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

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

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.

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 ☒

On ~~March 31, 2023,~~January 4, 2024, the number of common shares, without par value, of the Registrant issued and outstanding was ~~49,755,365~~49,994,385.

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 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:

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

The 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 the Company ~~assumes no~~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.

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.

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			Income (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
Net earnings		-			-			64,082			64,082			1,162			65,244
Other comprehensive loss		-			(20,462	)		-			(20,462	)		-			(20,462	)
Common shares issued, net of withholding tax		(3,466	)		-			-			(3,466	)		-			(3,466	)
Common shares in non-qualified plans		136			-			-			136			-			136
Stock-based compensation		6,976			-			-			6,976			-			6,976
Cash dividends declared		-			-			(15,418	)		(15,418	)		-			(15,418	)
Balance at August 31, 2022	$	277,085		$	(43,312	)	$	1,278,827		$	1,512,600		$	134,372		$	1,646,972
(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		-			-			16,218			16,218			3,287			19,505			-			-			96,106			96,106			3,597			99,703
Other comprehensive loss		-			(3,224	)		-			(3,224	)		-			(3,224	)		-			(5,408	)		-			(5,408	)		-			(5,408	)
Common shares issued, net of withholding tax		(649	)		-			-			(649	)		-			(649	)		(5,130	)		-			-			(5,130	)		-			(5,130	)
Common shares in non-qualified plans		298			-			-			298			-			298			130			-			-			130			-			130
Stock-based compensation		3,620			-			-			3,620			-			3,620			8,995			-			-			8,995			-			8,995
Cash dividends declared		-			-			(15,470	)		(15,470	)		-			(15,470	)		-			-			(16,081	)		(16,081	)		-			(16,081	)
Dividends to noncontrolling interests		-			-			-			-			(11,760	)		(11,760	)		-			-			-			-			(1,921	)		(1,921	)
Balance at November 30, 2022	$	280,354		$	(46,536	)	$	1,279,575		$	1,513,393		$	125,899		$	1,639,292
Balance at August 31, 2023																			$	294,794		$	(28,587	)	$	1,508,416		$	1,774,623		$	127,293		$	1,901,916
Net earnings		-			-			46,325			46,325			3,933			50,258			-			-			24,302			24,302			3,865			28,167
Other comprehensive income		-			36,228			-			36,228			-			36,228			-			14,446			-			14,446			-			14,446
Common shares issued, net of withholding tax		704			-			-			704			-			704			(9,207	)		-			-			(9,207	)		-			(9,207	)
Common shares in non-qualified plans		107			-			-			107			-			107			195			-			-			195			-			195
Stock-based compensation		3,818			-			-			3,818			-			3,818			4,511			-			-			4,511			-			4,511
Cash dividends declared		-			-			(15,149	)		(15,149	)		-			(15,149	)		-			-			(16,061	)		(16,061	)		-			(16,061	)
Balance at February 28, 2023	$	284,983		$	(10,308	)	$	1,310,751		$	1,585,426		$	129,832		$	1,715,258
Balance at November 30, 2023																			$	290,293		$	(14,141	)	$	1,516,657		$	1,792,809		$	131,158		$	1,923,967

1011

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 interests		-			-			-			-			(2,879	)		(2,879	)		-			-			-			-			(11,760	)		(11,760	)
Balance at November 30, 2021	$	279,205		$	(16,745	)	$	1,217,337		$	1,479,797		$	153,294		$	1,633,091
Net earnings		-			-			56,342			56,342			2,305			58,647
Other comprehensive loss		-			(19,348	)		-			(19,348	)		-			(19,348	)
Common shares issued, net of withholding tax		269			-			-			269			-			269
Common shares in non-qualified plans		79			-			-			79			-			79
Stock-based compensation		2,889			-			-			2,889			-			2,889
Purchases and retirement of common shares		(5,559	)		-			(48,696	)		(54,255	)		-			(54,255	)
Cash dividends declared		-			-			(14,407	)		(14,407	)		-			(14,407	)
Dividends to noncontrolling interests		-			-			-			-			(3,360	)		(3,360	)
Balance at February 28, 2022	$	276,883		$	(36,093	)	$	1,210,576		$	1,451,366		$	152,239		$	1,603,605
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 OCI for the periods presented:

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

(7,549
)

(619
)

(2,999
)

(11,167
)
Reclassification adjustments to net earnings (a)

-

4,774

24,200

28,974

Income tax effect

(131
)

(975
)

(4,159
)

(5,265
)
Balance at February 28, 2023

$
(22,990
)

$
(3,064
)

$
15,746

$
(10,308
)


										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

Income (Loss)

Balance at May 31, 2021

$
1,779

$
(15,955
)

$
59,563

$
45,387

Other comprehensive income (loss) before reclassifications

(9,473
)

500

11,747

2,774

Reclassification adjustments to net earnings (a)

-

1,200

(107,152
)

(105,952
)
Income tax effect

(851
)

(336
)

22,885

21,698

Balance at February 28, 2022

$
(8,545
)

$
(14,591
)

$
(12,957
)

$
(36,093
)


										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	)

1112

Table of Contents

~~(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~~ recorded in miscellaneous income (expense), net in the consolidated statements of earnings; 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 – 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.

Expected volatility is based on the historical volatility of 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.

During the ~~nine~~six months ended ~~February 28,~~November 30, 2023, we granted an aggregate of ~~345,550~~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 $~~49.49~~65.97 per share. The calculated pre-tax stock-based compensation expense for these restricted common shares iswas $~~17,100,000~~11,640 and will be recognized on a straight-line basis over the three-year service-based vesting period, net of any forfeitures.

~~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:~~

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 in the fiscal quarter following the end of the applicable three-year performance period. The fair values of our performance shares are determined by the closing market prices of the underlying common shares at the respective grant dates of the performance shares and the pre-tax stock-based compensation expense is based on our periodic assessment of the probability of the targets being achieved and our estimate of the number of common shares that will ultimately be issued. During the ~~nine~~six months ended ~~February 28,~~November 30, 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.

~~Stock~~Non-qualified stock options covering ~~an aggregate of~~ ~~138,100~~58 and ~~53,800~~138 common shares for the three months ended ~~February 28,~~November 30, 2023 and November 30, 2022, respectively, and ~~131,000~~46 and ~~49,500~~127 common shares ~~for the nine~~six months ended ~~February 28,~~November 30, 2023 and November 30, 2022, respectively have been excluded from the computation of diluted earnings per common share because the effect would have been anti-dilutive for those periods.

Note O – Segment Operations

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”), ~~who is~~as defined in the 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 Executive Officer as our CODM. Our CODM assesses segment operating ~~segment~~ performance and allocates resources based on the profitability measure of adjusted EBIT. ~~EBIT is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest.~~ Adjusted EBIT excludes impairment and restructuring 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 our ongoing 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.

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.

Table of Contents

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


	Three Months Ended February 28, 2023																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	$	757,007		$	162,647		$	151,876	$	31,792		$	-		$	1,103,322	$	788,655	$	147,738	$	122,954	$	27,537		$	34		$	1,086,918
Impairment of long-lived assets		-			-			484		-			-			484
Restructuring and other expense, net		1			206			617		-			-			824		-		-		-		-			6			6
Separation costs		-			-			-		-			6,347			6,347		-		-		-		-			21,952			21,952
Miscellaneous income (expense), net		1,111			(21	)		130		(37	)		144			1,327		306		12		235		557			(90	)		1,020
Equity income		(185	)		-			37,836		-			(725	)		36,926		3,778		-		35,177		-			3,491			42,446
Adjusted EBIT (1)		7,788			17,943			51,472		(1,440	)		(4,443	)		71,320		6,762		9,510		40,284		(2,617	)		(1,090	)		52,849

(1)

Excludes the ~~following:~~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

•

AOur share of the pre-tax ~~benefit~~gain realized by Workhorse in connection with the sale of the joint venture’s operations in Brazil of $~~1,050,000~~2,780 ~~within selling, general,~~;


	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 administrative expense (“SG&A”) to reverse the compensation expense accrued during the first six months of fiscal 2023 for the anticipated payout under the first annual earnout period ending December 31, 2023restructuring activity:

•

Direct and incremental costs associated with the ~~Level5 acquisition (see the discussion of this acquisition~~Separation as discussed in “Note PA – ~~Acquisitions”)~~Basis of Presentation”;

•

~~Separation costs~~Incremental compensation expense of $~~6,347,000~~525 within ~~Other~~Consumer Products related to ~~direct and incremental costs incurred in connection with~~ the ~~anticipated Separation, including audit, advisory, and legal costs;~~earnout for the acquisition of Level5 Tools, LLC (“Level5”); and

•

~~A loss~~Noncontrolling interest portion of impairment of long-lived assets of $~~300,000~~1,850 ~~for the settlement of final transaction costs~~ within ~~Other related to the sale of our~~ 50~~% noncontrolling equity investment in ArtiFlex.~~Steel Processing.

