UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended November 30, ~~2022~~2023

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

For the transition period from ___________ to ___________

Commission File Number 001-08399

WORTHINGTON ~~INDUSTRIES,~~ENTERPRISES, 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 West Old Wilson Bridge Road, Columbus, Ohio		43085
(Address of principal executive offices)		(Zip Code)

(614) 438-3210

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, Without Par Value	WOR	New York Stock Exchange

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

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

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

~~Indicate~~On January 4, 2024, the number of common shares, ~~outstanding of each~~without par value, of the ~~issuer’s classes of common stock, as of the latest practicable date. On December 30, 2022, the number of Common Shares, without par value,~~Registrant issued and outstanding was ~~49,707,649~~49,994,385.

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Safe Harbor Statement			ii

Part I. Financial Information

	Item 1.	Financial Statements

		Consolidated Balance Sheets – November 30, ~~2022~~2023 and May 31, ~~2022~~2023	12

		Consolidated Statements of Earnings – Three Months and Six Months Ended November 30, ~~2022~~2023 and ~~2021~~2022	23

		Consolidated Statements of Comprehensive Income – Three Months and Six Months Ended November 30, ~~2022~~2023 and ~~2021~~2022	34

		Consolidated Statements of Cash Flows – Three Months and Six Months Ended November 30, ~~2022~~2023 and ~~2021~~2022	45
		Condensed Notes to Consolidated Financial Statements	56

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2224

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3437

	Item 4.	Controls and Procedures	3437

Part II. Other Information

	Item 1.	Legal Proceedings	3538

	Item 1A.	Risk Factors	3538

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3538

	Item 3.	Defaults Upon Senior Securities ~~(Not applicable)~~	3539

	Item 4.	Mine Safety Disclosures ~~(Not applicable)~~	3539

	Item 5.	Other Information ~~(Not applicable)~~	3539

	Item 6.	Exhibits	3640

Signatures			3842

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Safe Harbor Statement

Selected statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”), including, without limitation, in “PART I – Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking ~~statements”~~statements,” as that term is used in the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). Forward-looking statements reflect ~~our~~the Company’s 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,” “should,” “would,” “intend,” “plan,” “will,” “likely,” “estimate,” “project,” ~~“positioned,~~“position,” “strategy,” ~~“targets,~~“target,” ~~“aims,~~“aim,” “seek,” “foresee,” or other similar words or phrases. These forward-looking statements include, without limitation, statements relating to:

•

the ever-changing effects of the novel coronavirus (“COVID-19”) pandemic and the various responses of governmental and nongovernmental authorities thereto (such as fiscal stimulus packages, quarantines, shut downs and other restrictions on travel and commercial, social or other activities) on economies (local, national and international) and markets, and on our customers, counterparties, employees and third-party service providers;

•

future or expected cash positions, liquidity and ability to access financial markets and capital;

•

~~outlook, strategy~~outlooks, strategies or business plans;

•

anticipated benefits of the ~~intended~~ separation of the Company’s former Steel Processing business (the “Separation”)~~, see Note A~~ – ~~Basis of Presentation for additional information related to the Separation;~~;

•

~~the timing and method of the Separation;~~

•

~~the anticipated benefits of the Separation;~~

•

~~the~~ expected financial and operational performance of, and future opportunities for, ~~each~~the Company following the Separation;

•

the Company’s performance on a pro forma basis to illustrate the estimated effects of the ~~two independent, publicly-traded companies following the Separation;~~Separation on historical periods;

•

the tax treatment of the Separation transaction;

•

~~the leadership of each of the two independent, publicly-traded companies following the Separation;~~

•

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

•

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

•

the ability to improve or maintain margins;

•

expected demand or demand trends for the Company or its markets;

•

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

•

expected benefits from transformation and innovation efforts;

•

the ability to improve performance and competitive position at the Company’s 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;

•

the ability to make acquisitions, form joint ventures and consolidate operations and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, 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 capture and maintain market share and to develop or take advantage of future opportunities, customer initiatives, new businesses, new products and new markets;

•

expectations for Company and customer inventories, jobs and orders;

•

expectations for the economy and markets or improvements therein;

•

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

•

effects of judicial ~~rulings;~~rulings, laws and regulations;

•

effects of the novel coronavirus (“COVID-19”) pandemic and the various responses of governmental and nongovernmental authorities thereto on economies and markets, and on the Company’s customers, counterparties, employees and third-party service providers; and

•

other non-historical matters.

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

•

~~obtaining final approval of the Separation by the Worthington Industries, Inc. Board of Directors;~~

•

the uncertainty of obtaining regulatory approvals in connection with the Separation, including rulings from the Internal Revenue Service;

•

the ~~ability to satisfy the necessary closing conditions to complete the Separation on a timely basis, or at all;~~

~~Table of Contents~~

•

~~the~~ Company’s ability to successfully ~~separate the two independent companies and~~ realize the anticipated benefits of the Separation;

•

the effect of conditions in national and worldwide financial markets, including inflation, increases in interest rates and economic recession, and with respect to the ability of financial institutions to provide capital;

•

the risks, uncertainties and impacts related to the COVID-19 pandemic – the duration, extent and severity of which are impossible to predict, including the possibility of future resurgence in the spread of COVID-19 or variants thereof – and the availability, effectiveness and acceptance of vaccines, and other actual or potential public health emergencies and actions taken by governmental authorities or others in connection therewith;

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•

the effect of national, regional and global economic conditions generally and within major product markets, including significant economic disruptions from COVID-19, the actions taken in connection therewith and the implementation of related fiscal stimulus packages;

•

the impact of tariffs, the adoption of trade restrictions affecting the Company’s products or suppliers, a United States (“U.S.”) withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships;

•

changing ~~oil~~commodity prices and/or supply;

•

product demand and pricing;

•

changes in product mix, product substitution and market acceptance of the Company’s products;

•

volatility or fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities, labor and other items required by operations (especially in light of the COVID-19 pandemic and Russia’s invasion of Ukraine);

•

effects of sourcing and supply chain constraints;

•

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

•

effects of facility closures and the consolidation of operations;

•

the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction and other industries in which the Company participates;

•

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 the Company does business;

•

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

•

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

•

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

•

capacity levels and efficiencies, within facilities, within major product markets and within the industries in which the Company participates 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, labor shortages, ~~(especially in light of the COVID-19 pandemic),~~ interruption in utility services, civil unrest, international conflicts (especially in light of Russia’s invasion of Ukraine), 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 (especially in light of Russia’s invasion of Ukraine), foreign currency exchange rate exposure and the acceptance of the Company’s products in global markets;

•

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

•

the effect of inflation, interest rate increases and economic recession, which may negatively impact the Company’s operations and financial results;

•

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

•

the level of imports and import prices in the Company’s markets;

•

the impact of environmental laws and regulations or the actions of the U.S. Environmental Protection Agency or similar regulators which increase costs or limit the Company’s ability to use or sell certain products;

•

the impact of increasing environmental, greenhouse gas emission and sustainability ~~considerations~~regulations or ~~regulations;~~considerations;

~~iii~~

~~Table of Contents~~

•

the impact of judicial rulings and governmental regulations, both in the U.S. and abroad, including those adopted by the U.S. Securities and Exchange Commission (the “SEC”) and other governmental agencies as contemplated by the Coronavirus Aid, Relief and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, and the Dodd-Frank Wall Street Reform and ~~the~~ Consumer Protection Act of 2010;

•

the effect of healthcare laws in the U.S. and potential changes for such laws, ~~especially in light of the COVID-19 pandemic,~~ which may increase the Company’s healthcare and other costs and negatively impact the Company’s operations and financial results;

•

the ~~effects~~effect of tax laws in the U.S. and potential changes for such laws, which may increase the Company’s costs and negatively impact ~~the Company’s~~its operations and financial results;

•

cyber security risks;

•

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

iii

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•

other risks described from time to time in the Company’s filings ~~of Worthington Industries, Inc.~~ with the SEC, including those described in “PART I – Item 1A. — Risk Factors” of the ~~Annual Report on~~Company’s Form 10-K ~~of Worthington Industries, Inc.~~ for the fiscal year ended May 31, ~~2022.~~2023 (“2023 Form 10-K”).

~~We note~~

The Company notes these risk factors for investors as contemplated by the PSLRA. Forward-looking statements should be construed in the light of such risks. It is impossible to predict or identify all potential risk factors. Consequently, ~~you~~readers should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements. Any forward-looking statements in this Form 10-Q are based on current information as of the date of this Form 10-Q, and ~~we assume no~~the Company does not undertake, and hereby disclaims, any obligation to correct or update any ~~such~~forward-looking statements, ~~in the~~whether as a result of new information, future developments or otherwise, except as required by applicable law.

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EXPLANATORY NOTE

On December 1, 2023, Worthington Industries, Inc. completed the separation of its former Steel Processing business into an independent, publicly traded company: Worthington Steel, Inc. (“Worthington Steel”). Also on December 1, 2023, Worthington Industries, Inc. changed its name to Worthington Enterprises, Inc., with such entity referred to as “Worthington Enterprises” for all past, present and futures periods discussed in this Form 10-Q for the fiscal quarter ended November 30, 2023 (this “Form 10-Q”).

References in this Form 10-Q to “we,” “our,” “us” “Worthington,” or the “Company” are to Worthington Enterprises and its consolidated subsidiaries, which included Worthington Steel and the Steel Processing business through November 30, 2023, the end of our fiscal 2024 second quarter. Accordingly, the financial results of Worthington Enterprises prior to the Separation include our former Steel Processing business. Beginning with our fiscal 2024 third quarter, our historical results will be restated to reflect the operations of our former Steel Processing business as a discontinued operation in periods prior to the December 1, 2023 Separation.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. – Financial Statements

WORTHINGTON ~~INDUSTRIES,~~ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)


	(Unaudited)				(Unaudited)
	November 30,		May 31,		November 30,		May 31,
	2022		2022		2023		2023
Assets
Current assets:
Cash and cash equivalents	$	129,596	$	34,485	$	430,906	$	454,946
Receivables, less allowances of $2,679 and $1,292 at November 30, 2022
and May 31, 2022, respectively		694,668		857,493
Receivables, less allowances of $2,944 and $3,383 at November 30, 2023 and May 31, 2023, respectively						640,826		692,887
Inventories:
Raw materials		304,692		323,609		245,166		264,568
Work in process		159,772		255,019		156,361		183,248
Finished products		190,160		180,512		174,884		160,152
Total inventories		654,624		759,140		576,411		607,968
Income taxes receivable		19,834		20,556		5,511		4,198
Assets held for sale		5,191		20,318		1,789		3,381
Prepaid expenses and other current assets		98,873		93,661		117,160		104,957
Total current assets		1,602,786		1,785,653		1,772,603		1,868,337
Investments in unconsolidated affiliates		240,859		327,381		247,421		252,591
Operating lease assets		103,488		98,769		94,677		99,967
Goodwill		412,971		401,469		416,857		414,820
Other intangible assets, net of accumulated amortization of $102,561 and
$93,973 at November 30, 2022 and May 31, 2022, respectively		322,934		299,017
Other intangible assets, net of accumulated amortization of $121,478 and $112,202 at November 30, 2023 and May 31, 2023, respectively						305,649		314,226
Other assets		25,439		34,394		42,916		25,323
Property, plant and equipment:
Land		49,644		51,483		50,920		49,697
Buildings and improvements		302,999		303,269		312,830		308,669
Machinery and equipment		1,223,841		1,196,806		1,293,628		1,263,962
Construction in progress		60,673		59,363		78,536		45,165
Total property, plant and equipment		1,637,157		1,610,921		1,735,914		1,667,493
Less: accumulated depreciation		954,974		914,581		1,031,900		991,839
Total property, plant and equipment, net		682,183		696,340		704,014		675,654
Total assets	$	3,390,660	$	3,643,023	$	3,584,137	$	3,650,918

Liabilities and equity
Current liabilities:
Accounts payable	$	481,273	$	668,438	$	447,119	$	528,920
Short-term borrowings		4,935		47,997		175,000		2,813
Accrued compensation, contributions to employee benefit plans and related taxes		86,998		117,530		80,461		93,810
Dividends payable		17,663		15,988		17,245		18,330
Other accrued items		58,046		70,125		62,270		53,362
Current operating lease liabilities		11,719		11,618		12,493		12,608
Income taxes payable		-		300		485		7,451
Current maturities of long-term debt		257		265		150,269		264
Total current liabilities		660,891		932,261		945,342		717,558
Other liabilities		115,688		115,991		112,878		113,286
Distributions in excess of investment in unconsolidated affiliate		91,643		81,149		118,465		117,297
Long-term debt		693,453		696,345		298,549		689,718
Noncurrent operating lease liabilities		93,513		88,183		85,283		89,982
Deferred income taxes, net		96,180		115,132		99,653		101,449
Total liabilities		1,751,368		2,029,061		1,660,170		1,829,290
Shareholders' equity - controlling interest		1,513,393		1,480,752		1,792,809		1,696,011
Noncontrolling interests		125,899		133,210		131,158		125,617
Total equity		1,639,292		1,613,962		1,923,967		1,821,628
Total liabilities and equity	$	3,390,660	$	3,643,023	$	3,584,137	$	3,650,918

~~See condensed notes to consolidated financial statements.~~

~~Table of Contents~~

~~WORTHINGTON INDUSTRIES, INC.~~

~~CONSOLIDATED STATEMENTS OF EARNINGS~~

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

~~(Unaudited)~~

Three Months Ended

Six Months Ended

November 30,

November 30,

2022

2021

2022

2021

Net sales
$
1,175,541

$
1,232,861

$
2,584,206

$
2,343,679

Cost of goods sold

1,069,778

1,048,270

2,309,069

1,939,714

Gross margin

105,763

184,591

275,137

403,965

Selling, general and administrative expense

107,813

96,130

211,261

191,981

Impairment of long-lived assets

-

-

312

-

Restructuring and other income, net

(4,282
)

(2,004
)

(5,382
)

(14,278
)
Separation costs

9,246

-

9,246

-

Operating income (loss)

(7,014
)

90,465

59,700

226,262

Other income (expense):

Miscellaneous income (expense), net

1,405

1,040

(3,681
)

1,670

Interest expense

(7,612
)

(7,312
)

(16,210
)

(15,030
)
Equity in net income of unconsolidated affiliates

36,857

60,218

68,569

113,134

Earnings before income taxes

23,636

144,411

108,378

326,036

Income tax expense

4,131

31,226

23,629

71,376

Net earnings

19,505

113,185

84,749

254,660

Net earnings attributable to noncontrolling interests

3,287

2,884

4,449

11,868

Net earnings attributable to controlling interest
$
16,218

$
110,301

$
80,300

$
242,792

Basic

Weighted average common shares outstanding

48,558

50,381

48,518

50,618

Earnings per share attributable to controlling interest
$
0.33

$
2.19

$
1.66

$
4.80

Diluted

Weighted average common shares outstanding

49,330

51,214

49,293

51,532

Earnings per share attributable to controlling interest
$
0.33

$
2.15

$
1.63

$
4.71

Common shares outstanding at end of period

48,572

50,334

48,572

50,334

Cash dividends declared per share
$
0.31

$
0.28

$
0.62

$
0.56

See condensed notes to consolidated financial statements.

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WORTHINGTON ~~INDUSTRIES,~~ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME~~EARNINGS

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

(Unaudited)

Three Months Ended

Six Months Ended

November 30,

November 30,

2022

2021

2022

2021

Net earnings
$
19,505

$
113,185

$
84,749

$
254,660

Other comprehensive income (loss)

Foreign currency translation, net of tax

858

(4,872
)

(9,243
)

(8,847
)
Pension liability adjustment, net of tax

(82
)

-

2,857

-

Cash flow hedges, net of tax

(4,000
)

(52,986
)

(17,300
)

(53,285
)
Other comprehensive loss

(3,224
)

(57,858
)

(23,686
)

(62,132
)
Comprehensive income

16,281

55,327

61,063

192,528

Comprehensive income attributable to noncontrolling interests

3,287

2,884

4,449

11,868

Comprehensive income attributable to controlling interest
$
12,994

$
52,443

$
56,614

$
180,660


	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2023			2022			2023			2022
Net sales	$	1,086,918		$	1,175,541		$	2,280,174		$	2,584,206
Cost of goods sold		963,204			1,069,778			1,958,971			2,309,069
Gross margin		123,714			105,763			321,203			275,137
Selling, general and administrative expense		107,688			107,813			220,036			211,261
Impairment of long-lived assets		-			-			1,401			312
Restructuring and other expense (income), net		6			(4,282	)		6			(5,382	)
Separation costs		21,952			9,246			27,987			9,246
Operating income (loss)		(5,932	)		(7,014	)		71,773			59,700
Other income (expense):
Miscellaneous income (expense), net		1,020			1,405			2,031			(3,681	)
Loss on extinguishment of debt		-			-			(1,534	)		-
Interest expense, net		(2,169	)		(7,612	)		(5,252	)		(16,210	)
Equity in net income of unconsolidated affiliates		42,446			36,857			96,827			68,569
Earnings before income taxes		35,365			23,636			163,845			108,378
Income tax expense		7,198			4,131			35,975			23,629
Net earnings		28,167			19,505			127,870			84,749
Net earnings attributable to noncontrolling interests		3,865			3,287			7,461			4,449
Net earnings attributable to controlling interest	$	24,302		$	16,218		$	120,409		$	80,300

Basic
Weighted average common shares outstanding		49,186			48,558			49,013			48,518
Earnings per common share attributable to controlling interest	$	0.49		$	0.33		$	2.46		$	1.66

Diluted
Weighted average common shares outstanding		50,042			49,330			50,102			49,293
Earnings per common share attributable to controlling interest	$	0.49		$	0.33		$	2.40		$	1.63

Common shares outstanding at end of period		49,287			48,572			49,287			48,572

Cash dividends declared per common share	$	0.32		$	0.31		$	0.64		$	0.62

See condensed notes to consolidated financial statements.

Table of Contents

WORTHINGTON ~~INDUSTRIES,~~ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

November 30,

November 30,

2022

2021

2022

2021

Operating activities:

Net earnings
$
19,505

$
113,185

$
84,749

$
254,660

Adjustments to reconcile net earnings to net cash provided (used) by operating activities:

Depreciation and amortization

28,354

21,090

56,355

43,154

Impairment of long-lived assets

-

-

312

-

Provision for (benefit from) deferred income taxes

(3,617
)

1,309

(14,673
)

2,675

Bad debt expense

1,098

335

1,440

514

Equity in net income of unconsolidated affiliates, net of distributions

18,352

(31,274
)

61,197

(64,492
)
Net gain on sale of assets

(4,265
)

(496
)

(5,034
)

(13,202
)
Stock-based compensation

4,547

4,248

8,783

7,551

Changes in assets and liabilities, net of impact of acquisitions:

Receivables

119,674

(89,817
)

157,093

(121,685
)
Inventories

72,293

(97,182
)

113,460

(260,864
)
Accounts payable

(100,535
)

(47,594
)

(202,116
)

(926
)
Accrued compensation and employee benefits

3,336

14,358

(30,532
)

(31,819
)
Income taxes payable

(7,629
)

(22,922
)

(300
)

12,935

Other operating items, net

(18,172
)

15,656

(16,755
)

2,583

Net cash provided (used) by operating activities

132,941

(119,104
)

213,979

(168,916
)

Investing activities:

Investment in property, plant and equipment

(24,490
)

(24,234
)

(45,967
)

(48,159
)
Investment in non-marketable equity securities

(140
)

-

(250
)

-

Acquisitions, net of cash acquired

-

(3,000
)

(56,088
)

(107,750
)
Proceeds from sale of investment in ArtiFlex

-

-

36,095

-

Proceeds from sale of assets, net of selling costs

23,739

5,136

35,494

31,821

Net cash used by investing activities

(891
)

(22,098
)

(30,716
)

(124,088
)

Financing activities:

Net repayments of short-term borrowings

(10,619
)

-

(43,062
)

-

Principal payments on long-term obligations

(13
)

(10
)

(150
)

(402
)
Payments for issuance of common shares, net of tax withholdings

(649
)

(2,694
)

(4,115
)

(6,785
)
Payments to noncontrolling interests

(11,760
)

(2,879
)

(11,760
)

(12,076
)
Repurchase of common shares

-

(12,702
)

-

(73,587
)
Dividends paid

(15,181
)

(14,565
)

(29,065
)

(29,263
)
Net cash used by financing activities

(38,222
)

(32,850
)

(88,152
)

(122,113
)

Increase (decrease) in cash and cash equivalents

93,828

(174,052
)

95,111

(415,117
)
Cash and cash equivalents at beginning of period

35,768

399,246

34,485

640,311

Cash and cash equivalents at end of period
$
129,596

$
225,194

$
129,596

$
225,194


	Three Months Ended					Six Months Ended
	November 30,					November 30,
	2023		2022			2023			2022
Net earnings	$	28,167	$	19,505		$	127,870		$	84,749
Other comprehensive income (loss), net of tax
Foreign currency translation		897		858			2,342			(9,243	)
Pension liability adjustment		-		(82	)		(3	)		2,857
Cash flow hedges		13,549		(4,000	)		6,699			(17,300	)
Other comprehensive income (loss)		14,446		(3,224	)		9,038			(23,686	)
Comprehensive income		42,613		16,281			136,908			61,063
Comprehensive income attributable to noncontrolling interests		3,865		3,287			7,461			4,449
Comprehensive income attributable to controlling interest	$	38,748	$	12,994		$	129,447		$	56,614

See condensed notes to consolidated financial statements.

