Worthington Steel DRS Draft registration statement | WS 19 Apr 23

Exhibit 99.1

Confidential Treatment Requested by Worthington Steel, Inc.

Pursuant to 17 C.F.R. Section 200.83

LOGO

, 20

Dear Worthington Industries, Inc. Shareholder:

On September 29, 2022, we announced our intention to separate our company into two independent, publicly-traded companies. Completion of the separation will create (i) a market-leading company with premier brands in fast-growing, attractive end markets in consumer products, building products and sustainable energy solutions that will operate under a new name, (“New Worthington”) and (ii) a market-leading, value-added steel processing company with a differentiated capability set, sophisticated supply chain and price risk management solutions and expanded product offerings in electrical steel laminations and laser welding solutions, named Worthington Steel, Inc. (“Worthington Steel”). The separation will occur by means of a pro rata distribution of 100% of the outstanding common shares of Worthington Steel to Worthington Industries, Inc. (“Worthington”) shareholders as of the record date. Following the separation, each company is expected to be positioned to have enhanced agility and sharpened strategic focus, capital structures and capital allocation strategies that are tailored to each company’s strategy, improved shareholder value creation opportunities, and outstanding boards of directors and management teams.

Worthington Steel will be comprised of Worthington’s existing steel processing business and certain other assets and liabilities that Worthington is expected to contribute to Worthington Steel prior to the separation. As a standalone entity, Worthington Steel is expected to be a market-leading, value-added steel processor and producer of electrical steel laminations and automotive lightweighting solutions, positioned to capitalize on expanding opportunities in electrification, sustainability and infrastructure spending. Worthington Steel is expected to have a differentiated capability set and sophisticated supply chain and price risk management solutions to serve its blue chip customers, grow market share and increase margins. Worthington Steel is expected to continue leveraging the Worthington Business System to power a winning culture, higher growth and profitability through transformation, innovation and acquisitions.

New Worthington, is expected to be a market-leading company with premier brands in attractive end markets in consumer products, building products and sustainable energy solutions. As a more focused company, New Worthington is expected to be well-positioned to capitalize on key trends in sustainability, technology, remodeling and construction and outdoor living. New Worthington is expected to continue to pursue a growth strategy focused on leveraging its robust new product pipeline of sustainable, tech-enabled solutions to disrupt mature markets. New Worthington is expected to continue to leverage the Worthington Business System. The new company is anticipated to have a high-margin and asset-light profile, which is expected to enable strong free cash flow generation and returns for shareholders. Further, New Worthington’s value is expected to no longer be highly correlated to the price of steel, providing the opportunity for premium sector multiples.

The separation will provide Worthington shareholders as of the record date with ownership interests in both New Worthington and Worthington Steel. The separation will be in the form of a pro rata distribution of 100% of the outstanding common shares of Worthington Steel to Worthington shareholders as of the record date. Each Worthington shareholder will receive common share(s) of Worthington Steel for every common share(s) of Worthington held on (the “record date” for the distribution).

You do not need to take any action to receive the common shares of Worthington Steel to which you are entitled as a Worthington shareholder. You also do not need to pay any consideration, to exchange or surrender your existing common shares of Worthington or take any other action in order to receive the common shares of Worthington Steel to which you are entitled.

The distribution is intended to be tax-free to Worthington shareholders as of the record date for U.S. federal income tax purposes, except for cash received in lieu of fractional common shares. You should consult your own tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local and non-U.S. tax laws.

I encourage you to read the information statement, which is being provided to all Worthington shareholders who held common shares of Worthington on the record date. The information statement describes the separation and the distribution in detail and contains important business and financial information about Worthington Steel.

We believe the separation is a significant and exciting step in our company’s history, and we remain committed to working on your behalf to continue to build long-term shareholder value.

Sincerely,

Andy Rose

President and Chief Executive Officer

Worthington Industries, Inc.

Confidential Treatment Requested by Worthington Steel, Inc.

Pursuant to 17 C.F.R. Section 200.83

Worthington Steel, Inc.

, 20

Dear Future Worthington Steel, Inc. Shareholder:

We are excited to welcome you as a shareholder of Worthington Steel, Inc. (“Worthington Steel”). We are proud of our heritage and are committed to using our experienced management team, talented employees, outstanding brand and leading market position to establish our own independent record of strong performance.

Worthington Steel is a market-leading, value-added steel processing business with best-in-class expanded product offerings in electrical steel laminations and laser welding solutions. For the fiscal year ended May 31, 2023, the Worthington Steel business generated $ billion in net sales. Worthington Steel intends to continue its balanced approach to capital allocation and maintain a strong balance sheet and a dividend policy that is consistent with the historic practices of Worthington Industries, Inc. (“Worthington”).

As a standalone company, we believe we will have a differentiated capability set and sophisticated supply chain and price risk management solutions to serve our blue chip customers, grow market share and increase margins. We intend to continue leveraging the Worthington Business System to power a winning culture, higher growth and profitability through transformation, innovation and acquisitions.

Our outstanding team has a strong Worthington legacy and seeks to make continuous improvement part of everything we do.

I personally invite you to learn more about Worthington Steel and our strategic initiatives by reading the accompanying information statement. With our strong foundation derived from Worthington, Worthington Steel is set up well for what we believe will be our best days to come.

Sincerely,

Geoff Gilmore

Chief Executive Officer

Worthington Steel, Inc.

Confidential Treatment Requested by Worthington Steel, Inc.

Pursuant to 17 C.F.R. Section 200.83

Information contained herein is subject to completion or amendment. A registration statement on Form 10 relating to these securities has been confidentially submitted to the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended.

PRELIMINARY AND SUBJECT TO COMPLETION, DATED , 2023

INFORMATION STATEMENT

Worthington Steel, Inc.

This information statement is being furnished in connection with the pro rata distribution by Worthington Industries, Inc. (“Worthington”) to its shareholders of 100% of the outstanding common shares of Worthington Steel, Inc., a wholly-owned subsidiary of Worthington that will hold, directly or indirectly, the assets and liabilities associated with Worthington’s steel processing business (“Worthington Steel” or the “Company”). Upon completion of the distribution, Worthington will change its name to (“New Worthington”).

For every common share(s) of Worthington held of record by you as of the close of business on (the “record date” for the distribution), you will receive common share(s) of Worthington Steel. You will receive cash in lieu of any fractional common shares of Worthington Steel that you would have received after application of the above ratio.

The distribution is intended to be tax-free to Worthington shareholders for U.S. federal income tax purposes, except for cash received in lieu of fractional common shares.

No vote of Worthington shareholders is required to complete the distribution. Therefore, you are not being asked for any proxy in connection with the distribution. You also do not need to pay any consideration, to exchange or surrender your existing common shares of Worthington or to take any other action in order to receive the common shares of Worthington Steel to which you are entitled.

There is no current trading market for Worthington Steel’s common shares. Worthington Steel expects that a limited market, commonly known as a “when-issued” trading market, will develop on or shortly before the record date, and further expects that “regular-way” trading will begin on the first trading day following the distribution. Worthington Steel intends to apply to have its common shares authorized for listing on the New York Stock Exchange (the “NYSE”) under the symbol “ .” Following the distribution, New Worthington will trade on the NYSE under the symbol “ .”

In reviewing this information statement, you should carefully consider the matters described under “Risk Factors” beginning on page 16.

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is .

A Notice of Internet Availability of Information Statement Materials containing instructions describing how to access this information statement was first mailed to Worthington shareholders on or about . This information statement will be mailed to those Worthington shareholders who previously elected to receive a paper copy of such materials.

TABLE OF CONTENTS


QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION			iii
INFORMATION STATEMENT SUMMARY			1
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA			13
RISK FACTORS			16
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS			40
DIVIDEND POLICY			43
CAPITALIZATION			44
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS			45
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			54
BUSINESS			69
MANAGEMENT			83
EXECUTIVE COMPENSATION			87
DIRECTOR COMPENSATION			90
PAY VERSUS PERFORMANCE DISCLOSURE			91
EQUITY COMPENSATION PLAN INFORMATION			92
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS			93
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			96
THE SEPARATION AND DISTRIBUTION			97
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION TO U.S. HOLDERS			103
DESCRIPTION OF CERTAIN INDEBTEDNESS			107
DESCRIPTION OF CAPITAL STOCK			108
WHERE YOU CAN FIND MORE INFORMATION			115
INDEX TO FINANCIAL STATEMENTS			F-1

Presentation of Information

Except as otherwise indicated or unless the context otherwise requires, references herein to: (i) “Worthington Steel,” the “Company,” “we,” “us” and “our” refer to Worthington Steel, Inc., an Ohio corporation, and its consolidated subsidiaries after giving effect to the separation or, with respect to historical information, the business and operations of Worthington’s steel processing segment that will be transferred to the Company in connection with the separation and distribution. In connection with the separation and distribution, Worthington Industries, Inc., will change its name to “New Worthington.” References herein to the terms “Worthington,” “Parent” and “New Worthington,” when used in a historical context, refer to Worthington Industries, Inc., an Ohio corporation, and its consolidated subsidiaries (including Worthington Steel and all of its subsidiaries) and, when used in the future tense, refer to New Worthington, an Ohio corporation, and its consolidated subsidiaries after giving effect to the separation and distribution.

In connection with the separation and distribution, we will enter into a series of transactions with Worthington pursuant to which Worthington will transfer the assets and liabilities of its steel processing business and certain other assets and liabilities to us in exchange for a Cash Distribution, as defined herein. As used herein: (i) the “separation” refers to the separation of the steel processing business from Worthington and the creation of a separate, publicly-traded company holding the steel processing business; and (ii) the “distribution” refers to the pro rata distribution of 100% of the common shares of Worthington Steel owned by Worthington as of the record date to Worthington shareholders. Except as otherwise indicated or unless the context otherwise requires, the information in this information statement about Worthington Steel assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution.

Market, Industry and Other Data

Unless otherwise indicated, information in this information statement concerning our industry, the industries we serve and the markets in which we operate, including our general expectations, market position, market opportunity and market share, is based on information from third-party sources and management estimates. Management estimates are derived from publicly available information and reports provided to us (including reports from S&P Global Mobility and other industry publications, surveys and forecasts), our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. Management estimates have not been verified by any independent source. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. These and other factors could cause future performance to differ materially from our assumptions and estimates. See “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements.”

S&P reports, data and information referenced herein (the “S&P Materials”) are the copyrighted property of S&P Global Inc. and its subsidiaries (“S&P”). The S&P Materials are from sources considered reliable; however, the accuracy and completeness thereof are not warranted, nor are the opinions and analyses published by S&P representations of fact. The S&P Materials speak as of the original publication date thereof and are subject to change without notice. S&P and other trademarks appearing in the S&P Materials are the property of S&P or their respective owners.

Trademarks and Trade Names

The name and mark, Worthington Steel, and other of our trademarks, trade names and service marks appearing in this information statement are our property or, as applicable, licensed to us, or, as applicable, are the property of Worthington. The name and mark, Worthington, New Worthington, and other trademarks, trade names and service marks of Worthington appearing in this information statement are the property of Worthington.


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QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION


*What is Worthington Steel and why is Worthington separating Worthington Steel’s business and distributing Worthington Steel’s common shares?*		Worthington Steel, which is currently a wholly-owned subsidiary of Worthington, was formed to hold Worthington’s steel processing business. The separation of Worthington Steel from Worthington and the distribution of Worthington Steel common shares are intended to provide you with equity investments in two separate, publicly-traded companies that will each be able to focus on its respective business strategies. Worthington and Worthington Steel believe that the separation will result in enhanced long-term performance of each business for the reasons discussed in “The Separation and Distribution—Background” and “The Separation and Distribution—Reasons for the Separation.”

*Why am I receiving this information statement?*		Worthington is delivering this information statement to you because you are a holder of record of common shares of Worthington. If you are a holder of Worthington common shares as of the close of business on (the record date for the distribution), you will be entitled to receive common share(s) of Worthington Steel for every common share(s) of Worthington that you held at the close of business on such date. This information statement will help you understand how the separation and distribution will affect your investment in Worthington and your investment in us after the separation.

*How will the separation of Worthington Steel from Worthington work?*		To accomplish the separation of Worthington Steel into a separate, publicly-traded company, Worthington will distribute 100% of our outstanding common shares to Worthington shareholders on a pro rata basis in a distribution intended to be tax-free for U.S. federal income tax purposes, except for cash received in lieu of fractional common shares.

*Why is the separation of Worthington Steel structured as a distribution?*		Worthington believes that a distribution of our common shares to Worthington shareholders that is tax-free for U.S. federal income tax purposes is an efficient way to separate the steel processing business in a manner that will create long-term value for Worthington and its shareholders.

*What is the record date for the distribution?*		The record date for the distribution will be .

*When will the distribution occur?*		It is expected that 100% of our common shares will be distributed by Worthington on to holders of record of Worthington common shares as of the close of business on (the record date for the distribution).

*What do Worthington shareholders need to do to participate in the distribution?*		Worthington shareholders as of the record date are not required to take any action to receive our common shares in the distribution, but you are urged to read this entire information statement carefully. No shareholder approval of the distribution is required, and you are not being asked for a proxy. You also do not need to pay any consideration, exchange or surrender your existing common shares of Worthington or take any other action to receive the common shares of Worthington Steel to which you are entitled. The distribution will not affect the number of outstanding common shares of Worthington or any rights of Worthington shareholders, although it will affect the market value of each outstanding common share of Worthington.


		iii

How will common shares of Worthington Steel be issued?

You will receive our common shares through the same or substantially similar channels that you currently use to hold or trade common shares of Worthington (whether through a brokerage account, 401(k) plan or other channel). Receipt of our common shares will be documented for you in substantially the same manner that you typically receive shareholder updates, such as monthly broker statements and 401(k) statements.

If you own common shares of Worthington as of the record date, Worthington, with the assistance of Broadridge Corporate Issuer Solutions, LLC, the distribution agent, transfer agent and registrar for our common shares (“Broadridge”), will electronically distribute our common shares to you or to your brokerage firm on your behalf by way of direct registration in book-entry form. Broadridge will mail you a book-entry account statement that reflects your common shares of Worthington Steel, or your bank or brokerage firm will credit your account for such common shares.


*How many common shares of Worthington Steel will I receive in the distribution?*		Worthington will distribute to you of our common share(s) for every common share(s) of Worthington held by you as of the record date. Based on approximately common shares of Worthington outstanding as of , assuming a distribution of 100% of our common shares and applying the distribution ratio (without accounting for cash to be issued in lieu of fractional common shares), we expect that a total of approximately of our common shares will be distributed to Worthington. See “The Separation and Distribution.”

*Will Worthington Steel issue fractional common shares in the distribution?*		No. Worthington Steel will not issue fractional common shares in the distribution. Fractional common shares that Worthington shareholders would otherwise have been entitled to receive will be aggregated into whole common shares and sold in the public market by the distribution agent. The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional common share such shareholder would otherwise be entitled to receive) to those shareholders who would otherwise have been entitled to receive fractional common shares. Recipients of cash in lieu of fractional common shares will not be entitled to any interest on the amounts of payment made in lieu of fractional common shares. The receipt of cash in lieu of a fractional common shares generally will be taxable to the recipient shareholders for U.S. federal income tax purposes as described in “Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders.”

What are the conditions to the distribution?

The distribution is subject to final approval by the board of directors of Worthington (the “Worthington Board”), or a duly authorized committee thereof, as well as a number of other conditions, including, among others:

• the transfer of assets and liabilities to us in accordance with the separation agreement will have been completed, other than assets and liabilities intended to transfer after the distribution;

• Worthington will have received an opinion of Latham & Watkins LLP, tax counsel to Worthington, regarding the qualification of the distribution, together with certain related


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transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”);

• the making of a cash distribution of approximately $ (the “Cash Distribution”) from Worthington Steel to Worthington as partial consideration for the contribution of assets to Worthington by Worthington Steel in connection with the separation, and the determination by Worthington in its sole discretion that following the separation, Worthington will have no further liability or obligation whatsoever with respect to any of the financing arrangements that Worthington Steel will be entering into in connection with the separation;

• the SEC will have declared effective the registration statement on Form 10 of which this information statement forms a part, no stop order suspending the effectiveness of the registration statement will be in effect, no proceedings for such purpose will be pending before or threatened by the SEC and this information statement (or a Notice of Internet Availability) will have been mailed to Worthington shareholders;

• all actions and filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities laws will have been taken and, where applicable, will have become effective or been accepted by the applicable governmental authority;

• the transaction agreements relating to the separation will have been duly executed and delivered by the parties thereto;

• no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions will be in effect;

• the common shares of Worthington Steel to be distributed will have been accepted for listing on the NYSE, subject to official notice of distribution;

• Worthington will have entered into a distribution agent agreement with, or provided instructions regarding the distribution to, Broadridge as distribution agent;

• all material governmental approvals necessary to consummate the distribution and to permit the operation of our business after the separation substantially as it is currently conducted will have been obtained;

• the financing described in “Description of Certain Indebtedness” will have been completed; and

• no other event or development will have occurred or exist that, in the judgment of the Worthington Board, in its sole discretion, makes it inadvisable to effect the separation, the distribution or the other related transactions.


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		Neither we nor Worthington can assure you that any or all of these conditions will be met. In addition, Worthington can decline at any time to go forward with the separation and distribution. See “The Separation and Distribution—Conditions to the Distribution.”

*What is the expected date of completion of the separation and distribution?*		The completion and timing of the separation and distribution are dependent upon a number of conditions. It is expected that 100% of our common shares will be distributed by Worthington on to holders of record of Worthington common shares as of the close of business on (the record date for the distribution). However, no assurance can be provided as to the timing of the separation or that all conditions to the distribution will be met.

*Can Worthington decide to cancel the distribution of Worthington Steel common shares even if all the conditions have been met?*		Yes. The distribution is subject to the satisfaction or waiver of certain conditions as described in “The Separation and Distribution—Conditions to the Distribution.” Until the distribution has occurred, Worthington has the right to terminate, modify or abandon the distribution, even if all of the conditions are satisfied.

*What if I want to sell my Worthington or Worthington Steel common shares?*		You should consult with your financial advisor, such as your brokerage firm, bank or tax advisor.

*What is “regular-way” and “ex-distribution” trading of Worthington common shares?*		Beginning on or shortly before the record date and continuing through the distribution date, it is expected that there will be two markets in Worthington common shares: a “regular-way” market and an “ex-distribution” market. Common shares of Worthington that trade in the “regular-way” market will trade with an entitlement to our common shares distributed pursuant to the distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to our common shares distributed pursuant to the distribution. If you decide to sell any common shares of Worthington before the distribution date, you should ensure that your brokerage firm, bank or other nominee understands whether you want to sell your common shares of Worthington with or without your entitlement to our common shares distributed pursuant to the distribution.

*Where will I be able to trade common shares of Worthington Steel?*		Worthington Steel intends to apply to list Worthington Steel’s common shares on the NYSE under the symbol “ .” We anticipate that trading in our common shares will begin on a “when-issued” basis on or shortly before the record date and will continue up to the distribution date. We anticipate that “regular-way” trading in our common shares will begin on the first trading day following the completion of the distribution. If trading begins on a “when-issued” basis, you may purchase or sell our common shares up to the distribution date, but your transaction will not settle until after the distribution date. We cannot predict the trading prices for our common shares before, on or after the distribution date.


*What will happen to the listing of Worthington common shares?*		Upon completion of the distribution, Worthington will change its name to New Worthington. After the distribution, New Worthington common shares will trade on the NYSE under the symbol “WOR.”


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*Will the number of common shares of Worthington that I own change as a result of the distribution?*		No. The number of common shares of Worthington that you own will not change as a result of the distribution.

*Will the distribution affect the market price of my common shares of New Worthington?*		Yes. As a result of the distribution, Worthington expects the trading price of common shares of New Worthington immediately following the distribution to be lower than the “regular-way” trading price of such common shares immediately prior to the distribution because the trading price will no longer reflect the value of the steel processing business. There can be no assurance that the aggregate market value of the New Worthington common shares and our common shares following the separation will be higher or lower than the market value of Worthington common shares if the separation did not occur. This means, for example, that after the distribution, the combined trading prices of one common share of New Worthington and of our common share(s) (representing the number of our common shares to be received per every one common share of Worthington in the distribution) may be equal to, greater than or less than the trading price of one common share of Worthington before the distribution.

*What are the U.S. federal income tax consequences of the separation and the distribution?*		The distribution is conditioned upon, among other things, Worthington’s receipt of an opinion of Latham & Watkins LLP, tax counsel to Worthington, regarding the qualification of the distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code. The opinion of tax counsel will be based on certain factual assumptions, representations and undertakings and subject to qualifications and limitations. If the distribution, together with certain related transactions, qualifies as a reorganization, then for U.S. federal income tax purposes, U.S. Holders (as defined in “Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders”) will not recognize gain or loss or include any amount in taxable income (other than with respect to cash received in lieu of fractional common shares) as a result of the distribution. The material U.S. federal income tax consequences of the distribution are described in the section entitled “Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders.” Each Worthington shareholder is encouraged to consult its tax advisor as to the specific tax consequences of the distribution to such shareholder, including the effect of any state, local and non-U.S. tax laws and of changes in applicable tax laws.