Three Months Ended February 28, 2022

(in thousands)
Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Consolidated

Net sales
$
1,052,562

$
161,692

$
132,944

$
31,037

$
-

$
1,378,235

Impairment of long-lived assets

3,076

-

-

-

-

3,076

Restructuring and other expense (income), net

114

-

(35
)

-

(583
)

(504
)
Miscellaneous income, net

(12
)

(39
)

(3
)

(38
)

485

393

Equity income

4,692

-

39,978

-

2,796

47,466

Adjusted EBIT (2)

7,116

26,674

49,570

(2,801
)

4,039

84,598

~~(2)~~

~~Excludes the noncontrolling interest portion of the impairment of long-lived assets and restructuring expense within Steel Processing of $1,139,000~~.


	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

1415

Table of Contents

Nine Months Ended February 28, 2023

(in thousands)
Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Consolidated

Net sales
$
2,637,834

$
505,145

$
443,870

$
100,679

$
-

$
3,687,528

Impairment of long-lived assets

312

-

484

-

-

796

Restructuring and other expense (income), net

(4,204
)

206

617

-

(1,177
)

(4,558
)
Separation costs

-

-

-

-

15,593

15,593

Miscellaneous income (expense), net

2,145

(102
)

428

19

(4,844
)

(2,354
)
Equity income

3,491

-

116,809

-

(14,805
)

105,495

Adjusted EBIT (3)(4)

25,450

52,350

145,431

(1,690
)

(2,588
)

218,953

(3)

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

•

Direct and incremental costs associated with the Separation 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

•

Noncontrolling interest portion of impairment of long-lived assets of $519 within Steel 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 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 the 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 $~~4,774,000~~4,774 in miscellaneous income (expense), net within Other related to the pension lift-out transaction associated with ~~The~~the Gerstenslager Company Bargaining Unit Employees’ Pension ~~Plan and described further in “Note K – Changes in Equity;”~~Plan;

•

A loss of $~~16,059,000~~15,759 ~~for the settlement of final transaction costs~~ within ~~Other~~equity income related to the August 31, 2022, sale of our 50% noncontrolling ~~equity investment~~interest in ~~ArtiFlex effective August 3, 2022;~~ArtiFlex;

•

Incremental compensation expense of $1,050 within Consumer Products related to the Level5 earnout agreement; and

•

~~Separation costs of $15,593,000~~ ~~within Other related to direct and incremental costs incurred in connection with the anticipated Separation, including audit, advisory, and legal costs.~~

~~(4)~~

~~Excludes the noncontrolling~~Noncontrolling interest portion of the ~~impairment of long-lived assets and~~ restructuring ~~income~~gain within Steel ~~Processing~~processing of $~~1,734,000~~1,734.

Nine Months Ended February 28, 2022

(in thousands)
Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Consolidated

Net sales
$
2,813,214

$
450,268

$
368,813

$
89,619

$
-

$
3,721,914

Impairment of long-lived assets

3,076

-

-

-

-

3,076

Restructuring and other expense (income), net

(12,199
)

-

(35
)

(143
)

(2,405
)

(14,782
)
Miscellaneous income, net

35

169

141

(16
)

1,734

2,063

Equity income

22,864

-

132,865

-

4,871

160,600

Adjusted EBIT (5)

186,734

64,813

153,042

(4,561
)

5,517

405,545

~~(5)~~

~~Excludes the noncontrolling interest portion of impairment of long-lived assets and restructuring income~~ within Steel ~~Processing of $4,888,000~~.Processing.

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


	February 28,		May 31,		November 30,		May 31,
(in thousands)	2023		2022
(In thousands)					2023		2023
Total assets
Steel Processing	$	1,763,730	$	2,082,522	$	1,834,226	$	1,758,981
Consumer Products		636,896		577,026		622,304		615,430
Building Products		647,582		681,188		611,771		635,650
Sustainable Energy Solutions		121,689		114,084		103,448		129,872
Other		327,775		188,203		412,388		510,985
Total assets	$	3,497,672	$	3,643,023	$	3,584,137	$	3,650,918

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.

~~Table of Contents~~

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.

Table of Contents

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 ~~February 28,~~November 30, 2023:

Asset Derivatives

Liability Derivatives

Balance

Balance

Sheet

Fair

Sheet

Fair

(in thousands)

Location

Value

Location

Value

Derivatives designated as hedging instruments:

Commodity contracts

Receivables

$
30,670

Accounts payable

$
1,701

Other assets

1,137

Other liabilities

8

31,807

1,709

Foreign currency exchange contracts

Other assets

273

Accounts payable

-

Total

$
32,080

$
1,709

Derivatives not designated as hedging instruments:

Commodity contracts

Receivables

$
1,410

Accounts payable

$
19,185

Other assets

-

Other liabilities

1,719

1,410

20,904

Foreign currency exchange contracts

Receivables

-

Accounts payable

15

Total

$
1,410

$
20,919

Total derivative financial instruments

$
33,490

$
22,628

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 an $~~8,326,000~~ ~~increase in Receivables with a corresponding increase in 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:~~


		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	$	12,498	Accounts payable	$	3,743
		Other assets		-	Other liabilities		48		Other assets		47	Other liabilities		-
				1,040			4,565				12,545			3,743
Foreign currency exchange contracts		Receivables		-	Accounts payable		-
		Other assets		-	Other liabilities		17
				-			17
Total			$	1,040		$	4,582
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	$	11,555	Accounts payable	$	4,142		Receivables	$	2,476	Accounts payable	$	2,609
		Other assets		48	Other liabilities		24		Other assets		-	Other liabilities		39
				11,603			4,166
Foreign currency exchange contracts		Receivables		-	Accounts payable		255
Total			$	11,603		$	4,421
Subtotals											2,476			2,648

Total derivative financial instruments			$	12,643		$	9,003			$	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 $~~6,300,000~~5,150 increase in ~~Receivables~~receivables with a corresponding increase in ~~Accounts~~accounts payable.

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, 2023:


	Asset Derivatives			Liability Derivatives
	Balance			Balance
	Sheet	Fair		Sheet	Fair
(In thousands)	Location	Value		Location	Value
Derivatives designated as hedging instruments:
Commodity contracts	Receivables	$	20	Accounts payable	$	6,749
	Other assets		51	Other liabilities		379
			71			7,128

Foreign currency exchange contracts	Receivables		-	Accounts payable		33
			-			33

Subtotals		$	71		$	7,161

Derivatives not designated as hedging instruments:
Commodity contracts	Receivables	$	2,539	Accounts payable	$	8,604
	Other assets		-	Other liabilities		35
Subtotals			2,539			8,639

Total derivative financial instruments		$	2,610		$	15,800

Table of Contents

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 $7,576 increase in receivables with a corresponding increase in 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 ~~February 28,~~November 30, 2023:

Notional

(in thousands)

Amount

Maturity Date
Commodity contracts

$
136,907

March 2023 - September 2024
Foreign currency exchange contracts

$
604

March 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 February 28, 2023:
(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:								For the three months ended November 30, 2023:
Commodity contracts	$	32,976		Cost of goods sold	$	(10,980	)		$	15,019		Cost of goods sold	$	(2,360	)
Interest rate contracts		-		Interest expense		(7	)			-		Interest expense, net		52
Foreign currency exchange contracts		67		Net sales/Cost of goods sold		67				(34	)	Net sales/Cost of goods sold		(97	)
Total	$	33,043			$	(10,920	)		$	14,985			$	(2,405	)

For the three months ended February 28, 2022:
For the three months ended November 30, 2022:								For the three months ended November 30, 2022:
Commodity contracts	$	(2,460	)	Cost of goods sold	$	24,025			$	(19,641	)	Cost of goods sold	$	(13,648	)
Interest rate contracts		-		Interest expense		(7	)			-		Interest expense		(7	)
Foreign currency exchange contracts		(71	)	Miscellaneous income, net		(21	)			376		Net sales/Cost of goods sold		53
Total	$	(2,531	)		$	23,997			$	(19,265	)		$	(13,602	)

For the nine months ended February 28, 2023:
For the six months ended November 30, 2023:								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:								For the six months ended November 30, 2022:
Commodity contracts	$	(3,123	)	Cost of goods sold	$	(24,173	)		$	(36,099	)	Cost of goods sold	$	(13,192	)
Interest rate contracts		-		Interest expense		(20	)			-		Interest expense		(13	)
Foreign currency exchange contracts		124		Net sales/Cost of goods sold		(7	)			58		Net sales/Cost of goods sold		(74	)
Total	$	(2,999	)		$	(24,200	)		$	(36,041	)		$	(13,279	)

For the nine months ended February 28, 2022:
Commodity contracts	$	11,758		Cost of goods sold	$	107,190
Interest rate contracts		-		Interest expense		(20	)
Foreign currency exchange contracts		(11	)	Miscellaneous income, net		(18	)
Total	$	11,747			$	107,152

The estimated net amount of the ~~gains~~gain recognized in AOCI at ~~February 28,~~November 30, 2023 expected to be reclassified into net earnings within the succeeding twelve months is $~~13,848,000~~7,678 (net of tax of $~~3,313,000~~1,703). This amount was computed using the fair value of the cash flow hedges at ~~February 28,~~November 30, 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.