Table of Contents

WORTHINGTON ~~INDUSTRIES,~~ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2023			2022			2023			2022
Operating activities:
Net earnings	$	28,167		$	19,505		$	127,870		$	84,749
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		28,007			28,354			56,332			56,355
Impairment of long-lived assets		-			-			1,401			312
Provision for (benefit from) deferred income taxes		1,968			(3,617	)		(3,485	)		(14,673	)
Loss on extinguishment of debt		-			-			1,534
Bad debt expense (income)		345			1,098			(454	)		1,440
Equity in net income of unconsolidated affiliates, net of distributions		(4,129	)		18,352			6,096			61,197
Net gain on sale of assets		(439	)		(4,265	)		(334	)		(5,034	)
Stock-based compensation		6,175			4,547			10,691			8,783
Changes in assets and liabilities, net of impact of acquisitions:
Receivables		76,704			119,674			67,861			157,093
Inventories		103,150			72,293			38,823			113,460
Accounts payable		(75,373	)		(100,535	)		(75,095	)		(202,116	)
Accrued compensation and employee benefits		2,794			3,336			(9,220	)		(30,532	)
Income taxes payable		(35,428	)		(7,629	)		(6,966	)		(300	)
Other operating items, net		3,049			(18,172	)		(20,368	)		(16,755	)
Net cash provided by operating activities		134,990			132,941			194,686			213,979

Investing activities:
Investment in property, plant and equipment		(32,876	)		(24,490	)		(62,174	)		(45,967	)
Proceeds from sale of assets, net of selling costs		751			23,739			802			35,494
Acquisitions, net of cash acquired		(21,013	)		-			(21,013	)		(56,088	)
Investment in note receivable		-			-			(15,000	)		-
Investment in non-marketable equity securities		(1,500	)		(140	)		(1,540	)		(250	)
Proceeds from the sale of investment in ArtiFlex, net of selling costs		-			-			-			36,095
Distribution from unconsolidated affiliate		1,085			-			1,085			-
Net cash used by investing activities		(53,553	)		(891	)		(97,840	)		(30,716	)

Financing activities:
Net proceeds from (repayments of) short-term borrowings		175,000			(10,619	)		172,187			(43,062	)
Principal payments on long-term obligations		-			(13	)		(243,757	)		(150	)
Proceeds from issuance of common shares, net of tax withholdings		(9,207	)		(649	)		(14,337	)		(4,115	)
Payments to noncontrolling interests		-			(11,760	)		(1,921	)		(11,760	)
Dividends paid		(17,333	)		(15,181	)		(33,058	)		(29,065	)
Net cash provided (used) by financing activities		148,460			(38,222	)		(120,886	)		(88,152	)

Increase (decrease) in cash and cash equivalents		229,897			93,828			(24,040	)		95,111
Cash and cash equivalents at beginning of period		201,009			35,768			454,946			34,485
Cash and cash equivalents at end of period	$	430,906		$	129,596		$	430,906		$	129,596

See condensed notes to consolidated financial statements.

Table of Contents

WORTHINGTON ENTERPRISES, INC.

CONDENSED Notes to Consolidated Financial Statements (UNAUDITED)

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

Note A – Basis of Presentation

Basis of Presentation

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

We own controlling interests in the following three operating joint ventures: Spartan Steel Coating, L.L.C. (“Spartan”) (52%); TWB Company, L.L.C. (“TWB”) (55%); and Worthington Samuel Coil Processing LLC (“Samuel” ~~or “Samuel joint venture”~~) (63%). ~~The last remaining manufacturing facility of our~~We also own a 51% controlling interest in Worthington Specialty Processing (“WSP”), which became a non-operating joint venture ~~was sold in~~on October 31, 2022, when the ~~second quarter~~remaining net assets of ~~fiscal 2022. See “Note F – Restructuring and Other Income, Net” for additional information.~~WSP were sold. These joint ventures are consolidated with the equity owned by the other joint venture members shown as ~~“Noncontrolling interests”~~noncontrolling interests in our consolidated balance sheets, and ~~the other joint venture members’~~their portions of net earnings and other comprehensive income (loss) (“OCI”) are shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively. Investments in ~~unconsolidated~~ affiliates that we do not control are accounted for ~~using~~under the equity ~~method.~~method with our proportionate share of income or loss recognized within equity in net income of unconsolidated affiliates (“equity income”) in our consolidated statements of earnings. See further discussion of our unconsolidated affiliates in “Note D – Investments in Unconsolidated Affiliates.”

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and notes required by ~~accounting principles generally accepted in the~~ U.S. ~~(“U.S. GAAP”)~~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 Form 10-Q, necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included. Operating results for the ~~three months and the six months ended November 30, 2022~~second quarter of fiscal 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, ~~2023~~2024 (“fiscal ~~2023”~~2024”). or for any other fiscal quarter. For further information, refer to the consolidated financial statements and notes thereto included in the ~~Annual Report on~~2023 Form ~~10-K for the fiscal year ended May 31, 2022 (“fiscal 2022”) of Worthington Industries, Inc. (the “2022 Form 10-K”).~~10-K.

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

~~Steel Processing Separation~~

On September 29, 2022, the Company announced that the Board of Directors of Worthington Industries, Inc. approved a plan to pursue a separation into two independent, publicly-traded companies – one company is expected to be comprised of the Company’s Steel Processing operating segment, and the other company is expected to be comprised of the Company’s Consumer Products, Building Products and Sustainable Energy Solutions operating segments. The ~~Company plans to effect the separation via a distribution of stock~~Separation of the Steel Processing Business

On December 1, 2023, we completed the Separation and Worthington Steel, comprised of our former Steel Processing business, became an independent, publicly traded company. To effectuate the Separation, we made a pro-rata distribution of all outstanding shares of Worthington Steel, which ~~is expected to be~~was tax-free to our shareholders for U.S. federal income tax purposes. ~~The Separation transaction is expected to be completed by early 2024, but is subject to certain conditions, including, among other things, general market conditions, finalization~~Each holder of record of Worthington Enterprises common shares received one common share of Worthington Steel for every one common share of Worthington Enterprises held (the “Distribution”) as of the ~~capital structure~~close of ~~the two companies, completion of steps necessary to qualify~~business on November 21, 2023 (the “Record Date”).

On November 30, 2023, in connection with the Separation, aswe entered into several agreements with Worthington Steel that govern the relationship between Worthington Steel and us following the Distribution, including a ~~tax-free transaction, receipt of regulatory approvals~~Separation and ~~final approval from the Board of Directors of Worthington Industries, Inc.~~ Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, and Transition Services Agreement.

Direct and incremental costs ~~incurred in connection~~associated with the ~~anticipated~~ Separation ~~including audit, advisory, and legal costs,~~ are presented ~~separately~~as a separate component of operating expense within the Separation costs caption in our consolidated statements of earnings ~~as “Separation costs”.~~and are held at the corporate level. Separation costs ~~totaled~~through the first six months of fiscal 2024 consisted primarily of third-party advisory fees and certain non-recurring employee-related costs totaling $~~9,246,000~~15,760 ~~during~~and $7,093, respectively, with the ~~three~~residual related to incremental costs associated with the separation of shared corporate functions. Employee-related costs in fiscal 2024 include $5,437 of incremental compensation expense associated with the modification of unvested long-term incentive compensation awards as required under the Employee Matters Agreement as well as accrued retention bonuses and severance expense. Substantially all of the costs incurred through the first six months ~~ended November 30, 2022.~~of fiscal 2023 related to third-party advisory fees.

Table of Contents

Note B – Inventory

~~Due to a decline in steel pricing during~~During the ~~first~~second quarter of fiscal ~~2023,~~2024, we initiated a recall with the ~~net realizable value~~Consumer Protection Safety Commission for our recently introduced Balloon Time® Mini helium tank. We have reserved for the estimated direct and incremental costs expected to be incurred to administer the recall program, which we expect to be immaterial due to the small population of ~~our inventory was lower than the cost reflected in our records at August 31, 2022. Accordingly,~~tanks purchased by end consumers. However, we ~~recorded~~booked a ~~lower~~reserve of ~~cost or net realizable value adjustment during the first quarter of fiscal 2023 totaling~~approximately $~~4,488,000~~3,000 to reflect ~~this lower~~the impacted inventory at its estimated net realizable value. The ~~entire amount of the~~ adjustment was attributed to our ~~Steel Processing~~Consumer Products operating segment and was recorded in cost of goods sold in the consolidated statement of earnings for the three ~~months ended August 31, 2022. There was~~ no ~~lower of cost or net realizable value adjustment to inventory during the three~~and six months ended November 30, ~~2022.~~2023.

~~Table of Contents~~

Note C – Revenue Recognition

The following table summarizes net sales by operating segment and product class within the Steel Processing operating segment for the periods presented:


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	November 30,				November 30,				November 30,				November 30,
(in thousands)	2022		2021		2022		2021
(In thousands)									2023		2022		2023		2022
Steel Processing
Direct	$	807,259	$	900,666	$	1,809,394	$	1,688,694	$	750,622	$	807,259	$	1,595,985	$	1,809,394
Toll		34,688		37,176		71,433		71,958		38,033		34,688		74,008		71,433
Total		841,947		937,842		1,880,827		1,760,652		788,655		841,947		1,669,993		1,880,827

Consumer Products ~~(1)~~		153,795		140,793		342,497		288,576		147,738		153,795		297,151		342,497
Building Products ~~(1)~~		141,671		121,125		291,994		235,868		122,954		141,671		256,822		291,994
Sustainable Energy Solutions ~~(1)~~		38,128		33,101		68,888		58,583		27,537		38,128		56,174		68,888

Other										34		-		34		-
Total	$	1,175,541	$	1,232,861	$	2,584,206	$	2,343,679	$	1,086,918	$	1,175,541	$	2,280,174	$	2,584,206

~~(1)~~

The products contained within each of these operating segments have similar production processes, require substantially the same raw materials, use similar equipment, and serve similar purposes. Therefore, we believe the products within each of these segments are appropriately combined for purposes of the disclosure requirements prescribed by Accounting Standards Codification (“ASC”) Topic 280 and Topic 606.

~~The following table summarizes the over time revenue for the periods presented:~~

With the exception of toll processing, net sales are recognized at the point in time the performance obligation is satisfied and control is transferred to the customer, typically upon shipment or delivery.

Three Months Ended

Six Months Ended

November 30,

November 30,

(in thousands)
2022

2021

2022

2021

Steel Processing - toll
$
34,688

$
37,176

$
71,433

$
71,958

The following table summarizes the unbilled receivables at the dates indicated:


		November 30,		May 31,			November 30,		May 31,
(in thousands)	Balance Sheet Classification	2022		2022
(In thousands)						Balance Sheet Classification	2023		2023
Unbilled receivables	Receivables	$	3,192	$	5,001	Receivables	$	4,148	$	3,708

There were no contract assets at November 30, ~~2022~~2023 or at May 31, ~~2022.~~

We have elected the optional exemption, which allows for the exclusion of the amounts for remaining performance obligations that are a part of contracts with an expected duration of one year or less. As of November 30, 2022, there were no ~~unsatisfied or partially satisfied performance obligations related to contracts with an expected duration greater than one year.~~2023.

Table of Contents

Note D – Investments in Unconsolidated Affiliates

Investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity ~~method. At~~method and included the following at November 30, ~~2022, we held noncontrolling investments in the following affiliated companies:~~2023: Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”) (25%); Serviacero Planos, S. de R. L. de C.V. (“Serviacero Worthington”) (50%); Taxi Workhorse Holdings, LLC (“Workhorse”) (20%); and Worthington Armstrong Venture (“WAVE”) (50%).

~~On August 3, 2022, the Company sold its~~We also held a 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (“ArtiFlex”) to, through August 3, 2022, when it was purchased by the ~~unaffiliated~~unrelated joint venture ~~member for approximately $42,086,000, after adjustments for closing debt and final~~partner. In connection with this transaction, we received net ~~working capital. Approximately $6,000,000~~ ~~of the total~~ cash proceeds ~~were attributed to real property in Wooster, Ohio, with a net book value~~ of approximately $~~6,300,000~~36,095~~. This real property was owned by Worthington~~ and ~~leased to ArtiFlex prior to closing of the transaction. The Company recognized~~realized a pre-tax loss of ~~approximately~~ $~~15,759,000~~15,759 inwithin equity income, ~~related to~~representing the amount by which the book value of our investment exceeded the net cash proceeds.

During the second quarter of fiscal 2024, we recognized a pre-tax gain of $2,780 within equity income, representing our portion of the overall gain realized in connection with the sale of ~~its~~ 50~~% noncontrolling equity interest portion of the transaction.~~Workhorse’s operations in Brazil.

~~Table of Contents~~

We received distributions from unconsolidated affiliates totaling $~~129,766,000~~104,008 during the six months ended November 30, ~~2022.~~2023. We have received cumulative distributions from WAVE in excess of our investment balance amounting to $~~91,643,000~~118,465 and $117,297, ~~which is shown as a separate liability on our consolidated balance sheet~~respectively, at November 30, ~~2022. In accordance with the applicable accounting guidance, we have reclassified the negative investment balance to the~~2023 and May 31, 2023, which are presented separately within long-term liabilities ~~section of~~in our consolidated balance sheets. We will continue to record our equity in the net income of WAVE as a debit to the investment account, and if the investment balance becomes positive, it will again be shown as an asset on our consolidated balance sheets. If it becomes probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any negative investment balance classified as a liability as income immediately.

We use the “cumulative earnings” approach for determining cash flow presentation of distributions from our unconsolidated joint ventures. Distributions received are included in our consolidated statements of cash flows as operating activities, unless the cumulative distributions ~~received, less distributions received in prior periods that were determined to be returns of investment,~~ exceed our portion of the cumulative equity in the net earnings of the joint venture, in which case the excess distributions are deemed to be returns of the investment and are classified as investing activities in our consolidated statements of cash flows. During the second quarter of fiscal 2024, we classified $1,085 of dividends received from WAVE as an investing activity.

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


	November 30,		May 31,		November 30,		May 31,
(in thousands)	2022		2022
(In thousands)					2023		2023
Cash and cash equivalents	$	41,768	$	68,563	$	37,728	$	49,185
Other current assets		911,881		1,148,029		871,945		899,913
Noncurrent assets		301,027		369,608		372,258		394,468
Total assets	$	1,254,676	$	1,586,200	$	1,281,931	$	1,343,566

Current liabilities		292,303		345,097		282,320		247,796
Short-term borrowings		10,000		5,943
Current maturities of long-term debt		36,110		33,054		-		36,936
Long-term debt		304,108		306,814		349,323		349,215
Other noncurrent liabilities		69,667		76,437		138,566		144,649
Equity		542,488		818,855		511,722		564,970
Total liabilities and equity	$	1,254,676	$	1,586,200	$	1,281,931	$	1,343,566


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	November 30,				November 30,				November 30,				November 30,
(in thousands)	2022		2021		2022		2021
(In thousands)									2023		2022		2023		2022
Net sales	$	711,665	$	858,165	$	1,535,607	$	1,603,160	$	676,875	$	711,665	$	1,397,308	$	1,535,607
Gross margin		147,299		226,502		328,704		416,176		166,939		147,299		361,247		328,704
Operating income		107,356		184,779		245,183		330,767		134,120		107,356		283,529		245,183
Depreciation and amortization		6,864		7,848		15,052		16,075		8,303		6,864		16,946		15,052
Interest expense		3,910		2,711		6,590		5,172		4,538		3,910		10,277		6,590
Income tax expense		1,262		8,565		3,372		16,461		6,708		1,262		8,354		3,372
Net earnings		105,183		173,915		238,421		312,803		122,670		105,183		266,236		238,421

Table of Contents

Note E – Impairment of Long-Lived Assets

~~Impairment of Long-Lived Assets~~

~~Fiscal 2023~~: During the first quarter of fiscal 2023, we committed to plans to liquidate certain fixed assets at ~~our~~the Samuel joint venture’s toll processing facility in Cleveland, Ohio. As all of the criteria for classification as assets held for sale continue to be met during the quarter ended November 30, 2022, the net assets have been presented separately as assets held for sale in our consolidated balance sheet as of November 30, 2022. In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair market value less costs to ~~sell. As a result,~~sell resulting in a pre-tax impairment charge of $~~312,000~~312 ~~was recognized during~~.

During the first quarter of fiscal ~~2023~~2024, we lowered our estimate of fair value less costs to ~~write~~sell to reflect the ~~book~~expected scrap value of the ~~land and building of the asset group~~equipment, to ~~its estimated fair value less cost to sell. The land and building were subsequently sold during the second quarter of fiscal 2023 for net cash proceeds~~$150, resulting in a pre-tax impairment charge of $~~3,298,000~~1,401. ~~Machinery and equipment with a net book value of $1,562,000~~ ~~continues to be classified as held for sale.~~ No ~~impairment charges were recorded during the second quarter of fiscal 2023.~~

~~Fiscal 2022~~: None

Note F – Restructuring and Other ~~Income,~~Expenses (Income), Net

We consider restructuring activities to be programs whereby we fundamentally change our operations, such as divestitures, closing ~~and~~or consolidating ~~manufacturing~~ facilities, employee severance (including rationalizing headcount or ~~moving manufacturing of a product to another location. Restructuring activities may also involve substantial~~other significant changes in personnel), and realignment of ~~the~~existing operations (including changes to management structure ~~of a business unit~~ in response to underlying performance and/or changing market ~~conditions.~~conditions).

~~A progression~~We made severance payments of $141, primarily associated with a prior restructuring initiative in the Building Products operating segment during the six months ended November 30, 2023. As a result, there were no liabilities associated with our restructuring activities ~~combined with a reconciliation to the restructuring~~at November 30, 2023.

Restructuring and other income, net ~~financial statement caption, in our consolidated statement of earnings~~ for the six months ended November 30, 2022 ~~is summarized below:~~of $

5,382

(in thousands)

Balance, as of
May 31, 2022

Expense
(Income)

Payments

Adjustments

Balance, as of
November 30, 2022

Early retirement and severance

$
541

$
85

$
(605
)

$
-

$
21

Net gain on sale of assets (1)(2)

(5,467
)

Restructuring and other income, net

$
(5,382
)

~~(1)~~

On resulted primarily from the sale of the remaining real property of our former oil and gas equipment business on June 14, 2022, ~~we sold real property in Tulsa, Oklahoma,~~ for net cash proceeds of $~~5,775,000~~5,775, ~~resulting in a pre-tax gain of $1,177,000. These assets had been excluded from~~and the sale of ~~our former oil & gas equipment business in January 2021. The assets were classified in assets held for sale~~WSP on ~~the consolidated balance sheets immediately prior to the closing of the sale.~~

~~(2)~~

On October 31, ~~2022, the Company’s consolidated steel processing joint venture, WSP, sold its remaining manufacturing facility, located~~2022. The sale resulted in ~~Jackson, Michigan. Net~~net cash proceeds of $~~21,277,000~~21,277, ~~were realized in connection with the transaction, of~~ which $~~2,000,000~~ ~~is being held in escrow for general representations and warranties. The transaction~~ resulted in a pre-tax gain of $~~3,926,000~~3,926. ~~The assets were classified in assets held for sale on the consolidated balance sheets immediately prior to the closing of the sale.~~

~~The total liability associated with our restructuring activities as of November 30, 2022 is expected to be paid in the next twelve months.~~

~~Table of Contents~~

Note G – Contingent Liabilities and Commitments

Legal Proceedings

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

Note H – 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, ~~we had in place $14,137,000~~ ~~of outstanding stand-by letters of credit issued to third-party service providers~~ at November 30, ~~2022.~~ No ~~amounts~~2023, we were ~~drawn against these stand-by letters of credit at November 30, 2022. We are also~~ party to an operating lease for an aircraft in which we have guaranteed a residual value at the termination of the lease ~~termination.~~on March 30, 2028. The maximum obligation under the terms of this guarantee was approximately $~~17,524,000~~16,143 at November 30, ~~2022.~~2023. 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.

At November 30, 2023, we also had in place $12,137 of outstanding stand-by letters of credit issued to third-party service providers. The fair value of these guarantees, based on premiums paid, was not material and no amounts were drawn against them at November 30, 2023.

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Note I – Debt and Receivables Securitization

The following table summarizes our long-term debt and short-term borrowings outstanding at November 30, 2023 and May 31, 2023:


	November 30,			May 31,
(In thousands)	2023			2023
Short-term borrowings	$	175,000		$	2,813
4.60% senior notes due August 10, 2024		150,000			150,000
4.55% senior notes due April 15, 2026		-			243,623
4.30% senior notes due August 1, 2032		200,000			200,000
1.56% Series A senior note due August 23, 2031		39,962			39,226
1.90% Series B senior notes due August 23, 2034		59,887			58,786
Other		402			528
Total debt		625,251			694,976
Unamortized discount and debt issuance costs		(1,433	)		(2,181	)
Total debt, net		623,818			692,795
Less: current maturities and short-term borrowings		325,269			3,077
Total long-term debt	$	298,549		$	689,718

Maturities of long-term debt and short-term borrowings in fiscal 2024 year and the four fiscal years thereafter, are as follows:


(In thousands)
2024 (1)	$	175,133
2025		150,269
2026		-
2027		-
2028		-
Thereafter		299,849
Total	$	625,251

(1)

Includes $175,000 associated with the Worthington Steel Credit Facility (as defined below). Subsequent to the Separation on December 1, 2023, we have no remaining obligation. See the “Other Financing Arrangements” section below for additional information.