*How will I determine my tax basis in the common shares of Worthington Steel that I receive in the distribution?*		For U.S. federal income tax purposes, assuming that the distribution, together with certain related transactions, qualifies as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, the tax basis in the common shares of Worthington that a Worthington shareholder holds immediately prior to the distribution will be allocated between such shareholder’s common shares of New Worthington and the common shares of Worthington Steel received in the distribution (including any fractional common share interest for which cash is received) in proportion to their relative fair market values. See “Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders” for a more detailed description of the effects of the distribution on Worthington shareholders’ tax basis in common shares of New Worthington and common shares of Worthington Steel. Each


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		Worthington shareholder is encouraged to consult its tax advisor as to how this allocation will work based on such shareholder’s situation (including if common shares of Worthington were purchased by such shareholder at different times or for different amounts) and regarding any particular consequences of the distribution to such shareholder, including the application of state, local and non-U.S. tax laws.


*What will Worthington Steel’s relationship be with New Worthington following the separation?*		Worthington Steel expects to enter into a separation agreement with Worthington to effect the separation and provide a framework for our relationship with New Worthington after the separation. We also expect to enter into certain other agreements, including a transition services agreement, an employee matters agreement, a tax matters agreement and other commercial agreements. These agreements will govern the separation between us and Worthington of the assets, employees, services, liabilities and obligations (including their respective investments, property and employee benefits and tax-related assets and liabilities) of Worthington and its subsidiaries attributable to periods prior to, at and after the separation and will govern certain relationships between us and New Worthington after the separation. See “Certain Relationships and Related Person Transactions” and “Risk Factors—Risks Related to the Separation.”

*Who will manage Worthington Steel after the separation?*		Worthington Steel benefits from having in place a management team with an extensive background in the steel processing business. Led by Geoff Gilmore, who will serve as our President and Chief Executive Officer, Tim Adams, who will serve as our Vice President and Chief Financial Officer, and Jeff Klingler, who will serve as our Executive Vice President and Chief Operating Officer, Worthington Steel’s management team possesses deep knowledge of, and extensive experience in, our industry. See “Management.”

*Are there risks associated with owning Worthington Steel common shares?*		Yes. Ownership of our common shares is subject to both general and specific risks, including those relating to our business, the industries we serve, our ongoing contractual relationships with New Worthington after the separation and our status as a separate, publicly-traded company. Ownership of our common shares is also subject to risks relating to the separation. These risks are described in the “Risk Factors” section of this information statement beginning on page 16. You are encouraged to read that section carefully.

*Does Worthington Steel plan to pay dividends?*		Subject to any preferential rights of any outstanding preferred shares, holders of our common shares will be entitled to receive ratably the dividends, if any, as may be declared from time to time by our Board out of funds legally available for that purpose. If there is a liquidation, dissolution or winding up of us, holders of our common shares would be entitled to ratable distribution of our assets remaining after the payment in full of liabilities and any preferential rights of any then-outstanding preferred share. See “Dividend Policy.”

*Will Worthington Steel incur any indebtedness prior to or at the time of the distribution?*		Yes, we anticipate having certain indebtedness upon completion of the separation. Additional details regarding such financing arrangements will be provided in subsequent amendments to this information statement. See “Description of Certain Indebtedness” and “Risk Factors—Risks Related to Our Business.”


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*Who will be the distribution agent, transfer agent, registrar and information agent for the Worthington Steel common shares?*		The distribution agent, transfer agent and registrar for our common shares will be Broadridge. Broadridge will also serve as the information agent for the distribution. For questions relating to the transfer or mechanics of the distribution, you should contact: Broadridge Corporate Issuer Solutions, LLC. .

*Where can I find more information about each of Worthington and Worthington Steel?*		Before the distribution, if you have any questions relating to Worthington’s business performance, you should contact Worthington at: Marcus Rogier Treasurer & Investor Relations Officer Worthington Industries, Inc. Telephone: +1 (614) 840-4663 Email: Marcus.Rogier@worthingtonindustries.com After the distribution, Worthington Steel shareholders who have any questions relating to our business performance should contact us at: We maintain an internet website at . Our website, and the information contained on or accessible through our website, is not incorporated by reference in this information statement.


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INFORMATION STATEMENT SUMMARY

This summary highlights information included elsewhere in this information statement and does not contain all of the information that may be important to you. You should read this entire information statement carefully, including “Risk Factors,” “Cautionary Statement Concerning Forward-Looking Statements,” “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our combined financial statements and the notes thereto (the “Combined Financial Statements”).

Business Summary

Overview

We believe our key investment attributes to be:

•

Long-standing customer relationships focused on value creation and best-in-class service delivery

•

Manufacturing scale enabling proximity to customers and suppliers, operational efficiencies, and purchasing power

•

Attractive growth opportunities via strategic capital investments and/or value-enhancing acquisitions

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A market-leading supplier to growing end markets

•

Ideally positioned to benefit from expanding global opportunities in electrification, sustainability, and infrastructure spending

For nearly 70 years, we have been delivering high quality steel processing capabilities across a variety of end-markets including automotive, heavy truck, agriculture, construction, and energy. With the ability to produce customized steel solutions, we aim to be the preferred value-added steel processor in the markets we serve by delivering highly technical, customer-specific solutions, while also providing advanced materials support and price risk management solutions to optimize customer supply chains. Our scale and operating footprint allow us to achieve an advantaged cost structure and service platform supported by a strategic operating footprint.

Our people-first philosophy is rooted in the belief that people are our most important asset, which serves as the basis for our unwavering commitment to our employees, customers, suppliers, and investors. Our primary goal is to create value for our shareholders. Built on the successful foundation of the Worthington Business System, we apply a disciplined approach to capital deployment and seek to grow earnings by optimizing our operations and supply chain, developing and commercializing new products and applications, and pursuing strategic investments and acquisitions.

For the fiscal year ended May 31, 2023, we delivered approximately million tons of value-added processed steel, generating net sales of $ compared to million tons and net sales of

$ in fiscal 2022. Net earnings and adjusted earnings before interest and taxes (“adjusted EBIT”) were $ and $ , respectively, in fiscal 2023 compared to $ and $ million, respectively, in fiscal 2022.

Adjusted EBIT is a non-GAAP measure used by management to assess operating performance. For further information regarding our use of this non-GAAP measure as well as a reconciliation to the most comparable GAAP measure, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement.

The following pie chart presents our net sales by end-market for the fiscal year ended May 31, 2022:

Net Sales by End Market (Fiscal 2022)

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Value-Added Products and Services

We believe our diversified portfolio of products and services makes us a premier value-added steel processor in the markets we serve. We generate sales by processing and selling flat-rolled steel coils, which we source primarily from various North American steel mills, into the precise type, thickness, length, width, shape, and surface quality required by customer specifications. Our product lines and processing capabilities include:

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Carbon Flat-Roll Steel Processing

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Electrical Steel Laminations

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Tailor Welded Products

We can sell steel on a direct basis, whereby we are exposed to the risk and rewards of ownership of the material while in our possession. Alternatively, we can also toll process steel under a fee for service arrangement whereby we process customer-owned material. Please refer to the “Business” section for more detail on “Value-Added Products and Services.”

Our Key Strengths

Strong and differentiated positions in key markets

We strive to be a collaborative partner to our customers by delivering complex and value-added solutions that meet our customers’ most demanding and performance-critical applications. We believe our portfolio of differentiated and value-added solutions is unique in the service center industry and provides for a competitive advantage that we will continue to leverage to create value for all of our stakeholders. We believe few service centers in North America offer the same breadth of value-added processing capabilities as Worthington Steel. Our market expertise extends beyond steel processing to include end-to-end supply chain management and price risk management solutions for customers seeking to develop efficient supply chains and reduce risk. In doing so, we have become one of the largest participants in North America’s steel futures market.


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Through our TWB Company, LLC (“TWB”) joint venture, which operates 11 manufacturing facilities across North America, we believe we are the largest independent tailor welded blank operation in the region with capabilities that include mild carbon steel, advanced high strength steel and aluminum. Worthington Steel’s product offering is further differentiated by our electrical steel capabilities. With manufacturing facilities in both North America and Asia Pacific, we are one of the leading global providers of electrical steel laminations for motors, generators, and transformers.

Strong operating platform guided by the Worthington Philosophy and driven by the Worthington Business System

The backbone of our culture is the Worthington Philosophy, which was memorialized in 1968 by our founder, John H. McConnell. The Worthington Philosophy is rooted in the ‘Golden Rule,’ which serves as the basis for an unwavering commitment to our key stakeholders – our employees, customers, suppliers, and shareholders – and helps drive strong partnerships, not only with our customers and suppliers, but our employees as well.

We follow a people-first philosophy, with the primary goal of driving value creation for our shareholders. We seek to accomplish this by optimizing existing operations, commercializing value-added offerings, and pursuing strategic capital investments and acquisitions. Our employees at all levels work together under the framework of the Worthington Business System to develop cross-functional solutions across our operations, including back-office support, to drive efficiency by streamlining costs and reducing waste while maintaining the operational agility necessary to respond to the wide range of environments in which we operate.

Further, we are committed to protecting the safety and health of our workforce and the environment, while using resources in a responsible and sustainable manner, subscribing to internationally recognized measures of consistent performance metrics relating to health, safety, security, and the environment.

As outlined below, the Worthington Business System is rooted in the Worthington Philosophy and designed to drive continuous improvement through use of enabling tools and technologies that help drive results and inform our business decisions:

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Ideally positioned to benefit from the global shift toward electrified vehicles

We believe we are ideally positioned to benefit from the once-in-a-lifetime industry tailwinds associated with the global shift from internal combustion powered vehicles to electrified vehicles over the coming decade. As one of the largest suppliers of highly engineered, precision-stamped, electrical steel laminations in the world, we aim to be the preferred supplier of electrical steel laminations to our blue-chip automobile original equipment manufacturer (OEM) customers as demand continues to grow. As shown by the chart below, battery electric and hybrid vehicles are expected to make up approximately two-thirds of all vehicles produced in North America and approximately 90% of all vehicles produced in Europe and Greater China by 2030. Due to our leading position as a supplier of laminations in the electric generator and transformer markets, we are also well-positioned to capitalize on growth opportunities associated with expanding and modernizing the existing power infrastructure and charging network.

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Worthington Steel’s operating footprint provides strategic jurisdictional advantages due to its proximity to both its suppliers and automobile OEM customer base. As a result, we are well positioned to benefit from financial incentives in the form of tax credits and rebates for localizing the development of an electric vehicle ecosystem in North America and globally.

Deep and long-standing relationships with customers

We focus on providing superior customer service and delivering best-in-class products and services, which result in deeply entrenched and long-lasting customer relationships, many of which span decades, particularly with our automobile OEM customers. Our uniform quality control processes across downstream operations, including cold rolling, hot-dipped galvanizing, tailor welded blanking, pickling, and stamping electrical steel laminations allows us to deliver value-added and tailored products that meet our customers’ most demanding and technical applications.


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engineers, material scientists and other technical experts, focus on pre-sale material specification and selection, as well as after-sale material performance, and can help customers select the best products for their specific business needs.

We believe our customer-centric approach to fostering meaningful and mutually beneficial relationships with our customers gives us a significant competitive advantage and are proud to have repeatedly received recognition from several of our blue-chip customers.

Our scale allows us to create highly efficient supply chains supported by a highly experienced workforce

We maintain an operating portfolio comprised of key manufacturing facilities and operations strategically located near both suppliers and customers, which allows us to compete effectively in our selected end-markets across numerous geographies. We have long-standing relationships with our suppliers that we believe are mutually beneficial. Furthermore, many of our sites have multiple operations under one roof, allowing us to remain dynamic and responsive to the changing demands of our customers, further minimizing in-transit work in progress inventory, and reducing logistics costs. In-house forecasting expertise generates early signals for potentially significant changes in automotive platform demand, giving us the ability to flex our operations accordingly. Our production lines are operated by a highly skilled workforce with decades of accumulated operational experience and an exceptional safety record, by industry standards. We believe our efficient supply chains and the collective knowledge base of our workforce is very difficult to replicate and is a key contributing factor in our ability to produce high-quality products and solutions on a consistent basis.

Attractive growth prospects through continued disciplined strategic capital investments and acquisitions

Applying a disciplined approach to capital deployment has been, and will continue to be, a core part of our business strategy. We have successfully used strategic capital expenditures and selective acquisitions to strengthen our competitive position, enter new markets, and accelerate growth. Recent examples of strategic capital expenditures include a $17 million project to add an additional pot to our hot-dip galvanizing line in Monroe, Michigan, to produce Type 1 aluminized steels for the automotive industry to support light weighting as well as a $3 million investment in laser welding capacity to support a new OEM battery electric vehicle and $13 million of investment in new electrical steel lamination press capacity in Mexico, China, and India to support growth in electrified vehicles.

Recent acquisitions include two completed in fiscal 2022 that have enabled us to scale our business by offering a more comprehensive range of products and services while also expanding into new markets: 1) the June 2021 acquisition of Shiloh Industries’ U.S. BlankLight business (“Shiloh”) and 2) the December 2021 acquisition of Tempel. The Shiloh acquisition has allowed us to expand both the capacity and capabilities of our tailor welded blank joint venture, TWB, while the Tempel acquisition added one of the world’s leading manufacturers of precision motor and transformer laminations for the electrical steel market.

Balance sheet strength and flexibility

We expect to maintain a flexible capital structure with modest leverage and ample liquidity that will enable us to pursue strategic investments and value-enhancing acquisitions. We anticipate having sufficient cash on hand, committed credit availability and debt capacity to execute on our business strategy and to utilize operating cash flow to strategically invest in corporate development and organic growth initiatives. A disciplined capital allocation framework and rigorous process will be applied in the evaluation of organic and acquisition opportunities with the requirement to meet stringent return criteria in order to maintain moderate leverage levels that allow us to remain operationally nimble while deploying capital to improve our return on invested capital metrics.


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Experienced and proven management team

Our leadership team consists of long-tenured leaders from Worthington who have a proven track record of delivering on growth and operational excellence through various economic cycles. The Worthington Steel leadership team will be comprised of Geoff Gilmore as Chief Executive Officer, Tim Adams as Chief Financial Officer, and Jeff Klingler as Chief Operating Officer; together they have accumulated a collective 75 years of experience at Worthington and will continue working together to create sustainable value through execution of our growth and business strategies.

Our Growth and Business Strategies

Capitalize on key growth trends

Worthington Steel is uniquely positioned to capitalize on several key growth trends, including the global decarbonization of transportation, the energy transition to renewable sources, and restoration of aging American infrastructure.

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Partner with our customers to help them meet their goals and overcome supply chain challenges specific to their businesses

We collaborate with our customers across all of our end-markets to deliver solutions that meet performance-critical specifications and strive to give our customers a competitive advantage in terms of meeting fuel efficiency, strength, and safety requirements. We partner with our customers to develop tailored solutions for evolving quality and service requirements, which enables the deep, entrenched relationships with our blue-chip customer base.

Strategically grow our presence in electrical steel


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portfolio of highly technical electrical steel products and capabilities with a strong local manufacturing and product development focus with the goal of capturing market share in the growing electric vehicle and transformer markets.

Drive continuous improvement through use of the Worthington Business System

We intend to continue to implement operational improvements by applying lean techniques to streamline costs and reduce waste within manufacturing, commercial, sourcing and supply chain. Through continuous improvement initiatives, we believe we can achieve improved metrics for product quality, service, delivery, workforce safety, and waste reduction to further optimize cost, productivity and efficiencies, while creating a resilient and efficient operating platform that can remain agile regardless of external market conditions.

Expand our value-added offerings and leading market positions through disciplined strategic investments and acquisitions

Following the separation, Worthington Steel will be well-positioned to expand our leading market positions and scale through organic and strategic growth initiatives. Utilizing a disciplined growth strategy, we plan to selectively seek opportunities to strengthen our existing portfolio while expanding into new metals-related value-added products and services, which will result from a combination of new product development, strategic capital expenditures, and/or acquisitions.

Alongside our efforts to optimize our existing manufacturing facilities, we have also identified opportunities to profitably add incremental production capacity to enhance our North American footprint and grow our positions in certain markets, particularly for our electrical steel products and services.

We have, and intend to continue, to evaluate various strategic capital expenditure projects that allow us to develop additional business where we already have deep expertise, relationships with prominent customers, and a strong track record of performance. We remain committed to applying a disciplined approach to evaluating any opportunity, focusing on those with exposure to high-growth, target end-markets and the potential to be immediately financially accretive.

The Separation and Distribution

The Separation and Distribution

On September 29, 2022, Worthington announced its intention to separate its steel processing business from the remainder of its businesses.

It is expected that the Worthington Board, or a duly authorized committee thereof, will approve the pro rata distribution of 100% of our issued and outstanding common shares, on the basis of of our common share(s) for every common share(s) of Worthington held as of the close of business on (the record date for the distribution).

Our Post-Separation Relationship with New Worthington

Prior to the completion of the distribution, we will be a wholly-owned subsidiary of Worthington, and all of our outstanding common shares will be owned by Worthington. Following the separation and distribution, we and New Worthington will operate as separate publicly-traded companies.

Prior to the completion of the distribution, we will enter into a separation agreement with Worthington (the “separation agreement”). We will also enter into various other agreements to provide a framework for our relationship with Worthington after the separation, including a transition services agreement, an employee


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matters agreement, a tax matters agreement and other commercial agreements. These agreements will provide for the allocation between us and New Worthington of the assets, employees, services, liabilities and obligations (including their respective investments, property and employee benefits and tax-related assets and liabilities) of Worthington and its subsidiaries attributable to periods prior to, at and after the separation and will govern certain relationships between us and New Worthington after the separation. In exchange for the transfer of the assets and liabilities of Worthington’s steel processing business and certain other assets and liabilities to us, we will deliver to Worthington a Cash Distribution. For additional information regarding the separation agreement and such other agreements, please refer to sections entitled “The Separation and Distribution Agreement,” “Certain Relationships and Related Person Transactions” and “Risk Factors—Risks Related to the Separation and Our Relationship with New Worthington.”

Reasons for the Separation

The Worthington Board believes that separating its steel processing business from the remainder of Worthington is in the best interests of Worthington and its shareholders for the following reasons:

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Enhanced Agility and Sharpened Strategic Focus. The separation will allow each company to more effectively pursue its own distinct businesses, operating priorities and strategies. The separation will enable the management teams of each of the two companies to focus on strengthening their respective core businesses and operations, more effectively address unique operating needs, and pursue distinct and targeted opportunities for long-term growth and profitability.

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Tailored Capital Structures and Capital Allocation Strategies. Each company is expected to have modest leverage and ample liquidity combined with strong cash flows, providing flexibility to deploy capital toward its specific growth opportunities. As a result of the separation, we will have our own capital structure and the ability to deploy capital toward executing Worthington Steel’s distinct business strategy, without the need to balance Worthington’s priorities for its other businesses.

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Shareholder Value Creation Opportunities. The separation will create two more focused businesses with differentiated investment theses, making each company easier for investors to understand and appropriately value. Our business differs from the other Worthington businesses in several respects, including the exposure to steel market dynamics. We believe the separation will allow investors to evaluate the performance and future growth prospects of each company’s respective businesses and to invest in each company separately based on its distinct characteristics.

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Employee Incentives, Recruitment, and Retention. The separation will allow each company to more effectively recruit, retain, and motivate employees through stock-based compensation that more closely reflects and aligns management and employee incentives with specific growth objectives, financial goals and performance of the respective businesses. In addition, the separation will allow incentive structures and targets at each company to be better aligned with each underlying business.

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Creation of Independent Equity Securities. The separation will create independent equity securities, affording Worthington Steel direct access to the capital markets, enabling it to use its own industry-focused stock to consummate future acquisitions or other transactions. As a result, Worthington Steel will have more flexibility to capitalize on its unique strategic opportunities.

The Worthington Board also considered the following potentially negative factors in evaluating the separation:

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Loss of Joint Purchasing Power and Increased Costs. As a current part of Worthington, the steel processing business that will become our business benefits from Worthington’s size and purchasing power in procuring certain goods, services and technologies. After the separation, as a separate, independent entity, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those Worthington obtained prior to the separation. We may also incur costs for


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certain functions previously performed by Worthington, such as accounting, tax, legal, human resources and other general administrative functions, that are higher than the amounts reflected in our historical financial statements, which could cause our profitability to decrease.

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Disruptions to the Businesses as a Result of the Separation. The actions required to separate our and New Worthington’s respective businesses could disrupt our and New Worthington’s operations after the separation.

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Increased Significance of Certain Costs and Liabilities. Certain costs and liabilities that were otherwise less significant to Worthington as a whole will be more significant for us and New Worthington, after the separation, as stand-alone companies.

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One-time Costs of the Separation. We (and prior to the separation, Worthington) will incur costs in connection with the transition to being a standalone publicly-traded company that may include accounting, tax (including transaction taxes), legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel and costs to separate information systems.

