily~~ by ~~a $1.5 million increase in legal expenses.~~higher earnings at WEI.
Liquidity and Capital Resources
During the ~~six~~three months ended ~~November 30, 2016,~~August 31, 2017, we generated ~~$152.2~~$83.4 million of cash from operating activities, invested ~~$31.0~~$18.0 million in property, plant and equipment, spent $284.5 million on acquisitions and paid dividends of ~~$24.7~~$12.8 million on our common shares. Additionally, we paid $45.1 million to repurchase 875,000 of our common shares. The following table summarizes our consolidated cash flows for the ~~six~~three months ended ~~November 30, 2016~~August 31, 2017 and ~~2015:~~2016:

   Six Months Ended
November 30,    Three Months Ended
August 31,
(in millions)    2016    2015    2017    2016
Net cash provided by operating activities
   $ 152.2       $ 189.7       $ 83.4    $ 120.9
Net cash used by investing activities
   (30.1 )    (55.9 )    (302.1 )    (16.2 )
Net cash used by financing activities
   (31.1 )    (137.5 )
Net cash provided (used) by financing activities
   136.5    (7.4 )








Increase (decrease) in cash and cash equivalents
   91.0       (3.7 )    (82.2 )    97.3
Cash and cash equivalents at beginning of period
   84.2       31.1       278.1    84.2








Cash and cash equivalents at end of period
   $ 175.2       $ 27.4       $ 195.9    $ 181.5