Table of Contents

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 ~~February 28,~~November 30, 2023:

Notional

(in thousands)

Amount

Maturity Date(s)
Commodity contracts

$
2,439

February 2023 - December 2024
Foreign currency exchange contracts

$
2,138

March 2023 - July 2023

~~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 February 28,						Location of Gain (Loss)	Three Months Ended November 30,
(in thousands)	Recognized in Earnings	2023			2022
(In thousands)								Recognized in Earnings	2023		2022
Commodity contracts	Cost of goods sold	$	(6,523	)	$	(4,694	)	Cost of goods sold	$	1,459	$	3,861
Foreign currency exchange contracts	Miscellaneous income, net		79			(23	)	Miscellaneous income, net		-		(47	)
Total		$	(6,444	)	$	(4,717	)		$	1,459	$	3,814


		Gain (Loss) Recognized						Gain (Loss) Recognized
		in Earnings for the						in Earnings for the
	Location of Gain (Loss)	Nine Months Ended February 28,					Location of Gain (Loss)	Six Months Ended November 30,
(in thousands)	Recognized in Earnings	2023			2022

(In thousands)							Recognized in Earnings	2023		2022
Commodity contracts	Cost of goods sold	$	(6,428	)	$	14,698	Cost of goods sold	$	395	$	2,284
Foreign currency exchange contracts	Miscellaneous income, net		32			226	Miscellaneous income, net		-		(141	)
Total		$	(6,396	)	$	14,924		$	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.

Table of Contents

Recurring Fair Value Measurements

At ~~February 28,~~November 30, 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)	$	-	$	33,490	$	-	$	33,490	$	-	$	15,021	$	-	$	15,021
Total assets	$	-	$	33,490	$	-	$	33,490	$	-	$	15,021	$	-	$	15,021

Liabilities
Derivative financial instruments (1)	$	-	$	22,628	$	-	$	22,628	$	-	$	6,391	$	-	$	6,391
Total liabilities	$	-	$	22,628	$	-	$	22,628	$	-	$	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)

Table of Contents

Non-Recurring Fair Value Measurements

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

At ~~February 28,~~May 31, 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 and used (1)	$	-	$	70	$	-	$	70
Long-lived assets held for sale (1)									$	-	$	2,623	$	-	$	2,623
Long-lived assets held and used (2)										-		70		-		70
Total assets	$	-	$	70	$	-	$	70	$	-	$	2,693	$	-	$	2,693

(1)

~~During~~Comprised of the ~~three months ended February 28, 2023, we recognized a pre-tax impairment charge~~following: (a) idled equipment at the manufacturing facility in Taylor, Michigan; and (b) the net assets of $our former toll processing facility in Cleveland, Ohio.~~484,000~~

~~related to~~(2)

Comprised of certain assets associated with a capital project at our Building Products facility in Jefferson, Ohio ~~that~~which were ~~determined to have no alternative use and~~ written down to their estimated salvage value of ~~approximately~~ $~~70,000~~70.

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

Significant

Quoted Prices

Other

Significant

in Active

Observable

Unobservable

Markets

Inputs

Inputs

(in thousands)

(Level 1)

(Level 2)

(Level 3)

Totals

Assets

Long-lived assets held for sale (1)

$
-

$
700

$
-

$
700

Total assets

$
-

$
700

$
-

$
700

~~Table of Contents~~

~~(1)~~

~~Comprised of production equipment at our Samuel facility in Twinsburg, Ohio facility with an estimated fair market value of $700,000.~~ ~~Refer to “Note E – Impairment of Long-Lived Assets” for additional information.~~

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 $~~638,163,000~~391,947 and $~~684,830,000~~639,948 at ~~February 28,~~November 30, 2023 and May 31, ~~2022,~~2023, respectively. The carrying amount of long-term debt, including current maturities, was $~~689,600,000~~448,818 and $~~696,610,000~~689,982 at ~~February 28,~~November 30, 2023 and May 31, ~~2022,~~2023, respectively.

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

Selected statements contained in this “Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” constitute “forward-looking statements” as that term is used in the 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 I – Item 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.

The following discussion and analysis of market and industry trends, business developments, and the results of our operations and financial position, 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 our business, operations and 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 CODM 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.divided into six main sections:

As of February 28, 2023, we held equity positions in seven operating joint ventures and one non-operating joint venture. We own controlling interests in four of these joint ventures, including the non-operating joint venture, and they are consolidated within the Steel Processing operating segment. When we own controlling interests in a joint venture, the equity owned by the other joint venture member(s) is shown as noncontrolling interests in our consolidated balance sheets, and other joint venture members’ portions of net earnings and 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. We hold noncontrolling investments in the remaining four of our joint ventures and they are accounted for using the equity method.

On ~~January 5,~~December 1, 2023, we ~~announced~~completed the ~~implementation~~Separation and Worthington Steel, comprised of ~~a Board transition plan, pursuant to~~our former Steel Processing business, became an independent, publicly traded company. The Separation of Worthington Steel from Worthington Enterprises, which ~~John H. McConnell II was appointed as a member~~is comprised of the ~~Board, effective~~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 ~~January 4,~~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 Separation, Worthington Steel made a cash distribution of $150 million to Worthington Enterprises. Following the completion of the Separation, Worthington Industries, Inc. changed its name to 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, ~~and John P. McConnell intends to step down in June 2023.~~the common shares of Worthington Steel began trading on the NYSE under the ticker symbol “WS.”

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 ~~June 29, 2023,~~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 ~~shareholders~~meet delivery requirements. Our products are priced competitively, primarily based on market factors, including, among other things, market pricing, the cost and availability of ~~record on June 15, 2023.~~raw materials, transportation and shipping costs, and overall economic conditions in the U.S. and abroad.

We sell our products and services to a diverse customer base and a broad range of end markets. The breakdown of net sales by end market for the ~~third~~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~~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 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 12%~~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

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.

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, 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.~~&A”).

Inflation ~~has accelerated~~ and government deficits and debt ~~levels~~ remain at high ~~levels~~levels. While inflation has moderated recently, a period of sustained inflation could pressure our margins in ~~many major markets. Inflationary pressures have been felt across our business~~future periods. In response to the concerns over inflation risk in the ~~form of higher input and conversion costs as well as higher overall SG&A. The~~broader U.S. economy, the U.S. Federal Reserve ~~has pushed~~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 ~~to the highest level~~and/or increases in ~~more than 15 years in an attempt to slow growth and reduce inflation. The impact of rising~~ interest rates, ~~could cause~~geopolitical issues or otherwise are difficult to predict and may have a ~~significant~~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 ~~downturn~~conditions on our business, financial condition and impact several end markets that we serve as well as overall demand for our products and services. Despite the economic headwinds presented by a rising interest rate environment, demand remained steady through the third quarterresults of ~~fiscal 2023 in most of our end markets and we believe pent-up demand continues to exist in certain markets, like automotive, due to lingering supply chain effects brought on by the COVID-19 pandemic.~~operations.

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

Sales to one Steel Processing customer in the automotive industry represented ~~12.5%~~11.1% and 12.3% of consolidated net sales during the ~~third~~second quarter of fiscal ~~2023~~2024 and the ~~third~~second quarter of fiscal ~~2022,~~2023, respectively. While our automotive business is largely driven by the production schedules of the Detroit Three automakers, our customer base is much broader and includes other domestic manufacturers and many of their suppliers. During the ~~third~~second quarter of fiscal ~~2023,~~2024, vehicle production for the Detroit Three automakers ~~and~~was down 11% due to the United Auto Workers Strike while overall North American vehicle production was up ~~6% and 7%, respectively, over the prior year quarter.~~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 indicator of our business.

~~The market price of hot-rolled~~Our principal raw material is flat-rolled steel, ~~is one of the most significant factors impacting our selling prices and operating results. The~~which we purchase from multiple primary steel industry as a whole has been cyclical, and at times availability and pricing can be volatile due to a number of factors beyond our control. This volatility can significantly affect our steel costs. In an environment of increasing prices for steel and other raw materials, competitive conditions may impact how much of the price increases we can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our customers, our financial results could be adversely affected. Also, if steel prices decrease, in general, competitive conditions may impact how quickly we must reduce our prices to our customers, and we could be forced to use higher-priced raw materials to complete orders for which the selling prices have decreased. Declining steel prices could also require us to write-down the value of our inventories to reflect current market pricing. Further, the number of suppliers has decreased in recent years due to industry consolidation and the financial difficulties of certain suppliers, and consolidation may continue. Accordingly, if delivery from a major steel supplier is disrupted, it may be more difficult to obtain an alternative supply than in the past.

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 on current price levels, we expect to have meaningful inventory holding gains~~Steel prices declined throughout most of fiscal 2023 before increasing significantly in the fourth quarter on

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 of $19.3 million during the 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 ~~and third quarters)~~quarter), fiscal ~~2022~~2023 and fiscal ~~2021:~~2022:

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 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 price of the steel raw material, it can have a negative impact on our margins. We refer to this effect as the “scrap gap,” which has narrowed in recent years from historically high levels, including quarter-over-quarter declines in the 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.