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Inability to Realize Anticipated Benefits of the Separation. We may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others, the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business, following the separation, we may be more susceptible to market fluctuations and other adverse events than if we were still a part of Worthington, and following the separation, our business will be less diversified than Worthington’s businesses prior to the separation.

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Limitations Placed upon Us as a result of the Tax Matters Agreement. Under the tax matters agreement that we will enter into with New Worthington, we will be restricted from taking or failing to take certain actions if such action or failure to act could adversely affect the U.S. federal income tax treatment of the distribution and certain related transactions. These restrictions may limit for a period of time our ability to pursue certain transactions that we may believe to be in the best interests of our shareholders or that might increase the value of our business.

While all of the bullets above are considered to be potentially negative factors to us, only the second, third, fourth and fifth bullets above are considered to be potentially negative factors to Worthington.

The Worthington Board concluded that the potential benefits of the separation outweighed these factors. See “The Separation and Distribution—Reasons for the Separation” and “Risk Factors.”

Description of Certain Indebtedness

We intend to enter into certain financing arrangements prior to or concurrently with the separation and distribution. Additional details regarding such financing arrangements will be provided in subsequent amendments to this information statement. See “Description of Certain Indebtedness” and “Risk Factors—Risks Related to Our Business.”

Risk Factors Summary

An investment in our common shares is subject to a number of risks, including risks relating to the separation, the successful implementation of our strategy and the ability to grow our business. The following list of risk factors is not exhaustive. See “Risk Factors” for a more thorough description of these and other risks.

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The automotive and construction industries account for a significant portion of our net sales, and reduced demand from these industries could adversely affect our business.


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We face intense competition which may cause decreased demand, decreased market share and/or reduced prices for our products and services.

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Our operating results may be adversely affected by continued volatility in steel prices.

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Our operating results may be affected by fluctuations in raw material prices and our ability to pass on increases in raw material costs to our customers.

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Our business could be harmed if we fail to maintain proper inventory levels.

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The loss of significant volume from our key customers could adversely affect us.

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Many of our key end markets, such as automotive and construction, are cyclical in nature.

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Significant reductions in sales to any of the Detroit Three automakers, or to our automotive-related customers in general, could have a negative impact on our business.

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Our business is highly competitive, and increased competition could negatively impact our financial results.

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If steel prices increase compared to certain substitute materials, the demand for our products could be negatively impacted, which could have an adverse effect on our financial results.

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Increasing freight and energy costs could increase our operating costs or the costs of our suppliers, which could have an adverse effect on our financial results.

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The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.

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We are subject to information system security risks and systems integration issues that could disrupt our operations.

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A change in the relationship between the members of any of our joint ventures may have an adverse effect on that joint venture and our financial results.

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Our business requires capital investment and maintenance expenditures, and our capital resources may not be adequate to provide for all of our cash requirements.

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We may be subject to legal proceedings or investigations, the resolution of which could negatively affect our results of operations and liquidity.

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Our operations have historically been subject to seasonal fluctuations that may impact our cash flows for a particular period.

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We have no history of operating as a separate, publicly-traded company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly-traded company and may not be a reliable indicator of our future results.


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As a separate, publicly-traded company, we may not enjoy the same benefits that we did as a part of Worthington.

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If the distribution, together with certain related transactions, fails to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, New Worthington and its shareholders could incur significant tax liabilities, and we could be required to indemnify New Worthington for taxes that could be material pursuant to indemnification obligations under the tax matters agreement.

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We might not be able to engage in certain transactions and equity issuances following the distribution.

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After the distribution, certain of our executive officers and directors may have actual or potential conflicts of interest because of their equity interests in New Worthington.

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We may not achieve some or all of the expected benefits of the separation, and the separation may adversely affect our business.

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We may be unable to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

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We cannot be certain that an active trading market for our common shares will develop or be sustained after the separation, and following the separation, the trading price of our common shares may fluctuate significantly.

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If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common shares may be negatively affected.

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The obligations associated with our being a stand-alone public company will require significant resources and management attention.

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The market price of our common shares may be volatile, which could cause the value of your investment to decline.

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We cannot guarantee the payment of dividends on our common shares, or the timing or amount of any such dividends.

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Our business is cyclical and weakness or downturns in the general economy or certain industries could have an adverse effect on our business.

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Corporate Information

We were incorporated in Ohio on February 28, 2023, for the purpose of holding Worthington’s steel processing business in connection with the separation and the distribution. Prior to the separation, which is expected to occur immediately prior to completion of the distribution, we had no operations. The address of our principal executive offices is 100 Old Wilson Bridge Road, Columbus, Ohio 43085. Our telephone number is (614) 438-3210.

We maintain an internet website at . Our website, and the information contained on or accessible through our website, is not incorporated by reference in this information statement.


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Reason for Furnishing this Information Statement

This information statement is being furnished solely to provide information to Worthington shareholders who will receive our common shares in the distribution. This information statement is not, and should not be construed as, an inducement or encouragement to buy or sell any securities. The information in this information statement is believed by us to be accurate as of the date set forth on its cover. Changes may occur after that date, and neither we nor Worthington will update the information except in the normal course of our and Worthington’s respective disclosure obligations and practices.


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SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA

The following summary historical and unaudited pro forma combined financial data reflects the combined financial statements of the steel processing business of Parent. We derived the summary historical combined statement of earnings for the three months ended August 31, 2023, and the fiscal years ended May 31, 2023, 2022, and 2021 and the summary historical combined balance sheet data as of August 31, 2023, May 31, 2023 and May 31, 2022, as set forth below, from our audited historical combined financial statements, which are included elsewhere in this information statement. We derived the summary unaudited pro forma combined statements of earnings for the three months ended August 31, 2023, and the fiscal year ended May 31, 2023, and the summary unaudited pro forma combined balance sheet data as of August 31, 2023, as set forth below, from our unaudited pro forma combined financial information included in the “Unaudited Pro Forma Combined Financial Information” section of this information statement.

We have historically operated as part of Parent and not as a separate, publicly traded company. Our combined financial statements have been derived from Parent’s historical accounting records and are presented on a carve out basis. All sales, costs, assets and liabilities directly associated with our business activity are included as a component of the pro forma combined financial statements. The pro forma combined financial statements also include allocations of certain general, administrative, sales and marketing expenses and cost of sales from Parent’s corporate office and from other Worthington businesses to us and allocations of related assets, liabilities, and net parent investment, as applicable. While these allocations have been determined on a reasonable basis, the amounts are not necessarily representative of the amounts that would have been reflected in the combined financial statements had we been an entity that operated separately from Parent during the periods presented.

The summary unaudited pro forma combined financial data presented has been prepared to reflect the transactions described in “Unaudited Pro Forma Combined Financial Statements” section (the “Transactions”). The summary unaudited pro forma combined financial data has been derived from our unaudited pro forma combined financial statements included elsewhere in this information statement. The unaudited pro forma combined statement of earnings data presented reflects our financial results as if the Transactions had occurred on June 1, 2022, the beginning of our most recently completed fiscal year. The unaudited pro forma combined balance sheet data reflects our financial position as if the Transactions had occurred on August 31, 2023, our latest balance sheet date. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information.

The summary unaudited pro forma combined financial statements are not necessarily indicative of our results of operations or financial condition had the Transactions been completed on the dates assumed. Also, they may not reflect the results of operations or financial condition that would have resulted had we been operating as a separate, publicly traded company during such periods. In addition, they are not necessarily indicative of our future results of operations, financial position or cash flows.


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This summary historical and pro forma combined financial data should be reviewed in combination with “Unaudited Pro Forma Combined Financial Statements,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and accompanying notes included in this information statement. The Unaudited Pro Forma Combined Financial Information constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this information statement.


	Pro Forma		Historical
(In thousands)	Three Months Ended August 31,	Fiscal Year Ended May 31,	Three Months Ended August 31,		Fiscal Years Ended May 31,
(In thousands)	2023 (Unaudited)	2023 (Unaudited)	2023 (Unaudited)	2022 (Unaudited)	2023	2022		2021
Selected Statements of Earnings Data:
Net sales						$	4,068,934	$	2,127,404
Cost of goods sold							3,673,474		1,756,564

Gross margin							395,460		370,840
Selling, general and administrative expense							180,288		147,435
Impairment of long-lived assets							3,076		—
Restructuring and other (income) expense, net							(14,480		1,883

Operating income							226,576		221,522
Other income (expense):
Miscellaneous income (expense), net							870		(347
Interest (expense) income, net							(3,024		12
Equity in net income of unconsolidated affiliate							29,787		15,965

Earnings before income taxes							254,209		237,152
Income tax expense							53,956		48,483

Net earnings							200,253		188,669
Net earnings attributable to noncontrolling interests							19,878		17,655

Net earnings attributable to controlling interest						$	180,375	$	171,014


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Pro Forma

Historical

As of August 31,

As of May 31,

(In thousands)

2023
(Unaudited)

2023

2022

Balance Sheet Data:

Cash and cash equivalents

20,052

Total assets

2,084,026

Total liabilities

817,665

Total equity

1,266,361

Total liabilities and equity

2,084,026


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RISK FACTORS

You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this information statement. The risks and uncertainties described below are those that we have identified as material but are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies, such as market conditions, economic conditions, geopolitical events, changes in laws, regulations or accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters or other disruptions of expected business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.

Risks Related to Our Business

General Economic or Industry Downturns and Weakness

The automotive and construction industries account for a significant portion of our net sales, and reduced demand from these industries could adversely affect our business. An overall downturn in the general economy, a disruption in capital and credit markets, high inflation, high unemployment, reduced consumer confidence or other factors, could cause reductions in demand from our end markets in general and, in particular, the automotive and construction end markets. If demand for the products we sell to the automotive, construction or other end markets which we supply were to be reduced, our sales, financial results and cash flows could be negatively affected.

We face intense competition which may cause decreased demand, decreased market share and/or reduced prices for our products and services. Our business operates in industries that are highly competitive and have been subject to increasing consolidation of customers. Because of the range of the products and services we sell and the variety of markets we serve, we encounter a wide variety of competitors. Our failure to compete effectively and/or pricing pressures resulting from competition may adversely impact our business and financial results.

Financial difficulties and bankruptcy filings by our customers could have an adverse impact on our business. In past years, some customers have experienced, and some continue to experience, whether due to the novel coronavirus (“COVID-19”) pandemic, the war in Ukraine, inflationary pressures, or otherwise, challenging financial conditions. The financial difficulties of certain customers and/or their failure to obtain credit or otherwise improve their overall financial condition could result in changes within the markets we serve, including plant closings, decreased production, reduced demand, changes in product mix, unfavorable changes in the prices, terms or conditions we are able to obtain and other changes that may result in decreased purchases from us and otherwise negatively impact our business. These conditions also increase the risk that our customers may delay or default on their payment obligations to us. If the general economy or any of our markets decline, the risk of bankruptcy filings by and financial difficulties of our customers may increase. While we have taken and will continue to take steps intended to mitigate the impact of financial difficulties and potential bankruptcy filings by our customers, these matters could have a negative impact on our business.

Raw Material Pricing and Availability

Our operating results may be adversely affected by continued volatility in steel prices. Over the past three years, steel prices have increased significantly due to supplier consolidation, tight mill orders due to the COVID-19 pandemic, the war in Ukraine and tariffs on foreign steel. More recently, the volatility in the steel market resulted in steel prices rapidly decreasing before increasing again. If steel prices or other raw material prices were to decrease, competitive conditions or contractual obligations may impact how quickly we must reduce our prices to our customers, and we could be forced to use higher-priced raw materials then on hand to complete orders for which the selling prices have decreased. Decreasing steel prices could require us to write-down the value of our inventory to reflect current net realizable value.


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Our operating results may be affected by fluctuations in raw material prices and our ability to pass on increases in raw material costs to our customers. Our principal raw material is flat-rolled steel, which we purchase from multiple primary steel producers. The 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. These factors include general economic conditions, domestic and worldwide supply and demand, high inflation, the influence of hedge funds and other investment funds participating in commodity markets, curtailed production from major suppliers due to factors such as the closing or idling of facilities, COVID-19 or other pandemics, international conflicts, accidents or equipment breakdowns, repairs or catastrophic events, labor costs, shortages, strikes or other problems, competition, new laws and regulations, import duties, tariffs, energy costs, availability and cost of steel inputs (e.g., ore, scrap, coke and energy), foreign currency exchange rates and other factors described in the immediately following paragraph. This volatility, as well as any increases in raw material costs, could significantly affect our steel costs and adversely impact our financial results. If our suppliers increase the prices of our critical raw materials, we may not have alternative sources of supply. In addition, in an environment of increasing prices for steel and other raw materials, competitive conditions or contractual obligations 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.

The costs of manufacturing our products and/or our ability to meet our customers’ demands could be negatively impacted if we experience interruptions in deliveries of needed raw materials or supplies. If, for any reason, our supply of flat-rolled steel (including electrical steel) or other key raw materials, such as zinc or other supplies is curtailed or we are otherwise unable to obtain the quantities we need at competitive prices, our business could suffer and our financial results could be adversely affected. Such interruptions could result from a number of factors, including a shortage of capacity in the supplier base of raw materials, energy or the inputs needed to make steel or other supplies, a failure of suppliers to fulfill their supply or delivery obligations, financial difficulties of suppliers resulting in the closing or idling of supplier facilities, other significant events affecting supplier facilities, significant weather events, those factors listed in the immediately preceding paragraph or other factors beyond our control like pandemics such as COVID-19. Further, the number of suppliers has decreased in recent years due to industry consolidation and the financial difficulties of certain suppliers, and this consolidation may continue.

An increase in the spread between the price of steel and steel scrap prices can have a negative impact on our margins. 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.

Inventories

Our business could be harmed if we fail to maintain proper inventory levels. We are required to maintain sufficient inventories to accommodate the needs of our customers including, in many cases, short lead times and just-in-time delivery requirements. Although we typically have customer orders in hand prior to placement of our raw material orders, we anticipate and forecast customer demand. We purchase raw materials on a regular basis in an effort to maintain our inventory at levels that we believe are sufficient to satisfy the anticipated needs of our customers based upon orders, customer volume expectations, historic buying practices and market conditions. Inventory levels in excess of customer demand may result in the use of higher-priced inventory to fill orders reflecting lower selling prices, if raw material prices have significantly decreased. For example, if steel prices decrease, we could be forced to use higher-priced steel then on hand to complete orders for which the selling price has decreased. These events could adversely affect our financial results. Conversely, if we underestimate demand for our products or if our suppliers fail to supply quality products in a timely manner, we may experience inventory shortages. Inventory shortages could result in unfilled orders, negatively impacting our customer relationships and resulting in lost revenues, which could harm our business and adversely affect our financial results.


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Customers and Suppliers

The loss of significant volume from our key customers could adversely affect us. A significant loss of, or decrease in, business from any of our key customers could have an adverse effect on our sales and financial results if we cannot obtain replacement business. Also, due to consolidation in the industries we serve, including the automotive, and construction industries, our sales may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments with respect to, one or more of our top customers. We generally do not have long-term contracts with our customers. As a result, although our customers periodically provide notice of their future product needs and purchases, they generally purchase our products on an order-by-order basis, and the relationship, as well as particular orders, can be terminated at any time.

Many of our key end markets, such as automotive and construction, are cyclical in nature. Many of our key end markets, such as automotive and construction, are cyclical and can be impacted by both market demand and raw material supply, particularly with respect to steel. The demand for our products is directly related to, and quickly impacted by, customer demand in our end markets, which can change as the result of changes in the general U.S. or worldwide economies and other factors beyond our control. Adverse changes in demand or pricing can have a negative effect on our business.

Significant reductions in sales to any of the Detroit Three automakers, or to our automotive-related customers in general, could have a negative impact on our business. Approximately 50% of our net sales are to automotive-related customers. Although we do sell to the domestic operations of foreign automakers and their suppliers, a significant portion of our automotive sales are to Ford, General Motors, and Stellantis North America (the “Detroit Three automakers”) and their suppliers. A reduction in sales for any of the Detroit Three automakers, as well as additional or prolonged idling of production facilities in response to COVID-19 or other related supply chain constraints, has negatively impacted and could continue to negatively impact our business. In addition, some automakers have begun using greater amounts of aluminum and smaller proportions of steel in some new models, thereby reducing the demand for certain of our products.

The closing or relocation of customer facilities could adversely affect us. Our ability to meet delivery requirements and the overall cost of our products as delivered to customer facilities are important competitive factors. If customers close or move their production facilities further away from our manufacturing facilities which can supply them, it could have an adverse effect on our ability to meet competitive conditions, which could result in the loss of sales. Likewise, if customers move their production facilities outside the U.S., it could result in the loss of potential sales for us.

Sales conflicts with our customers and/or suppliers may adversely impact us. In some instances, we may compete with one or more of our customers and/or suppliers in pursuing the same business. Such conflicts may strain our relationships with the parties involved, which could adversely affect our future business with them.

The closing or idling of manufacturing facilities could have a negative impact on us. As steel makers have reduced their production capacities by closing or idling production lines, whether due to COVID-19, the war in Ukraine or otherwise, the number of facilities from which we can purchase steel, in particular certain specialty steels, has decreased. Accordingly, if delivery from a supplier is disrupted, particularly with respect to certain types of specialty steel, it may be more difficult to obtain an alternate supply than in the past. These closures and disruptions could also have an adverse effect on our suppliers’ on-time delivery performance, which could have an adverse effect on our ability to meet our own delivery commitments and may have other adverse effects on our business.

The loss of key supplier relationships could adversely affect us. Over the years, we have developed relationships with certain steel and other suppliers which have been beneficial to us by providing more assured delivery and a more favorable all-in cost, which includes price and shipping costs. If any of those relationships were disrupted, it could have an adverse effect on delivery times and the overall cost, quality and availability of our products or


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raw materials, which could have a negative impact on our business. In addition, we do not have long-term contracts with any of our suppliers. If, in the future, we are unable to obtain sufficient amounts of steel and other materials at competitive prices and on a timely basis from our traditional suppliers, we may be unable to obtain these materials from alternative sources at competitive prices to meet our delivery schedules, which could have a material adverse impact on our results of operations.

Competition

Our business is highly competitive, and increased competition could negatively impact our financial results. Generally, the markets in which we conduct business are highly competitive. Our competitors include a variety of domestic and foreign companies in all major markets. Competition for most of our products is primarily on the basis of price, product quality and our ability to meet delivery requirements. Depending on a variety of factors, including raw material, energy, labor and capital costs, freight availability, government control of foreign currency exchange rates and government subsidies of foreign steel producers or competitors, our business may be materially adversely affected by competitive forces. Competition may also increase if suppliers to or customers in the steel industry begin to more directly compete with our business through new facilities, acquisitions or otherwise. As noted above, we can have conflicts with our customers or suppliers who, in some cases, supply the same products and services as we do. Increased competition could cause us to lose market share, increase expenditures, lower our margins or offer additional services at a higher cost to us, which could adversely impact our financial results.

Material or Component Substitution

If steel prices increase compared to certain substitute materials, the demand for our products could be negatively impacted, which could have an adverse effect on our financial results. In certain applications, steel competes with other materials, such as aluminum (particularly in the automobile industry), cement and wood (particularly in the construction industry), and composites. Prices of all of these materials fluctuate widely, and differences between the prices of these materials and the price of steel may adversely affect demand for our products and/or encourage material substitution, which could adversely affect the prices of and demand for steel products. The higher cost of steel relative to certain other materials may make material substitution more attractive for certain uses.

If increased government mileage and/or emissions standards for automobiles result in the substitution of other materials for steel, or electric motors for internal combustion engines, demand for our products could be negatively impacted, which could have an adverse effect on our financial results. Due to government requirements that manufacturers increase the fuel efficiency of automobiles, the automobile industry is exploring alternative materials to steel in order to decrease weight and increase mileage. In addition, in an effort to reduce emissions, the automobile industry is also shifting toward products that rely on electric motors instead of internal combustion engines. Although our product offerings include certain light weighting solutions and electric motor components, the substitution of lighter weight material for steel and/or electric motors for internal combustion engines in automobiles could adversely affect prices of and demand for certain of our steel products.

Freight and Energy

Increasing freight and energy costs could increase our operating costs or the costs of our suppliers, which could have an adverse effect on our financial results. The availability and cost of freight and energy, such as electricity, natural gas and diesel fuel, are important in the manufacture and transport of our products. Our operations consume substantial amounts of energy, and our operating costs generally increase when energy costs rise. Factors that may affect our energy costs include significant increases in fuel, oil or natural gas prices, unavailability of electrical power or other energy sources due to droughts, hurricanes or other natural causes or due to shortages resulting from insufficient supplies to serve customers, or interruptions in energy supplies due to equipment failure, international conflict or other causes. During periods of increasing energy and freight costs,


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we may be unable to fully recover our operating cost increases through price increases without reducing demand for our products. Our financial results could be adversely affected if we are unable to pass all of the cost increases on to our customers or if we are unable to obtain the necessary freight and/or energy. Also, increasing energy costs could put a strain on the transportation of our materials and products if the increased costs force certain transporters to discontinue their operations.