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 ~~$152.2~~$83.4 million during the ~~six~~three months ended ~~November 30, 2016~~August 31, 2017 compared to ~~$189.7~~$120.9 million in the comparable period of fiscal ~~2016.~~2017. The decrease was driven primarily by ~~an increase~~the decline in ~~working capital levels as a result of higher average steel prices partially offset by higher~~ net ~~earnings.~~earnings and lower distributions from unconsolidated joint ventures.
Investing Activities
Net cash used by investing activities was ~~$30.1~~$302.1 million during the ~~six~~three months ended ~~November 30, 2016~~August 31, 2017 compared to ~~$55.9~~$16.2 million in the prior year period. The ~~decrease~~increase from the prior year period was driven primarily by ~~lower~~the acquisition of Amtrol on June 2, 2017, which reduced cash by $284.5 million, net of cash acquired. We also made capital ~~expenditures.~~expenditures of $18.0 million during the first three months of fiscal 2018.
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~~provided by financing activities was ~~$31.1~~$136.5 million during the ~~six~~three months ended ~~November 30, 2016~~August 31, 2017 compared to ~~$137.5~~a net cash outflow of $7.4 million in the comparable prior year period. The ~~decrease~~increase from the prior year period was driven primarily by the ~~absence~~issuance of $200.0 million aggregate principal amount of senior unsecured notes on July 28, 2017, partially offset by share ~~repurchases and lower repayments~~repurchases. During the first three months of ~~short-term borrowings.~~fiscal 2018, we paid $45.1 million to repurchase 875,000 of our common shares.
As of ~~November 30, 2016,~~August 31, 2017, we were in compliance with our short-term and long-term financial debt covenants. These debt agreements do not include credit rating triggers or material adverse change ~~provisions. Our~~provisions.Our credit ratings at ~~November 30, 2016~~August 31, 2017 were unchanged from those reported as of May 31, ~~2016.~~2017.
Common shares— - The Board of Directors of Worthington Industries, Inc. ~~(the “Board”)~~ declared a quarterly dividend of $0.21 per common share for the first quarter of fiscal 2018 compared to $0.20 per common share for the first ~~and second quarters~~quarter of fiscal ~~2017 compared to $0.19 per common share for the first and second quarters of fiscal 2016.~~2017. Dividends paid on our common shares totaled ~~$24.7~~$12.8 million and ~~$23.6~~$11.9 million during the ~~six~~three months ended ~~November 30,~~August 31, 2017 and 2016, ~~and 2015,~~ respectively. On ~~December 20, 2016,~~September 27, 2017, the Board declared a quarterly dividend of ~~$0.20~~$0.21 per share payable on ~~March~~December 29, 2017, to shareholders of record on ~~March~~December 15, 2017.
On June 25, 2014, the Board authorized the repurchase of up to 10,000,000 of our outstanding common shares. A total of ~~5,953,855~~6,828,855 common shares have been repurchased under this authorization, including 875,000 during the first three months of fiscal 2018, leaving ~~4,046,145~~3,171,145 common shares available for repurchase. NoOn September 27, 2017, the Board authorized the repurchase of up to an additional 6,828,855 of the Company’s common shares, ~~were repurchased under this authorization during~~increasing the ~~first and second quarters~~total number of ~~fiscal 2017.~~common shares available for repurchase to 10,000,000.
The common shares available for repurchase under ~~this authorization~~the authorizations, described above, may be purchased 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.
Dividend Policy
We currently have no material contractual or regulatory restrictions on the payment of dividends. Dividends are declared at the discretion of the Board. The 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 Obligations 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 ~~2016~~2017 Form10-K, other than the changes in borrowings, as described in “Part I – Item 1. – Financial Statements – NOTE GF – Debt and Receivables Securitization” of this Quarterly Report on Form10-Q.
Off-Balance Sheet Arrangements
We do not have guarantees or otheroff-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 ~~November 30, 2016,~~August 31, 2017, 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 ~~$9.9~~$9.0 million at ~~November 30, 2016.~~August 31, 2017. 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 Adopted Accounting Standards
In ~~February~~July 2015, amended accounting guidance was issued ~~that revised consolidation requirements in order to provide financial statement users with a more useful presentation~~regarding the measurement of ~~an entity’s economic and operational results.~~inventory. The amended guidance ~~revises~~requires that inventory accounted for under the ~~consolidation requirements~~first-in,first-out (FIFO) or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amended guidance has no impact on inventory accounted for ~~limited partnerships,~~under the ~~considerations surrounding the primary beneficiary determination and the consolidation of certain investment funds.~~last-in,first-out (LIFO) or retail inventory methods. The Company adopted this amended guidance on a prospective basis effective June 1, ~~2016.~~2017. The adoption of this guidance did not impact our consolidated financial position or results of operations.
In April 2015, amended accounting guidance was issued that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability itself. The amended guidance does not apply to line-of-credit arrangements. Accordingly, issuance costs related to line-of-credit arrangements will continue to be presented as an asset and amortized ratably over the term of the arrangement. The Company adopted this guidance on a retrospective basis effective June 1, 2016. As a result, debt issuance costs totaling $2.3 million and $2.5 million as of November 30, 2016 and May 31, 2016, respectively, have been presented as a component of the carrying amount of long-term debt reported in our consolidated balance sheets. These amounts were previously capitalized and reported within other assets.
In September 2015, amended accounting guidance was issued regarding adjustments to provisional amounts recorded in conjunction with a business combination. The amended guidance requires the acquirer to recognize adjustments to provisional amounts identified during the measurement period in the reporting period in which such adjustments are identified, rather than retrospectively adjusting previously reported amounts. The Company adopted this amended guidance on a prospective basis effective June 1, 2016. The adoption of this guidance did not impact our consolidated financial position or results of operations.
In March 2016, amended accounting guidance was issued that simplifies the accounting for share-based payments. The amended guidance impacts several aspects of the accounting for share-based payment transactions, including the income tax consequences, forfeitures, statutory withholding requirements, and classification in the statement of cash flows. The Company early adopted this guidance during the fourth quarter of fiscal 2016. As required for early adoption in an interim period, all adjustments have been reflected as of the beginning of fiscal 2016. Accordingly, income tax expense for the three and six months ended November 30, 2015 has been restated to reflect excess tax benefits associated with share-based payments totaling $136,000 and $694,000, respectively, in current income tax expense, rather than in paid-in capital.
Recently Issued Accounting Standards
In May 2014, ~~amended~~new accounting guidance was issued that replaces most existing revenue recognition guidance under U.S. GAAP. The ~~amended~~new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Subsequently, additional guidance was issued on several areas including guidance intended to improve the operability and understandability of the implementation of principal versus agent considerations and clarifications on the identification of performance obligations and implementation of guidance related to licensing. The ~~amended~~new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The ~~amended~~ guidance permits the use of either the retrospective or cumulative effect transition method. We are in the process of evaluating the effect this guidance will have on the presentation of our consolidated financial statements and related disclosures. ~~Our~~While we have not yet identified any material changes in the timing of revenue recognition, our evaluation is ongoing and not complete. ~~However, we currently do not anticipate a material impact on our revenue recognition practices.~~ We ~~expect~~plan to ~~make a determination as to~~adopt the ~~timing and method of adoption~~new guidance in the ~~second half~~first quarter of fiscal ~~2017.~~
~~In July 2015, amended accounting guidance was issued regarding~~2019. The Company will continue to monitor any modifications, clarifications, and interpretations by the ~~measurement of inventory. The amended guidance requires~~FASB that inventory accounted for under the first-in, first-out (FIFO) or average cost methods be measured at the lower of cost and net realizable value, where net realizable value represents the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amended guidance has nomay impact on inventory accounted for under the last-in, first-out (LIFO) or retail inventory methods. The amended guidance is effective prospectively for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted as of the beginning of an interim or annual reporting period. We do not expect the adoption of this amended accounting guidance to have a material impact on our consolidated financial position or results of operations.its conclusions.
In February 2016, ~~amended~~new accounting guidance was issued that replaces most existing lease accounting guidance under U.S. GAAP. Among other changes, the ~~amended~~new guidance requires that lease assets and liabilities be recognized on the balance sheet by lessees for those leases classified as operating leases under previous guidance. The ~~amended~~new 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. We are in the process of evaluating the effect this guidance will have on our consolidated financial position, results of operations and cash flows, and we have not determined the effect of the ~~amended~~new guidance on our ongoing financial reporting.
In March 2016, amended accounting guidance was issued regarding derivative instruments designated as hedging instruments. The amended guidance clarifies that a change in the counterparty to such a hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The amended guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, and the change may be applied either prospectively or retrospectively. We do not expect the adoption of this amended accounting guidance to have a material impact on our consolidated financial position or results of operations.
In June 2016, ~~amended~~new accounting guidance was issued related to the measurement of credit losses on financial instruments. The ~~amended~~new guidance changes the impairment model for most financial assets to require measurement and recognition of expected credit losses for financial assets held. The ~~amended~~new 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 guidance will have on our consolidated financial position and results of operations, and we have not determined the effect of the ~~amended~~new guidance on our ongoing financial reporting.
In August 2016, amended accounting guidance was issued to clarify the proper cash flow presentation of certain specific types of cash payments and cash receipts. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the effect this guidance will have on our consolidated financial position, results of operations and cash flows, and we have not determined the effect of the amended guidance on our ongoing financial reporting.
In October 2016, amended accounting guidance was issued that requires the income tax consequences of an intra-entity transfer of an asset other than inventory to be recognized when the transfer occurs. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the effect this guidance will have on our consolidated financial position, results of operations and cash flows, and have not determined the effect of the amended guidance on our ongoing financial reporting.
In November 2016, amended accounting guidance was issued that requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts shown on the statement of cash flows. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material impact on our consolidated cash flows.
In January 2017, amended accounting guidance was issued to clarify the definition of a business to provide additional guidance to assist in evaluating whether transactions should be accounted for as an acquisition (or disposal) of either an asset or business. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material impact on our consolidated financial position or results of operations.
In January 2017, amended accounting guidance was issued to simplify the goodwill impairment calculation, by removing Step 2 of the goodwill impairment test. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill. The amended guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the effect this guidance will have on our consolidated financial position and results of operations, and have not determined the effect on our ongoing financial reporting.
In March 2017, amended accounting guidance was issued that requires an employer to report the service cost component of pension and postretirement benefits in the same line as other current employee compensation costs. Additionally, other components of net benefit cost are to be presented in the income statement separately from the service cost component and outside of income from operations. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are in the process of evaluating the effect this guidance will have on our consolidated financial position and results of operations, and have not determined the effect on our ongoing financial reporting.
In May 2017, amended accounting guidance was issued to provide guidance about which changes to the terms or conditions of a share-based payment award require application of modification accounting. The amended guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. We do not expect the adoption of this amended guidance to have a material impact on our consolidated financial position or results of operations.
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 guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We are in the process of evaluating the effect this guidance will have on our consolidated financial position and results of operations, and have not determined the effect on our ongoing financial reporting.
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, 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 obtained from other sources. Critical accounting policies are defined as those that require our significant judgments and involve 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 financial position or results of operations could be materially different if we were to report under different conditions or to use different assumptions in the application of such policies. 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 ~~2016~~2017 Form10-K.
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 ~~2016~~2017 Form10-K.
Item 4. – Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures [as defined in Rules13a-15(e) and15d-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 Form10-Q (the fiscal quarter ended ~~November 30, 2016)~~August 31, 2017). 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 Form10-Q.
Changes in Internal Control Over Financial Reporting
There were no changes that occurred during the period covered by this Quarterly Report on Form10-Q (the fiscal quarter ended ~~November 30, 2016)~~August 31, 2017) in our internal control over financial reporting (as defined in Rules13a-15(f) and15d-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 the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, ~~2016~~2017 (the ~~“2016~~“2017 Form10-K”), as filed with the Securities and Exchange Commission on ~~August 1, 2016,~~July 24, 2017, and available at www.sec.gov or at www.worthingtonindustries.com, we included a detailed discussion of our risk factors. Our risk factors have not changed significantly from those disclosed in our ~~2016~~2017 Form10-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 Form10-Q. Any of the risks described in our ~~2016~~2017 Form10-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 ~~2016~~2017 Form10-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.
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 Rule10b-18(a) (3) under the Securities Exchange Act of 1934, as amended) of common shares of Worthington Industries, Inc. during each month of the fiscal quarter ended ~~November 30, 2016:~~August 31, 2017:

         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)
September 1-30, 2016 (2)
   14,321       $ 46.92       -       4,046,145
October 1-31, 2016 (2)
   10,762       $ 48.21       -       4,046,145
November 1-30, 2016 (2)
   87,297       $ 57.24       -       4,046,145







Total
   112,380       $ 55.06       -







         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)
June1-30, 2017 (2)
   143,527    $ 49.99    75,000    3,971,145
July1-31, 2017
   800,000    $ 51.64    800,000    3,171,145
August1-31, 2017
   -    $ -    -    3,171,145







Total
   943,527    $ 51.39    875,000








(1)
The number shown represents, as of the end of each period, the maximum number of common shares that could be purchased under the publicly announced repurchase authorization then in effect. On June 26, 2014, Worthington Industries, Inc. announced that on June 25, 2014, the Board of Directors of Worthington Industries had authorized the repurchase of up to 10,000,000 of Worthington Industries’ outstanding common shares. A total of ~~4,046,145~~3,171,145 common shares were available under this repurchase authorization at ~~November 30, 2016.~~August 31, 2017. On September 27, 2017, the Board of Directors of Worthington Industries authorized the repurchase of up to an additional 6,828,855 of Worthington Industries’ outstanding common shares, increasing the total number of common shares available for repurchase to 10,000,000.
The common shares available for repurchase under ~~this authorization~~these authorizations may be purchased 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 appropriate factors. Repurchases may be made on the open market or through privately negotiated transactions.
(2)
Includes an aggregate of ~~112,380~~68,527 common shares surrendered by employees in ~~September—November 2016~~June 2017 to satisfy tax withholding obligations upon the ~~exercise of stock options and~~ vesting of restricted common shares. These common shares were not counted against the share repurchase authorization in effect throughout the ~~second~~first quarter of fiscal ~~2017~~2018 and discussed in footnote (1) above.
Item 3. – Defaults Upon Senior Securities
Not ~~applicable~~applicable.
Item 4. – Mine Safety Disclosures
Not ~~applicable~~applicable.
Item 5. – Other Information
Not ~~applicable~~applicable.
Item 6. – Exhibits