Long-Term Debt

On April 15, 2014, we issued senior unsecured notes in the principal amount of $250,000, which bear interest at a rate of 4.55% and were scheduled to mature on April 15, 2026 (the “2026 Notes”). During fiscal 2023, we purchased approximately $6,377 of the principal amount of the 2026 Notes in open market transactions, leaving $243,623 within long-term debt at May 31, 2023. On June 29, 2023, we notified the trustee under the indenture to which the 2026 Notes are subject that we had elected to redeem in full the 2026 Notes. On July 28, 2023, we redeemed, in full, the 2026 Notes at a price that approximated the par value of the debt of $243,623. In connection with the debt redemption, we recognized a non-cash loss of $1,534 related primarily to unamortized debt issuance costs and amounts deferred in accumulated other comprehensive income (“AOCI”) associated with an interest rate swap executed prior to the issuance of the 2026 Notes.

Other Financing Arrangements

On November 30, 2023, Worthington Steel entered into a five-year senior secured revolving credit facility (the “Worthington Steel Credit Facility”) with a group of lenders. The Worthington Steel Credit Facility will allow for borrowings of up to $550,000, to the extent secured by eligible accounts receivable and inventory balances at period end, which consist primarily of U.S. Dollar denominated account balances. Amounts drawn under the Worthington Steel Credit Facility have maturities of up to one year and accrue interest at rates equal to an applicable margin over the SOFR Rate. In order to facilitate the post-separation capital structure of each company, $175,000 was drawn on the Worthington Steel Credit Facility immediately prior to the Separation. See “Note S – Subsequent Events” for further information.

We maintain a $~~500,000,000~~500,000 ~~multi-year~~unsecured revolving credit facility (the “Credit Facility”) with a group of lenders. On ~~August 20, 2021,~~September 27, 2023, we amended and restated the Credit Facility, extending the final maturity from ~~February 16, 2023~~August 20, 2026 to ~~August 20, 2026~~September 27, 2028 while keeping in place the ~~$500,000,000~~$500,000 aggregate commitments under the Credit ~~Facility.~~Facility in anticipation of the Separation. Borrowings under the Credit

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Facility have maturities of up to one year. We have the option to borrow at rates equal to an applicable margin over the ~~Daily LIBOR~~Simple SOFR Rate, the Prime Rate of PNC Bank, National Association or the Overnight Bank Funding Rate. The ~~Credit Facility contains customary LIBOR benchmark replacement language. The~~ applicable margin is determined by our ~~credit rating.~~Total Leverage Ratio. There were no borrowings outstanding under the Credit Facility at November 30, ~~2022,~~2023, leaving $~~500,000,000~~500,000 available for ~~future~~ use.

~~We also maintain~~On May 19, 2022, we entered into a five-year revolving trade accounts receivable securitization facility ~~(the “AR~~(“AR Facility”)~~. Pursuant~~ that allowed for short-term borrowings of up to $175,000 through the ~~terms~~factoring and subsequent sale, on a revolving basis, of ~~the AR Facility,~~eligible accounts receivable of certain of our subsidiaries ~~sell or contribute all of their eligible accounts receivable and other related assets without recourse, on a revolving basis,~~ to Worthington Receivables Company, LLC, ~~(“WRC”),~~ a wholly-owned, consolidated, bankruptcy-remote indirect subsidiary. ~~In turn, WRC sells, on a revolving basis, up~~On June 29, 2023, we elected to $terminate the AR Facility. ~~175,000,000~~No 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 120 days past due, receivables offset by an allowance for doubtful accounts due to bankruptcyearly termination or other ~~cause, concentrations over certain limits~~similar fees or penalties were paid in connection with ~~specific customers and certain reserve amounts, we believe additional risk of loss is minimal. As of November 30, 2022, there were~~ no ~~borrowings outstanding under~~ the ~~AR Facility, leaving $175,000,000~~ ~~available for future use.~~

~~Tempel China has short-term loan facilities that result in the equivalent of $4,935,000~~ ~~U.S. dollars outstanding at November 30, 2022. These loans, which are used to finance steel purchases, are collateralized by Tempel China property and equipment and mature in~~ ~~2023. New loans may be entered into as these loans mature. The effective interest rate on these loans is~~ ~~3.5% at November 30, 2022.~~termination.

Note J – Other Comprehensive Income (Loss)

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


	Three Months Ended																		Three Months Ended
	November 30, 2022									November 30, 2021									November 30, 2023							November 30, 2022
	Before-Tax			Tax			Net-of-Tax			Before-Tax			Tax			Net-of-Tax
(in thousands)
(In thousands)																			Before-Tax		Tax			Net-of-Tax		Before-Tax			Tax			Net-of-Tax
Foreign currency translation	$	550		$	308		$	858		$	(4,507	)	$	(365	)	$	(4,872	)	$	843	$	54		$	897	$	550		$	308		$	858
Pension liability adjustment		15			(97	)		(82	)		-			-			-			-		-			-		15			(97	)		(82	)
Cash flow hedges		(5,665	)		1,665			(4,000	)		(68,677	)		15,691			(52,986	)		17,390		(3,841	)		13,549		(5,665	)		1,665			(4,000	)
Other comprehensive loss	$	(5,100	)	$	1,876		$	(3,224	)	$	(73,184	)	$	15,326		$	(57,858	)
Other comprehensive income (loss)																			$	18,233	$	(3,787	)	$	14,446	$	(5,100	)	$	1,876		$	(3,224	)

~~Table of Contents~~


	Six Months Ended																		Six Months Ended
	November 30, 2022									November 30, 2021									November 30, 2023								November 30, 2022
	Before-Tax			Tax			Net-of-Tax			Before-Tax			Tax			Net-of-Tax
(in thousands)
(In thousands)																			Before-Tax		Tax			Net-of-Tax			Before-Tax			Tax			Net-of-Tax
Foreign currency translation	$	(8,970	)	$	(273	)	$	(9,243	)	$	(8,124	)	$	(723	)	$	(8,847	)	$	2,170	$	172		$	2,342		$	(8,970	)	$	(273	)	$	(9,243	)
Pension liability adjustment		3,740			(883	)		2,857			-			-			-			-		(3	)		(3	)		3,740			(883	)		2,857
Cash flow hedges		(22,762	)		5,462			(17,300	)		(68,876	)		15,591			(53,285	)		8,578		(1,879	)		6,699			(22,762	)		5,462			(17,300	)
Other comprehensive loss	$	(27,992	)	$	4,306		$	(23,686	)	$	(77,000	)	$	14,868		$	(62,132	)
Other comprehensive income (loss)																			$	10,748	$	(1,710	)	$	9,038		$	(27,992	)	$	4,306		$	(23,686	)

Note K – Changes in Equity

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


	Controlling Interest																		Controlling Interest
				Accumulated																		Accumulated
				Other																		Other
	Additional			Comprehensive									Non-						Additional			Comprehensive									Non-
	Paid-in			Loss,			Retained						controlling						Paid-in			Income (Loss),			Retained						controlling
(in thousands)	Capital			Net of Tax			Earnings			Total			Interests			Total
Balance at May 31, 2022	$	273,439		$	(22,850	)	$	1,230,163		$	1,480,752		$	133,210		$	1,613,962
(In thousands)																			Capital			Net of Tax			Earnings			Subtotal			Interests			Total
Balance at May 31, 2023																			$	290,799		$	(23,179	)	$	1,428,391		$	1,696,011		$	125,617		$	1,821,628
Net earnings		-			-			64,082			64,082			1,162			65,244			-			-			96,106			96,106			3,597			99,703
Other comprehensive loss		-			(20,462	)		-			(20,462	)		-			(20,462	)		-			(5,408	)		-			(5,408	)		-			(5,408	)
Common shares issued, net of withholding tax		(3,466	)		-			-			(3,466	)		-			(3,466	)		(5,130	)		-			-			(5,130	)		-			(5,130	)
Common shares in non-qualified plans		136			-			-			136			-			136			130			-			-			130			-			130
Stock-based compensation		6,976			-			-			6,976			-			6,976			8,995			-			-			8,995			-			8,995
Cash dividends declared		-			-			(15,418	)		(15,418	)		-			(15,418	)		-			-			(16,081	)		(16,081	)		-			(16,081	)
Balance at August 31, 2022	$	277,085		$	(43,312	)	$	1,278,827		$	1,512,600		$	134,372		$	1,646,972
Dividends to noncontrolling interests																				-			-			-			-			(1,921	)		(1,921	)
Balance at August 31, 2023																			$	294,794		$	(28,587	)	$	1,508,416		$	1,774,623		$	127,293		$	1,901,916
Net earnings		-			-			16,218			16,218			3,287			19,505			-			-			24,302			24,302			3,865			28,167
Other comprehensive loss		-			(3,224	)		-			(3,224	)		-			(3,224	)
Other comprehensive income																				-			14,446			-			14,446			-			14,446
Common shares issued, net of withholding tax		(649	)		-			-			(649	)		-			(649	)		(9,207	)		-			-			(9,207	)		-			(9,207	)
Common shares in non-qualified plans		298			-			-			298			-			298			195			-			-			195			-			195
Stock-based compensation		3,620			-			-			3,620			-			3,620			4,511			-			-			4,511			-			4,511
Cash dividends declared		-			-			(15,470	)		(15,470	)		-			(15,470	)		-			-			(16,061	)		(16,061	)		-			(16,061	)
Dividends to noncontrolling interest		-			-			-			-			(11,760	)		(11,760	)
Balance at November 30, 2022	$	280,354		$	(46,536	)	$	1,279,575		$	1,513,393		$	125,899		$	1,639,292
Balance at November 30, 2023																			$	290,293		$	(14,141	)	$	1,516,657		$	1,792,809		$	131,158		$	1,923,967

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Table of Contents


	Controlling Interest																		Controlling Interest
				Accumulated																		Accumulated
				Other																		Other
	Additional			Comprehensive									Non-						Additional			Comprehensive									Non-
	Paid-in			Income (Loss),			Retained						controlling						Paid-in			Income (Loss),			Retained						controlling
(in thousands)	Capital			Net of Tax			Earnings			Total			Interests			Total
Balance at May 31, 2021	$	282,790		$	45,387		$	1,070,016		$	1,398,193		$	153,502		$	1,551,695
(In thousands)																			Capital			Net of Tax			Earnings			Subtotal			Interests			Total
Balance at May 31, 2022																			$	273,439		$	(22,850	)	$	1,230,163		$	1,480,752		$	133,210		$	1,613,962
Net earnings		-			-			132,491			132,491			8,984			141,475			-			-			64,082			64,082			1,162			65,244
Other comprehensive loss		-			(4,274	)		-			(4,274	)		-			(4,274	)		-			(20,462	)		-			(20,462	)		-			(20,462	)
Common shares issued, net of withholding tax		(4,091	)		-			-			(4,091	)		-			(4,091	)		(3,466	)		-			-			(3,466	)		-			(3,466	)
Common shares in non-qualified plans		89			-			-			89			-			89			136			-			-			136			-			136
Stock-based compensation		6,324			-			-			6,324			-			6,324			6,976			-			-			6,976			-			6,976
Purchases and retirement of common shares		(5,477	)		-			(55,408	)		(60,885	)		-			(60,885	)
Cash dividends declared		-			-			(14,504	)		(14,504	)		-			(14,504	)		-			-			(15,418	)		(15,418	)		-			(15,418	)
Dividends to noncontrolling interests		-			-			-			-			(9,197	)		(9,197	)
Balance at August 31, 2021	$	279,635		$	41,113		$	1,132,595		$	1,453,343		$	153,289		$	1,606,632
Balance at August 31, 2022																			$	277,085		$	(43,312	)	$	1,278,827		$	1,512,600		$	134,372		$	1,646,972
Net earnings		-			-			110,301			110,301			2,884			113,185			-			-			16,218			16,218			3,287			19,505
Other comprehensive loss		-			(57,858	)		-			(57,858	)		-			(57,858	)		-			(3,224	)		-			(3,224	)		-			(3,224	)
Common shares issued, net of withholding tax		(2,694	)		-			-			(2,694	)		-			(2,694	)		(649	)		-			-			(649	)		-			(649	)
Common shares in non-qualified plans		257			-			-			257			-			257			298			-			-			298			-			298
Stock-based compensation		3,304			-			-			3,304			-			3,304			3,620			-			-			3,620			-			3,620
Purchases and retirement of common shares		(1,297	)		-			(11,405	)		(12,702	)		-			(12,702	)
Cash dividends declared		-			-			(14,154	)		(14,154	)		-			(14,154	)		-			-			(15,470	)		(15,470	)		-			(15,470	)
Dividends to noncontrolling interest		-			-			-			-			(2,879	)		(2,879	)
Balance at November 30, 2021	$	279,205		$	(16,745	)	$	1,217,337		$	1,479,797		$	153,294		$	1,633,091
Dividends to noncontrolling interests																				-			-			-			-			(11,760	)		(11,760	)
Balance at November 30, 2022																			$	280,354		$	(46,536	)	$	1,279,575		$	1,513,393		$	125,899		$	1,639,292

The following table summarizes the changes in accumulated ~~other comprehensive income (loss)~~OCI for the periods presented:

Accumulated

Foreign

Pension

Other

Currency

Liability

Cash Flow

Comprehensive

(in thousands)

Translation

Adjustment

Hedges

Loss

Balance as of May 31, 2022

$
(15,310
)

$
(6,244
)

$
(1,296
)

$
(22,850
)
Other comprehensive loss before reclassifications

(8,970
)

(1,034
)

(36,041
)

(46,045
)
Reclassification adjustments to net earnings (a)

-

4,774

13,279

18,053

Income tax effect

(273
)

(883
)

5,462

4,306

Balance as of November 30, 2022

$
(24,553
)

$
(3,387
)

$
(18,596
)

$
(46,536
)

Accumulated

Foreign

Pension

Other

Currency

Liability

Cash Flow

Comprehensive

(in thousands)

Translation

Adjustment

Hedges

Income (Loss)

Balance as of May 31, 2021

$
1,779

$
(15,955
)

$
59,563

$
45,387

Other comprehensive income (loss) before reclassifications

(8,124
)

-

14,279

6,155

Reclassification adjustments to net earnings (a)

-

-

(83,155
)

(83,155
)
Income tax effect

(723
)

-

15,591

14,868

Balance as of November 30, 2021

$
(7,068
)

$
(15,955
)

$
6,278

$
(16,745
)


										Accumulated
	Foreign			Pension						Other
	Currency			Liability			Cash Flow			Comprehensive
(In thousands)	Translation			Adjustment			Hedges			Loss
Balance at May 31, 2023	$	(22,123	)	$	(1,730	)	$	674		$	(23,179	)
Other comprehensive income before reclassifications		2,170			-			12,947			15,117
Reclassification adjustments to net earnings (a)		-			-			(4,369	)		(4,369	)
Income tax effect		172			(3	)		(1,879	)		(1,710	)
Balance at November 30, 2023	$	(19,781	)	$	(1,733	)	$	7,373		$	(14,141	)


										Accumulated
	Foreign			Pension						Other
	Currency			Liability			Cash Flow			Comprehensive
(In thousands)	Translation			Adjustment			Hedges			Loss
Balance at May 31, 2022	$	(15,310	)	$	(6,244	)	$	(1,296	)	$	(22,850	)
Other comprehensive loss before reclassifications		(8,970	)		(1,034	)		(36,041	)		(46,045	)
Reclassification adjustments to net earnings (a)(b)		-			4,774			13,279			18,053
Income tax effect		(273	)		(883	)		5,462			4,306
Balance at November 30, 2022	$	(24,553	)	$	(3,387	)	$	(18,596	)	$	(46,536	)

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~~(a)~~

The consolidated statement of earnings classification of amounts reclassified to net ~~earnings~~income include:

~~Pension liability adjustment~~ ~~– During August 2022, we purchased (using pension plan assets) an annuity contract from a third-party insurance company to transfer approximately~~ 31% of the total projected benefit obligation of The Gerstenslager Company Bargaining Unit Employees’ Pension Plan as of the purchase date. As a result of this transaction: 1) we incurred a non-cash settlement charge of $~~4,774,000~~ within “Miscellaneous income (expense), net”; 2) we were relieved of all responsibility for these pension obligations; and 3) the insurance company is now required to pay and administer the retirement benefits owed to ~~220~~ ~~beneficiaries; and~~

2.(a)

Cash flow hedges – ~~disclosed~~See the disclosure in “Note Q – Derivative Financial Instruments and Hedging ~~Activities”.~~Activities;” and

(b)

Pension liability adjustment – Reflects a non-cash settlement charge of $4,774 recognized in connection with a pension lift-out transaction completed in August 2022 for The Gerstenslager Company Bargaining Unit Employees’ Pension Plan.

Note L – Stock-Based Compensation

Non-Qualified Stock Options

During the six months ended November 30, ~~2022,~~2023, we granted non-qualified stock options covering a total of ~~84,400~~54 common shares,no par value, of Worthington Enterprises (the “common shares”) under our stock-based compensation plans. The ~~weighted average~~ exercise price of $~~46.39~~69.47 per share ~~was~~for the non-qualified stock options granted in fiscal 2024 is equal to the closing market price of the underlying common shares aton the grant date. The fair value of these non-qualified stock options, based on the Black-Scholes option-pricing model, calculated at the grant date, was $~~16.36~~25.95 per share. The calculated pre-tax stock-based compensation expense for these non-qualified stock options iswas $~~1,381,000~~1,401 and will be recognized on a straight-line basis over the three-year vesting period, net of any forfeitures. The following assumptions were used to value these non-qualified stock options:


Dividend yield	~~2.33~~2.39	%
Expected volatility	~~41.63~~43.00	%
Risk-free interest rate	~~3.19~~4.05	%
Expected term (years)	6.0

Expected volatility is based on the historical volatility of ~~Worthington Industries, Inc.’s~~the common shares and the risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the non-qualified stock options. The expected term was developed using historical exercise experience.

Service-Based Restricted Common Shares

During the six months ended November 30, ~~2022,~~2023, we granted an aggregate of ~~308,000~~176 service-based restricted common shares under our stock-based compensation plans, which ~~generally~~cliff vest three years ~~after their~~from the grant date. The fair value of these restricted common shares was equal to the weighted average closing market price of the underlying common shares on the grant date, ~~of grant,~~ or $~~51.09~~65.97 per share. The calculated pre-tax stock-based compensation expense for these restricted common shares iswas $~~15,216,000~~11,640 and will be recognized on a straight-line basis over the three-year service-based vesting ~~period.~~period, net of any forfeitures.

~~Market-Based Restricted Common Shares~~

~~On June 24, 2022, we granted~~ ~~10,000~~ market-based restricted common shares to one key employee under one of our stock-based compensation plans. Vesting of these restricted common shares is contingent upon the average closing price of the common shares reaching $~~65.00~~ ~~during any~~ 90 consecutive day period during the five-year period following the date of grant and completion of a three-year service vesting period. The grant date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $~~35.49~~ ~~per share. The calculated pre-tax stock-based compensation expense for these market-based restricted common shares is $355,000~~ ~~and will be recognized on a straight-line basis over the~~ ~~three-year~~ ~~service-based vesting period.~~ ~~The following assumptions were used to determine the grant-date fair value and the derived service period for these restricted common shares:~~


~~Dividend yield~~	~~2.67~~	%
~~Expected volatility~~	~~43.00~~	%
~~Risk-free interest rate~~	~~3.18~~	%

~~Table of Contents~~

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, a business unit adjusted earnings before interest and taxes (“adjusted EBIT”) target, in each case for the three-year periods ending May 31, ~~2023,~~ 2024, 2025 and ~~2025.~~2026. These performance share awards will be paid, to the extent earned, in common shares ~~of Worthington Industries, Inc.~~ in the fiscal quarter following the end of the applicable three-year performance period. The fair values of our performance shares are determined by the closing market prices of the underlying common shares at the respective grant dates of the performance shares and the pre-tax stock-based compensation expense is based on our periodic assessment of the probability of the targets being achieved and our estimate of the number of common shares that will ultimately be issued. During the six months ended November 30, ~~2022,~~2023, we granted performance share awards covering an aggregate of ~~58,100~~47 common shares (at target levels). The calculated pre-tax stock-based compensation expense for these performance shares is $~~2,695,000~~3,235 (at target levels). The ultimate pre-tax stock-based compensation expense to be recognized over the three-year performance period on all tranches will vary based on our periodic assessment of the probability of the targets being achieved.

Note M – Income Taxes

Income tax expense for the ~~six~~three months ended November 30, ~~2022~~2023 and ~~2021~~November 30, 2022 reflected estimated annual effective income tax rates of ~~23.7~~23.4% and ~~22.8~~23.7%, respectively, and ~~exclude~~excluded 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, Samuel ~~Spartan,~~and TWB ~~and WSP (through October 31, 2022)~~ consolidated joint ventures. The net earnings attributable to the noncontrolling interests in ~~Samuel, Spartan, TWB and WSP’s~~our consolidated joint ventures’ U.S. operations do not generate tax expense to ~~Worthington~~us since the investors in ~~Samuel, Spartan, TWB and WSP’s~~the consolidated joint ventures’ U.S. operations are taxed directly based on the earnings attributable to them. The tax expense of TWB’s wholly-owned foreign corporations is reported in our consolidated income tax expense. Management is required to estimate the annual effective income tax rate based upon its forecast

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of annual pre-tax income for domestic and foreign operations. Our actual effective income tax rate for fiscal ~~2023~~2024 could be materially different from the forecasted rate as of November 30, ~~2022.~~ 2023.