We depend on third parties for freight services, and increases in the costs or the lack of availability of freight services can adversely affect our operations. We rely primarily on third parties for transportation of our products as well as delivery of our raw materials, primarily by truck. If, due to a lack of freight services, raw materials or products are not delivered to us in a timely manner, we may be unable to manufacture and deliver our products to meet customer demand. Likewise, if due to a lack of freight services, we cannot deliver our products in a timely manner, it could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our results of operations. In addition, any increase in the cost of the transportation of raw materials or our products, as a result of increases in fuel or labor costs, higher demand for logistics services, international conflict or otherwise, may adversely affect our results of operations as we may not be able to pass such cost increases on to our customers.

The COVID-19 Pandemic.

The COVID-19 pandemic has significantly impacted the global economy and has had and could continue to have material adverse effects on our business, financial position, results of operations and cash flows. The COVID-19 pandemic has had, and may continue to have, an adverse impact on our business. These impacts include, without limitation, potential significant volatility or continued decreases in the demand for our products, changes in customer and consumer behavior and preferences, disruptions in or additional closures of our manufacturing operations or those of our customers and suppliers, disruptions within our supply chain, limitations on our employees’ ability to work and travel, potential financial difficulties of customers and suppliers, significant changes in economic or political conditions, and related financial and commodity volatility, including volatility in raw material and other input costs. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which cannot be predicted and are highly uncertain. The situation is changing rapidly and there may be additional impacts of which we are currently unaware.

It is also uncertain what the impact of various legislation and other responses being taken in the U.S. and other countries will have on the economy, international trade, our industry, our business and the businesses of our customers and suppliers. Governments around the world have implemented stringent measures to help control the spread of COVID-19, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school and childcare closures, and other measures. These actions have caused, and may in the future cause, business shutdowns or slowdowns and significant disruption in the global economy.

Despite our efforts to manage the impacts, the degree to which COVID-19 and related actions ultimately impact our business, financial position, results of operations and cash flows will depend on factors beyond our control including the duration, extent and severity of any resurgence of COVID-19, the actions taken to contain COVID-19 and mitigate its public health effects, the impact on the U.S. and global economies and demand for our products, and to what extent normal economic and operating conditions resume. Although there has been an increase in vaccinations and boosters throughout the U.S., vaccinations internationally have progressed at a slower rate. Continued disruption to the global economy, as well as to the end markets our business serves, could result in material adverse effects on our business, financial position, results of operations and cash flows.

The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.

Since early 2022, Russia and Ukraine have been engaged in active armed conflict. The length, impact and outcome of the ongoing conflict and its potential impact on our business is highly volatile and difficult to predict. It has and could continue to cause significant market and other disruptions, including significant volatility in


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commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, and increases in cyberattacks and espionage.

Further, the broader consequences of the current conflict between Russia and Ukraine may also have the effect of heightening many other risks disclosed herein, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, adverse effects on global macroeconomic conditions; increased volatility in the price and demand of iron, steel, oil, natural gas, and other commodities, increased exposure to cyberattacks; disruptions in global supply chains; and exposure to foreign currency fluctuations and potential constraints or disruption in the capital markets and our sources of liquidity.

Information Systems

We are subject to information system security risks and systems integration issues that could disrupt our operations. We are dependent upon information technology and networks in connection with a variety of business activities including the distribution of information internally and to our customers and suppliers. This information technology is subject to potential damage or interruption from a variety of sources, including, without limitation, computer viruses, security breaches, and natural disasters. We could also be adversely affected by system or network disruptions if new or upgraded business management systems are defective, not installed properly or not properly integrated into operations. In addition, security breaches of our information systems could result in unauthorized disclosure or destruction of confidential or proprietary information and/or loss of the functionality of our systems. These risks may be increased as more employees continue to work remotely. Various measures have been implemented to manage our risks related to information system and network disruptions and to prevent attempts to gain unauthorized access to our information systems. While we undertake mitigating activities to counter these risks, a system failure could negatively impact our operations and financial results and cyberattacks could threaten the integrity of our trade secrets and sensitive intellectual property.

Business Disruptions

Disruptions to our business or the business of our customers or suppliers could adversely impact our operations and financial results. Business disruptions, including materials, resulting from shortages of supply or transportation, severe weather events (such as hurricanes, tsunamis, earthquakes, tornados, floods, droughts and blizzards), casualty events (such as explosions, fires or material equipment breakdown), acts of terrorism, international conflicts (such as the war in Ukraine), labor disruptions, the idling of facilities due to reduced demand (resulting from a downturn in economic activity or otherwise), pandemic disease such as COVID-19 or other events (such as required maintenance shutdowns), could cause interruptions to our business as well as the operations of our customers and suppliers. While we maintain insurance coverage that can offset some losses relating to certain types of these events, losses from business disruptions could have an adverse effect on our operations and financial results and we could be adversely impacted to the extent any such losses are not covered by insurance or cause some other adverse impact to us.

Foreign Operations

Economic, political and other risks associated with foreign operations could adversely affect our international financial results. Although the substantial majority of our business activity takes place in the U.S., we derive a portion of our revenues and earnings from operations in foreign countries, and we are subject to risks associated with doing business internationally. The risks of doing business in foreign countries include, among other factors: the potential for adverse changes in the local political climate, in diplomatic relations between foreign countries and the U.S. or in government policies, laws or regulations; international conflicts; terrorist activity that may cause social disruption; logistical and communications challenges; costs of complying with a variety of laws and regulations; difficulty in staffing and managing geographically diverse operations; deterioration of foreign


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economic conditions; inflation and fluctuations in interest rates; foreign currency exchange rate fluctuations; foreign exchange restrictions; differing local business practices and cultural considerations; restrictions on imports and exports or sources of supply, including energy and raw materials; changes in duties, quotas, tariffs, taxes or other protectionist measures; and potential issues related to matters covered by the Foreign Corrupt Practices Act, regulations related to import/export controls, the Office of Foreign Assets Control sanctions program, anti-boycott provisions or similar laws. We believe that our business activities outside of the U.S. involve a higher degree of risk than our domestic activities, and any one or more of these factors could adversely affect our operating results and financial condition. In addition, global and regional economic conditions and the volatility of worldwide capital and credit markets have significantly impacted and may continue to significantly impact our foreign customers and markets. These factors may result in decreased demand in our foreign operations and have had significant negative impacts on our business. Refer to “Risk Factors—General Economic or Industry Downturns and Weakness” for additional information concerning the impact of the global economic conditions and the volatility of capital and credit markets on our business.

Joint Ventures and Investments

A change in the relationship between the members of any of our joint ventures may have an adverse effect on that joint venture and our financial results. We have been successful in the development and operation of various joint ventures. We believe an important element in the success of any joint venture is a solid relationship between the members of that joint venture. If there is a change in ownership, a change of control, a change in management or management philosophy, a change in business strategy or another event with respect to a member of a joint venture that adversely impacts the relationship between the joint venture members, it could adversely impact that joint venture. The other members in our joint ventures may also, as a result of financial or other reasons, be unable or unwilling to fulfill their obligations in the respective joint ventures. In addition, joint ventures necessarily involve special risks. Whether or not we hold a majority interest or maintain operational control in a joint venture, the other members in our joint ventures may have economic or business interests or goals that are inconsistent with our interests or goals. For example, the other members in our joint ventures may exercise veto rights to block actions that we believe to be in our best interests, may take action contrary to our policies or objectives with respect to our investments, or may be unable or unwilling to fulfill their obligations or commitments to the joint venture.

Acquisitions

We may be unable to successfully consummate, manage or integrate our acquisitions or our acquisitions may not meet our expectations. We may from time to time continue to seek attractive opportunities to acquire businesses, enter into joint ventures and make other investments that are complementary to our existing strengths. There are no assurances, however, that any acquisition opportunities will arise or, if they do, that they will be consummated, or that any needed additional financing for such opportunities will be available on satisfactory terms when required. In addition, acquisitions involve risks that the businesses acquired will not perform in accordance with expectations, that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect, that we may assume unknown liabilities from the seller, that the acquired businesses may not be integrated successfully and that the acquisitions may strain our management resources or divert management’s attention from other business concerns. International acquisitions may present unique challenges and increase our exposure to the risks associated with foreign operations and countries. Also, failure to successfully integrate any of our acquisitions may cause significant operating inefficiencies and could adversely affect our operations and financial condition. Even if the operations of an acquisition are integrated successfully, we may fail to realize the anticipated benefits of the acquisition, including the synergies, cost savings or growth opportunities that we expect. These benefits may not be achieved within the anticipated timeframe, or at all. Failing to realize the benefits could have a material adverse effect on our financial condition and results of operations.


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Capital Expenditures and Capital Resources

Our business requires capital investment and maintenance expenditures, and our capital resources may not be adequate to provide for all of our cash requirements. Many of our operations are capital intensive. For the fiscal year ended May 31, 2023, our total capital expenditures, including acquisitions and investment activity, were approximately $ . Additionally, as of May 31, 2023, we were obligated to make aggregate operating and financing lease payments of $ and $ , respectively, under lease agreements. Our business also requires expenditures for maintenance of our facilities. Additionally, growth in the electrical steel market will require a significant amount of strategic capital expenditures to meet market growth expectations. We currently believe that we have adequate resources (including cash and cash equivalents, cash provided by operating activities, and availability under existing credit facilities) to meet our cash needs for normal operating costs, capital expenditures, debt repayments, dividend payments, future acquisitions and working capital for our existing businesses. However, given the potential for challenges, uncertainty and volatility in the domestic and global economies and financial markets, there can be no assurance that our capital resources will be adequate to provide for all of our cash requirements.

Litigation

We may be subject to legal proceedings or investigations, the resolution of which could negatively affect our results of operations and liquidity. Our results of operations or liquidity could be affected by an adverse ruling in any legal proceedings or investigations which may be pending against us or filed against us in the future. We are also subject to a variety of legal and compliance risks, including, without limitation, potential claims relating to product liability, privacy and information security, health and safety, environmental matters, taxes and compliance with U.S. and foreign export laws, anti-bribery laws, competition laws and sales and trading practices. While we believe that we have adopted appropriate risk management and compliance programs to address and reduce these risks, the global and diverse nature of our operations means that these risks will continue to exist and additional legal proceedings and contingencies may arise from time to time. An adverse ruling or settlement or an unfavorable change in laws, rules or regulations could have a material adverse effect on our financial condition and results of operations.

Claims and Insurance

Adverse claims experience, to the extent not covered by insurance, may have an adverse effect on our financial results. We self-insure most of our risks for product recall, cyber liability and pollution liability. We also self-insure a significant portion of our potential liability for workers’ compensation, product liability, general liability, property liability, automobile liability and employee medical claims, and in order to reduce risk for these liabilities, we purchase insurance from highly-rated, licensed insurance carriers that cover most claims in excess of the applicable deductible or retained amounts. We also maintain reserves for the estimated cost to resolve certain open claims that have been made against us, as well as an estimate of the cost of claims that have been incurred but not reported. The occurrence of significant claims, our failure to adequately reserve for such claims, a significant cost increase to maintain our insurance or the failure of our insurance providers to perform could have an adverse impact on our financial condition and results of operations.

Accounting and Tax-Related Estimates

We are required to make accounting and tax-related estimates, assumptions and judgments in preparing our combined financial statements, and actual results may differ materially from the estimates, assumptions and judgments that we use. In preparing our combined financial statements in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”), we are required to make certain estimates and assumptions that affect the accounting for and recognition of assets, liabilities, revenues and expenses. These estimates and assumptions must be made because certain information that is used in the preparation of our combined financial statements is dependent on future events or cannot be calculated with a high degree of precision from data


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available to us. In some cases, these estimates and assumptions are particularly difficult to determine and we must exercise significant judgment. Some of the estimates, assumptions and judgments having the greatest amount of uncertainty, subjectivity and complexity are related to our accounting for bad debts, returns and allowances, inventory, self-insurance reserves, derivatives, stock-based compensation, deferred tax assets and liabilities and asset impairments. Our actual results may differ materially from the estimates, assumptions and judgments that we use, which could have a material adverse effect on our financial condition and results of operations.

Our internal controls could be negatively impacted if a portion of our workforce continues to work remotely, as new processes, procedures, and controls could be required due to the changes in our business environment, which could negatively impact our internal control over financial reporting.

Employees

The loss of, or inability to attract and retain, qualified personnel could adversely affect our business. Our ability to successfully operate, grow our business and implement our business strategies is largely dependent on the efforts, abilities and services of our employees. The loss of employees or our inability to attract, train and retain additional personnel could reduce the competitiveness of our business or otherwise impair our operations or prospects. Our future success will also depend, in part, on our ability to attract and retain qualified personnel, including engineers and other skilled technicians, who have experience in the application of our products and are knowledgeable about our business, markets and products. We also face risks associated with the actions taken in response to COVID-19, including those associated with workforce reductions, and may continue to experience difficulties with hiring additional employees or replacing former employees, which may be exacerbated by the tight labor market. In addition, COVID-19 has, and may again result in quarantines of our personnel or an inability to access facilities, which could adversely affect our operations.

If we lose senior management or other key employees, our business may be adversely affected. We cannot assure that we will be able to retain our existing senior management personnel or other key employees or attract additional qualified personnel when needed. The loss of any member of our management team could adversely impact our business and operations. We have not entered into any formal employment contracts with or other stand-alone change in control provisions relative to our executive officers. However, we do have certain change in control provisions in our various compensation plans. We may modify our management structure from time to time or reduce our overall workforce, which may create marketing, operational and other business risks.

Difficult Financial Markets

If we are required to raise capital in the future, we could face higher borrowing costs, less available capital, more stringent terms and tighter covenants or, in extreme conditions, an inability to raise capital. Although we currently have cash reserves, as well as adequate borrowing availability under our existing credit facilities and should be able to access other capital if needed, should those facilities become unavailable due to covenant or other defaults, or should financial markets tighten so that we otherwise cannot raise capital outside our existing facilities, or the terms under which we do so change, we may be negatively impacted. Any adverse change in our access to capital or the terms of our borrowings, including increased costs, could have a negative impact on our financial condition.

Environmental, Health and Safety

We may incur additional costs related to environmental and health and safety matters. Our operations and facilities are subject to a variety of federal, state, local and foreign laws and regulations relating to the protection of the environment and human health and safety. Compliance with these laws and regulations and any changes therein may sometimes involve substantial operating costs and capital expenditures, and any failure to maintain or achieve compliance with these laws and regulations or with the permits required for our operations could


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result in increased costs and capital expenditures and potentially fines and civil or criminal sanctions, third-party claims for property damage or personal injury, cleanup costs or temporary or permanent discontinuance of operations. Over time, we and predecessor operators of our facilities have generated, used, handled and disposed of hazardous and other regulated wastes. Environmental liabilities, including cleanup obligations, could exist at our facilities or at off-site locations where materials from our operations were disposed of or at facilities we have divested, which could result in future expenditures that cannot be currently quantified and which could reduce our profits and cash flow. We may be held strictly liable for any contamination of these sites, and the amount of any such liability could be material. Under the “joint and several” liability principle of certain environmental laws, we may be held liable for all remediation costs at a particular site, even with respect to contamination for which we are not responsible. In addition, changes in environmental and human health and safety laws, rules, regulations or enforcement policies could have a material adverse effect on our business, financial condition or results of operations.

Seasonality

Our operations have historically been subject to seasonal fluctuations that may impact our cash flows for a particular period. Our sales are generally strongest in the fourth quarter of the fiscal year when our business is normally operating at seasonal peaks, and our sales are generally weakest in the third quarter of the fiscal year, primarily due to reduced activity in the building and construction industry as a result of the colder, more inclement weather, as well as customer plant shutdowns in the automotive industry due to holidays. Our quarterly results may also be affected by the timing of large customer orders. Consequently, our cash flow from operations may fluctuate significantly from quarter to quarter. If, as a result of any such fluctuation, our quarterly cash flows were significantly reduced, we may be unable to service our indebtedness or maintain compliance with certain covenants under the documents governing our indebtedness. A default under any of the documents governing our indebtedness could prevent us from borrowing additional funds, limit our ability to pay interest or principal and allow our lenders to declare the amounts outstanding to be immediately due and payable and to exercise certain other remedies.

Risks Related to the Separation and Our Relationship with New Worthington

The historical information about us in this information statement refers to our business as operated by and integrated with Worthington. Our historical and pro forma financial information included in this information statement is derived from the consolidated financial statements and accounting records of Worthington. Accordingly, the historical and pro forma financial information included in this information statement does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly-traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below:

•

prior to the separation, our business has been operated by Worthington as part of its broader corporate organization, rather than as a separate, publicly-traded company. Worthington or one of its affiliates performed various corporate functions for us such as legal, treasury, accounting, internal audit, human resources and finance. Our historical and pro forma financial results reflect allocations of corporate expenses from Worthington for such functions and are likely to be less than the expenses we would have incurred had we operated as a separate publicly-traded company. Following the separation, our cost related to such functions previously performed by Worthington may therefore increase;

•

currently, our business is integrated with the other businesses of Worthington. Historically, we have shared economies of scope and scale in costs, employees, vendor relationships and customer relationships. Although we will enter into transition agreements with New Worthington, these


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arrangements may not fully capture the benefits that we have enjoyed as a result of being integrated with Worthington and may result in us paying higher charges than in the past for these services. This could have an adverse effect on our results of operations and financial condition following the completion of the separation;

•

generally, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, have historically been satisfied as part of the corporate-wide cash management policies of Worthington. Following the completion of the separation, we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements;

•

after the completion of the separation, the cost of capital for our business may be higher than Worthington’s cost of capital prior to the separation; and

•

our historical financial information does not reflect the debt or the associated interest expense that we are expected to incur as part of the separation and distribution.

Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from Worthington. See “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited combined financial statements and notes thereto included elsewhere in this information statement.

As a separate, publicly-traded company, we may not enjoy the same benefits that we did as a part of Worthington.

There is a risk that, by separating from Worthington, we may become more susceptible to market fluctuations and other adverse events than we would have been if we were still a part of the current Worthington organizational structure. As part of Worthington, we have been able to enjoy certain benefits from Worthington’s operating diversity, purchasing power and opportunities to pursue integrated strategies with Worthington’s other businesses. As a separate, publicly-traded company, we will not have similar diversity or integration opportunities and may not have similar purchasing power or access to capital markets.

The unaudited pro forma combined financial statements included in this information statement are presented for informational purposes only and may not be an indication of our future financial condition or results of operations.

The unaudited pro forma combined financial statements included in this information statement are presented for informational purposes only and are not necessarily indicative of what our actual financial condition or results of operations would have been had the separation been completed on the date indicated. The assumptions used in preparing the pro forma financial information may not prove to be accurate and other factors may affect our financial condition or results of operations. Accordingly, our financial condition and results of operations in the future may not be evident from or consistent with such pro forma financial information.

Future sales of our common shares reserved for issuance under equity and incentive plan or plans, or the perception that such sales may occur, could depress our common share price.

Upon completion of the distribution, except as otherwise described herein, all of our common shares that are being distributed hereby will be freely tradable without restriction, other than those held by our affiliates. Immediately following the distribution, we intend to file a registration statement on Form S-8 registering under the Securities Act of 1933, as amended (the “Securities Act”), our common shares reserved for issuance under equity and incentive plan or plans. If equity securities granted under such an equity and incentive plan or plans are sold or it is perceived that they will be sold in the public market, the trading price of our common shares could decline substantially. These sales also could impede our ability to raise future capital.


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Our customers, prospective customers, suppliers or other companies with whom we conduct business may conclude that our financial stability as a separate, publicly-traded company is insufficient to satisfy their requirements for doing or continuing to do business with them.

Some of our customers, prospective customers, suppliers or other companies with whom we conduct business may conclude that our financial stability as a separate, publicly-traded company is insufficient to satisfy their requirements for doing or continuing to do business with them, or may require us to provide additional credit support, such as letters of credit or other financial guarantees. Any failure of parties to be satisfied with our financial stability could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Potential indemnification obligations to New Worthington pursuant to the separation agreement could materially and adversely affect our business, financial condition, results of operations and cash flows.

The separation agreement, among other things, provides for indemnification obligations (for uncapped amounts) designed to make us financially responsible for all liabilities that New Worthington may incur relating to our business activities (as currently and historically conducted), whether incurred prior to or after the separation. If we are required to indemnify New Worthington under the circumstances set forth in the separation agreement, we may be subject to substantial liabilities. See “Business—Legal Proceedings” and “Certain Relationships and Related Person Transactions—Agreements with New Worthington.”

In connection with our separation from Worthington, New Worthington will indemnify us for certain liabilities. However, there can be no assurance that such indemnity will be sufficient to insure us against the full amount of such liabilities, or that New Worthington’s ability to satisfy its indemnification obligations will not be impaired in the future.

Pursuant to the separation agreement and certain other agreements with New Worthington, New Worthington will agree to indemnify us for certain liabilities as discussed further in “Certain Relationships and Related Person Transactions.” However, third parties could also seek to hold us responsible for any of the liabilities that New Worthington has agreed to retain, and there can be no assurance that the indemnity from New Worthington will be sufficient to protect us against the full amount of such liabilities, or that New Worthington will be able to fully satisfy its indemnification obligations. In addition, New Worthington’s insurance will not necessarily be available to us for liabilities associated with occurrences of indemnified liabilities prior to the separation, and in any event New Worthington’s insurers may deny coverage to us for liabilities associated with certain occurrences of indemnified liabilities prior to the separation. Moreover, even if we ultimately succeed in recovering from New Worthington or such insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks could negatively affect our business, financial position, results of operations and cash flows.