Exhibit No.
Description
2.1    ~~10.1~~ Agreement and Plan of Merger, dated as of June 2, 2017, by and among Worthington ~~Industries,~~Steel of Michigan, Inc. ~~Amended~~, Worthington Rhode Island Corporation, New AMTROL Holdings, Inc. and ~~Restated 2006 Equity Incentive Plan for Non-Employee Directors, reflecting the First Amendment and the Second Amendment thereto~~Aqua Stockholder Representative, LLC, as Stockholder Representative (Incorporated herein by reference to Exhibit ~~10.1~~2.1 to the Current Report on Form8-K of Worthington Industries, Inc., dated ~~October 3, 2016~~June 6, 2017 and filed with the SEC on the same ~~day~~date (SEC FileNo. 1-8399))†
3.1 Amended Articles of Incorporation of Worthington Industries, Inc., as filed with the Ohio Secretary of State on October 13, 1998 (Incorporated herein by reference to Exhibit 3(a) to the Quarterly Report on Form10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 1998 (SEC FileNo. 0-4016))
3.2 Code of Regulations of Worthington Industries, Inc. (reflecting all amendments through the date of this Quarterly Report on Form10-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 Form10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2000 (SEC FileNo. 1-8399))
4.1 Third Supplemental Indenture, dated as of July 28, 2017, between Worthington Industries, Inc. and U.S. Bank National Association, as Trustee (Incorporated herein by reference to Exhibit 4.2 to the Current Report on Form8-K of Worthington Industries, Inc., dated July 28, 2017 and filed with the SEC on the same date (SEC FileNo. 1-8399))
4.2 Form of 4.300% Notes due 2032 (included in Exhibit 4.2 to the Current Report on Form8-K of Worthington Industries, Inc., dated July 28, 2017 and filed with the SEC on the same date (SEC FileNo. 1-8399) and incorporated herein by reference thereto)
10.1 Third Amendment to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Third Amendment effective as of June 28, 2017) (Incorporated herein by reference to Exhibit 10.16 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))
10.2 Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (reflects the First Amendment, the Second Amendment and the Third Amendment thereto) (Incorporated herein by reference to Exhibit 10.17 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))
10.3 Form of Restricted Stock Award Agreement for awards granted after June 28, 2017 entered into by Worthington Industries, Inc. in order to evidence the grant, after June 28, 2017, of restricted common shares, in each case which will vest on the fourth anniversary of the grant date, subject to the terms thereof and of the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.22 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))
10.4 Form of Restricted Stock Award Agreement for awards granted after June 28, 2017 to be entered into by Worthington Industries, Inc. in order to evidence the grant, after June 28, 2017, of restricted common shares, in each case which will vest on the third anniversary of the grant date, subject to the terms thereof and of the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.24 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))
†
The Disclosure Schedules and Exhibits referenced in the Agreement and Plan of Merger have been omitted pursuant to Item 601(b)(2) of SEC Regulation S-K. Worthington Industries, Inc. hereby undertakes to furnish a copy of any of the omitted Disclosure Schedules and Exhibits to the Securities and Exchange Commission upon request.
10.5    Second Amendment to the Worthington Industries, Inc. Amended and Restated 2003 Stock Option Plan (Second Amendment effective June 28, 2017) (Incorporated herein by reference to Exhibit 10.27 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))
10.6 Second Amendment to the Worthington Industries, Inc. 2010 Stock Option Plan (Second Amendment effective as of June 28, 2017) (Incorporated herein by reference to Exhibit 10.35 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))
10.7 Summary of Annual Base Salaries Approved for Named Executive Officers of Worthington Industries, Inc. (Incorporated herein by reference to Exhibit 10.67 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))
10.8 Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2018 for Named Executive Officers (Incorporated herein by reference to Exhibit 10.74 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))
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 Form10-Q of Worthington Industries, Inc. are the following documents formatted in XBRL (Extensible Business Reporting Language):
(i)
Consolidated Balance Sheets at ~~November 30, 2016~~August 31, 2017 and May 31, ~~2016;~~2017;
(ii)
Consolidated Statements of Earnings for the three ~~and six~~ months ended ~~November 30, 2016~~August 31, 2017 and ~~2015;~~2016;
(iii)
Consolidated Statements of Comprehensive Income for the three ~~and six~~ months ended ~~November 30, 2016~~August 31, 2017 and ~~2015;~~2016;
(iv)
Consolidated Statements of Cash Flows for the three ~~and six~~ months ended ~~November 30, 2016~~August 31, 2017 and ~~2015;~~2016; and
(v)
Notes to Consolidated Financial Statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WORTHINGTON INDUSTRIES, INC.
Date: ~~January 6,~~October 10, 2017

By:

/s/ B. Andrew Rose

B. Andrew Rose,

Executive Vice President and Chief Financial Officer

(On behalf of the Registrant and as Principal
Financial Officer)
~~INDEX TO EXHIBITS~~
37
~~Exhibit No.~~
~~Description~~
~~Location~~
~~10.1~~
~~Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors, reflecting the First Amendment and the Second Amendment thereto~~
~~Incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Worthington Industries, Inc. dated October 3, 2016 and filed with the SEC on the same day (SEC FileNo. 1-8399)~~
~~31.1~~
~~Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Executive Officer)~~
~~Filed herewith~~
~~31.2~~
~~Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Financial Officer)~~
~~Filed herewith~~
~~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~~
~~Furnished herewith~~
~~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~~
~~Furnished herewith~~
~~101.INS~~
~~XBRL Instance Document~~
~~Submitted electronically herewith #~~
~~101.SCH~~
~~XBRL Taxonomy Extension Schema Document~~
~~Submitted electronically herewith #~~
~~101.PRE~~
~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~Submitted electronically herewith #~~
~~101.LAB~~
~~XBRL Taxonomy Extension Label Linkbase Document~~
~~Submitted electronically herewith #~~
~~101.CAL~~
~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~Submitted electronically herewith #~~
~~101.DEF~~
~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~Submitted electronically 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 November 30, 2016 and May 31, 2016;~~
~~(ii)~~
~~Consolidated Statements of Earnings for the three and six months ended November 30, 2016 and 2015;~~
~~(iii)~~
~~Consolidated Statements of Comprehensive Income for the three and six months ended November 30, 2016 and 2015;~~
~~(iv)~~
~~Consolidated Statements of Cash Flows for the three and six months ended November 30, 2016 and 2015; and~~
~~(v)~~
~~Notes to Consolidated Financial Statements.~~
44


WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
(Unaudited)


WORTHINGTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


	Three Months Ended November 30,						Six Months Ended November 30,
	2016			2015			2016			2015
Net sales	$	727,780		$	699,816		$	1,465,329		$	1,457,963
Cost of goods sold		604,977			590,637			1,195,244			1,235,768