The following discussion provides a review of results for the three months ended ~~February 28,~~November 30, 2023 and November 30, 2022.

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

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

•


	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 ~~$0.7~~$17.9 million 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~~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 $143.8 million, as higher direct spreads in Steel Processing and a favorable product mix in Building Products were largely offset by a $23.2 million increase in manufacturing expenses, primarily due to inflationary pressures and lower volume in the ~~Consumer Products business.~~prior year quarter.

~~Selling, General and Administrative Expense~~Other operating items

Three Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Selling, general and administrative expense
$
106.1

9.6
%

$
102.9

7.5
%

$
3.2

•

~~SG&A increased $3.2 million over the prior year quarter due primarily to the net impact of acquisitions and divestitures, partially offset by lower profit sharing and bonus expense.~~


	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

~~Other Operating Items~~

Three Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Impairment of long-lived assets
$
0.5

$
3.1

$
(2.6
)
Restructuring and other expense (income), net

0.8

(0.5
)

1.3

Separation costs

6.3

-

6.3

•

Impairment of long-lived assets in the current year quarter was due to changes in the intended use of certain fixed assets at our Building Products facility in Jefferson, Ohio. Impairment charges in the prior year quarter were due to the write-down of certain production equipment at our Samuel facility in Twinsburg, Ohio facility that was determined to be below fair market value. Refer to “Note E – Impairment of Long-Lived Assets” for additional information.

•

~~Restructuring activity during the current year quarter related primarily to a reduction in workforce at our Columbus, Ohio facility and organizational realignment~~The net gain within ~~Building Products. Restructuring activity~~restructuring in the prior year quarter was driven primarily by ~~a $0.7 million gain recognized on~~ the sale of the remaining facility of WSP, our ~~Wooster, Ohio facility that was previously leased to ArtiFlex. Refer to “Note F – Restructuring and Other Expense (Income), net” for additional information.~~former operating joint venture.

•

Separation costs ~~of $6.3 million~~ reflect direct and incremental costs incurred in connection with the ~~planned~~ Separation ~~including audit, advisory, and legal costs. Refer to~~as discussed in “Note A -– Basis of ~~Presentation” for additional information.~~Presentation.”

~~Miscellaneous Income,~~Interest expense, net

Three Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Miscellaneous income, net
$
1.3

$
0.4

$
0.9

~~Interest Expense, net~~


	Three Months Ended							Three Months Ended
	February 28,							November 30,
					Increase/							Increase/
(In millions)	2023		2022		(Decrease)			2023		2022		(Decrease)
Interest expense, net	$	6.0	$	8.1	$	(2.1	)	$	2.2	$	7.6	$	(5.4	)

•

Interest expense, ~~was $6.0~~net of $2.2 million in the ~~current~~second quarter ~~down $2.1~~of fiscal 2024 was favorable to the second quarter of fiscal 2023 by $5.4 million ~~over the prior year quarter~~ due to higher interest income ~~earned on the Company’s cash balances,~~ and, to a lesser extent, ~~the impact of~~ lower average long-term debt levels ~~associated with short-term borrowings.~~due to the July 28, 2023 redemption of our 2026 Notes. Refer to “Note I – Debt and Receivables Securitization” for additional information

Equity ~~Income~~income

Three Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

WAVE
$
18.9

$
18.6

$
0.3

ClarkDietrich

18.9

21.4

(2.5
)
Serviacero Worthington

(0.2
)

4.7

(4.9
)
ArtiFlex (1)

(0.3
)

1.8

(2.1
)
Workhorse

(0.4
)

1.0

(1.4
)
Total Equity Income
$
36.9

$
47.5

$
(10.6
)

~~Table of Contents~~

~~(1)~~

On August 3, 2022, we sold our 50% noncontrolling equity interest in ArtiFlex. Activity for the three months ended February 28, 2023, represents settlement of final deal costs associated with the sale.


	Three Months Ended
	November 30,
						Increase/
(In millions)	2023		2022			(Decrease)
WAVE	$	21.4	$	19.0		$	2.4
ClarkDietrich		13.7		16.1			(2.4	)
Serviacero Worthington		3.8		1.9			1.9
Workhorse		3.5		(0.2	)		3.7
Total Equity Income	$	42.4	$	36.8		$	5.6

•

Equity income ~~from unconsolidated joint ventures decreased $10.6~~increased $5.6 million ~~from~~over the prior year quarter ~~driven~~to $42.4 million, 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 Serviacero Worthington and ClarkDietrich, down $4.9 million and $2.5 million, respectively, combined with the divestiture of ArtiFlex which contributed $1.8 million in the prior year quarter. Lower contributions from Serviacero Worthington were primarily the result of reduced spreads driven by falling steel prices. ClarkDietrich’s results have declined from historical levels as prior year results benefited from customers executing purchases in advance of rising steel prices. ClarkDietrich’s current year volumes have been impacted by reduced demand in the construction end market.ClarkDietrich.

Income Taxes


														Three Months Ended
	Three Months Ended													November 30,
	February 28,															Effective					Effective			Increase/
(In millions)	2023		Effective Tax Rate			2022		Effective Tax Rate			Increase/ (Decrease)			2023		Tax Rate			2022		Tax Rate			(Decrease)
Income tax expense	$	12.1		22.8	%	$	18.7		23.2	%	$	(6.6	)	$	7.2		23.4	%	$	4.1		23.7	%	$	3.1

•

Income tax expense was ~~$12.1~~$7.2 million in the ~~current~~second quarter of fiscal 2024 compared to ~~income tax expense of $18.7~~$4.1 million in the ~~prior year quarter.~~second quarter of fiscal 2023. The ~~decrease~~increase was driven by ~~lower~~higher pre-tax ~~earnings. Tax expense in the current quarter reflected an estimated annual~~earnings as our effective tax rate ~~of 22.8% compared to 23.2% for~~was relatively unchanged from the prior year quarter. For additional information regarding our income taxes, refer to “Note M – Income Taxes.”

Table of Contents

Adjusted EBIT

We evaluate operating performance on the basis of adjusted 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 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. Adjusted EBIT is a non-GAAP financial measure and is used by management to evaluate operating performance, engage in financial and operational planning and determine incentive compensation because we believe that this financial measure provides additional perspective 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 ~~from consolidated~~of 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
	February 28,						November 30,
(In millions)	2023			2022			2023			2022
Net earnings attributable to controlling interest	$	46.3		$	56.3		$	24.3		$	16.2
Interest expense, net		6.0			8.1			2.2			7.6
Income tax expense		12.1			18.7			7.2			4.1
EBIT	$	64.4		$	83.1			33.7			27.9
True-up of Level5 earnout accrual (1)		(1.0	)		-
Impairment of long-lived assets (2)		0.5			2.0
Restructuring and other expense (income), net (3)		0.8			(0.5	)
Separation costs (4)		6.3			-
Loss on sale of investment in ArtiFlex (5)		0.3			-
Incremental expense related to Level5 earnout (1)								-			0.5
Restructuring and other income, net (2)								-			(2.3	)
Separation costs (3)								21.9			9.2
Gain on sale of assets in equity income (4)								(2.8	)		-
Adjusted EBIT	$	71.3		$	84.6		$	52.8		$	35.3

(1)

Reflects ~~a pre-tax benefit of $1.0 million within SG&A expense to reverse the~~incremental compensation expense ~~accrued during~~attributable to the ~~first six months~~Level5 earnout.

(2)

Restructuring activities consist of ~~fiscal 2023 for anticipated payout under~~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 ~~first annual earnout opportunity~~prior year quarter resulted primarily from the sale of WSP’s remaining manufacturing facility in Jackson, Michigan and excludes the impact of 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 ~~Level5 acquisition.~~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,
				% 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 $6.8 million in the second quarter of fiscal 2024, up $24.0 million over the prior year quarter on lower estimated inventory holding losses, down $18.3 million, and a $1.9 million increase in equity earnings at Serviacero.

Table of Contents

•

Consumer Products – Adjusted EBIT was $9.5 million in the second quarter of fiscal 2024, down $4.0 million compared to the second quarter of fiscal 2023, driven primarily by a $3.1 million reserve related to the voluntary recall of our Balloon Time® Mini helium tank and to a lesser extent unfavorable manufacturing expense.

•

Building Products – Adjusted EBIT was $40.3 million in the second quarter 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 modest decline at ClarkDietrich.

•

Sustainable Energy Solutions – Adjusted EBIT was unfavorable $3.7 million to the prior year quarter resulting in an overall loss of $2.6 million in the second quarter of fiscal 2024 on lower net sales.