If the distribution, together with certain related transactions, fails to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, Worthington and its shareholders could incur significant tax liabilities, and we could be required to indemnify New Worthington for taxes that could be material pursuant to indemnification obligations under the tax matters agreement.

The distribution is conditioned upon, among other things, Worthington’s receipt of an opinion of Latham & Watkins LLP, tax counsel to Worthington, regarding the qualification of the distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code. The opinion of tax counsel will be based on, among other things, certain factual assumptions, representations and undertakings from Worthington and us, including those regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these factual assumptions, representations, or undertakings are incorrect or not satisfied, Worthington may not be able to rely on the opinion, and Worthington and its shareholders could be subject to significant U.S. federal income tax liabilities. In addition, the opinion of tax counsel will not be


		27

binding on the U.S. Internal Revenue Service (the “IRS”) or the courts, and, notwithstanding the opinion of tax counsel, the IRS could determine on audit that the distribution does not so qualify or that the distribution should be taxable for other reasons, including as a result of a significant change in stock or asset ownership after the distribution.

If the distribution is ultimately determined not to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, the distribution could be treated as a taxable disposition of common shares of Worthington Steel by Worthington and as a taxable dividend or capital gain to Worthington’s shareholders for U.S. federal income tax purposes. In such case, Worthington and its shareholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities. For a more detailed discussion, see the section entitled “Material U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders.”

In addition, Worthington will undertake certain internal restructuring transactions in connection with the transfer of assets and liabilities to us in accordance with the separation agreement. Such internal restructuring transactions are intended to qualify as transactions that are generally tax-free for U.S. federal income tax purposes. If such internal restructuring transactions were to fail to qualify as transactions that are generally tax-free for U.S. federal income tax purposes, we and Worthington could be subject to additional tax liabilities.

Under the tax matters agreement that we will enter into with New Worthington, we will generally be required to indemnify New Worthington against taxes incurred by New Worthington that arise as a result of actions or omissions by us that prevent the distribution, together with certain related transactions, from qualifying as a reorganization under Sections 355 and 368(a)(1)(D) of the Code.

We might not be able to engage in certain transactions and equity issuances following the distribution.

Our ability to engage in equity transactions could be limited or restricted after the distribution in order to preserve, for U.S. federal income tax purposes, the qualification of the distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code. Even if the distribution otherwise qualifies for tax-free treatment to Worthington’s shareholders under Section 355 of the Code, it may result in corporate-level taxable gain to Worthington if there is a 50% or greater change in ownership, by vote or value, of shares of Worthington Steel, shares of New Worthington or the shares of a predecessor or successor of either occurring as part of a plan or series of related transactions that includes the distribution. Any acquisitions or issuances of shares of Worthington Steel or shares of New Worthington within two years of the distribution are generally presumed to be part of such a plan, although New Worthington may be able to rebut that presumption.

Under the tax matters agreement that we will enter into with New Worthington, we will be required to comply with the representations and undertakings made to legal counsel in connection with the tax opinion Worthington expects to receive regarding the intended tax treatment of the distribution and certain related transactions. The tax matters agreement will also restrict our ability to take or fail to take any action if such action or failure to act could adversely affect the intended tax treatment. In particular, except in specific circumstances, in the two years following the distribution, we will be restricted from, among other things, (i) entering into any transaction pursuant to which all or a portion of our equity would be acquired, whether by merger or otherwise, and (ii) ceasing to actively conduct certain elements of our business. These restrictions may limit for a period of time our ability to pursue certain transactions that we may believe to be in the best interests of our shareholders or that might increase the value of our business. For more information, see the section entitled “Certain Relationships and Related Person Transactions—Agreements with New Worthington—Tax Matters Agreement.”

After the distribution, certain of our executive officers and directors may have actual or potential conflicts of interest because of their equity interests in Worthington.

Because of their current or former positions with Worthington, certain of our executive officers and directors own equity interests in Worthington. Continuing ownership of common shares of New Worthington and equity


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awards could create, or appear to create, potential conflicts of interest if we and Worthington face decisions that could have implications for both New Worthington and us after the separation.

New Worthington may compete with us.

New Worthington will not be restricted from competing with us. If New Worthington in the future decides to engage in the type of business we conduct, it may have a competitive advantage over us, which may cause our business, financial condition and results of operations to be materially adversely affected.

We may not achieve some or all of the expected benefits of the separation, and the separation may adversely affect our business.

We may not be able to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed or not occur at all. The separation is expected to provide the following benefits, among others:

•

the separation will allow investors to separately value New Worthington and us based on Worthington’s and our distinct investment identities. Our business differs from Worthington’s other businesses in several respects, such as the market for products and manufacturing processes. The separation will enable investors to evaluate the merits, performance and future prospects of each company’s respective businesses and to invest in each company separately based on their respective distinct characteristics;

•

the separation will create an independent equity structure that will afford us direct access to the capital markets and facilitate our ability to capitalize on our unique growth opportunities;

•

the separation will facilitate incentive compensation arrangements for employees more directly tied to the performance of the relevant company’s businesses, and may enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives;

•

the separation will permit each company to concentrate its financial resources solely on its own operations without having to compete with each other for investment capital. This will provide each company with greater flexibility to invest capital in its businesses in a time and manner appropriate for its distinct strategy and business needs; and

•

the separation will allow us and New Worthington to more effectively pursue our and New Worthington’s distinct operating priorities and strategies and enable management of both companies to focus on unique opportunities for long-term growth and profitability. For example, while our management will be enabled to focus exclusively on our business, the management of New Worthington will be able to grow its businesses. Our and New Worthington’s separate management teams will also be able to focus on executing each companies’ differing strategic plans without diverting attention from the other businesses.

We may not achieve these and other anticipated benefits for a variety of reasons, including, among others:

•

as a current part of Worthington, our business benefits from Worthington’s size and purchasing power in procuring certain goods, services and technologies. After the separation, as a separate entity, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those Worthington obtained prior to the separation. We may also incur costs for certain functions previously performed by Worthington, such as accounting, tax, legal, human resources and other general administrative functions that are higher than the amounts reflected in our historical financial statements, which could cause our profitability to decrease;

•

the actions required to separate our and New Worthington’s respective businesses could disrupt our and New Worthington’s operations;


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•

certain costs and liabilities that were otherwise less significant to Worthington as a whole will be more significant for us and New Worthington as separate companies after the separation;

•

we (and prior to the separation, Worthington) will incur costs in connection with the transition to being a separate, publicly-traded company that may include accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel and costs to separate information systems; and

•

we may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others, (i) the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business, (ii) following the separation, we may be more susceptible to market fluctuations and other adverse events than if we were still a part of Worthington and (iii) following the separation, our business will be less diversified than Worthington’s businesses prior to the separation.

If we fail to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, our business, operating results and financial condition could be adversely affected.

We may have received better terms from unaffiliated third parties than the terms we will receive in our agreements with New Worthington.

The agreements we will enter into with New Worthington in connection with the separation, including the separation agreement, transition services agreement, employee matters agreement, tax matters agreement and other commercial agreements were prepared in the context of our separation from Worthington while we were still a wholly-owned subsidiary of Worthington. Accordingly, during the period in which the terms of those agreements were prepared, we did not have a separate or independent board of directors or a management team that was separate from or independent of Worthington. As a result, the terms of those agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. Arm’s-length negotiations between Worthington and an unaffiliated third party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third party. See “Certain Relationships and Related Person Transactions.”

We or New Worthington may fail to perform under various transaction agreements that will be executed as part of the separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

The separation agreement and other agreements to be entered into in connection with the separation will determine the allocation of assets and liabilities between the companies following the separation and will include any necessary indemnifications related to liabilities and obligations. The transition services agreement will provide for the performance of certain services by each company for the benefit of the other for a period of time after the separation. We will rely on New Worthington after the separation to satisfy its performance and payment obligations under these agreements. If New Worthington is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain transaction agreements expire, we may not be able to operate our business effectively and our profitability may decline. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that Worthington currently provides to us. However, we may not be successful in implementing these systems and services or in transitioning data from Worthington’s systems to us.

In addition, we expect this process to be complex, time-consuming and costly. We are also establishing or expanding our own tax, treasury, internal audit, investor relations, corporate governance and public company compliance and other corporate functions. We expect to incur one-time costs to replicate, or outsource from other


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providers, these corporate functions to replace the corporate services that Worthington historically provided us prior to the separation. Any failure or significant downtime in our own financial, administrative or other support systems or in the New Worthington financial, administrative or other support systems during the transitional period during which New Worthington provides us with support could negatively impact our results of operations or prevent us from paying our suppliers and employees, executing business combinations and foreign currency transactions or performing administrative or other services on a timely basis, which could negatively affect our results of operations.

In particular, our day-to-day business operations rely on information technology systems. A significant portion of the communications among our personnel, customers and suppliers take place on information technology platforms. We expect the transfer of information technology systems from Worthington to us to be complex, time consuming and costly. There is also a risk of data loss in the process of transferring information technology. As a result of our reliance on information technology systems, the cost of such information technology integration and transfer and any such loss of key data could have an adverse effect on our business, financial condition and results of operations.

As of the date of this information statement, we expect to have outstanding indebtedness on the distribution date of approximately $ and the ability to incur an additional $ of indebtedness under that we expect to enter into, and in the future we may incur additional indebtedness. This indebtedness could adversely affect our business and our ability to meet our obligations and pay dividends.

As of the date of this information statement, we expect to have outstanding indebtedness on the distribution date of approximately $ , and have the ability to incur an additional $ of indebtedness under that we expect to enter into prior to the distribution date. See “Description of Certain Indebtedness.” This debt could have important, adverse consequences to us and our investors, including:

•

requiring a substantial portion of our cash flow from operations to make interest payments;

•

making it more difficult to satisfy other obligations;

•

increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing;

•

increasing our vulnerability to general adverse economic and industry conditions;

•

reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business;

•

limiting our ability to pay dividends;

•

limiting our flexibility in planning for, or reacting to, changes in our business, our industry and the industries we serve; and

•

limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase our common shares.

The debt financing will not be available for borrowings until the date on which certain conditions are satisfied, which we expect will be satisfied prior to the completion of the distribution. We anticipate that the instruments governing the debt financing will contain restrictive covenants that will limit our ability to engage in activities that may be in our long-term interest, including for example, earnings before interest, taxes, depreciation and amortization (“EBITDA”)-based leverage and interest coverage ratios. If we breach any of these restrictions and cannot obtain a waiver from the lenders on favorable terms, subject to applicable cure periods, the outstanding indebtedness (and any other indebtedness with cross-default provisions) could be declared immediately due and payable, which would adversely affect our liquidity and financial statements. In addition, any failure to obtain and maintain credit ratings from independent rating agencies would adversely affect our cost of funds and could adversely affect our liquidity and access to the capital markets. If we add new debt, the risks described above could increase. See “Description of Certain Indebtedness.”


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The risks described above will increase with the amount of indebtedness we incur, and in the future we may incur significant indebtedness in addition to the indebtedness described above. In addition, our actual cash requirements in the future may be greater than expected. Our cash flow from operations may not be sufficient to service our outstanding debt or to repay the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt.

We may be unable to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures, or to dispose of material assets or operations, alter our dividend policy (if we pay dividends), seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The instruments that will govern our indebtedness may restrict our ability to dispose of assets and may restrict the use of proceeds from those dispositions. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.

In addition, we conduct our operations through our subsidiaries. Accordingly, repayment of our indebtedness will depend on the generation of cash flow by our subsidiaries, including certain international subsidiaries, and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Our subsidiaries may not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make adequate distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity and, under certain circumstances, legal, tax and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our business, financial condition and results of operations and our ability to satisfy our obligations under our indebtedness or pay dividends on our common shares.

Following the distribution, we will be dependent on New Worthington to provide us with certain transition services, which may be insufficient to meet our needs, and we may have difficulty finding replacement services or be required to pay increased costs to replace these services after our transition services agreement with New Worthington expires.

Historically, Worthington has provided, and until our separation from Worthington, Worthington will continue to provide significant corporate and shared services related to corporate functions such as executive oversight, risk management, information technology, accounting, audit, legal, investor relations, human resources, tax, treasury, procurement and other services. Following our separation from Worthington, we expect New Worthington to continue to provide many of these services on a transitional basis for a fee. While these services are being provided to us by New Worthington, we will be dependent on New Worthington for services that are critical to our operation as a separate, publicly-traded company, and our operational flexibility to modify or implement


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changes with respect to such services and the amounts we pay for them will be limited. After the expiration of the transition services agreement, we may not be able to replace these services or enter into appropriate third-party agreements on terms and conditions, including cost and quality of service, comparable to those that we will receive from New Worthington under the transition services agreement. Although we intend to replace portions of the services currently provided by Worthington following the separation, we may encounter difficulties replacing certain services or be unable to negotiate pricing or other terms as favorable as those we currently have in effect.

Certain non-U.S. entities or assets that are part of the separation may not be transferred to us prior to the distribution or at all.

Certain non-U.S. entities and assets that are part of our separation from Worthington may not be transferred prior to the distribution because the entities or assets, as applicable, are subject to foreign government or third-party approvals that we may not receive prior to the distribution. Such approvals may include, but are not limited to, approvals to merge or demerge, to form new legal entities (including obtaining required registrations and/or licenses or permits) and to transfer assets and/or liabilities. It is currently anticipated that all material transfers will occur without delays beyond the distribution date, but we cannot offer any assurance that such transfers will ultimately occur or not be delayed for an extended period of time. To the extent such transfers do not occur prior to the distribution, under the separation agreement, the economic benefits and burdens of owning such assets and/or entities will, to the extent reasonably possible and permitted by applicable law, be provided to us.

In the event such transfers do not occur or are significantly delayed because we do not receive the required approvals, we may not realize all of the anticipated benefits of our separation from Worthington and we may be dependent on Worthington for transition services for a longer period of time than would otherwise be the case. For additional information, see “Risk Factors—Risks Related to our Business.” Following the distribution, we will be dependent on Worthington to provide us with certain transition services, which may be insufficient to meet our needs, and we may have difficulty finding replacement services or be required to pay increased costs to replace these services after our transition services agreement with Worthington expires.”

Risks Related to Our Common Shares

We cannot be certain that an active trading market for our common shares will develop or be sustained after the separation, and following the separation, the price of our common shares may fluctuate significantly.

Prior to the completion of the distribution, there has been no public market for our common shares. We cannot guarantee that an active trading market will develop or be sustained for our common shares after the distribution. If an active trading market does not develop, you may have difficulty selling your Worthington Steel common shares at an attractive price, or at all. In addition, we cannot predict the prices at which our common shares may trade after the distribution.

The market price of our common shares may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

•

our quarterly or annual earnings, or those of other companies in our industry;

•

the failure of securities analysts to cover our common shares after the separation;

•

actual or anticipated fluctuations in our operating results;

•

changes in earnings estimated by securities analysts or our ability to meet those estimates;

•

the operating and stock price performance of other comparable companies;

•

changes to the regulatory and legal environment in which we operate;

•

changes in interest or inflation rates;


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•

overall market fluctuations and domestic and worldwide economic conditions; and

•

other factors described in these “Risk Factors” and elsewhere in this information statement.

Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common shares.

As a public company, we will be required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. In addition, beginning with our first annual report on Form 10-K, we intend to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing these assessments. These reporting and other obligations may place significant demands on management, administrative and operational resources, including accounting systems and resources.

The process of designing, implementing, and testing the internal control over financial reporting required to comply with this obligation is time consuming, costly, and complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are then listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

The obligations associated with being a public company will require significant resources and management attention.

Currently, we are not directly subject to the reporting and other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Following the effectiveness of the registration statement of which this information statement forms a part, we will be directly subject to such reporting and other obligations under the Exchange Act and the rules of the NYSE. As a separate public company, we are required to, among other things:

•

prepare and distribute periodic reports, proxy statements and other shareholder communications in compliance with the federal securities laws and rules;

•

have our own board of directors and committees thereof, which comply with federal securities laws and rules and applicable stock exchange requirements;

•

maintain an internal audit function;

•

institute our own financial reporting and disclosure compliance functions;

•

establish an investor relations function;

•

establish internal policies, including those relating to trading in our securities and disclosure controls and procedures; and

•

comply with the rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Act, the Public Company Accounting Oversight Board and the NYSE.


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These reporting and other obligations will place significant demands on our management and our administrative and operational resources, and we expect to face increased legal, accounting, administrative and other costs and expenses relating to these demands that we had not incurred as a business segment of Worthington. Certain of these functions will be provided on a transitional basis by New Worthington pursuant to a transition services agreement. See “Certain Relationships and Related Party Transactions.” Our investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses and a diversion of management’s time and attention from sales-generating activities to compliance activities, which could have an adverse effect on our business, financial position, results of operations and cash flows.

The market price of our common shares may be volatile, which could cause the value of your investment to decline.

Prior to the completion of the distribution, there has been no public market for our common shares. Even if a trading market develops, the market price of our common shares may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our common shares regardless of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly operating results or dividends, if any, to shareholders, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about the industries we participate in or individual scandals, and in response the market price of our common shares could decrease significantly.

In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We cannot guarantee the payment of dividends on our common shares, or the timing or amount of any such dividends.

While we currently intend to have a dividend policy consistent with Worthington’s historic practice, the payment of any dividends in the future, and the timing and amount thereof, to our shareholders will fall within the discretion of our board of directors (the “Board”). The Board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our then existing debt agreements, industry practice, legal requirements and other factors that the Board deems relevant. For more information, please refer to the section entitled “Dividend Policy.” Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends.

Your percentage ownership in us may be diluted in the future.

In the future, your percentage ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we will be granting to our directors, officers and employees. In addition, following the distribution, our employees will have rights to purchase or receive our common shares as a result of the conversion of their Worthington stock options or other equity


		35

interests into our stock options and restricted stock units. The conversion of these Worthington awards into our awards is described in further detail in the section entitled “Executive Compensation–Compensation Discussion and Analysis.” As of the date of this information statement, the exact number of our common shares that will be subject to the converted equity awards is not determinable, and, therefore, it is not possible to determine the extent to which your percentage ownership in us could be diluted as a result of the conversion. It is anticipated that our Compensation Committee will grant additional equity awards to our employees and directors after the distribution, from time to time, under our employee benefits plans. These additional awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common shares.

In addition, our amended and restated articles of incorporation will authorize us to issue, without the approval of our shareholders, one or more classes or series of preferred shares having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common shares respecting dividends and distributions, as the Board generally may determine. The terms of one or more classes or series of preferred shares could dilute the voting power or reduce the value of our common shares. For example, we could grant the holders of preferred shares the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences that we could assign to holders of preferred shares could affect the residual value of the common shares. Please refer to the section entitled “Description of Capital Stock.”

Certain provisions in our amended and restated articles of incorporation and amended and restated code of regulations, and of Ohio law, may prevent or delay an acquisition of us, which could decrease the trading price of our common shares.

Our amended and restated articles of incorporation and amended and restated code of regulations will contain, and Ohio law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirers to negotiate with the Board rather than to attempt an unsolicited takeover not approved by the Board. These provisions include, among others:

•

the inability of our shareholders to call a special meeting unless they hold fifty percent or more of our outstanding shares;

•

the inability of our shareholders to act by written consent;

•

rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;

•

the right of the Board to issue preferred shares without shareholder approval;

•

the division of the Board into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult;

•

provision that shareholders may only remove directors with cause;

•

the ability of our directors, and not shareholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board (except in the case of removal of a director by the shareholders, in which case the shareholders may fill such vacancy at the same meeting); and

•

the requirement that the affirmative vote of shareholders holding at least two-thirds of our voting stock is required to amend our amended and restated code of regulations and certain provisions in our amended and restated articles of incorporation.

We believe these provisions will protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the Board and by providing the Board with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these


		36

provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that the Board determines is not in the best interests of us and our shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

Our amended and restated code of regulations will designate the state courts in the State of Ohio or, if no state court located within the State of Ohio has jurisdiction, the federal court for the Southern District of Ohio, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders. Our amended and restated code of regulations will further designate the federal district courts of the United States of America as the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. These forum selection provisions could discourage lawsuits against us and our directors, officers, and employees.

Our amended and restated articles of incorporation will provide that, unless we consent otherwise in writing to the selection of an alternate forum, the state courts in the State of Ohio or, if no state court located within the State of Ohio has jurisdiction, the federal court for the Southern District of Ohio, Eastern Division, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of us, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or shareholders to us or our shareholders, any action asserting a claim arising pursuant to any provision of the Ohio General Corporation Law or our amended and restated articles of incorporation or our amended and restated code of regulations, or any action asserting a claim governed by the internal affairs doctrine. This provision would not apply to claims brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. We recognize that this forum selection clause may impose additional litigation costs on shareholders in pursuing any such claims, particularly if the shareholders do not reside in or near the State of Ohio. Our amended and restated articles of incorporation will further provide that, unless we consent otherwise in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. These forum selection provisions may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors, officers, and employees.