Note N – Earnings per Share

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

Three Months Ended

Six Months Ended

November 30,

November 30,

(in thousands, except per share amounts)
2022

2021

2022

2021

Numerator (basic & diluted):

Net earnings attributable to controlling interest -

income available to common shareholders
$
16,218

$
110,301

$
80,300

$
242,792

Denominator:

Denominator for basic earnings per share attributable to

controlling interest - weighted average common shares

48,558

50,381

48,518

50,618

Effect of dilutive securities

772

833

775

914

Denominator for diluted earnings per share attributable to

controlling interest - adjusted weighted average common shares

49,330

51,214

49,293

51,532

Basic earnings per share attributable to controlling interest
$
0.33

$
2.19

$
1.66

$
4.80

Diluted earnings per share attributable to controlling interest
$
0.33

$
2.15

$
1.63

$
4.71


	Three Months Ended				Six Months Ended
	November 30,				November 30,
(In thousands, except per common share amounts)	2023		2022		2023		2022
Numerator (basic & diluted):
Net earnings attributable to controlling interest -
income available to common shareholders	$	24,302	$	16,218	$	120,409	$	80,300
Denominator:
Denominator for basic earnings per common share attributable to
controlling interest – weighted average common shares		49,186		48,558		49,013		48,518
Effect of dilutive securities		856		772		1,089		775
Denominator for diluted earnings per common share attributable to
controlling interest – adjusted weighted average common shares		50,042		49,330		50,102		49,293

Basic earnings per common share attributable to controlling interest	$	0.49	$	0.33	$	2.46	$	1.66
Diluted earnings per common share attributable to controlling interest	$	0.49	$	0.33	$	2.40	$	1.63

~~Stock~~Non-qualified stock options covering ~~an aggregate of~~ ~~138,100~~58 and ~~54,500~~138 common shares for the three months ended November 30, ~~2022~~2023 and ~~2021,~~November 30, 2022, respectively, and ~~127,492~~46 and ~~47,352~~127 common shares ~~for the~~ six months ended November ~~20,~~30, 2023 and November 30, 2022, ~~and 2021,~~ respectively have been excluded from the computation of diluted earnings per common share because the effect would have been anti-dilutive for those periods.

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Note O – Segment Operations

~~The profit measure~~Our operations are managed principally on a products and services basis. Factors used to identify reportable segments include the nature of the products and services provided by each business, the management reporting structure, similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance. As of November 30, 2023, our operations were organized under four operating segments: Steel Processing, Consumer Products, Building Products, and Sustainable Energy Solutions. As none of the operating segments were aggregated for segment reporting purposes, they corresponded with the reportable segments.

Segment information is prepared on the same basis that our chief operating decision maker (“CODM”), as defined in the ~~Company’s~~accounting literature, reviews financial information for operational decision-making purposes. Factors used to identify operating segments include the nature of the products and services provided by each business, the management reporting structure, the similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance.

We have identified our Chief ~~Operating Decision Maker ("CODM") uses to assess~~Executive Officer as our CODM. Our CODM assesses segment operating performance and ~~allocate~~allocates resources isbased on the profitability measure of adjusted ~~earnings (loss) before interest and taxes (“adjusted EBIT”). EBIT is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest.~~EBIT. Adjusted EBIT excludes impairment and restructuring ~~charges (gains)~~expense (income), but may also exclude other items, as described in the tables below, that management believes are not reflective of, and thus should not be included when evaluating the performance of ~~the Company’s~~our ongoing ~~operations, including direct and incremental costs incurred in connection with the planned Separation of the Company’s Steel Processing business.~~operations. Adjusted EBIT is a non-GAAP financial measure and is used by management to evaluate operating segment performance, engage in financial and operational planning and determine incentive compensation because we believe that this financial measure provides additional perspective and, in some circumstances is more closely correlated to, the performance of the Company’s ongoing operations.compensation.

Impairment charges are excluded from adjusted EBIT because they do not occur in the ordinary course of our ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, so their exclusion facilitates the comparison of historical, current and forecasted financial results. Refer to “Note E – Impairment of Long-Lived Assets” for additional information.

Restructuring activities consist of established programs that are not part of our ongoing operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions). Refer to “Note F – Restructuring and Other Expense (Income), Net” for additional information.

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The following table presents summarized financial information for our reportable ~~operating~~ segments for the periods indicated.


	Three Months Ended November 30, 2022																Three Months Ended November 30, 2023
(in thousands)	Steel Processing			Consumer Products			Building Products		Sustainable Energy Solutions		Other			Consolidated
(In thousands)																	Steel Processing		Consumer Products		Building Products		Sustainable Energy Solutions			Other			Consolidated
Net sales	$	841,947		$	153,795		$	141,671	$	38,128	$	-		$	1,175,541		$	788,655	$	147,738	$	122,954	$	27,537		$	34		$	1,086,918
Restructuring and other income, net		(4,282	)		-			-		-		-			(4,282	)
Restructuring and other expense, net																		-		-		-		-			6			6
Separation costs		-			-			-		-		9,246			9,246			-		-		-		-			21,952			21,952
Miscellaneous income (expense), net		850			(47	)		76		142		384			1,405			306		12		235		557			(90	)		1,020
Equity in net income (loss) of unconsolidated affiliates		1,906			-			35,107		-		(156	)		36,857
Equity income																		3,778		-		35,177		-			3,491			42,446
Adjusted EBIT ~~(2)~~(1)		(17,249	)		13,473			41,224		1,143		(3,291	)		35,300			6,762		9,510		40,284		(2,617	)		(1,090	)		52,849

(1)

Excludes the ~~noncontrolling~~following items in addition to impairment and restructuring activity:

•

Direct and incremental costs associated with the Separation as discussed in “Note A – Basis of Presentation”; and

•

Our share of the pre-tax gain realized by Workhorse in connection with the sale of the joint venture’s operations in Brazil of $2,780;


	Three Months Ended November 30, 2022
(In thousands)	Steel Processing			Consumer Products			Building Products		Sustainable Energy Solutions		Other			Consolidated
Net sales	$	841,947		$	153,795		$	141,671	$	38,128	$	-		$	1,175,541
Restructuring and other income, net		(4,282	)		-			-		-		-			(4,282	)
Separation costs		-			-			-		-		9,246			9,246
Miscellaneous income (expense), net		850			(47	)		76		142		384			1,405
Equity income		1,906			-			35,107		-		(156	)		36,857
Adjusted EBIT (2)		(17,249	)		13,473			41,224		1,143		(3,291	)		35,300

(2)

Excludes the following items in addition to impairment and restructuring activity:

•

Direct and incremental costs associated with the Separation as discussed in “Note A – Basis of Presentation”;

•

Incremental compensation expense of $525 within Consumer Products related to the earnout for the acquisition of Level5 Tools, LLC (“Level5”); and

•

Noncontrolling interest portion of ~~the restructuring gains within Steel Processing~~impairment of long-lived assets of $1,850. within Steel Processing.


	Six Months Ended November 30, 2023
(in thousands)	Steel Processing		Consumer Products		Building Products		Sustainable Energy Solutions			Other			Consolidated
Net sales	$	1,669,993	$	297,151	$	256,822	$	56,174		$	34		$	2,280,174
Impairment of long-lived assets		1,401		-		-		-			-			1,401
Restructuring and other expense, net		-		-		-		-			6			6
Separation costs		-		-		-		-			27,987			27,987
Miscellaneous income (expense), net		1,018		43		292		838			(160	)		2,031
Loss on extinguishment of debt		-		-		-		-			(1,534	)		(1,534	)
Equity income		12,735		-		80,219		-			3,873			96,827
Adjusted EBIT (3)		84,762		18,502		94,300		(7,339	)		(959	)		189,266

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(3)

Excludes the following in addition to impairment and restructuring activity:

~~(2)~~•

~~Excludes $525~~ ~~in selling, general and administrative expense in Consumer Products related to incremental expense attributable to the Level5 earnout; excludes $9,246~~ ~~of Separation costs in Other related to direct~~Direct and incremental costs ~~incurred in connection~~associated with the ~~anticipated~~ Separation ~~including audit, advisory,~~as discussed in “Note A – Basis of Presentation”;

•

The pre-tax loss on extinguishment of debt resulting from the redemption of the 2026 Notes, in full, on July 28, 2023; and ~~legal costs.~~

Three Months Ended November 30, 2021

(in thousands)
Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Consolidated

Net sales
$
937,842

$
140,793

$
121,125

$
33,101

$
-

$
1,232,861

Restructuring and other income, net

(182
)

-

-

-

(1,822
)

(2,004
)
Miscellaneous income, net

17

159

218

82

564

1,040

Equity in net income of unconsolidated affiliates

8,823

-

49,894

-

1,501

60,218

Adjusted EBIT (3)

71,925

17,584

54,718

796

1,893

146,916

~~(3)~~•

~~Excludes the noncontrolling~~Noncontrolling interest portion of ~~the restructuring gains~~impairment of long-lived assets of $519 within Steel ~~Processing of $~~81.Processing.

Six Months Ended November 30, 2022

(in thousands)
Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Consolidated

Net sales
$
1,880,827

$
342,497

$
291,994

$
68,888

$
-

$
2,584,206

Impairment of long-lived assets

312

-

-

-

-

312

Restructuring and other income, net

(4,205
)

-

-

-

(1,177
)

(5,382
)
Separation costs

-

-

-

-

9,246

9,246

Miscellaneous income (expense), net

1,035

(82
)

299

56

(4,989
)

(3,681
)
Equity in net income (loss) of unconsolidated affiliates

3,676

-

78,973

-

(14,080
)

68,569

Adjusted EBIT (4)(5)

17,663

34,406

93,959

(250
)

1,854

147,632


	Six Months Ended November 30, 2022
(in thousands)	Steel Processing			Consumer Products			Building Products		Sustainable Energy Solutions			Other			Consolidated
Net sales	$	1,880,827		$	342,497		$	291,994	$	68,888		$	-		$	2,584,206
Impairment of long-lived assets		312			-			-		-			-			312
Restructuring and other income, net		(4,205	)		-			-		-			(1,177	)		(5,382	)
Separation costs		-			-			-		-			9,246			9,246
Miscellaneous income (expense), net		1,035			(82	)		299		56			(4,989	)		(3,681	)
Equity income		3,676			-			78,973		-			(14,080	)		68,569
Adjusted EBIT (4)		17,663			34,406			93,959		(250	)		1,854			147,632

(4)

Excludes athe following in addition to impairment and restructuring activity:

•

Direct and incremental costs associated with the Separation as discussed in “Note A – Basis of Presentation.”

•

A non-cash settlement charge of $4,774 in miscellaneous income (expense), net within Other related to ~~accelerate a portion of deferred pension cost as a result of a~~the pension lift-out transaction ~~executed~~associated with ~~a third-party insurance company to transfer a portion of~~ the ~~total projected benefit obligation of The~~ Gerstenslager Company Bargaining Unit Employees’ Pension ~~Plan to the third-party insurance company; excludes a~~Plan;

•

A loss of $15,759 inwithin equity ~~in net~~ income ~~(loss) of unconsolidated affiliates within Other~~ related to the August 31, 2022, sale of ~~the Company’s~~our 50% noncontrolling ~~equity investment~~interest in ~~ArtiFlex effective August 3, 2022; excludes~~ArtiFlex;

•

Incremental compensation expense of $1,050 ~~in selling, general and administrative expense in~~within Consumer Products related to ~~incremental compensation expense attributable to~~ the Level5 ~~earnout;~~earnout agreement; and ~~excludes~~

•

Noncontrolling interest portion of the restructuring gain within Steel processing of $~~9,246~~1,734 within Steel Processing.

Total assets for each of our reportable segments at the dates indicated were as follows:


	November 30,		May 31,
(In thousands)	2023		2023
Total assets
Steel Processing	$	1,834,226	$	1,758,981
Consumer Products		622,304		615,430
Building Products		611,771		635,650
Sustainable Energy Solutions		103,448		129,872
Other		412,388		510,985
Total assets	$	3,584,137	$	3,650,918

Note P – Acquisitions

Tempel Steel Europe GmbH

On November 16, 2023, the Company acquired Voestalpine Automotive Components Nagold GmbH & Co. KG, a facility in Nagold, Germany for net cash consideration of $21,013 and the assumption of a $929 pension liability. The business, which will operate as Tempel Steel Europe GmbH (Tempel Steel Europe), provides automotive and electrical steel lamination stamping in Europe. The total purchase consideration was allocated primarily to tangible assets, consisting of $12,282 of ~~Separation costs in Other related to direct~~property, plant and ~~incremental costs incurred in connection~~equipment and $9,069 of net working capital, with the ~~anticipated Separation, including audit, advisory,~~residual recognized as goodwill.

The information included herein has been prepared based on the preliminary allocation of the purchase price using estimates of the fair value and ~~legal costs.~~useful lives of the assets acquired. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets acquired is fully evaluated by the Company.

1416

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~~(5)~~

~~Excludes~~The purchase price includes the ~~noncontrolling interest portion~~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 strategic benefits specific to us, which resulted in a purchase price in excess of the ~~impairment charge and restructuring gains within Steel Processing of $1,734~~.

Six Months Ended November 30, 2021

(in thousands)
Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Consolidated

Net sales
$
1,760,652

$
288,576

$
235,868

$
58,583

$
-

$
2,343,679

Restructuring and other income, net

(12,313
)

-

-

(143
)

(1,822
)

(14,278
)
Miscellaneous income, net

47

209

144

22

1,248

1,670

Equity in net income of unconsolidated affiliates

18,172

-

92,887

-

2,075

113,134

Adjusted EBIT (6)

179,617

38,140

103,471

(1,760
)

1,479

320,947

~~(6)~~

~~Excludes the noncontrolling interest portion~~fair value of the ~~restructuring gains within Steel Processing of~~identifiable net assets. The goodwill resulting from the acquisition equaled approximately $~~6,027~~591.

~~Total assets~~ and will be deductible for ~~each of our operating segments as of the dates indicated were as follows:~~income tax purposes.

November 30,

May 31,

(in thousands)
2022

2022

Total assets

Steel Processing
$
1,796,136

$
2,082,522

Consumer Products

627,474

577,026

Building Products

645,566

681,188

Sustainable Energy Solutions

120,978

114,084

Other

200,506

188,203

Total assets
$
3,390,660

$
3,643,023

~~Note P – Acquisitions~~

The results of operations have been included in our combined statements of earnings since the date of acquisition. Proforma results, including the acquired business since the beginning of fiscal 2023, would not be materially different from the reported results.

~~Level5®~~

Level5 Tools, LLC

On June 2, 2022, we acquired ~~Level5® Tools, LLC ("Level5"),~~Level5, a leading provider of drywall tools and related accessories. The total purchase price was $~~59,321,000~~59,321, including $~~2,000,000~~2,000 attributed to an earnout agreement with the selling shareholders, that provides for up to an additional $~~25,000,000~~25,000 of cash consideration should certain earnings targets be met annually through calendar year 2024. The earnout agreement also requires continued employment of a selling shareholder during the duration of the earnout period. Accordingly, payments to this key employee, to the extent earned, will be accounted for as post-combination compensation expense. ~~During the three months and six months ended~~As of November 30, ~~2022,~~2023, no amounts were accrued as compensation expense ~~of $525,000~~ ~~and $1,050,000, respectively, has been accrued within selling, general, and administrative expense in~~for anticipated payments under the ~~consolidated statements of earnings related to the earnout.~~second earnout period ending December 31, 2023.

Level5 is being operated as part of the Consumer Products operating segment and its results have been included in our consolidated statements of earnings since the date of acquisition. Proforma results, including the acquired business since the beginning of fiscal 2022, would not be materially different from the reported results.

The information included herein has been based on the preliminary allocation of the purchase price using estimates of the fair value and useful lives of the assets acquired. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets acquired is fully evaluated by us, including but not limited to, the fair value accounting.

The assets acquired and liabilities assumed were recognized at their estimated 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 of Level5, we identified and valued the following intangible assets:


(in thousands)
(In thousands)
Category	Amount		Useful Life (Years)	Amount		Useful Life (Years)
Trade name	$	13,500	Indefinite	$	13,500	Indefinite
Customer relationships		13,300	10		13,300	10
Technological know-how		6,500	20		6,500	20
Non-compete agreement		280	3		280	3
Total acquired identifiable intangible assets	$	33,580		$	33,580

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The purchase price includes the fair values of other assets that were not identifiable, not separately recognizable under ~~applicable~~ accounting rules (e.g., assembled workforce) or of immaterial value. The purchase price also includes strategic and synergistic benefits (investment value) specific to us, which resulted in a purchase price in excess of the fair value of the identifiable net assets. This additional investment value resulted in goodwill which will be deductible ~~by us~~ for income tax purposes.

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The following table summarizes the consideration ~~transferred~~paid and the ~~estimated~~final fair value assigned to the assets ~~acquired~~ and liabilities assumed at the acquisition date.

These amounts reflect various preliminary fair value estimates and assumptions, including preliminary work performed by a third-party valuation specialist, and are subject to change within the measurement period as the valuation is finalized. The primary areas of preliminary purchase price allocation subject to change relate to the valuation of acquired tangible assets and liabilities, identification and valuation of residual goodwill and tax effects of acquired assets and assumed liabilities.


(in thousands)	Preliminary Valuation			Measurement Period Adjustments			Revised Valuation
(In thousands)										Preliminary Valuation			Measurement Period Adjustments			Final Valuation
Cash and cash equivalents	$	1,515		$	-		$	1,515		$	1,515		$	-		$	1,515
Accounts receivable		2,860			-			2,860			2,860			-			2,860
Inventories		9,161			-			9,161			9,161			-			9,161
Prepaid expenses		64			-			64			64			-			64
Property, plant and equipment		273			-			273			273			-			273
Intangible assets		33,580			-			33,580			33,580			-			33,580
Operating lease assets		377			-			377			377			-			377
Total identifiable assets		47,830			-			47,830			47,830			-			47,830
Accounts payable		(3,175	)		-			(3,175	)		(3,175	)		-			(3,175	)
Accrued expenses		(904	)		151			(753	)		(904	)		151			(753	)
Current operating lease liabilities		(111	)		-			(111	)		(111	)		-			(111	)
Noncurrent operating lease liabilities		(266	)		-			(266	)		(266	)		-			(266	)
Net identifiable assets		43,374			151			43,525			43,374			151			43,525
Goodwill		15,947			-			15,947			15,947			-			15,947
Total purchase price		59,321			151			59,472			59,321			151			59,472
Less: Fair value of earnout		(2,000	)		-			(2,000	)		(2,000	)		-			(2,000	)
Plus: Net working capital deficit		282			(151	)		131			282			(151	)		131
Cash purchase price	$	57,603		$	-		$	57,603		$	57,603		$	-		$	57,603

Note Q – Derivative Financial Instruments and Hedging Activities

We utilize derivative financial instruments to primarily manage exposure to certain risks related to our ongoing operations. The primary risks managed through the use of derivative financial instruments include interest rate risk, foreign currency exchange rate risk and commodity price risk. While certain of our derivative financial instruments are designated as hedging instruments, we also enter into derivative financial 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 financial instruments are adjusted to current fair value through earnings at the end of each period.

Interest Rate Risk Management – We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps and treasury locks to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.

Foreign Currency Exchange Rate Risk Management – We conduct business in several major international currencies and are, therefore, subject to risks associated with changing foreign currency exchange rates. We enter into various contracts that change in value as foreign currency exchange rates change to manage this exposure. Such contracts limit exposure to both favorable and unfavorable currency exchange rate fluctuations. The translation of foreign currencies into U.S. dollars also subjects us to exposure related to fluctuating currency exchange rates; however, derivative financial 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, copper, 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 financial instruments to manage the associated price risk.

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

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Refer to “Note R – Fair Value” for additional information regarding the accounting treatment for our derivative financial instruments, as well as how fair value is determined.

The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at November 30, ~~2022:~~2023:


		Asset Derivatives			Liability Derivatives				Asset Derivatives			Liability Derivatives
		Balance			Balance				Balance			Balance
		Sheet	Fair		Sheet	Fair			Sheet	Fair		Sheet	Fair
(in thousands)		Location	Value		Location	Value
(In thousands)									Location	Value		Location	Value
Derivatives designated as hedging instruments:
Commodity contracts		Receivables	$	140	Accounts payable	$	16,830		Receivables	$	12,498	Accounts payable	$	3,743
		Other assets		-	Other liabilities		941		Other assets		47	Other liabilities		-
				140			17,771				12,545			3,743
Foreign currency exchange contracts		Other assets		258	Accounts payable		-
Total			$	398		$	17,771

Subtotals										$	12,545		$	3,743

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Commodity contracts		Receivables	$	4,622	Accounts payable	$	2,155		Receivables	$	2,476	Accounts payable	$	2,609
		Other assets		18	Other liabilities		275		Other assets		-	Other liabilities		39
				4,640			2,430
Foreign currency exchange contracts		Receivables		-	Accounts payable		94
Total			$	4,640		$	2,524
Subtotals											2,476			2,648

Total derivative financial instruments			$	5,038		$	20,295			$	15,021		$	6,391

The amounts in the table above reflect the fair value of our derivative financial instruments on a net basis where allowable under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been a $~~6,739,000~~5,150 increase in ~~“Receivables”~~receivables with a corresponding increase in ~~“Accounts~~accounts payable.”