Gross margin		122,803			109,179			270,085			222,195
Selling, general and administrative expense		76,487			72,722			157,543			148,673
Impairment of long-lived assets		—			22,962			—			25,962
Restructuring and other expense		3,272			1,523			4,600			4,592

Operating income		43,044			11,972			107,942			42,968
Other income (expense):
Miscellaneous income, net		872			996			1,735			418
Interest expense		(7,658	)		(7,799	)		(15,528	)		(15,653	)
Equity in net income of unconsolidated affiliates		27,124			29,247			61,668			55,828

Earnings before income taxes		63,382			34,416			155,817			83,561
Income tax expense		13,515			8,665			37,414			22,815

Net earnings		49,867			25,751			118,403			60,746
Net earnings attributable to noncontrolling interests		3,302			2,375			6,271			5,402

Net earnings attributable to controlling interest	$	46,565		$	23,376		$	112,132		$	55,344


Basic
Average common shares outstanding		62,348			62,676			62,115			63,338

Earnings per share attributable to controlling interest	$	0.75		$	0.37		$	1.81		$	0.87


Diluted
Average common shares outstanding		64,725			64,663			64,599			65,350

Earnings per share attributable to controlling interest	$	0.72		$	0.36		$	1.74		$	0.85


Common shares outstanding at end of period		62,562			62,101			62,562			62,101

Cash dividends declared per share	$	0.20		$	0.19		$	0.40		$	0.38


(in thousands)	Beginning Balance		Expense		Payments			Adjustments		Ending Balance		Beginning Balance		Expense		Payments			Adjustments		Ending Balance
Early retirement and severance	$	1,831	$	1,572	$	(2,707	)	$	39	$	735	$	253	$	1,877	$	(182	)	$	127	$	2,075
Facility exit and other costs		653		2,019		(1,295	)		-		1,377		536		284		(950	)		131	��	1

	$	2,484		3,591	$	(4,002	)	$	39	$	2,112	$	789		2,161	$	(1,132	)	$	258	$	2,076

Net loss on sale of assets				1,009											143

Restructuring and other expense			$	4,600										$	2,304


	2016									2015
	Before-Tax			Tax			Net-of-Tax			Before-Tax			Tax		Net-of-Tax
(in thousands)
Foreign currency translation	$	(7,517	)	$	-		$	(7,517	)	$	(9,214	)	$	-	$	(9,214	)
Pension liability adjustment		-			-			-			-			-		-
Cash flow hedges		2,047			(395	)		1,652			(3,805	)		1,282		(2,523	)

Other comprehensive loss	$	(5,470	)	$	(395	)	$	(5,865	)	$	(13,019	)	$	1,282	$	(11,737	)


	2017								2016
	Before-Tax		Tax			Net-of-Tax			Before-Tax			Tax			Net-of-Tax
(in thousands)
Foreign currency translation	$	15,872	$	-		$	15,872		$	(665	)	$	-		$	(665	)
Pension liability adjustment		-		(6	)		(6	)		-			-			-
Cash flow hedges		2,993		(1,106	)		1,887			1,088			(463	)		625

Other comprehensive income (loss)	$	18,865	$	(1,112	)	$	17,753		$	423		$	(463	)	$	(40	)


	Controlling Interest																	Controlling Interest
(in thousands)	Additional Paid-in Capital		Accumulated Other Comprehensive Loss, Net of Tax			Retained Earnings			Total			Non- controlling Interests			Total			Additional Paid-in Capital			Accumulated Other Comprehensive Loss, Net of Tax			Retained Earnings			Total			Non controlling Interests			Total
Balance at May 31, 2016	$	298,984	$	(28,565	)	$	522,952		$	793,371		$	126,475		$	919,846
Balance at May 31, 2017																		$	303,391		$	(27,775	)	$	676,019		$	951,635		$	122,294		$	1,073,929
Net earnings		-		-			112,132			112,132			6,271			118,403			-			-			45,534			45,534			2,540			48,074
Other comprehensive loss		-		(5,762	)		-			(5,762	)		(143	)		(5,905	)
Other comprehensive income																			-			17,314			-			17,314			439			17,753
Common shares issued, net of withholding tax		2,972		-			-			2,972			-			2,972			(3,274	)		-			-			(3,274	)		-			(3,274	)
Common shares in NQ plans		948		-			-			948			-			948			536			-			-			536			-			536
Stock-based compensation		7,040		-			-			7,040			-			7,040			4,822			-			-			4,822			-			4,822
Purchases and retirement of common shares																			(4,235	)		-			(40,841	)		(45,076	)		-			(45,076	)
Cash dividends declared		-		-			(25,761	)		(25,761	)		-			(25,761	)		-			-			(13,317	)		(13,317	)		-			(13,317	)
Dividends to noncontrolling interest		-		-			-			-			(6,781	)		(6,781	)		-			-			-			-			(720	)		(720	)

Balance at November 30, 2016	$	309,944	$	(34,327	)	$	609,323		$	884,940		$	125,822		$	1,010,762
Balance at August 31, 2017																		$	301,240		$	(10,461	)	$	667,395		$	958,174		$	124,553		$	1,082,727


(in thousands)	Foreign Currency Translation			Pension Liability Adjustment			Cash Flow Hedges			Accumulated Other Comprehensive Loss			Foreign Currency Translation			Pension Liability Adjustment			Cash Flow Hedges			Accumulated Other Comprehensive Loss
Balance as of May 31, 2016	$	(18,728	)	$	(17,061	)	$	7,224		$	(28,565	)
Other comprehensive income (loss) before reclassifications		(8,039	)		-			8,050			11
Balance as of May 31, 2017													$	(17,358	)	$	(14,819	)	$	4,402		$	(27,775	)
Other comprehensive income before reclassifications														15,433			-			6,798			22,231
Reclassification adjustments to income (a)		-			-			(4,915	)		(4,915	)		-			-			(3,805	)		(3,805	)
Income taxes		-			-			(858	)		(858	)		-			(6	)		(1,106	)		(1,112	)