General Risks

General Economic or Industry Downturns and Weakness

Our business is cyclical and weakness or downturns in the general economy or certain industries could have an adverse effect on our business. If the domestic or global economies, or certain industry sectors of those economies that are key to our sales, contract or deteriorate, it could result in a corresponding decrease in demand for our products and negatively impact our results of operations and financial conditions.

Volatility in the U.S. and worldwide capital and credit markets could impact our end markets and result in negative impacts on demand, increased credit and collection risks and other adverse effects on our business. The domestic and worldwide capital and credit markets have experienced significant volatility, disruptions and dislocations with respect to price and credit availability. These factors caused diminished availability of credit and other capital in our end markets, and for participants in, and the customers of, those markets. The effects of the financial crisis, recent bank failures, as well as the concerns over the economic impact of COVID-19, the war in Ukraine and inflationary pressures, continue to present risks to us, our customers or our suppliers. In particular, there is no guarantee that the credit markets or liquidity will not once again be restricted. Additionally, government stimulus programs may not be available to us, our customers, or suppliers, or may prove to be ineffective. Stricter lending standards may make it more difficult and costly for some firms to access the credit markets. Further, uncertainties in Europe, especially in light of the war in Ukraine, regarding the financial sector and sovereign debt and the potential impact on banks in other regions of the world will continue to weigh on


		37

global and domestic growth. Although we believe we have adequate access to several sources of contractually committed borrowings and other available credit facilities, these risks could restrict our ability to borrow money on acceptable terms in the credit markets and potentially affect our ability to draw on our credit facilities. In addition, restricted access to the credit markets could make it difficult, or in some cases, impossible for our suppliers and customers to borrow money to fund their operations. Lack of, or limited access to, capital would adversely affect our suppliers to produce the materials we need for our operations and our customers’ ability to purchase our products or, in some cases, to pay for our products on a timely basis.

Tax Laws and Regulations

Tax increases or changes in tax laws or regulations could adversely affect our financial results. We are subject to tax and related obligations in the jurisdictions in which we operate or do business, including state, local, federal and non-U.S. taxes. The taxing rules of the various jurisdictions in which we operate or do business often are complex and subject to varying interpretations. Tax authorities may challenge tax positions that we take or historically have taken and may assess taxes where we have not made tax filings or may audit the tax filings we have made and assess additional taxes. Some of these assessments may be substantial, and also may involve the imposition of penalties and interest.

In addition, governments could change their existing tax laws, impose new taxes on us or increase the rates at which we are taxed in the future. The payment of substantial additional taxes, penalties or interest resulting from tax assessments, or the imposition of any new taxes, could materially and adversely impact our results of operations and financial condition. For example, President Biden has previously proposed to increase the federal corporate income tax rate and if any such proposal were to be adopted, then the increase in the federal corporate income tax rate would adversely affect our results of operations in future periods.

Legislation and Regulations

Certain proposed legislation and regulations may have an adverse impact on the economy in general and in our markets specifically, which may adversely affect our business. Our business may be negatively impacted by a variety of new or proposed legislation or regulations. For example, legislation and regulations proposing increases in taxation on, or heightened regulation of, greenhouse gas emissions may result in higher prices for steel, higher prices for utilities required to run our facilities, higher fuel costs for us and our suppliers and distributors, limitations on our ability to produce, use or sell certain products and other adverse impacts. To the extent that new legislation or regulations increase our costs, we may not be able to fully pass these costs on to our customers without a resulting decline in sales and adverse impact to our profits. Likewise, to the extent new legislation or regulations would have an adverse effect on the economy, our markets or the ability of domestic businesses to compete against foreign operations, we could also be adversely impacted.

Changes to global data privacy laws and cross-border transfer requirements could adversely affect our business and operations. Our business depends on the transfer of data between our affiliated entities, to and from our business partners, and with third-party service provider, which may be subject to global data privacy laws and cross-border transfer restrictions. In particular, a number of U.S. states have also introduced and passed legislation to expand data breach notification rules and which contain numerous requirements that must be complied with in connection with how we handle personal data.. While we take steps to comply with these legal requirements, the volatility and changes to the applicability of those laws may impact our ability to effectively transfer data in support of our business operations. Compliance with such laws, or other regulatory standards, could also increase our cost of doing business and/or force us to change our business practices in a manner adverse to our business. In addition, violations of such laws, or other privacy regulations, may result in significant fines, penalties and damage to our brands and businesses which could, individually or in the aggregate, materially harm our business and reputation.

Additionally, the U.S. federal government has imposed tariffs on certain foreign goods, including on certain steel products imported into the U.S. Although such steel tariffs may benefit portions of our business, these tariffs, as


		38

well as country-specific or product-specific exemptions, may also lead to steel price fluctuations and retaliatory actions from foreign governments and/or modifications to the purchasing patterns of our customers that could adversely affect our business or the steel industry as a whole. In particular, certain foreign governments, including Canada, China and Mexico, have instituted or are considering imposing tariffs on certain U.S. goods. Restrictions on trade with foreign countries, imposition of customs duties or further modifications to U.S. international trade policy have the potential to disrupt our supply chain or the supply chains of our customers and to adversely impact demand for our products, our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof, potentially leading to negative effects on our business.

Impairment Charges

Weakness or instability in the general economy, our markets or our results of operations could result in future asset impairments, which would reduce our reported earnings and net worth. Economic conditions remain fragile in some markets and the possibility remains that the domestic or global economies, or certain industry sectors that are key to our sales, may deteriorate. If certain aspects of our operations are adversely affected by challenging economic and financial conditions, we may be required to record future impairments, which would negatively impact our results of operations.


		39

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Selected statements contained in this information statement constitute “forward-looking 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,” “intend,” “estimate,” “plan,” “foresee,” “likely,” “will,” “should,” “forecast,” “project,” or other similar words or phrases. These forward-looking statements include, without limitation, statements relating to:

•

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

•

outlook, strategy or business plans;

•

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

•

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

•

the ability to improve or maintain margins;

•

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

•

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

•

expected benefits from transformation and innovation efforts;

•

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

•

anticipated working capital needs, capital expenditures and asset sales;

•

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

•

projected profitability;

•

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

•

projected capacity and the alignment of operations with demand;

•

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

•

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

•

expectations for Company and customer inventories, jobs and orders;

•

expectations for the economy and markets or improvements therein;

•

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

•

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

•

effects of judicial rulings; and

•

other non-historical matters.


		40

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

•

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

•

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

•

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

•

changing oil prices and/or supply;

•

product demand and pricing;

•

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

•

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

•

effects of sourcing and supply chain constraints;

•

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

•

effects of facility closures and the consolidation of operations;

•

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

•

failure to maintain appropriate levels of inventories;

•

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

•

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

•

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

•

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

•

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

•

the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, labor shortages (especially in light of the


		41

COVID-19 pandemic), interruption in utility services, civil unrest, international conflicts (especially in light of Russia’s invasion of Ukraine), terrorist activities, or other causes;

•

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

•

risks associated with doing business internationally, including economic, political and social instability (especially in light of Russia’s invasion of Ukraine), foreign currency exchange rate exposure and the acceptance of the Company’s products in global markets;

•

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

•

the effect of inflation, interest rate increases and economic recession, as well as potential adverse impacts as a result of the Inflation Reduction Act of 2022, which may negatively impact the Company’s operations and financial results;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

cyber security risks;

•

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

•

other risks described in this information statement. See “Risk Factors”.

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


		42

DIVIDEND POLICY

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

Likewise, our Board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our then existing debt agreements, industry practice, legal requirements and other factors that our Board deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends. Further, New Worthington’s decision as to whether to pay dividends in the future, if any, and in what amounts, shall have no bearing on our Board’s decision as to whether we pay dividends, if any.


		43

CAPITALIZATION

The following table sets forth our cash and equivalents and capitalization as of August 31, 2023 on a pro forma basis to give effect to the Transactions, as defined in “Summary Historical and Pro Forma Combined Financial Data.”

The information below is not necessarily indicative of what our cash and equivalents and capitalization would have been had the separation been completed as of August 31, 2023. In addition, it is not indicative of our future cash and equivalents and capitalization. This table should be read in conjunction with “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our combined financial statements and notes thereto included elsewhere in this information statement.


	As of August 31, 2023
(In thousands, except per share data)	Historical	Pro Forma⁽¹⁾
		Unaudited
Cash and equivalents
Capitalization:
Debt:
Short-term borrowings
Long-term debt

Total debt

Equity:
Common shares without par value, shares authorized, shares issued and outstanding on a pro forma basis
Additional paid in capital
Net parent investment
Accumulated other comprehensive income
Noncontrolling interests

Total equity

Total capitalization

Worthington Steel has not yet finalized its post-distribution capitalization. Pro forma financial information reflecting the Company’s post-distribution capitalization will be included in an amendment to this information statement.


		44

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial statements consist of an unaudited pro forma combined statement of earnings for the three months ended August 31, 2023, and the fiscal year ended May 31, 2023, and an unaudited pro forma combined balance sheet as of August 31, 2023. The unaudited pro forma combined statement of earnings for the three months ended August 31, 2023, and the fiscal year ended May 31, 2023, was derived from the historical audited annual combined financial statements of Parent’s (defined below) steel processing business included elsewhere in this information statement. The pro forma adjustments give effect to the transactions described below. The unaudited pro forma combined statements of earnings for the three months ended August 31, 2023, and the fiscal year ended May 31, 2023, gives effect to the transactions described below as if they had occurred on June 1, 2022, the first day of fiscal 2023. The unaudited pro forma combined balance sheet gives effect to the transactions described below as if they had occurred on August 31, 2023, our latest balance sheet date. References in this section and in the following unaudited pro forma combined financial statements and the combined financial statements and notes thereto included in this information statement to the “Company” or “Worthington Steel” shall mean the steel processing business of Worthington Industries, Inc. (“Worthington” or “Parent”). References herein to “fiscal 2021,” “fiscal 2022” or “fiscal 2023” refer to the fiscal years ended May 31, 2021, 2022 and 2023, respectively.

The following unaudited pro forma combined financial statements of Worthington Steel give effect to the separation and related adjustments in accordance with Article 11 of the Securities and Exchange Commission’s (the “SEC”) Regulation S-X. In May 2020, the SEC adopted Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” or the Final Rule. The Final Rule was effective on January 1, 2021 and the unaudited pro forma combined financial information herein is presented in accordance therewith.

The unaudited pro forma combined financial statements include certain transaction and autonomous entity adjustments that are necessary to present fairly our unaudited pro forma combined statement of earnings and unaudited pro forma combined balance sheet as of and for the periods indicated. The pro forma adjustments are based on assumptions that management believes are reasonable given the information currently available.

The unaudited pro forma combined financial statements give effect to the following transaction and autonomous entity adjustments:

•

the contribution of assets and liabilities that comprise our business by Parent pursuant to the separation and distribution agreement that were not included in the historical combined financial statements;

•

the impact of the tax matters agreement, transition services agreements, the employee matters agreement and other commercial agreements between Worthington Steel and Parent and the provisions contained therein;

•

the long-term debt arrangements entered into by the Company;

•

the transfer to us from Parent and Parent affiliates of the assets and liabilities of the steel processing business pursuant to the separation and distribution agreement in consideration for a cash distribution of $ ;

•

the anticipated capital structure after giving effect to the distribution; and

•

the incremental costs Worthington Steel expects to incur as an autonomous entity.

The unaudited pro forma combined financial statements are subject to the assumptions and adjustments described in the accompanying notes. These unaudited pro forma combined financial statements are subject to change as Parent and the Company finalize the terms of the separation and distribution agreement and other agreements and transactions related to the separation.


		45

The unaudited pro forma combined financial statements have been presented for informational purposes only. The unaudited pro forma information is not necessarily indicative of our results of operations or financial condition had the separation and the related transactions been completed on the dates assumed and should not be relied upon as a representation of our future performance or financial position as a separate public company. The historical audited combined financial statements have been derived from Parent’s historical accounting records and include allocations of certain general and administrative expenses from Parent’s corporate office. The allocations have been determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had the Company been an entity that operated independently of Parent during the periods or at the dates presented. As a result, autonomous entity adjustments have been reflected in the pro forma combined financial information.

The following unaudited pro forma combined financial statements should be read in conjunction with our historical combined financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this information statement. The unaudited pro forma combined financial information constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this information statement.”


		46

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

As of August 31, 2023

Historical

Transaction
Accounting
Adjustments

Autonomous
Entity
Adjustments

Pro Forma

(In thousands)

ASSETS

Current assets:

Cash and cash equivalents

Receivables, less allowance of $ at August 31, 2023

Inventories:

Raw materials

Work in process

Finished products

Total inventories

Income taxes receivable

Assets held for sale

Prepaid expenses and other current assets

Total current assets

Investments in unconsolidated affiliate

Operating lease assets

Goodwill

Other intangible assets, net of accumulated amortization of $ at August 31, 2023

Deferred income taxes

Other assets

Property, plant and equipment:

Land

Buildings and improvements

Machinery and equipment

Construction in progress

Total property, plant and equipment

Less: accumulated depreciation

Total property, plant and equipment, net

Total assets

See the accompanying notes to the unaudited pro forma combined financial statements.


		47

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

As of August 31, 2023

Historical

Transaction
Accounting
Adjustments

Autonomous
Entity
Adjustments

Pro Forma

(In thousands)

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

Short-term borrowings

Accrued compensation, contributions to employee benefit plans and related taxes

Other accrued items

Current operating lease liabilities

Income taxes payable

Current maturities of long-term debt due to Parent

Total current liabilities

Other liabilities

Long-term debt

Noncurrent operating lease liabilities

Deferred income taxes

Total liabilities

Equity:

Common stock

Additional paid-in capital

Accumulated other comprehensive income, net of taxes of $ at August 31, 2023

Net parent investment

Total equity - controlling interest

Noncontrolling interests

Total equity

Total liabilities and equity

See the accompanying notes to the unaudited pro forma combined financial statements.


		48

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS

Three Months Ended August 31, 2023

(In thousands, except per share amounts)

Historical

Transaction
Accounting
Adjustments

Autonomous
Entity
Adjustments

Pro Forma

Net sales

Cost of goods sold

Gross margin

Selling, general and administrative expense

Impairment of long-lived assets

Restructuring and other income, net

Separation costs

Operating income

Other income (expense):

Miscellaneous income, net

Interest expense

Equity in net income of unconsolidated affiliate

Earnings before income taxes

Income tax expense

Net earnings

Net earnings attributable to noncontrolling interests

Net earnings attributable to controlling interest

Pro forma basic

Average common shares outstanding

Earnings per share attributable to controlling interest

Pro forma diluted

Average common shares outstanding

Earnings per share attributable to controlling interest

See the accompanying notes to the unaudited pro forma combined financial statements.


		49

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS

Fiscal Year Ended May 31, 2023

(In thousands, except per share amounts)

Historical

Transaction
Accounting
Adjustments

Autonomous
Entity
Adjustments

Pro Forma

Net sales

Cost of goods sold

Gross margin

Selling, general and administrative expense

Impairment of long-lived assets

Restructuring and other income, net

Separation costs

Operating income

Other income (expense):

Miscellaneous income, net

Interest expense

Equity in net income of unconsolidated affiliate

Earnings before income taxes

Income tax expense

Net earnings

Net earnings attributable to noncontrolling interests

Net earnings attributable to controlling interest

Pro forma basic

Average common shares outstanding

Earnings per share attributable to controlling interest

Pro forma diluted

Average common shares outstanding

Earnings per share attributable to controlling interest

See the accompanying notes to the unaudited pro forma combined financial statements.


		50

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

For further information regarding the historical combined financial statements, please refer to the audited combined financial statements included in this information statement. The unaudited pro forma combined balance sheet as of August 31, 2023, and the unaudited pro forma combined statement of earnings for the three months ended August 31, 2023, and the fiscal year ended May 31, 2023, include adjustments related to the following:

Transaction Accounting Adjustments:

(a)

Reflects the incurrence of indebtedness in an aggregate principal amount of $ million. Total deferred debt issuance costs associated with such indebtedness are $ million, which will be amortized to interest expense over the terms of the instrument and are reflected as a reduction to long-term debt. The value and terms of such indebtedness and related capital structure remain under strategic review and will be finalized prior to the planned Separation.

(b)

Reflects adjustments for certain assets and liabilities that are to be transferred to Worthington Steel from Parent in connection with the separation. These assets of and liabilities of are to be contributed to the Company and were not included in our combined financial statements because they were not discretely attributable to Worthington Steel.

(c)

Represents the distribution of Worthington Steel common shares to the stockholders of Worthington Industries, Inc. on the basis of common share(s) of Worthington Steel for common share(s) of Worthington Industries, Inc. on the distribution date. Worthington Steel common shares are not expected to have a par value.

(d)

The number of Worthington Steel common shares used to compute basic earnings per share is based on: (a) the number of Parent’s common shares assumed to be outstanding on the distribution date and (b) the number of Worthington Steel’s common shares outstanding on August 31, 2023, assuming a distribution ratio of Worthington Steel common share(s) for common share(s) of Worthington Industries, Inc.

(e)

The number of shares used to compute diluted earnings per share is based on the number of common shares of Worthington Steel as described in Note (c) above, plus incremental shares assuming exercise of dilutive outstanding options and restricted stock awards. This calculation may not be indicative of the dilutive effect that will actually result from Worthington Steel stock-based awards issued in connection with the adjustment of outstanding Parent stock-based awards or the grant of new stock-based awards. The number of dilutive common shares underlying Worthington Steel stock-based awards issued in connection with the adjustment of outstanding Parent stock-based awards will not be determined until the distribution date or shortly thereafter.

(f)

Reflects the addition of estimated interest expense related to the debt issuance described in note (a) above and amortization of deferred debt issuance costs. A percent change to the annual interest rate would change interest expense by approximately $ million and $ million for the three months ended August 31, 2023, and the fiscal year ended May 31, 2023, respectively.

(g)	Reflects the reclassification of Parent’s investment in us, which was recorded as a component of equity, into additional paid-in-capital.

(h)

Represents the tax effects of the transaction pro forma adjustments as the applicable statutory tax rate of %. The effective tax rate of Worthington Steel could be different (either higher or lower) depending on activities subsequent to the planned Separation. The impacts of pro forma adjustments on deferred tax assets and liabilities were offset against existing deferred tax assets and liabilities reflected in our historical combined balance sheet.


		51

Autonomous Entity Adjustments:

(i)	Reflects the effects of the separation agreement, the transition services agreement, the tax matters agreement, the employee matters agreement and other commercial agreements between Worthington Steel and Parent.

(j)

Represents the tax effects of the autonomous pro forma adjustments at the applicable statutory tax rate of %. The effective tax rate of Worthington Steel could be different (either higher or lower) depending on activities subsequent to the planned Separation. The impacts of pro forma adjustments on deferred tax assets and liabilities were offset against existing deferred tax assets and liabilities reflected in our historical combined balance sheet.

Management Adjustments:

We have elected to present management adjustments to the pro forma financial information and included all adjustments necessary for a fair statement of such information. Following the planned Separation, we expect to incur incremental costs as a separate public company in certain of our corporate support functions (e.g., finance, accounting, tax, treasury, IT, HR, and legal, among others). We received the benefit of economies of scale as a business unit of Parent; however, in establishing these support functions independently, the expenses will be higher than the prior shared allocation.

As a stand-alone public company, we expect to incur certain costs in addition to those incurred pursuant to the autonomous adjustments as described in note (i) above, including costs resulting from:

•

One-time and non-recurring expenses associated with separation and stand-up of functions required to operate as a stand-alone public company. These non-recurring costs primarily relate to system implementation costs, business and facilities separation, applicable employee costs such as hiring costs and retention fees, and other matters; and

•

Recurring and ongoing costs required to operate new functions required for a public company such as external reporting, internal audit, treasury, investor relations, board of directors and officers, and stock administration.

The additional expenses have been estimated based on assumptions that our management believes are reasonable. However, actual additional costs that will be incurred could be different from the estimates and would depend on several factors, including the economic environment and strategic decisions made. In addition, adverse effects and limitations including those discussed in the section entitled “Risk Factors” to this document may impact actual costs incurred.

We estimate that we will incur approximately $ million of total expenses (including one-time expenses of approximately $ million and recurring expenses of approximately $ million for the three months ended August 31, 2023.

For the Three Months Ended August 31, 2023


Unaudited pro forma combined net income attributable to Worthington Steel⁽¹⁾		$
Management’s adjustments		$
Income tax effects		$
Unaudited pro forma combined net income attributable to Worthington Steel after management’s adjustments		$
Pro forma basic earnings per share attributable to controlling interest after management’s adjustments		$
Pro forma diluted earnings per share attributable to controlling interest after management’s adjustments		$

(1)	As shown in the unaudited pro forma combined statement of earnings.