~~Table of Contents~~

The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at May 31, ~~2022:~~2023:


		Asset Derivatives			Liability Derivatives				Asset Derivatives			Liability Derivatives
		Balance			Balance				Balance			Balance
		Sheet	Fair		Sheet	Fair			Sheet	Fair		Sheet	Fair
(in thousands)		Location	Value		Location	Value
(In thousands)									Location	Value		Location	Value
Derivatives designated as hedging instruments:
Commodity contracts		Receivables	$	1,040	Accounts payable	$	4,517		Receivables	$	20	Accounts payable	$	6,749
									Other assets		51	Other liabilities		379
		Other assets		-	Other liabilities		48				71			7,128
				1,040			4,565
Foreign currency exchange contracts		Receivables		-	Accounts payable		-		Receivables		-	Accounts payable		33
		Other assets		-	Other liabilities		17				-			33
				-			17
Total			$	1,040		$	4,582
Subtotals										$	71		$	7,161

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Commodity contracts		Receivables	$	11,555	Accounts payable	$	4,142		Receivables	$	2,539	Accounts payable	$	8,604
		Other assets		48	Other liabilities		24		Other assets		-	Other liabilities		35
				11,603			4,166
Foreign currency exchange contracts		Receivables		-	Accounts payable		255
Total			$	11,603		$	4,421
Subtotals											2,539			8,639

Total derivative financial instruments			$	12,643		$	9,003			$	2,610		$	15,800

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The amounts in the table above reflect the fair value of our derivative financial instruments on a net basis where allowable under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been a $~~6,300,000~~7,576 increase in ~~“Receivables”~~receivables with a corresponding increase in ~~“Accounts~~accounts payable.”

Cash Flow Hedges

We enter into derivative financial instruments to hedge our exposure to changes in cash flows attributable to commodity price fluctuations associated with certain forecasted transactions. These derivative financial instruments are designated and qualify as cash flow hedges. The earnings effects of these derivative financial instruments are presented in the same statement of earnings line items as the earnings effects of the hedged items. For derivative financial instruments designated as cash flow hedges, we assess hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative financial instruments.

The following table summarizes our cash flow hedges outstanding at November 30, ~~2022:~~2023:

Notional

(in thousands)

Amount

Maturity Date
Commodity contracts

$
114,516

December 2022 - December 2023
Foreign currency exchange contracts

$
1,751

January 2023 - July 2023

~~Table of Contents~~

The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from ~~Accumulated Other Comprehensive Income (Loss) (“AOCI”)~~AOCI into net earnings for derivative financial instruments designated as cash flow hedges for the periods presented:

(in thousands)

Gain (Loss)
Recognized in OCI

Location of Gain (Loss)
Reclassified from AOCI
into Net Earnings

Gain (Loss) Reclassified
from AOCI into
Net Earnings

For the three months ended November 30, 2022:

Commodity contracts

$
(19,641
)

Cost of goods sold

$
(13,648
)
Interest rate contracts

-

Interest expense

(7
)
Foreign currency exchange contracts

376

Net sales/Cost of goods sold

53

Total

$
(19,265
)

$
(13,602
)

For the three months ended November 30, 2021:

Commodity contracts

$
(21,002
)

Cost of goods sold

$
47,706

Interest rate contracts

-

Interest expense

27

Foreign currency exchange contracts

60

Miscellaneous income, net

3

Total

$
(20,942
)

$
47,736

For the six months ended November 30, 2022:

Commodity contracts

$
(36,099
)

Cost of goods sold

$
(13,192
)
Interest rate contracts

-

Interest expense

(13
)
Foreign currency exchange contracts

58

Net sales/Cost of goods sold

(74
)
Total

$
(36,041
)

$
(13,279
)

For the six months ended November 30, 2021:

Commodity contracts

$
14,218

Cost of goods sold

$
83,165

Interest rate contracts

-

Interest expense

(13
)
Foreign currency exchange contracts

61

Miscellaneous income, net

3

Total

$
14,279

$
83,155


(In thousands)	Gain (Loss) Recognized in OCI			Location of Gain (Loss) Reclassified from AOCI into Net Earnings	Gain (Loss) Reclassified from AOCI into Net Earnings
For the three months ended November 30, 2023:
Commodity contracts	$	15,019		Cost of goods sold	$	(2,360	)
Interest rate contracts		-		Interest expense, net		52
Foreign currency exchange contracts		(34	)	Net sales/Cost of goods sold		(97	)
Total	$	14,985			$	(2,405	)

For the three months ended November 30, 2022:
Commodity contracts	$	(19,641	)	Cost of goods sold	$	(13,648	)
Interest rate contracts		-		Interest expense		(7	)
Foreign currency exchange contracts		376		Net sales/Cost of goods sold		53
Total	$	(19,265	)		$	(13,602	)

For the six months ended November 30, 2023:
Commodity contracts	$	12,958		Cost of goods sold	$	4,970
Interest rate contracts		-		Loss on extinguishment of debt		(641	)
Interest rate contracts		-		Interest expense, net		84
Foreign currency exchange contracts		(11	)	Net sales/Cost of goods sold		(44	)
Total	$	12,947			$	4,369

For the six months ended November 30, 2022:
Commodity contracts	$	(36,099	)	Cost of goods sold	$	(13,192	)
Interest rate contracts		-		Interest expense		(13	)
Foreign currency exchange contracts		58		Net sales/Cost of goods sold		(74	)
Total	$	(36,041	)		$	(13,279	)

The estimated net amount of the ~~losses~~gain recognized in AOCI at November 30, ~~2022~~2023 expected to be reclassified into net earnings within the succeeding twelve months is $~~18,807,000~~7,678 (net of tax of $~~5,918,000~~1,703). This amount was computed using the fair value of the cash flow hedges at November 30, ~~2022,~~2023, and will change before actual reclassification from OCI to net earnings during the fiscal years ending May 31, ~~2023~~2024 and May 31, ~~2024.~~2025.

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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 financial instruments are adjusted to current market value at the end of each period through gain (loss) recognized in earnings.

The following table summarizes our economic (non-designated) derivative financial instruments outstanding at November 30, ~~2022:~~2023:

Notional

(in thousands)

Amount

Maturity Date(s)
Commodity contracts

$
5,100

December 2022 - December 2023
Foreign currency exchange contracts

$
15,096

December 2022

~~Table of Contents~~

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


		Gain (Loss) Recognized							Gain (Loss) Recognized
		In Earnings for the							in Earnings for the
	Location of Gain (Loss)	Three Months Ended November 30,						Location of Gain (Loss)	Three Months Ended November 30,
(in thousands)	Recognized in Earnings	2022			2021
(In thousands)								Recognized in Earnings	2023		2022
Commodity contracts	Cost of goods sold	$	3,861		$	(10,135	)	Cost of goods sold	$	1,459	$	3,861
Foreign currency exchange contracts	Miscellaneous income, net		(47	)		(588	)	Miscellaneous income, net		-		(47	)
Total		$	3,814		$	(10,723	)		$	1,459	$	3,814


		Gain (Loss) Recognized							Gain (Loss) Recognized
		in Earnings for the							in Earnings for the
	Location of Gain (Loss)	Six Months Ended November 30,						Location of Gain (Loss)	Six Months Ended November 30,
(in thousands)	Recognized in Earnings	2022			2021

(In thousands)								Recognized in Earnings	2023		2022
Commodity contracts	Cost of goods sold	$	2,284		$	(19,392	)	Cost of goods sold	$	395	$	2,284
Foreign currency exchange contracts	Miscellaneous income, net		(141	)		(249	)	Miscellaneous income, net		-		(141	)
Total		$	2,143		$	(19,641	)		$	395	$	2,143

Note R – 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.

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Recurring Fair Value Measurements

At November 30, ~~2022,~~2023, our assets and liabilities measured at fair value on a recurring basis were as follows:

Significant

Quoted Prices

Other

Significant

in Active

Observable

Unobservable

Markets

Inputs

Inputs

(in thousands)

(Level 1)

(Level 2)

(Level 3)

Totals

Assets

Derivative financial instruments (1)

$
-

$
5,038

$
-

$
5,038

Total assets

$
-

$
5,038

$
-

$
5,038

Liabilities

Derivative financial instruments (1)

$
-

$
20,295

$
-

$
20,295

Total liabilities

$
-

$
20,295

$
-

$
20,295


			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(In thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative financial instruments (1)	$	-	$	15,021	$	-	$	15,021
Total assets	$	-	$	15,021	$	-	$	15,021

Liabilities
Derivative financial instruments (1)	$	-	$	6,391	$	-	$	6,391
Total liabilities	$	-	$	6,391	$	-	$	6,391

(1)

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

~~Table of Contents~~

At May 31, ~~2022,~~2023, our assets and liabilities measured at fair value on a recurring basis were as follows:


			Significant								Significant
	Quoted Prices		Other		Significant				Quoted Prices		Other		Significant
	in Active		Observable		Unobservable				in Active		Observable		Unobservable
	Markets		Inputs		Inputs				Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
(In thousands)									(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative financial instruments (1)	$	-	$	12,643	$	-	$	12,643	$	-	$	2,610	$	-	$	2,610
Total assets	$	-	$	12,643	$	-	$	12,643	$	-	$	2,610	$	-	$	2,610

Liabilities
Derivative financial instruments (1)	$	-	$	9,003	$	-	$	9,003	$	-	$	15,800	$	-	$	15,800
Total liabilities	$	-	$	9,003	$	-	$	9,003	$	-	$	15,800	$	-	$	15,800

(1)

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Non-Recurring Fair Value Measurements

At November 30, ~~2022,~~2023, there were no assets measured at fair value on a non-recurring basis on ~~the Company’s~~our consolidated balance sheet.

At May 31, ~~2022,~~2023, our assets measured at fair value on a non-recurring basis were as follows:


			Significant								Significant
	Quoted Prices		Other		Significant				Quoted Prices		Other		Significant
	in Active		Observable		Unobservable				in Active		Observable		Unobservable
	Markets		Inputs		Inputs				Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
(In thousands)									(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Long-lived assets held for sale (1)	$	-	$	700	$	-	$	700	$	-	$	2,623	$	-	$	2,623
Long-lived assets held and used (2)										-		70		-		70
Total assets	$	-	$	700	$	-	$	700	$	-	$	2,693	$	-	$	2,693

(1)

Comprised of ~~production~~the following: (a) idled equipment at the manufacturing facility in Taylor, Michigan; and (b) the net assets of our ~~Twinsburg,~~former toll processing facility in Cleveland, Ohio.

(2)

Comprised of certain assets associated with a capital project at our Building Products facility in Jefferson, Ohio ~~facility with an~~which were written down to their estimated ~~fair market~~salvage value of $~~700,000~~70.

The fair value of non-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables, income taxes receivable, other assets, accounts payable, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities approximate carrying value due to their short-term nature. The fair value of long-term debt, including current maturities, based upon models utilizing market observable (Level 2) inputs and credit risk, was $~~646,856,000~~391,947 and $~~684,830,000~~639,948 at November 30, ~~2022~~2023 and May 31, ~~2022,~~2023, respectively. The carrying amount of long-term debt, including current maturities, was $~~693,710,000~~448,818 and $~~696,610,000~~689,982 at November 30, ~~2022~~2023 and May 31, ~~2022,~~2023, respectively.

Note S – Subsequent Events

On December 1, 2023, we completed the Separation. The Board of Directors of Worthington Enterprises (the “Board”) approved the completion of the Separation on November 9, 2023, which was effected by the Distribution by Worthington Enterprises of all of the outstanding common stock of Worthington Steel on December 1, 2023 to Worthington Enterprises stockholders who held its common shares as of the close of business on the Record Date. As part of the Distribution, each Worthington Enterprises stockholder of record as of the Record Date received one common share of Worthington Steel for every one common share of Worthington Enterprises held as of the Record Date. Refer to “Note A – Basis of Presentation” for additional information.

In connection with the Separation, we received a cash payment of $150,000 from Worthington Steel, which was funded by the Worthington Steel Credit Facility. On December 6, 2023, we used these cash proceeds to finalize our post-separation capital structure by redeeming, in full, the $150,000senior unsecured notes that were set to mature in August 2024.

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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.~~PSLRA. 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 Form 10-Q and “Part I – Item 1A. – Risk Factors” of the ~~2022~~2023 Form 10-K.

Unless otherwise indicated, all Note references contained in this ~~Part~~“Part I – Item 2.2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” refer to the Condensed Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q.

Introduction

The following discussion and analysis of market and industry trends, business developments, and the results of our operations and financial position, ~~of Worthington Industries, Inc., together with its subsidiaries (collectively, “we,” “our,” “us”, “Worthington,” or the “Company”),~~ should be read in conjunction with our consolidated financial statements and notes thereto included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. The ~~2022~~2023 Form 10-K includes additional information about ~~Worthington,~~ our business, operations and ~~our~~ consolidated financial position and should be read in conjunction with this Form 10-Q.

~~Our~~ This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations ~~are managed principally on~~and to allow investors to view the Company from the perspective of management. The results of operations contained in this MD&A include all of our operations, including our former Steel Processing business. Beginning in the third quarter of fiscal 2024, our historical results will be restated to reflect the operations of Worthington Steel as a ~~products and services basis. Segment information~~discontinued operation in periods prior to the December 1, 2023, Separation. This MD&A is prepared on the same basis that our management reviews financial information for operational decision-making purposes. Factors used to identify reportable operating segments include the nature of the products and services provided by each business, the management reporting structure, the similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance.divided into six main sections:

•

Separation of ~~November 30, 2022, we held equity positions in seven operating joint ventures. Three of these joint ventures are consolidated within~~ the Steel Processing ~~operating segment~~Business;

•

Recent Business Developments;

•

Trends and Factors Impacting our Performance;

•

Results of Operations;

•

Liquidity and Capital Resources; and

•

Critical Accounting Estimates

Separation of the Steel Processing Business

On December 1, 2023, we completed the Separation and Worthington Steel, comprised of our former Steel Processing business, became an independent, publicly traded company. The Separation of Worthington Steel from Worthington Enterprises, which is comprised of the Building Products, Consumer Products and Sustainable Energy Solutions businesses, was achieved through Worthington Enterprises’ pro rata distribution of 100% of the outstanding common shares of Worthington Steel to holders of record of Worthington Enterprises common shares as of the close of business on the Record Date. Each holder of record of Worthington Enterprises common shares received one common share of Worthington Steel for every one common share of Worthington Enterprises held at the close of business on the Record Date. In connection with the ~~equity owned by~~Separation, Worthington Steel made a cash distribution of $150 million to Worthington Enterprises. Following the ~~other joint venture member(s) shown as noncontrolling interests in our consolidated balance sheets, and their portions~~completion of ~~net earnings and other comprehensive income shown as net earnings or comprehensive income attributable~~the Separation, Worthington Industries, Inc. changed its name to ~~noncontrolling interests in our consolidated statements~~Worthington Enterprises, Inc. Worthington Enterprises’ common shares continue trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “WOR.” On December 1, 2023, the common shares of ~~earnings and consolidated statements~~Worthington Steel began trading on the NYSE under the ticker symbol “WS.”

Table of ~~comprehensive income, respectively. The remaining four of our joint ventures are accounted for using the equity method.~~Contents

Recent Business Developments

•

On June ~~2, 2022,~~29, 2023, we terminated the Company acquired Level5® Tools, LLC (“Level5”), a leading provider of drywall tools and related accessories. The net cash purchase price was approximately $56.1 million, with a potential earnout ofAR Facility that allowed us to borrow up to ~~$25.0 million based on performance through 2024.~~

•

~~On August 3, 2022,~~$175.0 million. No early termination or other similar fees or penalties were paid in connection with the Company sold its 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (“ArtiFlex”) to the unaffiliated joint venture member for approximately $42.1 million after adjustments for closing debttermination. See “Note I – Debt and final net working capital. Approximately $6.0 million of the total cash proceeds were attributed to real property in Wooster, Ohio, with a net book value of $6.3 million. This real property was owned by Worthington and leased to ArtiFlex prior to closing of the transaction. The Company recognized a pre-tax loss of approximately $15.8 million in equity income related to the sale of its 50% noncontrolling equity interest portion of the transaction.

•

On September 29, 2022, the Company announced that the Worthington Industries, Inc. Board of Directors approved a plan to pursue a separation of the Company’s Steel Processing business which it expects to complete by early 2024. In the months ahead, this plan will be referred to as “Worthington 2024.” Worthington 2024 will result in two independent, publicly-traded companies that are more specialized and fit-for-purpose, with enhanced prospects for growth and value creation. Worthington plans to effect the Separation via a distribution of stock of the Steel Processing business, which is expected to be tax-free to shareholders for U.S. federal income tax purposes. Refer to “Note A – Basis of Presentation”Receivables Securitization” for additional information.

•

On ~~October 31, 2022,~~July 28, 2023, we redeemed the ~~Company’s consolidated joint venture, WSP, sold its remaining manufacturing facility, located~~2026 Notes, which resulted in ~~Jackson, Michigan, for net proceeds~~a non-cash loss of approximately ~~$21.3~~$1.5 million ~~resulting~~related primarily to unamortized issuance costs and the remaining loss associated with an interest rate swap deferred in ~~a pre-tax gain of $3.9 million within restructuring~~AOCI at redemption. See “Note I – Debt and ~~other income, net. Refer to “Note F – Restructuring and Other Income, Net”~~Receivables Securitization” for additional information.

•

On December ~~20, 2022,~~6, 2023, we used the $150.0 million cash distribution from Worthington ~~Industries, Inc’s Board~~Steel to pay off in full the 2024 Notes. The payoff amount consisted of ~~Directors declared a quarterly dividend~~$150.0 million in principal plus accrued interest of ~~$0.31 per share payable on March 29, 2023, to shareholders of record on March 15, 2023.~~

•

On January 5, 2023 the Company announced the implementation of a Board of Directors transition plan, pursuant to which John H. McConnell II was appointed as a member of the Board of Directors, effective on January 4, 2023, and John P. McConnell intends to steps down in June 2023.$0.5 million. See “Note S – Subsequent Events” for additional information.

~~Table of Contents~~Trends and Factors Impacting our Performance

The industries in which we participate are fragmented and highly competitive. Given the broad base of products and services offered, specific competitors vary based on the target industry, product type, service type, size of program and geography. Competition is primarily on the basis of price, product quality and the ability to meet delivery requirements. Our products are priced competitively, primarily based on market factors, including, among other things, market pricing, the cost and availability of raw materials, transportation and shipping costs, and overall economic conditions in the U.S. and abroad.

General Economic and Market ~~& Industry Overview~~Conditions

We sell our products and services to a diverse customer base and a broad range of end markets. The breakdown of net sales by end market for the second quarter of each of fiscal ~~2023~~2024 and fiscal ~~2022~~2023 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 54%~~During the second quarter of fiscal 2024, approximately 53% of Steel Processing’s net sales ~~are~~were to the automotive market. North American vehicle production, primarily by Ford, General Motors and Stellantis North America (the “Detroit Three automakers”), has a considerable impact on the activity within ~~this~~the Steel Processing operating ~~segment. The majority of the net sales of one of our~~segment, including its unconsolidated joint ~~ventures,~~venture, Serviacero ~~Worthington, is also to the automotive market.~~Worthington.

~~Approximately 11%~~During the second quarter of fiscal 2024, approximately 13% of the net sales of our Steel Processing operating segment ~~are~~were to the construction market. The construction market is also the predominant end market for our unconsolidated joint ventures within the Building Products operating segment, 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 the U.S. gross domestic product (“U.S. GDP”), the Dodge Index of construction contracts and, in the case of ClarkDietrich, trends in the relative prices of framing lumber and steel.

~~Substantially~~During the second quarter of fiscal 2024, substantially all of the net sales of our Consumer Products, Building Products, and Sustainable Energy Solutions operating segments and approximately ~~35%~~34% of the net sales of our Steel Processing operating segment ~~are~~were to other

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markets such as agricultural, appliance, consumer products, heavy-truck, industrial products, including the industrial electric motor, generator, and transformer end markets, and lawn and garden. 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 the demand of these end markets.

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

Three Months Ended

Six Months Ended

November 30,

November 30,

2022

2021

Inc / (Dec)

2022

2021

Inc / (Dec)

U.S. GDP (% growth year-over-year) (1)

1.8
%

5.0
%

(3.2
%)

2.1
%

4.9
%

(2.8
%)
Hot-Rolled Steel ($ per ton) (2)

$
742

$
1,888

$
(1,146
)

$
860

$
1,825

$
(965
)
Detroit Three Auto Build (000's vehicles) (3)

1,711

1,481

230

3,472

2,856

616

No. America Auto Build (000's vehicles) (3)

3,713

3,170

544

7,341

6,413

928

Zinc ($ per pound) (4)

$
1.36

$
1.46

$
(0.10
)

$
1.46

$
1.41

$
0.05

Natural Gas ($ per mcf) (5)

$
6.77

$
5.26

$
1.51

$
7.32

$
4.47

$
2.85

On-Highway Diesel Fuel Prices ($ per gallon) (6)

$
4.26

$
3.57

$
0.69

$
4.84

$
3.45

$
1.39

~~(1)2021 figures based on revised actuals;~~ ~~(2)CRU Hot-Rolled Index, period average;~~ ~~(3)IHS Global;~~ ~~(4)LME Zinc, period average;~~ ~~(5)NYMEX Henry Hub Natural Gas, period average;~~ ~~(6)Energy Information Administration, period average~~

~~Table of Contents~~

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 generally indicative of a stronger economy, which generally increases demand and pricing for our products. Conversely, declining U.S. GDP growth rates generally indicate a weaker ~~economy.~~economy, which generally decreases demand and pricing for our products. Changes in U.S. GDP growth rates can also signal changes in conversion costs related to production and in selling, general, and administrative expense (“SG&A”) ~~expenses.~~.