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

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


	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

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


	Six Months Ended
	November 30,
			% of					% of			Increase/
(In millions)	2023		Net sales			2022		Net sales			(Decrease)
Steel Processing	$	1,670.0		73.2	%	$	1,880.8		72.8	%	$	(210.8	)
Consumer Products		297.2		13.0	%		342.5		13.3	%		(45.3	)
Building Products		256.8		11.3	%		292.0		11.3	%		(35.2	)
Sustainable Energy Solutions		56.2		2.5	%		68.9		2.6	%		(12.7	)
Consolidated Net Sales	$	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
	November 30,
					Increase/
	2023		2023		(Decrease)
Steel Processing (Tons)		1,958,394		1,900,083		58,311
Consumer Products (Units)		33,954,462		38,966,668		(5,012,206	)
Building Products (Units)		5,163,973		5,289,933		(125,960	)
Sustainable Energy Solutions (Units)		220,369		288,820		(68,451	)

•

Steel Processing– Net sales totaled $1,670 in the current year period, down 11%, or $210.8 million from the prior year period, driven primarily by lower average selling prices. The mix of direct versus toll tons processed was unchanged at 56% to 44%.

•

Consumer Products – Net sales totaled $297.2 million in the current year period, down 13%, or $45.3 million compared to the prior year period, almost entirely on lower volume driven largely by de-stocking at some of our retail customers that continued into the first quarter of fiscal 2024.

Table of Contents

•

Building Products – Net sales totaled $256.8 million in the current year period, down 12%, or $35.2 million, from the prior year period, driven by lower volume, and to a lesser extent, unfavorable product mix.

•

Sustainable Energy Solutions – Net sales totaled $56.2 million in the current year period, 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 the prior year period, driven primarily by lower inventory holding losses at Steel Processing estimated to be $19.3 million compared to $54.6 million in the comparable period in the prior year.

Selling, general and administrative expense


	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 increased $8.7 million over the prior year quarter primarily due to higher healthcare and other benefit-related costs, and, to a lesser extent, higher wages.

Other operating items


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

•

Impairment of long-lived assets in both the current year and prior year periods was driven by changes in the estimated fair market value less cost to 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 prior year period was driven by gains realized from the sale of long-lived assets, including a pre-tax gain of $3.9 million realized from the sale of WSP’s manufacturing facility in Jackson, Michigan and a pre-tax gain of $1.2 million from the sale of real property in Tulsa, Oklahoma.

•

Separation costs reflect direct and incremental costs incurred in connection with the Separation as discussed in “Note A – Basis of 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

Table of Contents

•

Miscellaneous expense in the 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.

Table of Contents

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
	November 30,
(In millions)	2023			2022
Net earnings attributable to controlling interest	$	120.4		$	80.3
Interest expense, net		5.3			16.2
Income tax expense		36.0			23.6
EBIT		161.7			120.1
Incremental expense related to Level5 earnout (1)		-			1.1
Impairment of long-lived assets (2)		0.9			0.2
Restructuring and other income, net (3)		-			(3.6	)
Separation costs (4)		28.0			9.2
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)

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 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). ~~Excludes~~The net gain recognized in the ~~impact~~prior year quarter resulted primarily from the sale of ~~noncontrolling interests.~~WSP’s remaining manufacturing facility, located in Jackson, Michigan.

(4)

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

(5)

OnReflects 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 ~~we sold~~sale of our 50% noncontrolling equity investment in ArtiFlex, resulting in a pre-tax loss of $16.1 million in equity income related to the sale, including a loss of $0.3 million for the settlement of final transaction costs related to the sale during the three months ended February 28, 2023.ArtiFlex.

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


	Three Months Ended									Six Months Ended
	February 28,									November 30,
							Increase/						% of Adjusted						% of Adjusted			Increase/
(In millions)	2023			2022			(Decrease)			2023			EBIT			2022			EBIT			(Decrease)
Steel Processing	$	7.8		$	7.1		$	0.7		$	84.8			44.8	%	$	17.7			12.0	%	$	67.1
Consumer Products		17.9			26.7			(8.8	)		18.5			9.8	%		34.4			23.3	%		(15.9	)
Building Products		51.5			49.6			1.9			94.3			49.8	%		94.0			63.7	%		0.3
Sustainable Energy Solutions		(1.4	)		(2.8	)		1.4			(7.3	)		(3.9	%)		(0.3	)		(0.2	%)		(7.0	)
Other		(4.5	)		4.0			(8.5	)		(1.0	)		(0.5	%)		1.8			1.2	%		(2.8	)
Total Adjusted EBIT	$	71.3		$	84.6		$	(13.3	)		189.3			100.0	%		147.6			100.0	%	$	41.7

•

Steel Processing – Adjusted EBIT was up $0.7 million over the prior year quarter to $7.8 million due to an improvement in operating income which was largely offset by a $4.9 million decline in contribution of equity income from Serviacero Worthington due to inventory holding losses in the current quarter versus inventory holding gains in the prior year quarter. Operating income was up $8.1 million over the prior year quarter to $10.8 million. Excluding the $3.2 million of combined impairment and restructuring charges in the prior year quarter, operating income was up $4.9 million over the prior year quarter, as the favorable impact of higher spreads was partially offset by a $12.3 million increase in manufacturing costs due to increased wages, benefits and maintenance costs. Inventory holding losses, estimated to be $26.6$84.8 million in the current ~~quarter, were comparable~~year period, an increase of $67.1 million compared to the prior year period, due primarily to favorable direct spreads, including $35.3 million associated with the year-over-year favorable swing in estimated inventory holding losses, ~~of $24.9 million in the prior year quarter.~~and, to a lesser extent, higher equity earnings at Serviacero, up $9.0 million.

•

Consumer Products – Adjusted EBIT was ~~down $8.8~~$18.5 million in the current ~~quarter~~year period, down $15.9 million compared to ~~$17.9 million, as~~ the ~~favorable impact of higher average selling prices was more than offset~~prior year period, driven primarily by lower volumes and higher ~~input and production costs due to inflationary cost pressures. Adjusted EBIT in the prior year quarter benefitted from~~manufacturing expenses, partially offset by a favorable pricing spread as price increases ~~ahead of inflationary pressures.~~implemented in fiscal 2023 held steady through November 30, 2023.

•

Building Products – Adjusted EBIT ~~increased $1.9~~was $94.3 million ~~from~~in the current year period, an increase of $0.3 million compared to the prior year ~~quarter to $51.5~~period, on a $1.2 million ~~primarily due to a favorable product mix and higher average selling prices,~~increase in equity income, partially offset by ~~higher input and production costs and~~the impact of lower contributions of equity income. Equity income for the current quarter totaled $37.8 million, down $2.2 million from the prior year quarter, as ClarkDietrich’s results declined $2.5 million from the record levels in the prior year quarter while WAVE’s results improved slightly.volume.

•

Sustainable Energy Solutions – Adjusted EBIT was a loss of ~~$1.4~~$7.3 million ~~favorable by $1.4 million to the prior year quarter’s loss, as higher average selling prices improved margins, but were partially offset by higher production costs.~~

~~Table of Contents~~

~~Nine Months Year-to-Date – Fiscal 2023 compared to Fiscal 2022~~

~~The following discussion provides a review of results~~ for ~~the nine months ended February 28, 2023 and 2022.~~

Nine Months Ended

February 28,

(In millions, except per share amounts)
2023

2022

Increase/
(Decrease)

Net sales
$
3,687.5

$
3,721.9

$
(34.4
)
Operating income

89.8

263.9

(174.1
)
Equity income

105.5

160.6

(55.1
)
Net earnings attributable to controlling interest

126.6

299.1

(172.5
)
Earnings per diluted share attributable to controlling interest
$
2.57

$
5.83

$
(3.26
)

~~Net Sales and Volume~~

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

Nine Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Steel Processing
$
2,637.8

71.5
%

$
2,813.2

75.6
%

$
(175.4
)
Consumer Products

505.1

13.7
%

450.3

12.1
%

54.8

Building Products

443.9

12.0
%

368.8

9.9
%

75.1

Sustainable Energy Solutions

100.7

2.8
%

89.6

2.4
%

11.1

Consolidated Net Sales
$
3,687.5

100.0
%

$
3,721.9

100.0
%

$
(34.4
)

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

Nine Months Ended

February 28,

Increase/

2023

2022

(Decrease)

Steel Processing (Tons)

2,817,752

3,128,466

(310,714
)
Consumer Products (Units)

58,124,832

60,384,101

(2,259,269
)
Building Products (Units)

7,784,814

8,237,296

(452,482
)
Sustainable Energy Solutions (Units)

410,959

429,785

(18,826
)

•

~~Steel Processing –~~ Net sales decreased $175.4 million from the prior year period, as the impact of lower average selling prices and lower tolling volumes more than offset the impact of the Tempel Steel Company (“Tempel”) acquisition. The mix of direct versus toll tons processed was 56% to 44% in the current year period, ~~compared to 49% to 51% in the prior year period. The shift in mix towards direct tons was driven primarily by lower tolling volume with our mill customers and the sale~~a decline of ~~WSP’s remaining manufacturing facility on October 31, 2022.~~

•

~~Consumer Products –~~ Net sales increased 12.2%, or $54.8 million, over the prior year period. The increase was driven by higher average selling prices, and, to a lesser extent, contributions from the June 2, 2022 acquisition of Level5. Excluding Level5 units shipped in the current period, overall volumes were down 5.9% as retail customers reduced inventory levels resulting in lower customer orders.