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For the Fiscal Year Ended May 31, 2023


Unaudited pro forma combined net income attributable to Worthington Steel⁽¹⁾		$
Management’s adjustments		$
Income tax effects		$
Unaudited pro forma combined net income attributable to Worthington Steel after management’s adjustments		$
Pro forma basic earnings per share attributable to controlling interest after management’s adjustments		$
Pro forma diluted earnings per share attributable to controlling interest after management’s adjustments		$

(1)	As shown in the unaudited pro forma combined statement of earnings.


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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires, references in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) to “Worthington Steel” or the “Company” (“we,” “us,” or “our”) shall mean the net assets and operating activities comprising the steel processing business of Worthington Industries, Inc. (“Worthington” or “Parent”). Worthington Steel, Inc., which was established on February 28, 2023 will be Worthington Steel’s new ultimate parent company. Worthington Steel, Inc. has engaged in no business activities to date and has no assets or liabilities of any kind, other than those incident to its formation. Parent will operate under the new name (“New Worthington”) upon the completion of the planned Separation. References herein to “fiscal 2021,” “fiscal 2022” or “fiscal 2023” refer to the fiscal years ended May 31, 2021, 2022 and 2023, respectively. Refer to “Note A – The Proposed Separation, Description of the Business, and the Basis of Presentation” in the accompanying audited combined financial statements for additional information.

This MD&A is designed to provide a reader of our financial statements with a narrative from the perspective of the Company’s management. This MD&A should be read in conjunction with “Unaudited Pro Forma Combined Financial Statements” and our audited combined financial statements included elsewhere in this information statement. This MD&A includes forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the results referred to in these forward-looking statements, see “Cautionary Statement Concerning Forward-Looking Statements.” This MD&A is divided into nine main sections:

•

Separation from Worthington Industries, Inc.;

•

Basis of Presentation;

•

Transition to Stand-alone Company;

•

Business Overview;

•

Acquisitions and Divestitures;

•

Trends and Factors Impacting our Performance;

•

Results of Operations;

•

Liquidity and Capital Resources; and

•

Critical Accounting Estimates.

Separation from Worthington Industries, Inc.

On September 29, 2022, Parent announced its intention to spin off its existing Steel Processing business into a stand-alone publicly traded company through a generally tax-free pro rata distribution of 100% of the common shares of Worthington Steel to Parent’s shareholders. While Parent currently intends to effect the distribution, subject to satisfaction of certain conditions, Parent has no obligation to pursue or consummate any dispositions of its ownership interest in us, including through the distribution, by any specified date or at all. The distribution is subject to various conditions, including the transfer of assets and liabilities to us in accordance with the separation agreement; due execution and delivery of the agreements relating to the separation; no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition in effect preventing the consummation of the separation, the distribution or any of the related transactions; acceptance for listing on the New York Stock Exchange (the “NYSE”) of our common shares to be distributed, subject to official notice of distribution; completion of the financing described under the section entitled “Description of Certain Indebtedness” and no other event or development having occurred or in existence that, in the judgment of the board of directors of Worthington Industries, Inc. (the “Parent Board”), in its sole discretion, makes it inadvisable to effect the separation, the distribution or the other related transactions.


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The conditions to the distribution may not be satisfied, Parent may decide not to consummate the distribution even if the conditions are satisfied or Parent may decide to waive one or more of these conditions and consummate the distribution even if all of the conditions are not satisfied. There can be no assurance whether or when any such transaction will be consummated or as to the final terms of any such transaction.

Basis of Presentation

The accompanying audited combined financial statements have been prepared on a stand-alone, carve-out basis using the consolidated financial statements and accounting records of Parent. The combined financial statements reflect the operations of Worthington Steel, as historically managed, in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The carve-out financial statements may not include all expenses that would have been incurred had the Company existed as a separate, stand-alone entity during the periods presented. In addition, transactions and accounts which have occurred within the Company have been eliminated, based on historical intracompany activity. Parent’s net investment in these operations, including intercompany transactions between Parent and the Company, are reflected as net parent investment on the accompanying combined financial statements. Certain situations require management to make estimates based on judgments and assumptions, which may affect the reported amounts of assets and respective disclosures at the date of the financial statements. Management’s judgements and assumptions may also affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates made by Management.

The Company has historically been dependent on Parent for all of its working capital and financing requirements and, with the exception of cash held outside of the United States, has participated in Parent’s centralized cash management and financing arrangements. Financing transactions relating to the Company are reflected within equity as net parent investment. Accordingly, none of Parent’s cash, cash equivalents or debt has been assigned to the Company. Borrowings outstanding under the May 19, 2022, revolving trade accounts receivable securitization facility (the “AR Facility”) and related interest expense are included in these combined financial statements as Worthington Steel is the legal party to the arrangement and will continue to be the obligor of ongoing borrowings under the facility upon separation.

Net parent investment, which includes retained earnings, represents Worthington’s interest in the recorded net assets of the Company. All significant transactions between us and Parent have been properly accounted for in the accompanying combined financial statements as related party transactions. To the extent not expected to be settled in cash, these transactions are reflected in the accompanying combined statements of equity as transfers (to) from Parent, net and in the accompanying combined balance sheets within net parent investment.

The effects of transactions with Parent are discussed further in “Note Q – Related Party Transactions” in the accompanying audited combined financial statements.

Transition to Stand-alone Company

Our historical combined financial statements include expense allocations for certain support functions provided by Parent on a centralized basis, such as corporate back-office functions (e.g., finance, accounting, tax, treasury, IT, HR, and legal, among others) and related services as well as other general and administrative costs that serve to benefit Parent and its businesses overall. These expenses have been allocated to us on the basis of direct usage where identifiable, with all other shared costs allocated on the basis of profitability or headcount, where appropriate. We consider the basis on which expenses have been allocated to be a reasonable reflection of the services provided to or the benefit derived from the use of such support functions. As a separate public company, our ongoing costs related to such support functions may differ from, and will likely exceed, the amounts that have been allocated to us in these combined financial statements. Following the separation, we expect Parent to continue to provide some of these services on a transitional basis in exchange for agreed-upon fees. We also expect to provide certain services to Parent on a transitional basis in exchange for agreed-upon fees. In addition


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to one-time costs to design and establish our corporate functions, we will also incur ongoing incremental costs associated with being a stand-alone public company, including:

•

additional personnel costs, including salaries, benefits and potential bonuses and/or stock based compensation awards for staff additions to establish certain corporate functions historically supported by Parent and not covered by the transition services agreement; and

•

corporate governance costs, including board of director compensation and expenses, audit and other professional services fees, annual report and proxy statement costs, SEC filing fees, transfer agent fees, consulting and legal fees and stock exchange listing fees.

Certain factors could impact the nature and amount of these separate public company costs, including the finalization of our staffing and organizational needs and negotiating terms with third-party vendors.

We expect these stand-alone public company costs to be in excess of the costs that have been historically allocated to us. Based on current facts and circumstances, we estimate the costs associated with being a stand-alone publicly-traded company to be in the range of approximately $ million and $ million per year compared to annual run-rate of approximately $70 million allocated to us in the accompanying combined financial statements. Moreover, we expect we may incur certain nonrecurring internal and external costs to implement new systems and stand-up stand-alone processes and controls.

We do not anticipate that increased costs solely from becoming an independent, publicly-traded company will have an adverse effect on our growth or business strategies in the future.

Business Overview

Worthington Steel is one of North America’s premier value-added steel processors with the ability to provide a diversified range of products and services that span a variety of end markets. We maintain market leading positions in the North American carbon flat-rolled steel and tailor welded blanks industries and, with the recent acquisition of Tempel Steel Company (“Tempel”), are now one of the largest global producers of electrical steel laminations. For nearly 70 years, we have been delivering high quality steel processing capabilities across a variety of end-markets including automotive, heavy truck, agriculture, construction, and energy. With the ability to produce customized steel solutions, we aim to be the preferred value-added steel processor in the markets we serve by delivering highly technical, customer specific solutions, while also providing advanced materials support and price risk management solutions to optimize customer supply chains. Our scale and operating footprint allow us to achieve an advantaged cost structure and service platform supported by a strategic operating footprint. We serve our customers primarily by processing flat-rolled steel coils, which we source primarily from various North American steel mills, into the precise type, thickness, length, width, shape, and surface quality required by customer specifications. We can sell steel on a direct basis, whereby we are exposed to the risk and rewards of ownership of the material while in our possession. Alternatively, we can also toll process steel under a fee for service arrangement whereby we process customer-owned material. Our manufacturing facilities further benefit from the flexibility to scale between direct versus tolling services based on demand dynamics throughout the year.

Our operations are managed principally on a products and services basis under a single group organizational structure. We own controlling interests in the following consolidated operating joint ventures: Spartan Steel Coating, L.L.C. (“Spartan”), TWB Company, L.L.C. (“TWB”), Worthington Samuel Coil Processing LLC (“Samuel”), and Worthington Specialty Processing (“WSP”), through October 2022 when we completed the divestiture of the remaining net assets of the business. The net assets and operating results of these joint ventures are consolidated with the equity owned by the minority joint venture member shown as “Noncontrolling interests” in our combined balance sheets, and the noncontrolling interest in net earnings and other comprehensive income (loss) (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively. The remaining joint venture, Serviacero Worthington, is unconsolidated and accounted for using the equity method.


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Acquisitions and Divestitures

•

On December 1, 2021, we acquired all of the issued and outstanding capital stock of Tempel, a leading global manufacturer of precision motor and transformer laminations for the electrical steel market. The purchase price consisted of cash consideration of approximately $272.2 million, plus the assumption of certain long-term liabilities. Tempel employs approximately 1,500 people, and is headquartered in Chicago, Illinois, with additional manufacturing locations in Burlington, Canada, Changzhou, China, Chennai, India and Monterrey, Mexico.

•

On June 9, 2021, our consolidated joint venture Worthington Specialty Processing (“WSP”), sold the remaining assets of its Canton, Michigan, facility for approximately $20 million, resulting in a pre-tax gain of $12.2 million within restructuring and other income, net during fiscal 2022. Additionally, on May 2, 2022, we purchased the non-controlling 49% interest in Worthington Taylor, the entity which owned the assets of WSP’s former Taylor, Michigan facility, for approximately $6.8 million. Worthington Taylor is now one of our wholly-owned subsidiaries. WSP continued to operate the then remaining location in Jackson, Michigan, through its divestiture in October 2022.

•

On June 8, 2021, we acquired certain assets of the Shiloh Industries’ U.S. BlankLight business (“Shiloh”), a provider of light-weighting laser welded solutions, for approximately $104.5 million. The acquisition included three facilities that are being operated as part of TWB Company, L.L.C. (“TWB”) our consolidated blanking joint venture. In addition to providing incremental capacity, the acquisition expanded our capabilities in this space to include light-weight aluminum tailor welded blanks.

Trends and Factors Impacting our Performance

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

General Economic and Market Conditions

We sell our products and services to a diverse customer base and a broad range of end markets. The breakdown of our net sales by end market for the fiscal year ended 2022 and 2021 is illustrated in the following chart.

LOGO


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The automotive industry is one of the largest consumers of flat-rolled steel, and the largest end market for Worthington Steel as well as our unconsolidated joint venture, Serviacero Worthington. North American vehicle production, primarily by the Detroit Three automakers, is a leading indicator of automotive demand for our business.

Our remaining net sales are to other markets such as agricultural, appliance, construction, container, energy, heavy-truck, HVAC, and, with the fiscal 2022 addition of Tempel, industrial electric motor, generator, and transformer. 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 this portion 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.

Inflation has accelerated and government deficits and debt levels remain at high levels in many major markets. In the U.S. inflation rose at an annual rate of 8.6% in May 2022. Inflationary pressures have been felt across our business in the form of higher input and conversion costs as well as higher overall selling, general and administrative (“SG&A”) expense. The U.S. Federal Reserve has pushed interest rates to the highest level in more than 15 years in an attempt to slow growth and reduce inflation. The impact of rising interest rates could cause a significant economic downturn and impact various of the end markets that we serve as well as overall domestic steel demand. Despite the economic headwinds presented by a rising interest rate environment, demand remains steady 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.

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


	2022			2021			2022 vs 2021
U.S. GDP (% growth year-over-year)⁽¹⁾		6.2	%		-1.7	%		7.9	%
Hot-Rolled Steel ($ per ton)⁽²⁾	$	1,588		$	869		$	719
Detroit Three Auto Build (000’s vehicles)⁽³⁾		6,178			6,808			(630	)
No. America Auto Build (000’s vehicles)⁽³⁾		13,366			14,813			(1,447	)
Zinc ($ per pound)⁽⁴⁾	$	1.56		$	1.15		$	0.41
Natural Gas ($ per mcf)⁽⁵⁾	$	4.92		$	2.49		$	2.43
On-highway Diesel Fuel Prices ($ per gallon)⁽⁶⁾	$	3.99		$	2.68		$	1.31

(1)	2022/2021 figures based on revised actuals

(2)	CRU Hot-Rolled Index; period average

(3)	IHS Global (S&P)

(4)	LME zinc; period average

(5)	NYMEX Henry Hub Natural Gas; period average

(6)	Energy Information Administration; period average

Sales to one automotive customer represented 17.0% of our combined net sales during both fiscal 2022 and 2021. 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 fiscal 2022, vehicle production for the Detroit Three automakers was down 9%, while overall North American vehicle production was down 10%.

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.

Impact of Raw Material Prices

Our principal raw materials are flat-rolled steel, including electrical steel, which we purchase in coils from integrated steel mills and mini-mills. The steel industry as a whole has been cyclical, and at times availability and


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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.

To manage our exposure to market risk, we attempt to negotiate the best prices for steel and to competitively price products and services to reflect the fluctuations in market prices. Derivative financial instruments have been used to manage a portion of our exposure to fluctuations in the cost of certain steel. These contracts covered periods commensurate with known or expected exposures throughout fiscal 2022. The derivative financial instruments were executed with highly rated financial institutions.

The following table presents the average quarterly market price per ton of hot-rolled steel during fiscal 2022 and 2021:


	Fiscal Year Ended May 31,
(Dollars per ton)⁽¹⁾	2022		2021
1st Quarter	$	1,762	$	475
2nd Quarter	$	1,888	$	625
3rd Quarter	$	1,421	$	1,016
4th Quarter	$	1,280	$	1,358
Annual Avg.	$	1,588	$	869

(1)	CRU Hot-Rolled Index

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.

Results of Operations

Fiscal 2022 Compared to Fiscal 2021

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


	Fiscal Year Ended May 31,
(in millions)	2022		2021		Increase/ (Decrease)
Net sales	$	4,068.9	$	2,127.4	$	1,941.5
Operating income		226.6		221.5		5.1
Equity income		29.8		16.0		13.8
Net earnings attributable to controlling interests		180.4		171.0		9.4


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The following table presents combined volume for the periods presented:

Fiscal Year Ended
May 31,

2022

2021

Increase/
(Decrease)

Tons

4,285,335

4,172,823

112,512

Net sales increased $1.9 billion over fiscal 2021 to $4.1 billion. Higher selling prices favorably impacted net sales by approximately $1.9 billion, as average HRC prices nearly doubled in fiscal 2022 to $1,588 per ton. The remaining increase in net sales was driven primarily by contributions from the Tempel and Shiloh acquisitions in fiscal 2022. The mix of direct versus toll tons processed was 52% to 48% in fiscal 2022, compared to 49% to 51% in the prior fiscal year. The shift in mix towards direct tons was driven primarily by general softness at our consolidated toll processing joint ventures, and, to a lesser extent, direct tons shipped by acquired businesses in fiscal 2022.

Gross Margin


	Fiscal Year Ended May 31,
(in millions)	2022		% of Net Sales			2021		% of Net Sales			Increase/ (Decrease)
Gross Margin	$	395.5		9.7	%	$	370.8		17.4	%	$	24.7

Gross margin increased $24.7 million over fiscal 2021 to $395.5 million. Gross margin in fiscal 2022 benefitted from improved direct spreads resulting from higher selling prices and contributions from acquisitions, partially offset by an estimated $53.1 million decline in estimated inventory holding gains as HRC prices peaked in November 2021 and then declined steadily throughout the remainder of fiscal 2022. The decrease in gross margin as a percent of net sales was due to the impact of higher overall steel prices during fiscal 2022.

Selling, General and Administrative Expense


	Fiscal Year Ended May 31,
(in millions)	2022		% of Net Sales			2021		% of Net Sales			Increase/ (Decrease)
Selling, general and administrative expense	$	180.3		4.4	%	$	147.4		6.9	%	$	32.9

SG&A expenses increased $32.9 million in fiscal 2022 due primarily to the impact of acquisitions, and to a lesser extent, higher profit sharing and bonus expense.

Other Operating Costs


	Fiscal Year Ended May 31,
(in millions)	2022			2021		Increase/ (Decrease)
Impairment of long-lived assets	$	3.1		$	—	$	3.1
Restructuring and other (income) expense, net		(14.5	)		1.9		(16.4	)

Impairment charges of $3.1 million in fiscal 2022 related to the write-down of certain production equipment at the Twinsburg, Ohio facility whose book value was determined to exceed fair market value less costs to sell.


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Restructuring activity during fiscal 2022 resulted primarily from pre-tax gains realized from the sale of WSP’s, Canton, Michigan, facility ($12.2 million) and the remaining fixed assets associated with our former facility in Decatur, Alabama ($2.6 million).

Refer to “Note E – Goodwill and Other Long-Lived Assets” and “Note F – Restructuring and Other (Income) Expense, Net” in the accompanying audited combined financial statements for additional information.

Miscellaneous income (expense), net


	Fiscal Year Ended May 31,
(in millions)	2022		2021			Increase/ (Decrease)
Miscellaneous income (expense), net	$	0.9	$	(0.3	)	$	1.2

Interest Expense


	Fiscal Year Ended May 31,
(in millions)	2022		2021		Increase/ (Decrease)
Interest expense	$	3.0	$	—	$	3.0

Interest expense in fiscal 2022 is the result of the $50 million term loan entered into on June 8, 2021, between TWB and Parent to finance the minority joint venture members’ portion of the Shiloh acquisition and higher short-term borrowings. Refer to “Note H – Debt and Receivables Securitization” in the accompanying audited financial statements for additional information.

Equity Income


	Fiscal Year Ended May 31,
(in millions)	2022		2021		Increase/ (Decrease)
Serviacero Worthington	$	29.8	$	16.0	$	13.8

Equity earnings at Serviacero Worthington increased $13.8 million on favorable spreads resulting from higher selling prices and improved volume. We received cash distributions of $2.5 million from Serviacero Worthington during fiscal 2022.

Income Taxes


	Fiscal Year Ended May 31,
(in millions)	2022		Effective Tax Rate		2021		Effective Tax Rate			Increase/ (Decrease)
Income Taxes	$	54.0		23.0	$	48.5		22.1	%	$	5.5

Income tax expense was up $5.5 million from fiscal 2021 to $54.0 million. The increase was driven primarily by higher pre-tax earnings. Tax expense in the current year period reflected an estimated annual effective rate of 23.0% compared to 22.1% for the prior year period. For additional information regarding our income taxes, refer to “Note L – Income Taxes” in the accompanying audited financial statements.


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Adjusted EBIT

We evaluate operating performance on the basis of adjusted earnings (loss) before interest and taxes (“adjusted EBIT”). EBIT is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest. Adjusted EBIT excludes impairment and restructuring charges (gains), but may also exclude other items that management believes are not reflective of, and thus should not be included when evaluating, the performance of our ongoing operations, including direct and incremental costs incurred in connection with the planned Separation beginning in fiscal 2023. Adjusted EBIT is a non-GAAP 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 measure provides additional perspective on the performance of our ongoing operations.

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


	Fiscal Year Ended May 31,
(in millions)	2022			2021
Net earnings attributable to controlling interest	$	180.4		$	171.0
Interest expense		3.0			—
Income tax expense		54.0			48.5

Earnings before interest and taxes	$	237.4		$	219.5
Impairment of long-lived assets ⁽¹⁾		1.9			—
Restructuring and other (income) expense, net ⁽¹⁾		(8.6	)		1.6

Adjusted earnings before interest and taxes ⁽¹⁾	$	230.7		$	221.1

⁽¹⁾

Excludes the impact of the noncontrolling interests. A more detailed discussion of our impairment and restructuring activity can be found elsewhere in this MD&A as well as in “Note E – Goodwill and Other Long-Lived Assets” and “Note F – Restructuring and Other (Income) Expense, Net” in the accompanying audited combined financial statements.

Adjusted EBIT was up $9.6 million over the prior year to $230.7 million on improved direct spreads and the impact of acquisitions partially offset by lower inventory holding gains, down an estimated $53.1 million from 2021. Adjusted EBIT was also positively impacted by higher equity income from Serviacero Worthington, up $13.8 million from the prior year on higher volume and improved spreads driven by higher average selling prices.

Liquidity and Capital Resources

During fiscal 2022, we generated $39.5 million of cash from operating activities, invested $36.4 million in property, plant and equipment, spent a combined $376.7 million to acquire Shiloh’s U.S. BlankLight business and Tempel. Additionally, we received $24.6 million in proceeds from assets sold. The following table summarizes our combined cash flows for the periods presented.