~~The market price~~Inflation and government deficits and debt remain at high levels. While inflation has moderated recently, a period of ~~hot-rolled steel~~sustained inflation could pressure our margins in future periods. In response to the concerns over inflation risk in the broader U.S. economy, the U.S. Federal Reserve increased its benchmark interest rate significantly during fiscal 2022 and fiscal 2023. Interest rates may remain high in fiscal 2024. Adverse economic conditions resulting from inflationary pressures, U.S. Federal Reserve actions, including continued high interest rates and/or increases in interest rates, geopolitical issues or otherwise are difficult to predict and may have a material adverse impact on our business, results of operations and financial condition. Please see Part I, Item 1A. “Risk Factors” on our 2023 Form 10-K for an additional discussion of risks and potential risks of inflation and adverse economic conditions on our business, financial condition and results of operations.

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


	Three Months Ended									Six Months Ended
	November 30,									November 30,
	2023			2022 (1)			Inc/ (Dec)			2023			2022 (1)			Inc/ (Dec)
U.S. GDP (% growth year-over-year)		2.8	%		1.8	%		1.0	%		2.5	%		1.8	%		0.7	%
Hot-Rolled Steel ($ per ton) (2)	$	747		$	742		$	5		$	813		$	860		$	(47	)
Detroit Three Auto Build (000's vehicles) (3)		1,558			1,742			(184	)		3,328			3,471			(143	)
No. America Auto Build (000's vehicles) (3)		3,914			3,737			177			7,890			7,375			515
Zinc ($ per pound) (4)	$	1.14		$	1.36		$	(0.22	)	$	1.11		$	1.46		$	(0.35	)
Natural Gas ($ per mcf) (5)	$	2.96		$	6.77		$	(3.81	)	$	2.77		$	7.32		$	(4.55	)
On-Highway Diesel Fuel Prices ($ per gallon) (6)	$	4.44		$	5.15		$	(0.71	)	$	4.23		$	5.29		$	(1.06	)

(1)

2022 figures are based on revised actuals

(2)

CRU Hot-Rolled Index: period average

(3)

IHS Global (S&P)

(4)

LME Zinc; period average

(5)

NYMEX Henry Hub Natural Gas; period average

(6)

Energy Information Administration; period average

Sales to one Steel Processing customer in the automotive industry represented 11.1% and 12.3% of consolidated net sales during the second quarter of fiscal 2024 and the second quarter of fiscal 2023, respectively. While our automotive business is ~~one~~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 quarter of fiscal 2024, vehicle production for the Detroit Three automakers was down 11% due to the United Auto Workers Strike while overall North American vehicle production was up 5%.

Sales for most of our products are generally strongest in our fiscal fourth quarter when our facilities operate at seasonal peaks. Historically, sales have been weaker in our fiscal third quarter, primarily due to reduced seasonal activity in the building and construction industry, as well as customer plant shutdowns due to holidays, particularly in the automotive industry. We do not believe backlog is a significant ~~factors impacting~~indicator of our ~~selling prices and operating results.~~business.

Impact of Raw Material Prices

Our principal raw material is flat-rolled steel, which we purchase from multiple primary steel producers. 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. ~~Based~~Steel prices declined throughout most of fiscal 2023 before increasing significantly in the fourth quarter on ~~current price levels, we expect to have meaningful~~

Table of Contents

production cuts at major steel mills and the replenishing of inventories in major end markets, then decreased again in the first and second quarters of fiscal 2024. The decline in steel prices in fiscal 2024 resulted in estimated inventory holding losses inof $19.3 million during the ~~third quarter of fiscal~~six months ended November 30, 2023.

The following table presents the average quarterly market price per ton of hot-rolled steel during fiscal ~~2023~~2024 (first and second ~~quarters)~~quarter), fiscal ~~2022~~2023 and fiscal ~~2021:~~2022:


	Fiscal Year						Fiscal Year
(Dollars per ton)(1)	2023		2022		2021		2024		2023		2022
1st Quarter	$	978	$	1,762	$	475	$	879	$	978	$	1,762
2nd Quarter	$	742	$	1,888	$	625	$	747	$	742	$	1,888
3rd Quarter	N/A		$	1,421	$	1,016	N/A		$	720	$	1,421
4th Quarter	N/A		$	1,280	$	1,358	N/A		$	1,116	$	1,280
Annual Avg.	$	860	$	1,588	$	869	$	813	$	889	$	1,588

(1)

CRU Hot-Rolled Index, period average

~~Sales~~No matter how efficient, our operations, which use steel as a raw material, create some amount of scrap. The expected price of scrap compared to ~~one Steel Processing customer~~the price of the steel raw material is factored into pricing. Generally, as the price of steel increases, the price of scrap increases by a similar amount. When increases in scrap prices do not keep pace with the increases in the automotive industry represented 12.3% and 15.6% of consolidated net sales during the second quarter of fiscal 2023 and fiscal 2022, respectively. While our automotive business is largely driven by the production schedulesprice of the ~~Detroit Three automakers,~~steel raw material, it can have a negative impact on our ~~customer base is much broader and includes other domestic manufacturers and many of their suppliers. During~~margins. We refer to this effect as the ~~second quarter of fiscal 2023, vehicle production for~~“scrap gap,” which has narrowed in recent years from historically high levels, including quarter-over-quarter declines in the ~~Detroit Three automakers and the North American vehicle production were up 16% and 17%, respectively, over the prior year quarter.~~current period.

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 operations and indirectly through transportation and freight expense.

Results of Operations

Second Quarter – Fiscal ~~2023~~2024 Compared to Fiscal ~~2022~~2023

The following discussion provides a review of results for the three months ended November 30, ~~2022~~2023 and ~~2021.~~November 30, 2022.


	Three Months Ended								Three Months Ended
	November 30,								November 30,
(In millions, except per share amounts)	2022			2021		Increase/ (Decrease)
(In millions, except per common share amounts)									2023			2022			Increase/ (Decrease)
Net sales	$	1,175.5		$	1,232.9	$	(57.4	)	$	1,086.9		$	1,175.5		$	(88.6	)
Operating income (loss)		(7.0	)		90.5		(97.5	)
Operating loss										(5.9	)		(7.0	)		1.1
Equity income		36.9			60.2		(23.3	)		42.4			36.9			5.5
Net earnings attributable to controlling interest		16.2			110.3		(94.1	)		24.3			16.2			8.1
Earnings per diluted share attributable to controlling interest	$	0.33		$	2.15	$	(1.82	)
Earnings per diluted common share attributable to controlling interest									$	0.49		$	0.33		$	0.16

~~Table of Contents~~

Net Sales and Volume

The following table provides a breakdown of our consolidated net sales by ~~reportable~~ operating segment, along with the respective percentage of the ~~total~~ consolidated net sales of each, for the periods indicated.


	Three Months Ended													Three Months Ended
	November 30,													November 30,
			% of					% of			Increase/					% of					% of			Increase/
(In millions)	2022		Net sales			2021		Net sales			(Decrease)			2023		Net sales			2022		Net sales			(Decrease)
Steel Processing	$	841.9		71.6	%	$	937.8		76.1	%	$	(95.9	)	$	788.7		72.6	%	$	841.9		71.6	%	$	(53.2	)
Consumer Products		153.8		13.1	%		140.8		11.4	%		13.0			147.7		13.6	%		153.8		13.1	%		(6.1	)
Building Products		141.7		12.1	%		121.1		9.8	%		20.6			123.0		11.3	%		141.7		12.1	%		(18.7	)
Sustainable Energy Solutions		38.1		3.2	%		33.1		2.7	%		5.0			27.5		2.5	%		38.1		3.2	%		(10.6	)
Other		-		0.0	%		-		0.0	%		-
Consolidated Net Sales	$	1,175.5		100.0	%	$	1,232.8		100.0	%	$	(57.3	)	$	1,086.9		100.0	%	$	1,175.5		100.0	%	$	(88.6	)

Table of Contents

The following table provides volume by ~~reportable~~ operating segment for the periods presented.


	Three Months Ended							Three Months Ended
	November 30,							November 30,
					Increase/							Increase/
	2022		2021		(Decrease)			2023		2022		(Decrease)
Steel Processing (Tons)		925,434		1,067,589		(142,155	)		958,736		925,434		33,302
Consumer Products (Units)		16,583,326		18,698,589		(2,115,263	)		16,885,517		16,583,326		302,191
Building Products (Units)		2,367,770		2,565,025		(197,255	)		2,392,515		2,367,770		24,745
Sustainable Energy Solutions (Units)		155,687		155,001		686			114,063		155,687		(41,624	)

•

Steel Processing – Net sales ~~decreased $95.9~~totaled $788.7 million in the second quarter of fiscal 2024, down 6%, or $53.2 million, from the ~~prior year quarter. The decrease was driven primarily by~~second quarter of fiscal 2023, as the impact of lower average selling prices ~~and to a lesser extent, lower tolling volume, partially~~more than offset ~~by contributions from~~ the ~~acquisition~~impact of ~~Tempel on December 1, 2021.~~higher direct volumes. The mix of direct versus toll tons processed was 56% to 44% in the second quarter of fiscal 2024, compared to 54% to 46% in the ~~current quarter, compared to 47% to 53% in~~prior year quarter. Excluding the impact of the prior year ~~quarter. The shift~~divestiture of the WSP toll processing facility in ~~mix towards~~Jackson, Michigan, both direct ~~tons was driven primarily by lower tolling volume with the steel mills~~ and ~~the exit of our consolidated joint venture, WSP.~~toll volumes were up approximately 7%.

•

Consumer Products – Net sales ~~increased 9.2%~~totaled $147.7 million in the second quarter of fiscal 2024, down 4%, or ~~$13.0~~$6.1 million ~~over~~compared to the ~~prior year~~second quarter ~~as higher~~of fiscal 2023, on the combined impact of lower average selling prices more than offset the impact of lower overall volumes, which were down 13%, excluding contributions from the Level 5 acquisition. End consumer demand began to slow during the quarter, which when combined with reduced inventory levels at certain retail customers, led to lower overall customer orders.and an unfavorable shift in product mix.

•

Building Products – Net sales ~~increased 17.0%~~totaled $123.0 million in the second quarter of fiscal 2024, down 13%, or ~~$20.6~~$18.7 million, ~~over~~from the ~~prior year quarter. The increase was~~second quarter of fiscal 2023, driven primarily by ~~higher~~lower average selling prices ~~partially offset by lower volumes. Units shipped were down 8% as customers reduced orders due to higher than optimal inventory levels.~~and an unfavorable shift in product mix.

•

Sustainable Energy Solutions – Net sales totaled $27.5 million in the second quarter of fiscal 2024, down 28%, or $10.6 million, compared to the prior year quarter on lower volumes and an unfavorable shift in product mix.

Gross margin


	Three Months Ended
	November 30,
			% of					% of			Increase/
(In millions)	2023		Net sales			2022		Net sales			(Decrease)
Gross Margin	$	123.7		11.4	%	$	105.8		9.0	%	$	17.9

Gross margin increased ~~$5.0~~$17.9 million ~~or 15.1%,~~over the comparable period in the prior year to $123.7 million, largely driven by lower estimated inventory holding losses in Steel Processing, down $18.3 million from the prior year ~~quarter due~~quarter.

Selling, general and administrative expense


	Three Months Ended
	November 30,
			% of					% of			Increase/
(In millions)	2023		Net sales			2022		Net sales			(Decrease)
Selling, general and administrative expense	$	107.7		9.9	%	$	107.8		9.2	%	$	(0.1	)

•

SG&A expense of $107.7 million was relatively flat compared to the ~~combined impact of increased volume and higher average selling prices.~~prior year quarter.

~~Gross Margin~~Other operating items

Three Months Ended

November 30,

% of

% of

Increase/

(In millions)
2022

Net sales

2021

Net sales

(Decrease)

Gross Margin
$
105.8

9.0
%

$
184.6

15.0
%

$
(78.8
)


	Three Months Ended
	November 30,
					Increase/
(In millions)	2023		2022		(Decrease)
Restructuring and other income, net		-		4.3		(4.3	)
Separation costs		21.9		9.2		12.7

Table of Contents

•

Gross margin decreased $78.8 million from the prior year quarter to $105.8 million due primarily to lower contributions from Steel Processing, down $79.7 million, as declining steel prices resulted in an estimated $95.2 million unfavorable swing related to estimated inventory holding losses in the current quarter compared to estimated inventory holding gains in the prior year quarter.

~~Selling, General and Administrative Expense~~

Three Months Ended

November 30,

% of

% of

Increase/

(In millions)
2022

Net sales

2021

Net sales

(Decrease)

Selling, general and administrative expense
$
107.8

9.2
%

$
96.1

7.8
%

$
11.7

•

~~SG&A expense increased $11.7 million over the prior year quarter due primarily to the impact of acquisitions, partially offset by lower profit sharing and bonus accruals.~~

~~Other Operating Costs/Income~~

Three Months Ended

November 30,

Increase/

(In millions)
2022

2021

(Decrease)

Restructuring and other income, net
$
4.3

$
2.0

$
2.3

Separation costs

9.2

-

9.2

•

~~Restructuring and other income,~~The net ~~in both periods was driven by gains realized from the sale of long-lived assets, including a $3.9 million pre-tax~~ gain ~~in the current year quarter related to the sale of our WSP joint venture’s facility in Jackson, Michigan and a $1.8 million pre-tax gain~~within restructuring in the prior year quarter ~~related to~~was driven primarily by the sale of the remaining facility of WSP, our ~~exit from the~~ former ~~Cabs facility located in Stow, Ohio. Refer to “Note F – Restructuring and Other Income, Net” for additional information.~~operating joint venture.

•

Separation costs ~~of $9.2 million~~ reflect direct and incremental costs incurred in connection with the ~~planned~~ Separation as discussed in “Note A – Basis of Presentation.”

Interest expense, net


	Three Months Ended
	November 30,
					Increase/
(In millions)	2023		2022		(Decrease)
Interest expense, net	$	2.2	$	7.6	$	(5.4	)

•

Interest expense, net of $2.2 million in the ~~Company’s Steel Processing business, including audit, advisory,~~second quarter of fiscal 2024 was favorable to the second quarter of fiscal 2023 by $5.4 million due to higher interest income and, ~~legal costs.~~to a lesser extent, lower average long-term debt levels due to the July 28, 2023 redemption of our 2026 Notes. Refer to “Note ~~A - Basis of Presentation”~~I – Debt and Receivables Securitization” for additional ~~information.~~information

Equity ~~Income~~income


	Three Months Ended									Three Months Ended
	November 30,									November 30,
							Increase/								Increase/
(In millions)	2022			2021			(Decrease)			2023		2022			(Decrease)
WAVE	$	19.0		$	22.4		$	(3.4	)	$	21.4	$	19.0		$	2.4
ClarkDietrich		16.1			27.5			(11.4	)		13.7		16.1			(2.4	)
Serviacero Worthington		1.9			8.8			(6.9	)		3.8		1.9			1.9
ArtiFlex (1)		-			1.8			(1.8	)
Workhorse		(0.2	)		(0.3	)		0.1			3.5		(0.2	)		3.7
Total Equity Income	$	36.8		$	60.2		$	(23.4	)	$	42.4	$	36.8		$	5.6

~~(1)~~

~~On August 3, 2022, the Company sold its 50% equity interest in ArtiFlex.~~

•

Equity income ~~from unconsolidated joint ventures decreased $23.4~~increased $5.6 million ~~from~~over the prior year quarter to ~~$36.8~~$42.4 million, ~~driven primarily~~due in part to a $2.8 million gain associated with the divestiture of the Brazilian operations of Workhorse. Excluding the impact of the divestiture, equity income was up $2.8 million in the current year quarter, as slightly higher contributions from both WAVE and Serviacero were partially offset by lower contributions from ~~ClarkDietrich and Serviacero Worthington.~~ClarkDietrich.

Income Taxes


	Three Months Ended
	November 30,
			Effective					Effective			Increase/
(In millions)	2023		Tax Rate			2022		Tax Rate			(Decrease)
Income tax expense	$	7.2		23.4	%	$	4.1		23.7	%	$	3.1

•

Income tax expense was $7.2 million in the second quarter of fiscal 2024 compared to $4.1 million in the second quarter of fiscal 2023. The increase was driven by higher pre-tax earnings as our effective tax rate was relatively unchanged from the prior year quarter. For additional information regarding our income taxes, refer to “Note M – Income Taxes.”

Table of Contents

~~Other income~~

Three Months Ended

November 30,

Increase/

(In millions)
2022

2021

(Decrease)

Miscellaneous income, net
$
1.4

$
1.0

$
0.4

Adjusted EBIT

We evaluate operating ~~segment~~ performance ~~based~~ on the basis of adjusted ~~earnings (loss) before interest and taxes (“adjusted EBIT”).~~EBIT. EBIT, a non-GAAP financial measure, is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest. Adjusted EBIT excludes impairment and restructuring ~~charges (gains)~~expense (income), but may also exclude other items, as described below, that management believes are not reflective of, and thus should not be included when evaluating the performance of our ongoing ~~operations, including direct and incremental costs incurred in connection with the planned Separation of the Company’s Steel Processing business.~~operations. Adjusted EBIT is a non-GAAP financial measure and is used by management to evaluate ~~segment~~operating performance, engage in financial and operational planning and determine incentive compensation because we believe that this financial measure provides additional perspective ~~and, in some circumstances is more closely correlated to,~~on the performance of our ongoing operations. Additionally, management believes these non-GAAP financial measures provide useful information to investors because they allow for meaningful comparisons and analysis of trends in our businesses and enable investors to evaluate operations and future prospects in the same manner as management.

The following table provides a reconciliation of ~~consolidated~~ net earnings attributable to controlling interest (the most comparable GAAP financial measure) to adjusted EBIT for the periods presented:


	Three Months Ended						Three Months Ended
	November 30,						November 30,
(In millions)	2022			2021			2023			2022
Net earnings attributable to controlling interest	$	16.2		$	110.3		$	24.3		$	16.2
Interest expense		7.6			7.3
Interest expense, net								2.2			7.6
Income tax expense		4.1			31.2			7.2			4.1
Earnings before interest and taxes	$	27.9		$	148.8
EBIT								33.7			27.9
Incremental expense related to Level5 earnout(1)		0.5			-			-			0.5
Restructuring and other income, net ~~(1)~~(2)		(2.3	)		(1.9	)		-			(2.3	)
Separation costs(3)		9.2			-			21.9			9.2
Adjusted earnings before interest and taxes	$	35.3		$	146.9
Gain on sale of assets in equity income (4)								(2.8	)		-
Adjusted EBIT							$	52.8		$	35.3

(1)

~~Excludes~~Reflects incremental compensation expense attributable to the Level5 earnout.

(2)

Restructuring activities consist of established programs that are not part of our ongoing operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions). The net gain recognized in the prior year quarter resulted primarily from the sale of WSP’s remaining manufacturing facility in Jackson, Michigan and excludes the impact of ~~the noncontrolling~~non-controlling interests.

(3)

Reflects direct and incremental costs incurred in connection with the tax-free spin-off of our former Steel Processing business, including third-party advisory fees, certain employee-related costs and non-recurring costs associated with the separation of shared corporate functions.

(4)

Reflects a $2.8 million gain associated with the divestiture of the Brazilian operations of Workhorse.

The following table provides a summary of adjusted EBIT by reportable segment for the periods presented.

Three Months Ended

November 30,

Increase/

(In millions)
2022

2021

(Decrease)

Steel Processing
$
(17.2
)

$
71.9

$
(89.1
)
Consumer Products

13.5

17.6

(4.1
)
Building Products

41.2

54.7

(13.5
)
Sustainable Energy Solutions

1.1

0.8

0.3

Other

(3.3
)

1.9

(5.2
)
Total Adjusted EBIT
$
35.3

$
146.9

$
(111.6
)


	Three Months Ended
	November 30,
				% of Adjusted						% of Adjusted			Increase/
(In millions)	2023			EBIT			2022			EBIT			(Decrease)
Steel Processing	$	6.8			12.9	%	$	(17.2	)		(48.7	%)	$	24.0
Consumer Products		9.5			18.0	%		13.5			38.2	%		(4.0	)
Building Products		40.3			76.3	%		41.2			116.7	%		(0.9	)
Sustainable Energy Solutions		(2.6	)		(5.0	%)		1.1			3.1	%		(3.7	)
Other		(1.2	)		(2.2	%)		(3.3	)		(9.3	%)		2.1
Total Adjusted EBIT	$	52.8			100.0	%	$	35.3			100.0	%	$	17.5

•

Steel Processing – Adjusted EBIT was ~~down $89.1~~$6.8 million ~~from~~in the second quarter of fiscal 2024, up $24.0 million over the prior year quarter ~~to a loss of $17.2 million~~ on lower contributions of both operating income and equity income. Excluding restructuring, operating income was down $84.5 million from the prior year quarter driven primarily by an estimated $95.2 million unfavorable swing related to estimated inventory holding losses, ~~of $53.1~~down $18.3 million, and a $1.9 million increase in ~~the current quarter compared to estimated inventory holding gains of $42.1 in the prior year quarter. Adjusted EBIT was also negatively impacted by lower~~ equity ~~income from Serviacero Worthington, down $6.9 million from the prior year quarter, as lower steel prices reduced spreads.~~earnings at Serviacero.