Balance as of November 30, 2016	$	(26,767	)	$	(17,061	)	$	9,501		$	(34,327	)
Balance as of August 31, 2017													$	(1,925	)	$	(14,825	)	$	6,289		$	(10,461	)


Dividend yield	~~2.59~~1.81	%
Expected volatility	~~36.86~~36.65	%
Risk-free interest rate	~~1.15~~1.98	%
Expected term (years)	6.0


(in thousands)	Amount		Useful Life (Years)
Category
Customer relationships	$	90,800		14-17
Trade names		62,200		Indefinite
Technology		13,000		15-16

Total acquired identifiable intangible assets	$	166,000


(in thousands)
Cash	$	6,893
Accounts receivable		40,212
Inventories		37,249
Prepaid expenses		981
Other assets		2,550
Intangible assets		166,000
Property, plant and equipment		52,870

Total assets		306,755
Accounts payable		25,945
Accrued liabilities		21,016
Long-term debt including current maturities		2,287
Other accrued items		3,993
Deferred income taxes, net		64,495

Net identifiable assets		189,019
Goodwill		102,902

Purchase price	$	291,921
Less: excess working capital		(523	)

Cash paid at closing	$	291,398


	Asset Derivatives			Liability Derivatives			Asset Derivatives				Liability Derivatives
(in thousands)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value
Derivatives designated as hedging instruments:
Commodity contracts	Receivables	$	15,807	Accounts payable	$	489		Receivables	$	6,282		Accounts payable	$	-
	Other assets		101	Other liabilities		-		Other assets		257		Other liabilities		-

			15,908			489				6,539				-

Interest rate contracts	Receivables		-	Accounts payable		141		Receivables		-		Accounts payable		150
	Other assets		-	Other liabilities		195		Other assets		-		Other liabilities		150

			-			336				-				300

Totals		$	15,908		$	825			$	6,539			$	300

Derivatives not designated as hedging instruments:
Commodity contracts	Receivables	$	4,149	Accounts payable	$	131		Receivables	$	2,508		Accounts payable	$	37
	Other assets		41	Other liabilities		-		Other assets		32		Other liabilities		-

			4,190			131				2,540				37

Foreign currency contracts	Receivables		514	Accounts payable		-
Foreign exchange contracts								Receivables		-		Accounts payable		5

Totals		$	4,704		$	131			$	2,540			$	42

Total derivative instruments		$	20,612		$	956			$	9,079			$	342


				Location of				Location of
				Gain (Loss)	Gain (Loss)			Gain	Gain
				Reclassified	Reclassified			(Ineffective	(Ineffective
	Gain (Loss)			from	from			Portion)	Portion)
	Recognized			Accumulated	Accumulated			and Excluded	and Excluded
	in OCI			OCI	OCI			from	from
	(Effective			(Effective	(Effective			Effectiveness	Effectiveness
(in thousands)	Portion)			Portion)	Portion)			Testing	Testing
For the six months ended November 30, 2016:
Interest rate contracts	$	7,926		Interest expense	$	5,485		Interest expense	$	-
Commodity contracts		124		Cost of goods sold		(570	)	Cost of goods sold		-

Totals	$	8,050			$	4,915			$	-

For the six months ended November 30, 2015:
Interest rate contracts	$	(167	)	Interest expense	$	(285	)	Interest expense	$	-
Commodity contracts		(18,336	)	Cost of goods sold		(15,647	)	Cost of goods sold		-
Foreign currency contracts		-		Miscellaneous income, net		(4	)	Miscellaneous income, net		-

Totals	$	(18,503	)		$	(15,936	)		$	-


			Gain (Loss) Recognized
			in Earnings for the
	Location of Gain (Loss)		Three Months Ended November 30,
(in thousands)	Recognized in Earnings		2016			2015
Commodity contracts		Cost of goods sold	$	2,003		$	(5,390	)
Foreign currency contracts		Miscellaneous income, net		(599	)		70

Total			$	1,404		$	(5,320	)


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.


(in thousands)	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Totals		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Totals
Assets
Derivative instruments (1)	$	-	$	20,612	$	-	$	20,612
Derivative contracts (1)									$	-	$	9,079	$	-	$	9,079

Total assets	$	-	$	20,612	$	-	$	20,612	$	-	$	9,079	$	-	$	9,079

Liabilities
Derivative instruments (1)	$	-	$	956	$	-	$	956
Derivative contracts (1)									$	-	$	342	$	-	$	342
Contingent consideration obligation (2)		-		-		4,549		4,549		-		-		593		593