•

~~Building Products –~~ ~~Net sales increased 20.4%, or $75.1 million, over the prior year period. The increase was driven primarily by higher average selling prices.~~

•

~~Sustainable Energy Solutions –~~ ~~Net sales increased $11.1 million or 12.4%, over the prior year period, driven by higher average selling prices.~~

~~Table of Contents~~

~~Gross Margin~~

Nine Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Gross Margin
$
418.9

11.4
%

$
547.1

14.7
%

$
(128.2
)

•

Gross margin decreased $128.2 million from the prior year period to $418.9 million, due primarily to a $134.1 million decline in contribution from Steel Processing, as declining steel prices resulted in an estimated $145.4 million unfavorable swing from prior year estimated inventory holding gains to current year estimated holding losses. Manufacturing expenses were also up $119.1 million, as inflationary pressures increased costs across all segments. The lower contribution from Steel Processing was partially offset by a $10.3 million improvement in Building Products driven primarily by higher average selling prices and a favorable product mix.

~~Selling, General and Administrative Expense~~

Nine Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Selling, general and administrative expense
$
317.3

8.6
%

$
294.9

7.9
%

$
22.4

•

~~SG&A increased $22.4 million over the prior year period driven primarily by the net impact of acquisitions and divestitures, partially offset by lower profit sharing and bonus expense.~~

~~Other Operating Costs/Income~~

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Impairment of long-lived assets
$
0.8

$
3.1

$
(2.3
)
Restructuring and other income, net

(4.6
)

(14.8
)

10.2

Separation costs

15.6

-

(15.6
)

•

Impairment of long-lived assets in the current year period consisted of $0.5 million related to changes in the intended use of certain fixed assets at our Building Products facility in Jefferson, Ohio and $0.3 million related to our commitment to a plan to sell certain fixed assets at our Samuel facility in Cleveland, Ohio that were written down to fair value less cost to sell. Impairment charges in the prior year period related to the write-down of certain production equipment at our Samuel facility in Twinsburg, Ohio that was determined to be below fair market value. Refer to “Note E – Impairment of Long-Lived Assets” for additional information.

•

Restructuring and other income, net in the current year period was driven by gains realized from the sale of long-lived assets, including a $3.9 million gain realized from the sale of WSP’s former manufacturing facility in Jackson, Michigan. Restructuring activity in the prior year period related primarily to the divestiture of WSP’s manufacturing facility in Canton, Michigan, which generated a pre-tax gain of $12.2 million and our exit from the former Engineered Cabs facility located in Stow, Ohio, which generated a pre-tax gain of $1.8 million. Refer to “Note F – Restructuring and Other Expense (Income), Net” for additional information.

•

Separation costs of $15.6 million reflect direct and incremental costs incurred in connection with the planned Separation, including audit, advisory, and legal costs. Refer to “Note A – Basis of Presentation” for additional information.

~~Table of Contents~~

~~Miscellaneous income (expense), net~~

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Miscellaneous income (expense), net
$
(2.4
)

$
2.1

$
(4.5
)

•

Miscellaneous expense in the current 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, as of the purchase date of the annuity contract, which resulted in a pre-tax, non-cash settlement charge of $4.8 million in the first quarter of fiscal 2023 to accelerate a portion of deferred pension cost.

~~Interest Expense, net~~

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Interest expense, net
$
22.2

$
23.2

$
(1.0
)

•

Interest expense was $22.2 million in the current year period, down $1.0 million from the prior year period due to higher interest income, and to a lesser extent, the impact of lower average debt levels associated with short-term borrowings.

~~Equity Income~~

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

  WAVE
$
61.7

$
66.7

$
(5.0
)
  ClarkDietrich

55.1

66.2

(11.1
)
  Serviacero Worthington

3.5

22.9

(19.4
)
  ArtiFlex (1)

(13.7
)

4.8

(18.5
)
  Workhorse

(1.1
)

-

(1.1
)
   Total Equity Income
$
105.5

$
160.6

$
(55.1
)

~~(1)~~

~~On August 3, 2022, we sold our 50% noncontrolling equity interest in ArtiFlex. Activity for the nine months ended February 28, 2023, includes a $16.1 million pre-tax loss related to the sale.~~

•

Equity income from our unconsolidated joint ventures decreased $55.1 million from the prior year period to $105.5 million due to a $16.1 million pre-tax loss related to the sale of our noncontrolling equity interest in ArtiFlex and lower contributions from all of our unconsolidated joint ventures. The lower contribution from Serviacero Worthington was primarily the result of reduced spreads driven by falling steel prices.

~~Income Taxes~~

Nine Months Ended

February 28,

(In millions)
2023

Effective Tax Rate

2022

Effective Tax Rate

Increase/
(Decrease)

Income tax expense
$
35.7

22.8
%

$
90.1

23.2
%

$
(54.4
)

~~Table of Contents~~

•

Income tax expense was down $54.4 million in the current year period to $35.7 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 22.8% compared to 23.2% for the prior year period. For additional information regarding our income taxes, refer to “Note M – Income Taxes.”

~~Adjusted EBIT~~

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

Nine Months Ended

February 28,

(In millions)
2023

2022

Net earnings attributable to controlling interest
$
126.6

$
299.1

Interest expense, net

22.2

23.2

Income tax expense

35.7

90.1

EBIT
$
184.5

$
412.4

Impairment of long-lived assets (1)

0.7

2.0

Restructuring and other income, net (2)

(2.7
)

(8.9
)
Separation costs (3)

15.6

-

Pension settlement charge (4)

4.8

-

Loss on sale of investment in ArtiFlex

16.1

-

Adjusted EBIT
$
219.0

$
405.5

~~(1)~~

~~(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). Excludes the impact of the noncontrolling interests.

~~(3)~~

~~Reflects direct and incremental costs incurred in connection with the anticipated Separation, including audit, advisory, and legal costs.~~

~~(4)~~

During the first quarter of 2023, we completed the pension lift-out transaction to transfer a portion of the total projected benefit obligation of The Gerstenslager Company Bargaining Unit Employees' Pension Plan to a third-party insurance company, resulting in a non-cash settlement charge of $4.7 million to accelerate a portion of the overall deferred pension cost.

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

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Steel Processing
$
25.5

$
186.7

$
(161.2
)
Consumer Products

52.4

64.8

(12.4
)
Building Products

145.4

153.0

(7.6
)
Sustainable Energy Solutions

(1.7
)

(4.6
)

2.9

Other

(2.6
)

5.6

(8.2
)
Total Adjusted EBIT
$
219.0

$
405.5

(186.5
)

~~Table of Contents~~

•

~~Steel Processing~~ – Adjusted EBIT was down $161.2 million from the prior year period to $25.5 million, due to a $151.9 million decline in operating income contribution and a $19.4 million decline in equity income contribution. Excluding impairment and restructuring activity, operating income was down $146.6 million from the prior year period driven primarily by an estimated $145.4 million unfavorable swing related to estimated inventory holding losses of $81.2 million in the current year period compared to estimated inventory holding gains of $64.2 million in the prior year period, partially offset by the favorable impact of higher spreads. Adjusted EBIT was also negatively impacted by $19.4 million in lower equity income at Serviacero Worthington from the prior year period, as lower steel prices reduced spreads.

•

~~Consumer Products –~~ Adjusted EBIT was down $12.4 million from the prior year period to $52.4 million as the favorable impact of higher average selling prices was more than offset by lower volumes and higher input and production costs, including $2.7 million of incremental material cost related to Level5 inventory that was written-up to fair value at acquisition. Adjusted EBIT was also negatively impacted by $11.2 million of higher SG&A, primarily due to the impact of the Level5 acquisition.

•

~~Building Products –~~ ~~Adjusted EBIT decreased $7.6 million from the prior year period to $145.4 million due to a $16.1 million decline in equity income contribution, partially offset by a~~ $7.0 million increase in operating income. Lower equity income was due to a $11.1 million and $5.0 million decrease in equity income at ClarkDietrich and WAVE, respectively, driven primarily by lower volumes. The increase in operating income was primarily driven by higher average selling prices and a favorable product mix, partially offset by higher input and production costs.

•

~~Sustainable Energy Solutions –~~ ~~Adjusted EBIT was a loss of $1.7 million, favorable by $2.9~~ million compared to the prior year period, ~~driven by~~due to lower volumes and higher ~~average selling prices, partially offset by higher production costs and an unfavorable product mix.~~manufacturing expenses.

Liquidity and Capital Resources

During the ~~nine~~six months ended ~~February 28,~~November 30, 2023, we generated ~~$396.1~~$135.0 million of cash from operating activities and invested ~~$68.7~~$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 ~~$71.3~~$175.0 million ~~from~~in the ~~sale~~form of ~~assets, including $35.8~~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 50% noncontrolling equity interest in ArtiFlex.~~Separation. Additionally, we repaid ~~$44.4~~$243.8 million ~~of short-term borrowings~~to redeem the 2026 Notes and paid dividends of ~~$44.2 million on the common shares. The following table summarizes our consolidated cash flows for the periods presented:~~$17.3 million.