2730

Table of Contents

•

Consumer Products – Adjusted EBIT was ~~down $4.1~~$9.5 million in the ~~current~~second quarter of fiscal 2024, down $4.0 million compared to ~~$13.5~~the second quarter of fiscal 2023, driven primarily by a $3.1 million ~~as the favorable impact of higher average selling prices was more than offset by lower volumes and higher input and production costs including $0.7 million of incremental material cost~~reserve related to the ~~remaining Level5 inventory that was written-up~~voluntary recall of our Balloon Time® Mini helium tank and to ~~fair value at acquisition.~~a lesser extent unfavorable manufacturing expense.

•

Building Products – Adjusted EBIT ~~decreased $13.5~~was $40.3 million ~~from the prior year quarter to $41.2 million, on lower contributions of equity income, down $14.8 million from the strong results~~ in the ~~prior year~~second quarter ~~partially~~of fiscal 2024, a decrease of $0.9 million compared to the second quarter of fiscal 2023, driven primarily by lower volume at our wholly-owned businesses. Equity income was essentially flat in the quarter, as higher contributions from WAVE were almost equally offset by a ~~$1.4 million increase in operating income driven by higher average selling prices and a favorable product mix.~~modest decline at ClarkDietrich.

•

Sustainable Energy Solutions – Adjusted EBIT ~~increased $0.3~~was unfavorable $3.7 million ~~over~~to the prior year quarter ~~to $1.1 million on the favorable impact~~resulting in an overall loss of ~~higher average selling prices, partially offset by higher production costs and an unfavorable product mix.~~

~~Interest Expense~~

Three Months Ended

November 30,

Increase/

(In millions)
2022

2021

(Decrease)

Interest Expense
$
7.6

$
7.3

$
0.3

•

~~Interest expense was $7.6~~$2.6 million in the ~~current~~second quarter ~~up $0.3 million over the prior year quarter due to the impact~~ of ~~higher average debt levels associated with short-term borrowings.~~fiscal 2024 on lower net sales.

~~Income Taxes~~

Three Months Ended

November 30,

(In millions)
2022

Effective Tax Rate

2021

Effective Tax Rate

Increase/
(Decrease)

Income tax expense
$
4.1

23.7
%

$
31.2

22.8
%

$
(27.1
)

•

Income tax expense was $4.1 million in the current quarter compared to income tax expense of $31.2 million in the prior year quarter. The decrease was driven by lower pre-tax earnings. Tax expense in the current quarter reflected an estimated annual effective rate of 23.7% compared to 22.8% for the prior year quarter. For additional information regarding our income taxes, refer to “Note M – Income Taxes”.

Six Months Year-to-Date – Fiscal ~~2023~~2024 compared to Fiscal ~~2022~~2023

The following discussion provides a review of results for the six months ended November 30, ~~2022~~2023 and ~~2021.~~November 30, 2022.

Six Months Ended

November 30,

(In millions, except per share amounts)
2022

2021

Increase/
(Decrease)

Net sales
$
2,584.2

$
2,343.7

$
240.5

Operating income

59.7

226.3

(166.6
)
Equity income

68.6

113.1

(44.5
)
Net earnings attributable to controlling interest

80.3

242.8

(162.5
)
Earnings per diluted share attributable to controlling interest
$
1.63

$
4.71

(3.08
)

~~Table of Contents~~


	Six Months Ended
	November 30,
(In millions, except per common share amounts)	2023		2022		Increase/ (Decrease)
Net sales	$	2,280.2	$	2,584.2	$	(304.0	)
Operating income		71.8		59.7		12.1
Equity income		96.8		68.6		28.2
Net earnings attributable to controlling interest		120.4		80.3		40.1
Earnings per diluted common share attributable to controlling interest	$	2.40	$	1.63		0.77

Net Sales and Volume


	Six Months Ended												Six Months Ended
	November 30,												November 30,
			% of					% of			Increase/				% of					% of			Increase/
(In millions)	2022		Net sales			2021		Net sales			(Decrease)		2023		Net sales			2022		Net sales			(Decrease)
Steel Processing	$	1,880.8		72.8	%	$	1,760.7		75.1	%	$	120.1	$	1,670.0		73.2	%	$	1,880.8		72.8	%	$	(210.8	)
Consumer Products		342.5		13.3	%		288.6		12.3	%		53.9		297.2		13.0	%		342.5		13.3	%		(45.3	)
Building Products		292.0		11.3	%		235.9		10.1	%		56.1		256.8		11.3	%		292.0		11.3	%		(35.2	)
Sustainable Energy Solutions		68.9		2.7	%		58.6		2.5	%		10.3		56.2		2.5	%		68.9		2.6	%		(12.7	)
Other		-		0.0	%		-		0.0	%		-
Consolidated Net Sales	$	2,584.2		100.0	%	$	2,343.8		100.0	%	$	240.4	$	2,280.2		100.0	%	$	2,584.2		100.0	%	$	(304.0	)

The following table provides volume by reportable operating segment for the periods presented.


	Six Months Ended							Six Months Ended
	November 30,							November 30,
					Increase/							Increase/
	2022		2021		(Decrease)			2023		2023		(Decrease)
Steel Processing (Tons)		1,900,083		2,129,877		(229,794	)		1,958,394		1,900,083		58,311
Consumer Products (Units)		38,966,668		40,086,729		(1,120,061	)		33,954,462		38,966,668		(5,012,206	)
Building Products (Units)		5,289,933		5,450,736		(160,803	)		5,163,973		5,289,933		(125,960	)
Sustainable Energy Solutions (Units)		288,820		285,677		3,143			220,369		288,820		(68,451	)

•

Steel Processing– Net sales ~~increased $120.1~~totaled $1,670 in the current year period, down 11%, or $210.8 million ~~over~~from the prior year ~~period. The increase was~~period, driven primarily ~~by contributions from Tempel, which was acquired on December 1, 2021, partially offset~~ by lower average selling ~~prices and lower tolling volumes.~~prices. The mix of direct versus toll tons processed was unchanged at 56% to 44% in the current year period, compared to 48% to 52% in the prior year period. The shift in mix towards direct tons was driven primarily by lower tolling volume with the steel mills and the exit of our consolidated toll processing joint venture, WSP..

•

Consumer Products – Net sales ~~increased 18.7%~~totaled $297.2 million in the current year period, down 13%, or ~~$53.9~~$45.3 million ~~over~~compared to the prior year ~~period. The increase was~~period, almost entirely on lower volume driven largely by ~~higher average selling prices, and, to a lesser extent, contributions from the June 2, 2022 acquisition~~de-stocking at some of ~~Level5. Excluding Level5 units shipped in the current period, overall volumes were down 5% as~~our retail customers ~~reduced inventory levels resulting in lower customer orders.~~that continued into the first quarter of fiscal 2024.

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•

Building Products – Net sales ~~increased 23.8%~~totaled $256.8 million in the current year period, down 12%, or ~~$56.1~~$35.2 million, ~~over~~from the prior year ~~period. The increase was~~period, driven ~~primarily by higher average selling prices, partially offset~~ by lower ~~volumes.~~volume, and to a lesser extent, unfavorable product mix.

•

Sustainable Energy Solutions – Net sales ~~increased $10.3~~totaled $56.2 million ~~or 17.6%, over~~in the ~~prior~~current year period, ~~due to the combined impact of increased volume and higher average selling prices.~~

~~Gross Margin~~

Six Months Ended

November 30,

% of

% of

Increase/

(In millions)
2022

Net sales

2021

Net sales

(Decrease)

Gross Margin
$
275.1

10.6
%

$
404.0

17.2
%

$
(128.9
)

~~Table of Contents~~

•

~~Gross margin decreased $128.9~~down 18%, or $12.7 million, from the prior year period, on lower volumes and an unfavorable shift in product mix.

Gross margin


	Six Months Ended
	November 30,
			% of					% of			Increase/
(In millions)	2023		Net sales			2022		Net sales			(Decrease)
Gross Margin	$	321.2		14.1	%	$	275.1		10.6	%	$	46.1

•

Gross margin was $321.2 million for the six months ended November 30, 2023, an increase of $46.1 million compared to ~~$275.1 million, due~~the prior year period, driven primarily toby lower ~~contributions from~~inventory holding losses at Steel Processing ~~down $137.8~~estimated to be $19.3 million ~~as declining steel prices resulted~~compared to $54.6 million in ~~an estimated $143.7 million unfavorable swing from~~the comparable period in the prior ~~year estimated inventory holding gains to current year estimated holding losses.~~year.

Selling, ~~General~~general and ~~Administrative Expense~~administrative expense

Six Months Ended

November 30,

% of

% of

Increase/

(In millions)
2022

Net sales

2021

Net sales

(Decrease)

Selling, general and administrative expense
$
211.3

8.2
%

$
192.0

8.2
%

$
19.3


	Six Months Ended
	November 30,
			% of					% of			Increase/
(In millions)	2023		Net sales			2022		Net sales			(Decrease)
Selling, general and administrative expense	$	220.0		9.6	%	$	211.3		8.2	%	$	8.7

•

SG&A ~~expense~~ increased ~~$19.3~~$8.7 million over the prior year ~~period~~quarter primarily due ~~primarily~~ to ~~the impact of acquisitions, partially offset by lower profit sharing~~higher healthcare and ~~bonus expense.~~other benefit-related costs, and, to a lesser extent, higher wages.

Other ~~Operating Costs/Income~~operating items


	Six Months Ended							Six Months Ended
	November 30,							November 30,
					Increase/							Increase/
(In millions)	2022		2021		(Decrease)			2023		2022		(Decrease)
Impairment of long-lived assets	$	0.3	$	-	$	0.3		$	1.4	$	0.3	$	1.1
Restructuring and other income, net		3.9		14.3		(10.4	)		-		5.4		(5.4	)
Separation costs		9.2		-		(9.2	)		28.0		9.2		18.8

•

Impairment of long-lived assets in both the current year ~~period~~and prior year periods was driven by ~~our commitment to a plan to sell certain fixed assets at our Samuel joint venture’s facility~~changes in ~~Cleveland, Ohio that were written down to~~the estimated fair market value less cost to ~~sell.~~sell related to ongoing efforts to divest certain production equipment of our former toll processing facility in Cleveland, Ohio. Refer to “Note E – Impairment of Long-Lived assets” for additional information.

•

Restructuring and other income, net in the ~~current~~prior year period was driven by gains realized from the sale of long-lived assets, including a pre-tax gain of $3.9 million ~~gain~~ realized from the sale of WSP’s manufacturing facility in Jackson, ~~Michigan. Refer to “Note F – Restructuring~~Michigan and ~~Other Income, Net” for additional information.~~a pre-tax gain of $1.2 million from the sale of real property in Tulsa, Oklahoma.

•

Separation costs ~~of $9.2 million~~ reflect direct and incremental costs incurred in connection with the ~~planned~~ Separation ~~of the Company’s Steel Processing business, including audit, advisory, and legal costs. Refer to~~as discussed in “Note A -– Basis of ~~Presentation” for additional information.~~Presentation.”

Miscellaneous income (expense), net


	Six Months Ended
	November 30,
						Increase/
(In millions)	2023		2022			(Decrease)
Miscellaneous income (expense), net	$	2.0	$	(3.7	)	$	5.7

~~Equity Income~~

Six Months Ended

November 30,

Increase/

(In millions)
2022

2021

(Decrease)

WAVE
$
42.8

$
48.1

$
(5.3
)
ClarkDietrich

36.2

44.8

(8.6
)
Serviacero Worthington

3.7

18.1

(14.4
)
ArtiFlex

(13.4
)

3.0

(16.4
)
Workhorse

(0.7
)

(0.9
)

0.2

Total Equity Income
$
68.6

$
113.1

$
(44.5
)

•

Equity income decreased $44.5 million from the prior year period to $68.6 million. The decrease was driven by a $15.8 million pre-tax loss related to the sale of our noncontrolling equity interest in ArtiFlex and lower contributions from WAVE, ClarkDietrich, and Serviacero Worthington.

3032

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~~Other income (expense)~~

Six Months Ended

November 30,

Increase/

(In millions)
2022

2021

(Decrease)

Miscellaneous income (expense), net
$
(3.7
)

$
1.7

$
(5.4
)

•

Miscellaneous expense in the ~~current~~prior year period was driven primarily by the annuitization of a portion of the total projected benefit obligation of the inactive Gerstenslager Company Bargaining Unit Employees’ Pension Plan, which resulted in a pre-tax, non-cash settlement charge of $4.8 million to accelerate a portion of deferred pension cost.

Loss on extinguishment of debt


	Six Months Ended
	November 30,
					Increase/
	2023		2022		(Decrease)
Loss on extinguishment of debt	$	1.5	$	-	$	1.5

•

Loss on extinguishment of debt of $1.5 million resulted from the July 28, 2023 early redemption of the 2026 Notes and consisted primarily of unamortized debt issuance costs and the remaining loss deferred in AOCI associated with an interest rate swap executed prior to the issuance of the 2026 Notes.

Interest expense, net


	Six Months Ended
	November 30,
					Increase/
(In millions)	2023		2022		(Decrease)
Interest expense, net	$	5.3	$	16.2	$	(10.9	)

•

Interest expense, net of $5.3 million in the current year period was favorable compared to the prior year period by $10.9 million, driven primarily by higher interest income and, to a lesser extent, lower average long-term debt levels due to the July 28, 2023 redemption of our 2026 Notes. Refer to “Note I – Debt and Receivables Securitization” for additional information.

Equity Income


	Six Months Ended
	November 30,
						Increase/
(In millions)	2023		2022			(Decrease)
WAVE	$	49.7	$	42.8		$	6.9
ClarkDietrich		30.5		36.2			(5.7	)
Serviacero Worthington		12.7		3.7			9.0
ArtiFlex		-		(13.4	)		13.4
Workhorse		3.9		(0.7	)		4.6
Total Equity Income	$	96.8	$	68.6		$	28.2

•

Equity income increased $28.2 million over the prior year period, which included a $15.8 million loss from the sale of our interest in ArtiFlex, as higher contributions by both Serviacero and WAVE were partially offset by a decline at ClarkDietrich. Serviacero was the biggest driver of the overall increase with equity earnings up $9.0 million, primarily due to higher direct spreads.

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Income Taxes


	Six Months Ended
	November 30,
			Effective					Effective			Increase/
(In millions)	2023		Tax Rate			2022		Tax Rate			(Decrease)
Income tax expense	$	36.0		23.4	%	$	23.6		23.7	%	$	12.4

•

Income tax expense was $36.0 million in the current year period compared to income tax expense of $23.6 million in the prior year period. The increase was driven by higher pre-tax earnings. For additional information regarding our income taxes, refer to “Note M – Income Taxes.”

Adjusted EBIT

The following table provides a reconciliation of consolidated net earnings attributable to controlling interest to adjusted EBIT for the periods presented:


	Six Months Ended						Six Months Ended
	November 30,						November 30,
(In millions)	2022			2021			2023			2022
Net earnings attributable to controlling interest	$	80.3		$	242.8		$	120.4		$	80.3
Interest expense		16.2			15.0
Interest expense, net								5.3			16.2
Income tax expense		23.6			71.4			36.0			23.6
Earnings before interest and taxes	$	120.1		$	329.2
EBIT								161.7			120.1
Incremental expense related to Level5 earnout(1)		1.1		$	-			-			1.1
Impairment of long-lived assets ~~(1)~~(2)		0.2			-			0.9			0.2
Restructuring and other income, net ~~(1)~~(3)		(3.6	)		(8.3	)		-			(3.6	)
Separation costs(4)		9.2			-			28.0			9.2
Pension settlement charge		4.8			-
Loss on sale of investment in ArtiFlex		15.8			-
Adjusted earnings before interest and taxes (1)	$	147.6		$	320.9
Loss on extinguisment of debt (5)								1.5			-
Pension settlement charge (6)								-			4.8
Gain on sale of assets in equity income (7)								(2.8	)		-
Loss on sale of investment in ArtiFlex (8)								-			15.8
Adjusted EBIT							$	189.3		$	147.6

(1)

~~Excludes~~Reflects incremental compensation expense attributable to the Level5 earnout.

(2)

Impairment charges are excluded because they do not occur in the ordinary course of our ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, so their exclusion facilitates the comparison of historical, current and forecasted financial results. Non-cash impairment charges in both periods were driven by changes in the estimated fair market value less cost to sell related to ongoing efforts to divest certain production equipment of Samuel’s former toll processing facility in Cleveland, Ohio, and exclude the impact of the noncontrolling ~~interests.~~interest.

(3)

Restructuring activities consist of established programs that are not part of our ongoing operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions). The net gain recognized in the prior year quarter resulted primarily from the sale of WSP’s remaining manufacturing facility, located in Jackson, Michigan.

(4)

(5)

Reflects a $1.5 million loss realized in connection with the July 28, 2023 early redemption of the 2026 Notes.

(6)

Reflects a non-cash settlement charge to accelerate a portion of the overall deferred pension cost associated with The Gerstenslager Company Bargaining Unit Employees' Pension Plan as a result of a pension lift-out transaction completed in August 2022 to transfer a portion of the total projected benefit obligation to a third-party insurance company.

(7)

Reflects a $2.8 million gain associated with the divestiture of the Brazilian operations of Workhorse.

Table of Contents

(8)

Reflects the loss realized in connection with the August 3, 2022 sale of our 50% noncontrolling equity investment in ArtiFlex.

The following table provides a summary of adjusted EBIT by reportable segment for the periods presented.


	Six Months Ended									Six Months Ended
	November 30,									November 30,
							Increase/						% of Adjusted						% of Adjusted			Increase/
(In millions)	2022			2021			(Decrease)			2023			EBIT			2022			EBIT			(Decrease)
Steel Processing	$	17.7		$	179.6		$	(161.9	)	$	84.8			44.8	%	$	17.7			12.0	%	$	67.1
Consumer Products		34.4			38.1			(3.7	)		18.5			9.8	%		34.4			23.3	%		(15.9	)
Building Products		94.0			103.5			(9.5	)		94.3			49.8	%		94.0			63.7	%		0.3
Sustainable Energy Solutions		(0.3	)		(1.8	)		1.5			(7.3	)		(3.9	%)		(0.3	)		(0.2	%)		(7.0	)
Other		1.8			1.5			0.3			(1.0	)		(0.5	%)		1.8			1.2	%		(2.8	)
Total Adjusted EBIT	$	147.6		$	320.9			(173.3	)		189.3			100.0	%		147.6			100.0	%	$	41.7

•

Steel Processing – Adjusted EBIT was down $161.9 million from the prior year period to $17.7 million, on lower contributions of both operating income and equity income. Excluding restructuring, operating income was down $151.9 million from the prior year period driven primarily by an estimated $143.7 million unfavorable swing related to estimated inventory holding losses of $54.6$84.8 million in the current year period, an increase of $67.1 million compared to ~~estimated inventory holding gains of $89.1 million in the prior year period. Adjusted EBIT was also negatively impacted by lower equity income at Serviacero Worthington, down $14.4 million from~~ the prior year period, ~~as lower steel prices reduced spreads.~~due primarily to favorable direct spreads, including $35.3 million associated with the year-over-year favorable swing in estimated inventory holding losses, and, to a lesser extent, higher equity earnings at Serviacero, up $9.0 million.

~~Table of Contents~~

•

Consumer Products – Adjusted EBIT was $18.5 million in the current year period, down ~~$3.7~~$15.9 million ~~from~~compared to the prior year period, ~~to $34.4 million as the favorable impact of higher average selling prices was more than offset~~driven primarily by lower volumes and higher input and production costs, including $2.7 million of incremental material cost related to Level 5 inventory that was written-up to fair value at acquisition. Adjusted EBIT was also negatively impactedmanufacturing expenses, partially offset by ~~higher SG&A expense, up $9.9 million, primarily on the impact of the Level5 acquisition.~~a favorable pricing spread as price increases implemented in fiscal 2023 held steady through November 30, 2023.

•

Building Products – Adjusted EBIT ~~decreased $9.5~~was $94.3 million ~~from~~in the current year period, an increase of $0.3 million compared to the prior year period, ~~to $94.0~~on a $1.2 million ~~on lower contributions of~~increase in equity income, ~~which were down $13.9 million,~~ partially offset by ~~a $4.3 million increase in operating income driven by higher average selling prices and a favorable product mix.~~the impact of lower volume.

•

Sustainable Energy Solutions – Adjusted EBIT was a loss of ~~$0.3~~$7.3 million ~~favorable by $1.5~~for the current year period, a decline of $7.0 million compared to the prior year period, ~~driven by increased volume~~due to lower volumes and higher ~~average selling prices, partially offset by higher production costs and an unfavorable product mix.~~manufacturing expenses.