Total liabilities	$	-	$	956	$	4,549	$	5,505	$	-	$	342	$	593	$	935


	Three Months Ended November 30,									Six Months Ended November 30,									Three Months Ended August 31,
	2016			2015			Inc / (Dec)			2016			2015			Inc / (Dec)			2017			2016			Inc / (Dec)
U.S. GDP (% growth year-over-year)¹		1.7	%		1.0	%		0.7	%		1.6	%		1.2	%		0.4	%		2.0	%		1.5	%		0.5	%
Hot-Rolled Steel ($ per ton)²	$	544		$	419		$	125		$	581		$	440		$	141		$	604		$	617		$	(13	)
Detroit Three Auto Build (000’s vehicles)³		2,388			2,495			(107	)		4,768			4,814			(46	)		2,124			2,330			(206	)
No. America Auto Build (000’s vehicles)³		4,619			4,619			-			9,182			9,012			170			4,197			4,648			(451	)
Zinc ($ per pound)⁴	$	0.83		$	0.75		$	0.08		$	0.83		$	0.82		$	0.01		$	1.22		$	0.98		$	0.24
Natural Gas ($ per mcf)⁵	$	1.90		$	2.59		$	(0.69	)	$	1.90		$	2.69		$	(0.79	)	$	2.95		$	2.69		$	0.26
On-Highway Diesel Fuel Prices ($ per gallon)⁶	$	2.78		$	2.50		$	0.28		$	2.59		$	2.63		$	(0.04	)	$	2.54		$	2.39		$	0.15
Crude Oil—WTI ($ per barrel)⁶	$	53.00		$	44.71		$	8.29		$	49.52		$	47.96		$	1.56		$	46.67		$	46.04		$	0.63


(Dollars per ton¹)							(Dollars per ton¹)
	Fiscal Year							Fiscal Year
	2017		2016		2015			2018		2017		2016
1st Quarter	$	617	$	461	$	673		$	604	$	617	$	461
2nd Quarter	$	544	$	419	$	651			N/A	$	544	$	419
3rd Quarter		N/A	$	383	$	578			N/A	$	608	$	381
4th Quarter		N/A	$	507	$	464			N/A	$	636	$	486
Annual Avg.	$	581	$	443	$	592		$	604	$	601	$	437


	Three Months Ended November 30,															Three Months Ended August 31,
				% of						% of			Increase/						% of						% of			Increase/
(In millions)	2016			Net sales			2015			Net sales			(Decrease)			2017			Net sales			2016			Net sales			(Decrease)
Net sales	$	727.8			100.0	%	$	699.9			100.0	%	$	27.9		$	848.2			100.0	%	$	737.5			100.0	%	$	110.7
Cost of goods sold		605.0			83.1	%		590.7			84.4	%		14.3			715.5			84.4	%		590.2			80.0	%		125.3

Gross margin		122.8			16.9	%		109.2			15.6	%		13.6			132.7			15.6	%		147.3			20.0	%		(14.6	)
Selling, general and administrative expense		76.5			10.5	%		72.7			10.4	%		3.8			88.2			10.4	%		81.1			11.0	%		7.1
Impairment of long-lived assets		—			0.0	%		23.0			3.3	%		(23.0	)
Restructuring and other expense		3.3			0.5	%		1.5			0.2	%		1.8			2.3			0.3	%		1.3			0.2	%		1.0

Operating income		43.0			5.9	%		12.0			1.7	%		31.0			42.2			5.0	%		64.9			8.8	%		(22.7	)
Miscellaneous income, net		0.9			0.1	%		1.0			0.1	%		(0.1	)		0.3			0.0	%		0.9			0.1	%		(0.6	)
Interest expense		(7.6	)		-1.0	%		(7.8	)		-1.1	%		(0.2	)		(8.8	)		-1.0	%		(7.9	)		-1.1	%		0.9
Equity in net income of unconsolidated affiliates (1)		27.1			3.7	%		29.2			4.2	%		(2.1	)		27.3			3.2	%		34.5			4.7	%		(7.2	)
Income tax expense		(13.5	)		-1.9	%		(8.6	)		-1.2	%		4.9			(13.0	)		-1.5	%		(23.9	)		-3.2	%		(10.9	)

Net earnings		49.9			6.9	%		25.8			3.7	%		24.1			48.0			5.7	%		68.5			9.3	%		(20.5	)
Net earnings attributable to noncontrolling interests		3.3			0.5	%		2.4			0.3	%		0.9			2.5			0.3	%		2.9			0.4	%		(0.4	)

Net earnings attributable to controlling interest	$	46.6			6.4	%	$	23.4			3.3	%	$	23.2		$	45.5			5.4	%	$	65.6			8.9	%	$	(20.1	)


(1) Equity income by unconsolidated affiliate
WAVE	$	18.7					$	19.1					$	(0.4	)	$	22.2					$	20.7					$	1.5
ClarkDietrich		4.3						6.4						(2.1	)		0.7						8.6						(7.9	)
Serviacero		2.0						0.4						1.6			3.0						2.0						1.0
ArtiFlex		2.1						2.6						(0.5	)		1.5						2.9						(1.4	)
WSP		—						0.7						(0.7	)
Other		—						—						—			(0.1	)					0.3						(0.4	)

Total	$	27.1					$	29.2					$	(2.1	)	$	27.3					$	34.5					$	(7.2	)


	Six Months Ended November 30,
				% of						% of			Increase/
(In millions)	2016			Net sales			2015			Net sales			(Decrease)
Net sales	$	1,465.3			100.0	%	$	1,458.0			100.0	%	$	7.3
Cost of goods sold		1,195.2			81.6	%		1,235.8			84.8	%		(40.6	)

Gross margin		270.1			18.4	%		222.2			15.2	%		47.9
Selling, general and administrative expense		157.6			10.8	%		148.6			10.2	%		9.0
Impairment of long-lived assets		—			0.0	%		26.0			1.8	%		(26.0	)
Restructuring and other expense		4.6			0.3	%		4.6			0.3	%		—

Operating income		107.9			7.4	%		43.0			2.9	%		64.9
Miscellaneous income, net		1.7			0.1	%		0.5			0.0	%		1.2
Interest expense		(15.5	)		-1.1	%		(15.7	)		-1.1	%		(0.2	)
Equity in net income of unconsolidated affiliates (1)		61.7			4.2	%		55.8			3.8	%		5.9
Income tax expense		(37.4	)		-2.6	%		(22.8	)		-1.6	%		14.6