	Nine Months Ended						Six Months Ended
	February 28,						November 30,
(in millions)	2023			2022
Net cash provided (used) by operating activities	$	396.1		$	(94.7	)
(In millions)							2023			2022
Net cash provided by operating activities							$	194.7		$	214.0
Net cash used by investing activities		(53.7	)		(413.2	)		(97.8	)		(30.7	)
Net cash used by financing activities		(109.6	)		(88.1	)
Net cash provided (used) by financing activities								(120.9	)		(88.2	)
Increase (decrease) in cash and cash equivalents		232.8			(596.0	)		(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	$	267.3		$	44.3		$	430.9		$	129.6

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 planned Separation.~~$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 ~~further 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.~~

3635

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 ~~$396.1~~$194.7 million during the ~~nine~~six months ended ~~February 28,~~November 30, 2023, ~~compared to net cash used by operating activities of $94.7~~down $19.3 million ~~during~~from the ~~nine months ended February 28, 2022. This~~comparable period in the prior year. The change was due primarily ~~due~~ to a ~~$466.2~~$36.8 million ~~decrease~~change in net operating working capital (accounts receivable, inventories, and accounts payable) requirements over the comparable prior year ~~nine-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 ~~$53.7~~$97.8 million during the ~~nine~~six months ended ~~February 28,~~November 30, 2023, compared to ~~$413.2~~$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~~cash consideration of $21.0 million, ~~and Tempel on December 1, 2021 for $272.5 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 ~~$68.7~~$46.0 million, partially offset by combined cash proceeds of ~~$71.3~~$71.6 million from the sale of our ~~50% noncontrolling~~ 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 ~~$109.6~~$120.9 million during the ~~nine~~six months ended ~~February 28,~~November 30, 2023 compared to ~~$88.1~~$88.2 million in the prior year period. The change was primarily due to ~~$44.4~~$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 2,235,000 common shares, at a cost of $127.8 million, in the prior year period.~~six months ended November 30, 2022.

Common shares – On ~~March 22,~~December 19, 2023, ~~the~~Worthington Enterprises’ Board of Directors declared a quarterly dividend of ~~$0.31~~$0.16 per share payable on ~~June~~March 29, ~~2023,~~2024, to shareholders of record on ~~June~~March 15, ~~2023.~~

2024.

On March 20, 2019, the Board authorized the repurchase of up to ~~6,600,000~~6.6 million common shares.

On March 24, 2021, the Board 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 ~~February 28,~~November 30, 2023, ~~6,065,000~~6.1 million common shares remained available for repurchase under these two authorizations.

The common shares 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.

3736

Table of Contents

Long-term debt and short-term borrowings – As of ~~February 28,~~November 30, 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. There were no ~~outstanding~~ borrowings ~~drawn against~~under our ARCredit Facility at ~~February 28,~~November 30, 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.~~

During the third quarter of fiscal 2023, we repurchased $5,615,000 of the 2026 Notes through open market purchases. This repurchase activity generated a gain of $77,000, which is recorded in Miscellaneous income (expense), net in the consolidated statements of earnings. Refer to “Note I – Debt” for additional information.

Dividend Policy

We currently have no material contractual or regulatory restrictions on the payment of dividends. Dividends are declared at the discretion of the Board. The Board reviews the dividend quarterly and establishes the dividend rate based upon our consolidated financial condition, results of operations, capital requirements, current and projected cash flows, business prospects, and other relevant factors. While we have paid a dividend every quarter since becoming a public company in 1968, there is no guarantee that payments of dividends will continue in the future.

Critical Accounting 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~~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’~~Enterprises’ principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

~~Table of Contents~~

Management, under the supervision of and with the participation of Worthington ~~Industries’~~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 ~~February 28,~~November 30, 2023). Based on that evaluation, Worthington ~~Industries’~~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 ~~February 28,~~November 30, 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.

3937

Table of Contents

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~~Enterprises sold by Worthington Enterprises during the ~~period covered by this Form 10-Q. There~~six months ended November 30, 2023, that were nonot 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 ~~repurchased by, or on behalf~~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 ~~Worthington Industries or any affiliated purchaser (as defined in Rule 10b - 18(a)(3)~~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 ~~Exchange Act) during~~publicly announced repurchase authorizations then in effect. On March 20, 2019, the ~~three months ended February 28, 2023.~~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.

Table of Contents

Item 3. – Defaults Upon Senior Securities

Not applicable.

Item 4. – Mine Safety Disclosures

Not applicable.

Item 5. – Other Information

~~Not applicable.~~No response required.

4039

Table of Contents

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		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 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 November 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 Worthington 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 Enterprises, Inc. and 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 Current Report on Form 8-K of Worthington Enterprises, Inc. filed with the SEC on December 5, 2023 (SEC 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))

Table of Contents


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 ~~February 28,~~November 30, 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 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~~Enterprises are the following documents formatted in Inline XBRL (Extensible Business Reporting Language):

(i)

Consolidated Balance Sheets at ~~February 28,~~November 30, 2023 and May 31, ~~2022;~~2023;

(ii)

Consolidated Statements of Earnings for the three months and ~~nine~~six months ended ~~February 28,~~November 30, 2023 and ~~February 28,~~November 30, 2022;

(iii)

Consolidated Statements of Comprehensive Income for the three months and ~~nine~~six months ended ~~February 28,~~November 30, 2023 and ~~February 28,~~November 30, 2022;

(iv)

Consolidated Statements of Cash Flows for the three months and ~~nine~~six months ended ~~February 28,~~November 30, 2023 and ~~February 28,~~November 30, 2022; and

(v)

Condensed Notes to Consolidated Financial Statements.

Table of Contents

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: ~~April 10, 2023~~January 9, 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)


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)


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


	(Unaudited)
	February 28,		May 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	267,244	$	34,485
Receivables, less allowances of $5,233 and $1,292 at February 28, 2023
and May 31, 2022, respectively		715,899		857,493
Inventories:
Raw materials		271,518		323,609
Work in process		160,688		255,019
Finished products		168,918		180,512
Total inventories		601,124		759,140
Income taxes receivable		15,619		20,556
Assets held for sale		5,191		20,318
Prepaid expenses and other current assets		105,689		93,661
Total current assets		1,710,766		1,785,653
Investments in unconsolidated affiliates		244,277		327,381
Operating lease assets		102,474		98,769
Goodwill		413,989		401,469
Other intangible assets, net of accumulated amortization of $107,167 and
$93,973 at February 28, 2023 and May 31, 2022, respectively		318,483		299,017
Other assets		25,454		34,394
Property, plant and equipment:
Land		49,695		51,483
Buildings and improvements		306,296		303,269
Machinery and equipment		1,247,994		1,196,806
Construction in progress		57,307		59,363
Total property, plant and equipment		1,661,292		1,610,921
Less: accumulated depreciation		979,063		914,581
Total property, plant and equipment, net		682,229		696,340
Total assets	$	3,497,672	$	3,643,023

Liabilities and equity
Current liabilities:
Accounts payable	$	489,346	$	668,438
Short-term borrowings		3,605		47,997
Accrued compensation, contributions to employee benefit plans and related taxes		84,098		117,530
Dividends payable		17,630		15,988
Other accrued items		57,703		70,125
Current operating lease liabilities		12,166		11,618
Income taxes payable		-		300
Current maturities of long-term debt		261		265
Total current liabilities		664,809		932,261
Other liabilities		118,736		115,991
Distributions in excess of investment in unconsolidated affiliate		116,825		81,149
Long-term debt		689,339		696,345
Noncurrent operating lease liabilities		92,481		88,183
Deferred income taxes, net		100,224		115,132
Total liabilities		1,782,414		2,029,061
Shareholders' equity - controlling interest		1,585,426		1,480,752
Noncontrolling interests		129,832		133,210
Total equity		1,715,258		1,613,962
Total liabilities and equity	$	3,497,672	$	3,643,023


	Three Months Ended						Nine Months Ended
	February 28,						February 28,
	2023			2022			2023			2022
Net sales	$	1,103,322		$	1,378,235		$	3,687,528		$	3,721,914
Cost of goods sold		959,515			1,235,107			3,268,584			3,174,821
Gross margin		143,807			143,128			418,944			547,093
Selling, general and administrative expense		106,057			102,945			317,318			294,926
Impairment of long-lived assets		484			3,076			796			3,076
Restructuring and other expense (income), net		824			(504	)		(4,558	)		(14,782	)
Separation costs		6,347			-			15,593			-
Operating income		30,095			37,611			89,795			263,873
Other income (expense):
Miscellaneous income (expense), net		1,327			393			(2,354	)		2,063
Interest expense, net		(6,035	)		(8,140	)		(22,245	)		(23,170	)
Equity in net income of unconsolidated affiliates		36,926			47,466			105,495			160,600
Earnings before income taxes		62,313			77,330			170,691			403,366
Income tax expense		12,055			18,683			35,684			90,059
Net earnings		50,258			58,647			135,007			313,307
Net earnings attributable to noncontrolling interests		3,933			2,305			8,382			14,173
Net earnings attributable to controlling interest	$	46,325		$	56,342		$	126,625		$	299,134
Basic
Weighted average common shares outstanding		48,587			49,749			48,541			50,331
Earnings per share attributable to controlling interest	$	0.95		$	1.13		$	2.61		$	5.94