~~Interest Expense~~

Six Months Ended

November 30,

Increase/

(In millions)
2022

2021

(Decrease)

Interest Expense
$
16.2

$
15.0

$
1.2

•

~~Interest expense was $16.2 million in the current year period, up $1.2 million over the prior year period due to the impact of higher average debt levels associated with short-term borrowings.~~

~~Income Taxes~~

Six Months Ended

November 30,

(In millions)
2022

Effective Tax Rate

2021

Effective Tax Rate

Increase/
(Decrease)

Income tax expense
$
23.6

23.7
%

$
71.4

22.8
%

$
(47.8
)

•

Income tax expense was down $47.8 million in the current year period to $23.6 million. The decrease was driven primarily by lower pre-tax earnings. Tax expense in the current year period reflected an estimated annual effective rate of 23.7% compared to 22.8% for the prior year period. For additional information regarding our income taxes, refer to “Note M – Income Taxes”.

Liquidity and Capital Resources

During the six months ended November 30, ~~2022,~~2023, we generated ~~$214.0~~$135.0 million of cash from operating activities and invested ~~$46.0~~$32.9 million in property, plant and equipment ~~spent $56.1~~and $15.0 million ~~to acquire Level5, and generated net~~in a note receivable. We also received cash proceeds of ~~$71.6~~$175.0 million ~~from~~in the ~~sale~~form of ~~assets, including $36.1~~short-term borrowings tied to the Worthington Steel Credit Facility, which was used to fund a $150.0 million ~~from~~cash distribution to Worthington Enterprises on December 1, 2023 in connection with the ~~sale of our noncontrolling equity interest in ArtiFlex.~~Separation. Additionally, we repaid ~~$43.1~~$243.8 million ~~of short-term borrowings~~to redeem the 2026 Notes and paid dividends of ~~$29.1 million on Worthington Industries, Inc.’s common shares. The following table summarizes our consolidated cash flows for the periods presented:~~$17.3 million.


	Six Months Ended						Six Months Ended
	November 30,						November 30,
(in millions)	2022			2021
Net cash provided (used) by operating activities	$	214.0		$	(168.9	)
(In millions)							2023			2022
Net cash provided by operating activities							$	194.7		$	214.0
Net cash used by investing activities		(30.7	)		(124.1	)		(97.8	)		(30.7	)
Net cash used by financing activities		(88.2	)		(122.1	)
Net cash provided (used) by financing activities								(120.9	)		(88.2	)
Increase (decrease) in cash and cash equivalents		95.1			(415.1	)		(24.0	)		95.1
Cash and cash equivalents at beginning of period		34.5			640.3			454.9			34.5
Cash and cash equivalents at end of period	$	129.6		$	225.2		$	430.9		$	129.6

~~Table of Contents~~

We believe that the available borrowing capacity of ~~our committed line of credit~~the Credit Facility is sufficient to meet the needs of our existing businesses for normal operating costs, mandatory capital expenditures, debt redemptions, dividend payments and working capital, to the extent not funded by cash provided by operating activities, for at least 12 months and for the foreseeable future ~~thereafter,~~thereafter. Our resources include cash and ~~expenditures related~~cash equivalents and unused committed lines of credit. There were no borrowings outstanding under the Credit Facility at November 30, 2023, leaving up to ~~the Separation of our Steel Processing business.~~$500.0 million available for use.

Although we do not currently anticipate a need, ~~based on our current operating structure,~~ we believe that we could access the financial markets to be in a position to sell long-term debt or equity securities. However, ~~lingering supply chain disruptions and other challenges caused by~~ the ~~COVID-19 pandemic and softening~~continuation of soft economic conditions and an uncertain interest rate environment could create ~~uncertainty and~~ volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so. ~~As the impact of such challenges on the economy and our operations is evolving, we will continue to review our discretionary spending and other variable costs as well as our liquidity needs.~~

Table of Contents

We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. ~~We are also in the process of evaluating our post-Separation capital structure.~~ Should we seek ~~such~~ additional capital, there can be no assurance that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing shareholders and/or increase our interest costs. We may also from time to time seek to retire or repurchase our outstanding debt through cash purchases, in open-market purchases, ~~privately negotiated~~privately-negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transaction may or may not be material. To facilitate our post-separation capital structure, on July 28, 2023, we redeemed in full our 2026 Notes for $243.8 million. Subsequent to quarter-end, we finalized our post-separation capital structure by redeeming an additional $150.0 million of long-term debt, as further discussed in “Note S – Subsequent Events.”

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 and industry 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, requiring 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 ~~$214.0~~$194.7 million during the six months ended November 30, ~~2022, compared~~2023, down $19.3 million from the comparable period in the prior year. The change was due primarily to a ~~net operating cash outflow of $168.9~~$36.8 million ~~during the six months ended November 30, 2021. This~~ change ~~was primarily due to a $451.9 million decrease~~ in net operating working capital (accounts receivable, inventories, and accounts payable) requirements over the comparable prior year ~~six-month~~ period, mainly driven by ~~the impact of lower average~~fluctuations in steel ~~prices.~~prices and lagging price indices.

Investing Activities

Net cash used by investing activities was ~~$30.7~~$97.8 million during the six months ended November 30, ~~2022~~2023, compared to ~~$124.1~~$30.7 million during the prior year period. Net cash used by investing activities in the ~~prior~~current year period resulted primarily from ~~cash used to acquire certain assets~~capital expenditures of $62.2 million, a $15.0 million investment in a note receivable, and the November 15, 2023 purchase of the ~~Shiloh Industries’ U.S BlankLight ®~~Voestalpine business ~~on June 8, 2021,~~ for ~~$104.8 million.~~cash consideration of $21.0 million, net of cash acquired. Net cash used by investing activities in the ~~current~~prior year period resulted primarily from the purchase of the Level5 business on June 2, 2022, for $56.1 million, net of cash acquired, and capital expenditures of $46.0 million, partially offset by combined cash proceeds of ~~$71.4~~$71.6 million from the sale of our equity investment in ArtiFlex, and the sale of the remaining facility of our ~~WSP Jackson, Michigan facility and other long-lived assets.~~former operating joint venture, WSP.

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 acquisition opportunities will be consummated, or that any needed additional financing will be available on satisfactory terms if required.

Financing Activities

Net cash used by financing activities was ~~$88.2~~$120.9 million during the six months ended November 30, ~~2022~~2023 compared to ~~$122.1~~$88.2 million in the prior year period. The change was primarily due to ~~$43.1~~$172.2 million of net proceeds of short-term borrowings and the repayment of $243.8 million of long-term debt associated with the redemption of the 2026 Notes in July 2023 and net repayments of $43.1 million of short-term borrowings in the ~~current year period and the repurchase of 1,235,000 common shares of Worthington Industries, Inc., at a cost of $73.6 million, in the prior year period.~~six months ended November 30, 2022.

Common shares – On December ~~20, 2022, the~~19, 2023, Worthington ~~Industries, Inc.~~Enterprises’ Board of Directors declared a quarterly dividend of ~~$0.31~~$0.16 per share payable on March 29, ~~2023,~~2024, to shareholders of record on March 15, ~~2023.~~2024.

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On March 20, 2019, the ~~Worthington Industries, Inc.~~ Board ~~of Directors~~ authorized the repurchase of up to ~~6,600,000 of Worthington Industries, Inc.’s outstanding~~6.6 million common shares.

On March 24, 2021, the ~~Worthington Industries, Inc.~~ Board ~~of Directors~~ authorized the repurchase of up to an additional ~~5,618,464~~5.6 million common shares, increasing the total number of common shares then authorized for repurchase to ~~10,000,000.~~10.0 million. As of November 30, ~~2022, 6,065,000~~2023, 6.1 million common shares remained available for repurchase under these two authorizations.

The common shares ~~available for repurchase under the authorizations currently in effect~~ may be repurchased under these authorizations 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.

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Long-term debt and short-term borrowings – As of November 30, ~~2022,~~2023, we were in compliance with the financial covenants of our short-term and long-term ~~financial~~ debt agreements. Our debt agreements do not include credit rating triggers or material adverse change provisions. ~~During the first quarter of fiscal 2023, our credit rating was upgraded from Baa3 to Baa2 by Moody’s Investors Service, Inc.~~ There were no ~~outstanding~~ borrowings ~~drawn against~~under our ARCredit Facility at November 30, ~~2022,~~2023, leaving the full borrowing capacity of ~~$175.0~~$500.0 million available for ~~future~~ use. ~~This is in addition to $500.0 million of short-term borrowing capacity available under our Credit Facility.~~

Dividend Policy

We currently have no material contractual or regulatory restrictions on the payment of dividends. Dividends are declared at the discretion of the ~~Worthington Industries, Inc.~~Board. The Board ~~of Directors. The Worthington Industries, Inc. Board of Directors~~ 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 of dividends will continue in the future.

Critical Accounting ~~Policies~~Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates, including those related to our valuation of receivables, inventories, intangible assets, accrued liabilities, income and other tax accruals, contingencies and litigation, and business combinations. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. These results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical accounting policies are defined as those that reflect our significant judgments and uncertainties that could potentially result in materially different results under different assumptions and conditions. Although actual results historically have not deviated significantly from those determined using our estimates, our consolidated financial position or results of operations could be materially different if we were to report under different conditions or to use different 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”~~Estimates” of the ~~2022~~2023 Form 10-K.

Item 3. – Quantitative and Qualitative Disclosures About Market Risk

Market risks have not materially changed from those disclosed in “Part II – Item 7A. – Quantitative and Qualitative Disclosures About Market Risk” of the ~~2022~~2023 Form 10-K.

Item 4. – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

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Management, under the supervision of and with the participation of Worthington ~~Industries, Inc.’s~~Enterprises’ principal executive officer and 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 Form 10-Q (the quarterly period ended November 30, ~~2022)~~2023). Based on that evaluation, Worthington ~~Industries, Inc.’s~~Enterprises’ principal executive officer and principal financial officer have concluded that such disclosure controls and procedures were effective at a reasonable assurance level as of the end of the quarterly period covered by this Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes that occurred during the period covered by this Form 10-Q (the quarterly period ended November 30, ~~2022)~~2023) in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. – Legal Proceedings

We are involved in various judicial and administrative proceedings, as both plaintiff and defendant, arising in the ordinary course of business. We do not believe that any such proceedings will have a material adverse effect on our business, financial position, results of operation 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 ~~2022~~2023 Form 10-K, as filed with the SEC on ~~August 1, 2022,~~July 31, 2023, and available at www.sec.gov or at ~~www.worthingtonindustries.com,~~www.worthingtonenterprises.com, we included a detailed discussion of our risk factors. Our risk factors have not changed significantly from those disclosed in the ~~2022~~2023 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and investments in the common shares and in connection with the forward-looking statements and other information contained in this Form 10-Q. Any of the risks described in the ~~2022~~2023 Form 10-K could materially affect our business, consolidated financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. The risk factors described in the ~~2022~~2023 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, consolidated financial condition and/or future results.

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

Unregistered Sales of Equity Securities

There were no ~~unregistered sales of~~ equity securities of Worthington ~~Industries, Inc.~~Enterprises sold by Worthington Enterprises during the period covered by the Form 10-Q. There were no common shares of Worthington Industries, Inc. repurchased by, or on behalf of, Worthington Industries, Inc. or any affiliated purchaser (as defined in Rule 10b - 18(a)(3) under the Exchange Act) during the threesix months ended November 30, ~~2022.~~2023, that were not registered under the Securities Act of 1933, as amended.

Issuer Purchases of Equity Securities

Common shares withheld to cover tax withholding obligations in connection with the vesting of restricted common shares are treated as common share repurchases. Those withheld common shares are not considered common share repurchases under an authorized common share repurchase plan. The table below provides information regarding common shares withheld from our employees to satisfy minimum statutory tax withholding obligations arising from the vesting of restricted common shares. The presentation of the table below and related footnote represents full common share amounts.


					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, 2023		140,488	$	69.28		-		6,065,000
October 1-31, 2023		23		61.55		-		6,065,000
November 1-30, 2023		198		66.34		-		6,065,000
Total		140,709	$	69.16		-

(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 authorizations then in effect. On March 20, 2019, the Board authorized the repurchase of up to 6,600,000 common shares. On March 24, 2021, the Board authorized the repurchase of up to an additional 5,618,464 common shares, increasing the total number of common shares then authorized for repurchase to 10,000,000 (net of previously repurchased common shares). A total of 3,935,000 common shares have been repurchased since the latest authorization, leaving 6,065,000 common shares available for repurchase under these authorizations at November 30, 2023, and such authorizations are not subject to a fixed expiration date. The common shares available for repurchase under the authorizations currently in effect 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.

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Item 3. – Defaults Upon Senior Securities

Not applicable.

Item 4. – Mine Safety Disclosures

Not applicable.

Item 5. – Other Information

~~Not applicable.~~

35No response required.

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Item 6. – Exhibits


Exhibit No.		Description

2.1		~~Equity Interest Purchase~~Separation and Distribution Agreement, dated ~~as of October 29, 2021, by~~November 30, 2023, between Worthington Enterprises, Inc. and ~~among~~ Worthington Steel, ~~of Michigan,~~ Inc.~~, Tempel Holdings Inc., and Tempel Steel Company~~ (Incorporated herein by reference to Exhibit ~~2.01~~2.1 to the Current Report on Form 8-K of Worthington ~~Industries,~~Enterprises, Inc. ~~dated November 1, 2021 and~~ filed with the SEC on ~~the same date~~December 5, 2023 (SEC File No. 1-8399)) †

3.1		Amended Articles of Incorporation of Worthington ~~Industries,~~Enterprises, Inc.~~, as filed with~~ [This document represents the ~~Ohio Secretary~~articles of ~~State on October 13, 1998 (Incorporated herein by reference to Exhibit 3(a) to the Quarterly Report on Form 10-Q~~incorporation of Worthington ~~Industries,~~Enterprises, Inc. ~~for the quarterly period ended August 31, 1998 (SEC File No. 0-4016)) P~~in compiled form incorporating all amendments.] *

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

4.1		Fourth Amended and Restated Credit Agreement, dated as of September 27, 2023, among Worthington Enterprises, Inc., as a Borrower; PNC Bank, National Association, as a Lender, the Swingline Lender, an Issuing Bank and Administrative Agent; JPMorgan Chase Bank, N.A. and Bank of America, N.A., as Lenders and Syndication Agents; U.S. Bank National Association, The Huntington National Bank, Fifth Third Bank, National Association, The Northern Trust Company, First National Bank of Pennsylvania and Goldman Sachs Bank USA, as Lenders; and Wells Fargo Bank, National Association and BMO Harris Bank, N.A., as the Departing Lenders; with Citibank, N.A. and The Huntington National Bank serving as Co-Documentation Agents; and JPMorgan Chase Bank, N.A., PNC Capital Markets LLC and BofA Securities, Inc. serving as Joint Bookrunners and Joint Lead Arrangers (Incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of Worthington Enterprises, Inc. filed with the SEC on September 28, 2023 (SEC File No. 1-8399))

4.2		Amendment No. 2 to Note Purchase and Private Shelf Agreement, dated as of November 1, 2023, by and among Worthington Enterprises, Inc., Worthington Industries International S.á.r.l., Worthington Cylinders GmbH, PGIM, Inc., the Prudential Insurance Company of America, Pruco Life Insurance Company of New Jersey, Pruco Life Insurance Company and the other affiliates of Prudential who become party thereto from time to time (Incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of Worthington Enterprises filed with the SEC on November 7, 2023 (SEC File No. 1-8399))

4.3		Form of 2.06% Amended and Restated Series A Note Due August 23, 2031 issued on November 1, 2023, by Worthington Industries International S.á.r.l. (Incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Worthington Enterprises filed with the SEC on November 7, 2023 (SEC File No. 1-8399))

4.4		Form of 2.40% Amended and Restated Series B Notes Due August 23, 2034 issued on November 1, 2023, by Worthington Cylinders GmbH (Incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 8-K of Worthington Enterprises filed with the SEC on November 7, 2023 (SEC File No. 1-8399))

10.1		~~First Amendment~~Transition Services Agreement, dated November 30, 2023, between Worthington Enterprises, Inc. and Worthington Steel, Inc. (Incorporated herein by reference to Exhibit 10.1 to the ~~Receivables Financing~~Current Report on Form 8-K of Worthington Enterprises, Inc. filed with the SEC on December 5, 2023 (SEC File No. 1-8399))

10.2		Tax Matters Agreement, dated asNovember 30, 2023, between Worthington Enterprises, Inc. and Worthington Steel, Inc. (Incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of ~~October 6, 2022, among~~ Worthington ~~Receivables Company, LLC,~~Enterprises, Inc. filed with the SEC on December 5, 2023 (SEC File No. 1-8399))

10.3		Employee Matters Agreement, dated November 30, 2023, between Worthington ~~Industries,~~Enterprises, Inc.~~, PNC Bank, National Association,~~ and ~~PNC Capital Markets LLC~~Worthington Steel, Inc. (Incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Worthington Enterprises, Inc. filed with the SEC on December 5, 2023 (SEC File No. 1-8399))

10.4		Trademark License Agreement, dated November 30, 2023, between Worthington Enterprises, Inc. and Worthington Steel, Inc. (Incorporated herein by reference to Exhibit 10.4 to the ~~Quarterly~~Current Report on Form ~~10-Q~~8-K of Worthington ~~Industries,~~Enterprises, Inc. ~~for~~filed with the ~~quarterly period ended August 31, 2022~~SEC on December 5, 2023 (SEC ~~file~~File No. 1-8399))

10.5		WBS License Agreement, dated November 30, 2023, between Worthington Enterprises, Inc. and Worthington Steel, Inc. (Incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K of Worthington Enterprises, Inc. filed with the SEC on December 5, 2023 (SEC File No. 1-8399))

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Exhibit No.		Description

10.6		Steel Supply Agreement, dated November 30, 2023, between Worthington Enterprises, Inc. and Worthington Steel, Inc. (Incorporated herein by reference to Exhibit 10.6 to the Current Report on Form 8-K of Worthington Enterprises, Inc. filed with the SEC on December 5, 2023 (SEC File No. 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 – the instance document does not appear in the Interactive Date File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document #

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document #

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document #

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document #

101.DEF		Inline XBRL Taxonomy ~~Extension~~ Definition Linkbase Document #

104		Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarterly period ended November 30, ~~2022,~~2023, formatted in Inline XBRL ~~(included~~(is included within the Exhibit 101 attachments).

* Filed herewith.

** Furnished herewith.

† ~~The Disclosure Schedules and Exhibits referenced in the Equity Interest Purchase Agreement~~Indicates a management contract or compensatory plan or arrangement.

+ Certain portions of this document that constitute confidential information have been ~~omitted pursuant to~~redacted in accordance with Regulation S-K, Item 601(a)(5) of SEC Regulation S-K. Worthington Industries, Inc. will supplementally furnish a copy of any of the omitted Disclosure Schedules and Exhibits to the SEC on a confidential basis upon request.601(b)(10).

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

(i)

Consolidated Balance Sheets at November 30, ~~2022~~2023 and May 31, ~~2022;~~2023;

(ii)

Consolidated Statements of Earnings for the three months and ~~the~~ six months ended November 30, ~~2022~~2023 and November 30, ~~2021;~~2022;

(iii)

Consolidated Statements of Comprehensive Income for the three months and ~~the~~ six months ended November 30, ~~2022~~2023 and November 30, ~~2021;~~2022;

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(iv)

Consolidated Statements of Cash Flows for the three months and ~~the~~ six months ended November 30, ~~2022~~2023 and November 30, ~~2021;~~2022; and

(v)

Condensed Notes to Consolidated Financial Statements.

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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,~~ENTERPRISES, INC.

Date: January 9, ~~2023~~2024	By:	/s/ Joseph B. Hayek
		Joseph B. Hayek,
		Vice President and Chief Financial Officer
		(On behalf of the Registrant as Duly Authorized Officer and as Principal Financial Officer)

3842


(in thousands)	Balance, as of May 31, 2022		Expense (Income)			Payments			Adjustments		Balance, as of November 30, 2022
Early retirement and severance	$	541	$	85		$	(605	)	$	-	$	21
Net gain on sale of assets (1)(2)				(5,467	)
Restructuring and other income, net			$	(5,382	)


	Three Months Ended November 30, 2021
(in thousands)	Steel Processing			Consumer Products		Building Products		Sustainable Energy Solutions		Other			Consolidated
Net sales	$	937,842		$	140,793	$	121,125	$	33,101	$	-		$	1,232,861
Restructuring and other income, net		(182	)		-		-		-		(1,822	)		(2,004	)
Miscellaneous income, net		17			159		218		82		564			1,040
Equity in net income of unconsolidated affiliates		8,823			-		49,894		-		1,501			60,218
Adjusted EBIT (3)		71,925			17,584		54,718		796		1,893			146,916


	Six Months Ended November 30, 2021
(in thousands)	Steel Processing			Consumer Products		Building Products		Sustainable Energy Solutions			Other			Consolidated
Net sales	$	1,760,652		$	288,576	$	235,868	$	58,583		$	-		$	2,343,679
Restructuring and other income, net		(12,313	)		-		-		(143	)		(1,822	)		(14,278	)
Miscellaneous income, net		47			209		144		22			1,248			1,670
Equity in net income of unconsolidated affiliates		18,172			-		92,887		-			2,075			113,134
Adjusted EBIT (6)		179,617			38,140		103,471		(1,760	)		1,479			320,947

(In thousands)

Maturity Date

Commodity contracts

December 2023 - June 2025