Net earnings		118.4			8.1	%		60.8			4.2	%		57.6
Net earnings attributable to noncontrolling interests		6.3			0.4	%		5.4			0.4	%		0.9

Net earnings attributable to controlling interest	$	112.1			7.7	%	$	55.4			3.8	%	$	56.7


(1) Equity income by unconsolidated affiliate
WAVE	$	39.5					$	41.2					$	(1.7	)
ClarkDietrich		12.9						9.0						3.9
Serviacero		4.0						1.2						2.8
ArtiFlex		5.0						4.2						0.8
WSP		—						1.5						(1.5	)
Other		0.3						(1.3	)					1.6

Total	$	61.7					$	55.8					$	5.9


					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)
September 1-30, 2016 (2)		14,321	$	46.92		-		4,046,145
October 1-31, 2016 (2)		10,762	$	48.21		-		4,046,145
November 1-30, 2016 (2)		87,297	$	57.24		-		4,046,145

Total		112,380	$	55.06		-


Exhibit No.	Description


2.1	~~10.1~~	Agreement and Plan of Merger, dated as of June 2, 2017, by and among Worthington ~~Industries,~~Steel of Michigan, Inc. ~~Amended~~, Worthington Rhode Island Corporation, New AMTROL Holdings, Inc. and ~~Restated 2006 Equity Incentive Plan for Non-Employee Directors, reflecting the First Amendment and the Second Amendment thereto~~Aqua Stockholder Representative, LLC, as Stockholder Representative (Incorporated herein by reference to Exhibit ~~10.1~~2.1 to the Current Report on Form8-K of Worthington Industries, Inc., dated ~~October 3, 2016~~June 6, 2017 and filed with the SEC on the same ~~day~~date (SEC FileNo. 1-8399))†

3.1	Amended Articles of Incorporation of Worthington Industries, Inc., as filed with the Ohio Secretary of State on October 13, 1998 (Incorporated herein by reference to Exhibit 3(a) to the Quarterly Report on Form10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 1998 (SEC FileNo. 0-4016))

3.2	Code of Regulations of Worthington Industries, Inc. (reflecting all amendments through the date of this Quarterly Report on Form10-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 Form10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2000 (SEC FileNo. 1-8399))

4.1	Third Supplemental Indenture, dated as of July 28, 2017, between Worthington Industries, Inc. and U.S. Bank National Association, as Trustee (Incorporated herein by reference to Exhibit 4.2 to the Current Report on Form8-K of Worthington Industries, Inc., dated July 28, 2017 and filed with the SEC on the same date (SEC FileNo. 1-8399))

4.2	Form of 4.300% Notes due 2032 (included in Exhibit 4.2 to the Current Report on Form8-K of Worthington Industries, Inc., dated July 28, 2017 and filed with the SEC on the same date (SEC FileNo. 1-8399) and incorporated herein by reference thereto)

10.1	Third Amendment to the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Third Amendment effective as of June 28, 2017) (Incorporated herein by reference to Exhibit 10.16 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))

10.2	Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (reflects the First Amendment, the Second Amendment and the Third Amendment thereto) (Incorporated herein by reference to Exhibit 10.17 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))

10.3	Form of Restricted Stock Award Agreement for awards granted after June 28, 2017 entered into by Worthington Industries, Inc. in order to evidence the grant, after June 28, 2017, of restricted common shares, in each case which will vest on the fourth anniversary of the grant date, subject to the terms thereof and of the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.22 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))

10.4	Form of Restricted Stock Award Agreement for awards granted after June 28, 2017 to be entered into by Worthington Industries, Inc. in order to evidence the grant, after June 28, 2017, of restricted common shares, in each case which will vest on the third anniversary of the grant date, subject to the terms thereof and of the Worthington Industries, Inc. Amended and Restated 1997 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.24 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))


10.5	Second Amendment to the Worthington Industries, Inc. Amended and Restated 2003 Stock Option Plan (Second Amendment effective June 28, 2017) (Incorporated herein by reference to Exhibit 10.27 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))

10.6	Second Amendment to the Worthington Industries, Inc. 2010 Stock Option Plan (Second Amendment effective as of June 28, 2017) (Incorporated herein by reference to Exhibit 10.35 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))

10.7	Summary of Annual Base Salaries Approved for Named Executive Officers of Worthington Industries, Inc. (Incorporated herein by reference to Exhibit 10.67 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))

10.8	Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2018 for Named Executive Officers (Incorporated herein by reference to Exhibit 10.74 to the Annual Report on Form10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2017 (SEC FileNo. 1-8399))

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 #


	WORTHINGTON INDUSTRIES, INC.

Date: ~~January 6,~~October 10, 2017	By:	/s/ B. Andrew Rose
		B. Andrew Rose,
		Executive Vice President and Chief Financial Officer
		(On behalf of the Registrant and as Principal
		Financial Officer)


~~Exhibit No.~~	~~Description~~	~~Location~~

~~10.1~~	~~Worthington Industries, Inc. Amended and Restated 2006 Equity Incentive Plan for Non-Employee Directors, reflecting the First Amendment and the Second Amendment thereto~~	~~Incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Worthington Industries, Inc. dated October 3, 2016 and filed with the SEC on the same day (SEC FileNo. 1-8399)~~

~~31.1~~	~~Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Executive Officer)~~	~~Filed herewith~~

~~31.2~~	~~Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Financial Officer)~~	~~Filed herewith~~

~~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~~	~~Furnished herewith~~

~~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~~	~~Furnished herewith~~

~~101.INS~~	~~XBRL Instance Document~~	~~Submitted electronically herewith #~~

~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~	~~Submitted electronically herewith #~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~	~~Submitted electronically herewith #~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~	~~Submitted electronically herewith #~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~	~~Submitted electronically herewith #~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~	~~Submitted electronically herewith #~~