Diluted
Weighted average common shares outstanding		49,493			50,641			49,356			51,275
Earnings per share attributable to controlling interest	$	0.94		$	1.11		$	2.57		$	5.83

Common shares outstanding at end of period		48,619			49,364			48,619			49,364

Cash dividends declared per share	$	0.31		$	0.28		$	0.93		$	0.84


	(Unaudited)
	November 30,		May 31,
	2023		2023
Assets
Current assets:
Cash and cash equivalents	$	430,906	$	454,946
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		245,166		264,568
Work in process		156,361		183,248
Finished products		174,884		160,152
Total inventories		576,411		607,968
Income taxes receivable		5,511		4,198
Assets held for sale		1,789		3,381
Prepaid expenses and other current assets		117,160		104,957
Total current assets		1,772,603		1,868,337
Investments in unconsolidated affiliates		247,421		252,591
Operating lease assets		94,677		99,967
Goodwill		416,857		414,820
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		42,916		25,323
Property, plant and equipment:
Land		50,920		49,697
Buildings and improvements		312,830		308,669
Machinery and equipment		1,293,628		1,263,962
Construction in progress		78,536		45,165
Total property, plant and equipment		1,735,914		1,667,493
Less: accumulated depreciation		1,031,900		991,839
Total property, plant and equipment, net		704,014		675,654
Total assets	$	3,584,137	$	3,650,918

Liabilities and equity
Current liabilities:
Accounts payable	$	447,119	$	528,920
Short-term borrowings		175,000		2,813
Accrued compensation, contributions to employee benefit plans and related taxes		80,461		93,810
Dividends payable		17,245		18,330
Other accrued items		62,270		53,362
Current operating lease liabilities		12,493		12,608
Income taxes payable		485		7,451
Current maturities of long-term debt		150,269		264
Total current liabilities		945,342		717,558
Other liabilities		112,878		113,286
Distributions in excess of investment in unconsolidated affiliate		118,465		117,297
Long-term debt		298,549		689,718
Noncurrent operating lease liabilities		85,283		89,982
Deferred income taxes, net		99,653		101,449
Total liabilities		1,660,170		1,829,290
Shareholders' equity - controlling interest		1,792,809		1,696,011
Noncontrolling interests		131,158		125,617
Total equity		1,923,967		1,821,628
Total liabilities and equity	$	3,584,137	$	3,650,918


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


Safe Harbor Statement			ii

Part I. Financial Information

	Item 1.	Financial Statements

		Consolidated Balance Sheets – ~~February 28,~~November 30, 2023 and May 31, ~~2022~~	1

		~~Consolidated Statements of Earnings – Three Months and Nine Months Ended February 28,~~ 2023 ~~and 2022~~	2

		Consolidated Statements of ~~Comprehensive Income~~Earnings – Three Months and ~~Nine~~Six Months Ended ~~February 28,~~November 30, 2023 and 2022	3

		Consolidated Statements of ~~Cash Flows~~Comprehensive Income – Three Months and ~~Nine~~Six Months Ended ~~February 28,~~November 30, 2023 and 2022	4

		Consolidated Statements of Cash Flows – Three Months and Six Months Ended November 30, 2023 and 2022	5
		Condensed Notes to Consolidated Financial Statements	56

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

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3837

	Item 4.	Controls and Procedures	3837

Part II. Other Information

	Item 1.	Legal Proceedings	4038

	Item 1A.	Risk Factors	4038

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4038

	Item 3.	Defaults Upon Senior Securities ~~(Not applicable)~~	4039

	Item 4.	Mine Safety Disclosures ~~(Not applicable)~~	4039

	Item 5.	Other Information ~~(Not applicable)~~	4039

	Item 6.	Exhibits	4140

Signatures			42


(in thousands)	Balance, as of May 31, 2022		Expense (Income)			Payments			Adjustments		Balance, as of February 28, 2023
Early retirement and severance	$	541	$	908		$	(1,083	)	$	-	$	366
Net gain on sale of assets				(5,466	)
Restructuring and other income, net			$	(4,558	)


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


	Three Months Ended																Three Months Ended
	February 28, 2023							February 28, 2022									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	$	1,421	$	142		$	1,563	$	(1,348	)	$	(134	)	$	(1,482	)	$	843	$	54		$	897	$	550		$	308		$	858
Pension liability adjustment		415		(92	)		323		1,700			(332	)		1,368			-		-			-		15			(97	)		(82	)
Cash flow hedges		43,963		(9,621	)		34,342		(26,529	)		7,295			(19,234	)		17,390		(3,841	)		13,549		(5,665	)		1,665			(4,000	)
Other comprehensive income (loss)	$	45,799	$	(9,571	)	$	36,228	$	(26,177	)	$	6,829		$	(19,348	)	$	18,233	$	(3,787	)	$	14,446	$	(5,100	)	$	1,876		$	(3,224	)


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


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


	Three Months Ended February 28, 2022
(in thousands)	Steel Processing			Consumer Products			Building Products			Sustainable Energy Solutions			Other			Consolidated
Net sales	$	1,052,562		$	161,692		$	132,944		$	31,037		$	-		$	1,378,235
Impairment of long-lived assets		3,076			-			-			-			-			3,076
Restructuring and other expense (income), net		114			-			(35	)		-			(583	)		(504	)
Miscellaneous income, net		(12	)		(39	)		(3	)		(38	)		485			393
Equity income		4,692			-			39,978			-			2,796			47,466
Adjusted EBIT (2)		7,116			26,674			49,570			(2,801	)		4,039			84,598


	Nine Months Ended February 28, 2023
(in thousands)	Steel Processing			Consumer Products			Building Products		Sustainable Energy Solutions			Other			Consolidated
Net sales	$	2,637,834		$	505,145		$	443,870	$	100,679		$	-		$	3,687,528
Impairment of long-lived assets		312			-			484		-			-			796
Restructuring and other expense (income), net		(4,204	)		206			617		-			(1,177	)		(4,558	)
Separation costs		-			-			-		-			15,593			15,593
Miscellaneous income (expense), net		2,145			(102	)		428		19			(4,844	)		(2,354	)
Equity income		3,491			-			116,809		-			(14,805	)		105,495
Adjusted EBIT (3)(4)		25,450			52,350			145,431		(1,690	)		(2,588	)		218,953


	Nine Months Ended February 28, 2022
(in thousands)	Steel Processing			Consumer Products		Building Products			Sustainable Energy Solutions			Other			Consolidated
Net sales	$	2,813,214		$	450,268	$	368,813		$	89,619		$	-		$	3,721,914
Impairment of long-lived assets		3,076			-		-			-			-			3,076
Restructuring and other expense (income), net		(12,199	)		-		(35	)		(143	)		(2,405	)		(14,782	)
Miscellaneous income, net		35			169		141			(16	)		1,734			2,063
Equity income		22,864			-		132,865			-			4,871			160,600
Adjusted EBIT (5)		186,734			64,813		153,042			(4,561	)		5,517			405,545


	Three Months Ended					Nine Months Ended					Three Months Ended				Six Months Ended
	February 28,					February 28,					November 30,				November 30,
(in thousands)	2023			2022		2023			2022
(In thousands)											2023		2022		2023		2022
Net sales	$	626,527		$	789,483	$	2,162,134		$	2,392,643	$	676,875	$	711,665	$	1,397,308	$	1,535,607
Gross margin		150,698			187,602		479,402			603,778		166,939		147,299		361,247		328,704
Operating income		107,994			144,575		353,177			475,341		134,120		107,356		283,529		245,183
Depreciation and amortization		6,774			7,831		21,826			23,907		8,303		6,864		16,946		15,052
Interest expense		4,607			2,661		11,197			7,833		4,538		3,910		10,277		6,590
Income tax expense (benefit)		(3,782	)		4,478		(410	)		20,938
Income tax expense												6,708		1,262		8,354		3,372
Net earnings		111,135			136,346		349,556			449,149		122,670		105,183		266,236		238,421


(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


(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


	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	$	720	$	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.	$	813	$	1,588	$	869	$	813	$	889	$	1,588


	Nine Months Ended
	February 28,
(In millions, except per share amounts)	2023		2022		Increase/ (Decrease)
Net sales	$	3,687.5	$	3,721.9	$	(34.4	)
Operating income		89.8		263.9		(174.1	)
Equity income		105.5		160.6		(55.1	)
Net earnings attributable to controlling interest		126.6		299.1		(172.5	)
Earnings per diluted share attributable to controlling interest	$	2.57	$	5.83	$	(3.26	)

(In thousands)

Maturity Date

Commodity contracts

December 2023 - June 2025