	Fiscal Year Ended May 31,
(in millions)	2022			2021
Net cash provided by operating activities	$	39.5		$	152.6
Net cash used by investing activities		(395.3	)		(27.7	)
Net cash provided (used) by financing activities		358.4			(116.7	)

Increase in cash and cash equivalents		2.6			8.2
Cash and cash equivalents at beginning of period		17.5			9.3

Cash and cash equivalents at end of period	$	20.1		$	17.5


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We currently finance our working capital requirements through cash flows from operating activities and arrangements with our Parent. We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, and capital expenditures. We believe that our sources of liquidity are adequate to fund our operations for the next twelve months and beyond.

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. Rising steel prices during the first half of fiscal 2022 led to a $175.3 million increase in operating working capital (accounts receivable, inventory and accounts payable) during fiscal 2022.

Net cash provided by operating activities was $39.5 million during fiscal 2022 compared to $152.6 million in fiscal 2021. The decrease was primarily due to a $69.4 million increase in operating working capital requirements over fiscal 2021, mainly driven by higher average steel prices.

Investing Activities

Net cash used by investing activities was $395.3 million during fiscal 2022 compared to $27.7 million in fiscal 2021. Net cash used by investing activities in fiscal 2022 resulted primarily from cash paid for acquired companies in fiscal 2022, partially offset by $24.6 million of proceeds from asset sales and $36.4 million of capital expenditures. During fiscal 2022, we spent $104.5 million to acquire the net assets of Shiloh’s U.S. BlankLight business and $272.2 million to acquire the outstanding equity interests in Tempel.

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 any 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 or at all if required.

Financing Activities

Net cash provided by financing activities was $358.4 million in fiscal 2022 compared to a cash outflow of $116.7 million in fiscal 2021, primarily due to transfers (to)/from Parent of $316.9 million and ($106.0) million, respectively. During fiscal 2022, we also received net proceeds of $35.0 million associated with a long-term loan with Parent to finance the minority joint venture members’ portion of the Shiloh U.S. BlankLight purchase price. Refer to “Note H – Debt and Receivables Securitization” in the accompanying audited financial statements for additional information.

Short-term borrowings

During fiscal 2022, we established a the AR Facility allowing us to borrow up to $175.0 million. Pursuant to the terms or the AR Facility, certain of our subsidiaries sell their accounts receivable without recourse, on a revolving basis, to Worthington Receivables Company, LLC (“WRC”), a wholly-owned, consolidated, bankruptcy-remote indirect subsidiary. In turn, WRC sells, on a revolving basis, up to $175.0 million of undivided ownership interests in this pool of accounts receivable to a third-party bank. We retain an undivided interest in this pool and are subject to risk of loss based on the collectability of the receivables from this retained interest. Because the amount eligible to be sold excludes receivables more than 120 days past due, receivables


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offset by an allowance for doubtful accounts due to bankruptcy or other cause, concentrations over certain limits with specific customers and certain reserve amounts, we believe additional risk of loss is minimal. As of May 31, 2022, borrowings outstanding under the AR Facility totaled $43.5 million, leaving $131.5 million available for future use. Refer to “Note H – Debt and Receivables Securitization” in the accompanying audited financial statements for additional information.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our combined financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these combined 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 combined financial statements and the reported amounts of revenues and expenses during the reporting periods. 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, as discussed below, our combined 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. The following accounting estimates are considered to be the most critical to us, as these are the primary areas where financial information is subject to our estimates, assumptions and judgment in the preparation of our combined financial statements.

See “Note B – Summary of Significant Accounting Policies” to the combined financial statements for further information on our significant accounting policies.

Impairment of Indefinite-Lived Long-Lived Assets:

Critical estimate. Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate that impairment may be present. Application of goodwill impairment testing involves judgment, including but not limited to, the identification of reporting units and estimation of the fair value of each reporting unit. A reporting unit is defined as an operating segment or one level below an operating segment. Prior to fiscal 2022, our operations were comprised of a single reporting unit (“Flat Rolled Steel Processing”) encompassing all of our traditional value-added flat-rolled steel products and services. The additions of Tempel and Shiloh in fiscal 2022 resulted in two additional reporting units: 1) Electrical Steel (comprised of the Tempel business) and 2) Laser Welding (comprised of the TWB business).

For goodwill and indefinite lived intangible assets, we test for impairment by first evaluating qualitative factors including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. If there are no concerns raised from this evaluation, no further testing is performed. If, however, our qualitative analysis indicates it is more likely than not that the fair value is less than the carrying amount, a quantitative analysis is performed. The quantitative analysis compares the fair value of each reporting unit or indefinite-lived intangible asset to the respective carrying amount, and an impairment loss is recognized in our combined statements of earnings equivalent to the excess of the carrying amount over the fair value.

Assumptions and judgments. When performing a qualitative assessment, judgment is required when considering relevant events and circumstances that could affect the fair value of the indefinite lived intangible asset or reporting unit to which goodwill is assigned. Management considers whether events and circumstances such as a change in strategic direction and changes in business climate would impact the fair value of the indefinite lived intangible asset or reporting unit to which goodwill is assigned. If a quantitative analysis is required, assumptions


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are required to estimate the fair value to compare against the carrying value. Significant assumptions that form the basis of fair value can include discount rates, underlying forecast assumptions, and royalty rates. These assumptions are forward looking and can be affected by future economic and market conditions. Our qualitative review for the most recently completed fiscal did not indicate any impairment.

Impairment of Definite-Lived Long-Lived Assets:

Critical estimate. We review the carrying value of our long-lived assets, including intangible assets with finite useful lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Impairment testing involves a comparison of the sum of the undiscounted future cash flows of the asset or asset group to its respective carrying amount. If the sum of the undiscounted future cash flows exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the sum of the undiscounted future cash flows, then a second step is performed to determine the amount of impairment, if any, to be recognized. An impairment loss is recognized to the extent that the carrying amount of the asset or asset group exceeds its fair value.

Assumptions and judgments. When performing the comparison of the sum of the undiscounted cash flows of the asset or asset group to its respective carrying amount, judgment is required when forming the basis for underlying cash flow forecast assumptions. If the second step of the impairment test is required, assumptions are required to estimate the fair value to compare against the carrying value. Significant assumptions that form the basis of fair value can include discount rates, underlying forecast assumptions, and royalty rates. These assumptions are forward looking and can be affected by future economic and market conditions.

Income Taxes:

Critical estimate. The income tax provision in the carve-out statement of earnings has been calculated as if Worthington Steel was operating on a stand-alone basis and filed separate tax returns in the jurisdiction in which it operates. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of Worthington Steel’s actual tax balances prior to or subsequent to the carve-out.

In accordance with the authoritative accounting guidance, we account for income taxes using the asset and liability method. The asset and liability method requires the recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between the tax basis and financial reporting basis of our assets and liabilities. We evaluate the deferred tax assets to determine whether it is more likely than not that some, or a portion, of the deferred tax assets will not be realized, and provide a valuation allowance as appropriate. Changes in existing tax laws or rates could significantly impact the estimate of our tax liabilities.

Assumptions and judgments. Significant judgment is required in determining our tax expense and in evaluating our tax positions. In accordance with accounting literature related to uncertainty in income taxes, tax benefits from uncertain tax positions that are recognized in the combined financial statements are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

We have reserves for income taxes and associated interest and penalties that may become payable in future years as a result of audits by taxing authorities. It is our policy to record these in income tax expense. While we believe the positions taken on previously filed tax returns are appropriate, we have established the tax and interest reserves in recognition that various taxing authorities may challenge our positions. These reserves are analyzed periodically, and adjustments are made as events occur to warrant adjustment to the reserves, such as lapsing of applicable statutes of limitations, conclusion of tax audits, additional exposure based on current calculations, identification of new issues, and release of administrative guidance or court decisions affecting a particular tax issue. We have provided for the amounts we believe will ultimately result from these changes; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially


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different from our current estimate of the tax liabilities. Such differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

See “Note L – Income Taxes” to the combined financial statements for further information on income taxes.

Employee Pension Plans:

Critical estimate. Defined benefit pension and other post-employment benefit (“OPEB”) plan obligations are remeasured at least annually as of May 31 based on the present value of projected future benefit payments for all participants for services rendered to date. The measurement of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by the plan, and other key measurement assumptions. The funded status of the benefit plans, which represents the difference between the benefit obligation and the fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded status are determined using assumptions as of the end of each year. Net periodic benefit cost is included in other income (expense) in our combined statements of earnings, except for the service cost component, which is recorded in SG&A expense.

Assumptions and judgements. Certain key actuarial assumptions critical to the pension and post-retirement accounting estimates include expected long-term rate of return on plan assets, discount rates, projected health care cost trend rates, cost of living adjustments, and mortality rates. In developing future long-term return expectations for our benefit plans’ assets, we formulate views on the future economic environment. We evaluate general market trends and historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation, valuations, yields, and spreads. We also consider expected volatility by asset class and diversification across classes to determine expected overall portfolio results given current and target allocations. Net periodic benefit costs, including service cost, interest cost, and expected return on assets, are determined using assumptions regarding the benefit obligation and the fair value of plan assets as of the beginning of each year.

Holding all other factors constant, a decrease in the expected long-term rate of return on plan assets by 0.25 percentage points would have increased 2023 pension expense by $ . Also, holding all other factors constant, a decrease in the discount rate used to determine net periodic pension cost by 0.25 percentage points would have decreased 2023 pension expense by $ .

Refer to “Note K – Employee Pension Plans” in the accompanying audited financial statements for additional information.

Business Combinations:

Critical estimate: We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair values of identifiable assets and liabilities requires significant judgments and estimates and the use of valuation techniques when market value is not readily available. For the valuation of intangible assets acquired in a business combination, we typically use an income approach. The purchase price allocated to the intangible assets is based on unobservable assumptions, inputs and estimates, including but not limited to, forecasted revenue growth rates, projected expenses, discount rates, customer attrition rates, royalty rates, and useful lives, among others.

Assumptions and judgements. Significant assumptions, which vary by the class of asset or liability are forward looking and could be affected by future economic and market conditions. We engage third-party valuation specialists who review our critical assumptions and prepare the calculation of the fair value of acquired intangible assets in connection with significant business combinations. The excess of the purchase price over the fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. During the


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measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Refer to “Note M – Acquisitions” in the accompanying audited financial statements for further information on our business combinations.

Corporate Allocations:

Critical estimate. The Company has historically operated as part of Parent and not as a stand-alone company. Accordingly, certain shared costs have been allocated to the Company and are reflected as expenses in the accompanying financial statements. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on the basis of profitability and headcount. We consider the basis on which expenses have been allocated to be a reasonable reflection of the services provided to or the benefit derived from the use of such support functions.

Assumptions and judgement. As a separate public company, our total costs related to such support functions may differ from the costs that were historically allocated to us. In addition, the expenses reflected in the financial statements may not be indicative of expenses that will be incurred in the future by the Company.

Refer to “Note Q – Related Party Transactions” in the accompanying audited financial statements for a description of the Company’s corporate allocations and related-party transactions.

Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to various market risks. We continually monitor these risks and regularly develop appropriate strategies to manage them. Accordingly, from time to time, we may enter into certain financial and commodity-based derivative financial instruments. These instruments are used primarily to mitigate market exposure. Refer to “Note N – Derivative Financial Instruments and Hedging Activities” in the accompanying audited financial statements for additional information.

Commodity Price Risk

We are exposed to market risk for price fluctuations on purchases of steel, natural gas, scrap, zinc and other raw materials as well as our utility requirements. We attempt to negotiate the best prices for commodities and to competitively price products and services to reflect the fluctuations in market prices. Derivative financial instruments have been used to manage a portion of our exposure to fluctuations in the cost of certain commodities, including steel, natural gas, zinc, and other raw materials. These contracts covered periods commensurate with known or expected exposures throughout fiscal 2022. The derivative financial instruments were executed with highly rated financial institutions. No credit loss is anticipated.

A sensitivity analysis of changes in the price of hedged commodities indicates that a 10% decline in the market prices of steel, scrap, zinc, natural gas or any combination of these would not have a material impact to the value of our hedges or our reported results.

The fair values of our outstanding derivative positions as of May 31, 2022 and 2021 are summarized below. Fair values of these derivative financial instruments do not consider the offsetting impact of the underlying hedged item.


	Fiscal Year Ended May 31,
(in millions)	2022		2021
Commodity contracts	$	1,007	$	39,698
Foreign currency exchange contracts		—		(254	)

Total derivative financial instruments	$	1,007	$	39,444


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Safe Harbor

Quantitative and qualitative disclosures about market risk include forward-looking statements with respect to management’s opinion about risks associated with the use of derivative financial instruments. These statements are based on certain assumptions with respect to market prices and industry supply of, and demand for, steel products and certain raw materials. To the extent these assumptions prove to be inaccurate, future outcomes with respect to hedging programs may differ materially from those discussed in the forward-looking statements.


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BUSINESS

General Overview

We believe our key investment attributes to be:

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Long-standing customer relationships focused on value creation and best-in-class service delivery

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Manufacturing scale enabling proximity to customers and suppliers, operational efficiencies, and purchasing power

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Attractive growth opportunities via strategic capital investments and/or value-enhancing acquisitions

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A market-leading supplier to growing end markets

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Ideally positioned to benefit from expanding global opportunities in electrification, sustainability and infrastructure spending

For the fiscal year ended May 31, 2023, we delivered approximately million tons of value-added processed steel, generating net sales of $ compared to million tons and net sales of $ in fiscal 2022. Net earnings and adjusted earnings before interest and taxes (“adjusted EBIT”) were $ and $ , respectively, in fiscal 2023 compared to $ and $ million, respectively, in fiscal 2022.

Adjusted EBIT is a non-GAAP measure used by management to assess operating performance. For further information regarding our use of this non-GAAP measure as well as a reconciliation to the most comparable GAAP measure, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement.


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The following pie chart presents our net sales by end-market for the fiscal year ended May 31, 2022:

Net Sales by End Market (Fiscal 2022)

LOGO

Value-Added Products and Services

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Carbon Flat-Roll Steel Processing: We perform a variety of value-added processes based on customer requirements including pickling, specialty re-rolling, hot dip galvanizing, blanking, slitting and cutting to length.

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Electrical Steel Laminations: We manufacture precision magnetic steel laminations for the automotive (including applications for electrified vehicles), industrial motor, generator, and transformer industries. We deliver precision manufacturing (including stamping, heat treating, core assembly, die casting, bonding, etc.), material sourcing, metallurgical analysis, engineering, prototyping and product design, tooling, and value-added capabilities to customers via a global manufacturing footprint.

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Tailor Welded Products: These products are used by North American automotive customers to reduce weight, lower cost, improve material utilization, and consolidate parts. Our highly engineered products allow for flexible part design and ensure the right material is used in the right place.

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Tailor Welded Blanks are made from individual sheets of steel of different thickness, strength and coating which are joined together by laser welding.

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Aluminum Tailor Welded Blanks are processed using friction stir welding technology. Friction stir offers the widest range of formable welded properties for all automotive aluminum alloys.

We can sell steel on a direct basis, whereby we are exposed to the risk and rewards of ownership of the material while in our possession. Alternatively, we can also toll process steel under a fee for service arrangement whereby we process customer-owned material. Our manufacturing facilities further benefit from the flexibility to scale between direct versus tolling services based on demand dynamics throughout the year.

Our Key Strengths

We believe we are well-positioned to execute on our growth initiatives and overall business strategy. In addition to our diverse offering and unique capability set, we have a long history of delivering reliable solutions to meet our customers’ supply chain needs and technical challenges, and, with the addition of Tempel, are well positioned to benefit from the global growth in electric vehicles. We believe our commitment to the Worthington Business System will enable us to execute our overall business strategy through continuous operational transformation, thoughtful and strategic deployment of capital, including acquisitions, and partnering with our customers and suppliers to create innovative solutions that allow us to evolve and adapt to changing market conditions. Our key strengths are described in more detail below:


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Strong and differentiated positions in key markets

We strive to be a collaborative partner to our customers by delivering complex and value-added solutions that meet our customers’ most demanding and performance-critical applications. We believe our portfolio of differentiated and value-added solutions is unique in the service center industry and provides for a competitive advantage that we will continue to leverage to create value for all of our stakeholders. We believe few service centers in North America offer the same breadth of value-added processing capabilities as Worthington Steel. For example, we own and operate two continuous hot dipped galvanizing lines with an annual capacity of approximately 1.4 million tons to zinc coat cold-rolled and hot-rolled steel and a network of six pickling facilities with capacity to process approximately five million tons of flat-rolled steel annually. Our market expertise extends beyond steel processing to include end-to-end supply chain management and price risk management solutions for customers seeking to develop efficient supply chains and reduce risk. In doing so, we have become one of the largest participants in North America’s steel futures market.

Through our TWB Company, LLC (“TWB”) joint venture, which operates 11 manufacturing facilities across North America, we believe we are the largest independent tailor welded blank operation in the region with capabilities that include mild carbon steel, advanced high strength steel and aluminum. Our product offering is further differentiated by our electrical steel capabilities. With manufacturing facilities in both North America and Asia Pacific, we are one of the leading global providers of electrical steel laminations for motors, generators, and transformers.

Strong operating platform guided by the Worthington Philosophy and driven by the Worthington Business System


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As outlined below, the Worthington Business System is rooted in the Worthington Philosophy and designed to drive continuous improvement through use of tools and technologies that help drive results and inform our business decisions:

LOGO

Ideally positioned to benefit from the global shift toward electrified vehicles

We believe we are ideally positioned to benefit from the once-in-a-lifetime industry tailwinds associated with the global shift from internal combustion powered vehicles to electrified vehicles over the coming decade. As one of the largest suppliers of highly engineered, precision-stamped, electrical steel laminations in the world, we aim to be the preferred supplier of electrical steel laminations to our blue-chip automobile original equipment manufacturer (“OEM”) customers as demand continues to grow. As shown by the chart below, battery electric and hybrid vehicles are expected to make up approximately two-thirds of all vehicles produced in North America and approximately 90% of all vehicles produced in Europe and Greater China by 2030. Due to our leading


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position as a supplier of laminations in the electric generator and transformer markets, we are also well-positioned to capitalize on growth opportunities associated with expanding and modernizing the existing power infrastructure and charging network.

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Deep and long-standing relationships with customers

Our customer relationships entail more than just steel processing. We work collaboratively with our customers to reduce material costs and provide supply chain management to minimize downstream impacts, including effective price risk management initiatives that aim to reduce risk across the entire supply chain by aligning customer demand with production and supply. Our Technical Services Team, composed of metallurgical engineers, material scientists and other technical experts, focus on pre-sale material specification and selection, as well as after-sale material performance, and can help customers select the best products for their specific business needs.


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LOGO

Our scale allows us to create highly efficient supply chains supported by a highly experienced workforce

Attractive growth prospects through continued disciplined strategic capital investments and acquisitions


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Balance sheet strength and flexibility

Experienced and proven management team

Our Growth and Business Strategies

Our primary objective is to deploy our unique value-added steel processing capabilities to provide customized solutions for our customers, using our network of sector experts and manufacturing facilities. We deliver value to customers in the form of high-quality products, process and cost efficiencies, as well as reliable outcomes. Our services are highly responsive to customer goals, and we are proactive in identifying potential improvement opportunities. To achieve this objective, we strive to provide best-in-class products and services to our customers, maximize operational efficiency and expand our product offerings to grow market share.


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Our growth and business strategy for Worthington Steel is as follows:

Capitalize on key growth trends

As outlined below, Worthington Steel is uniquely positioned to capitalize on several key growth trends, including the global decarbonization of transportation, the energy transition to renewable sources, and restoration of aging American infrastructure.

LOGO

Partner with our customers to help them meet their goals and overcome supply chain challenges specific to their businesses

Strategically grow our presence in electrical steel

The fiscal 2022 acquisition of Tempel has grown our global operating footprint in key geographic markets, which complements the continued development of the electric vehicle ecosystem. We expect to continue growing our portfolio of highly technical electrical steel products and capabilities with a strong local manufacturing and product development focus with the goal of capturing market share in the growing electric vehicle and transformer markets.

Drive continuous improvement through use of the Worthington Business System


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Expand our value-added offerings and leading market positions through disciplined strategic investments and acquisitions

Our Joint Ventures

As part of our strategy to selectively develop new products, markets, and technological capabilities and to expand our international presence, while mitigating the risks and costs associated with those activities, we participate in four operating joint ventures. Three of these operating joint ventures are consolidated due to our controlling financial interest and include:

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Worthington Samuel Coil Processing LLC (“Samuel”), a 63%-owned joint venture that operates two pickling facilities in Ohio

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Spartan Steel Coating LLC (“Spartan”), a 52%-owned joint venture that operates a cold-rolled, hot-dipped coating line for toll processing steel coils into galvanized, galvannealed and aluminized products intended primarily for the automotive industry

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TWB, a 55%-owned joint venture that supplies laser welded blanks, tailor welded aluminum blanks, laser welded coils and other laser welded products across North America for use primarily in the automotive industry for products such as inner-door panels, rails and pillars

Our remaining operating joint venture, Serviacero Planos, S. de R.L. de C.V. (“Serviacero Worthington”), in which we own a 50% noncontrolling interest, is unconsolidated and operates three steel processing facilities in Mexico. Serviacero Worthington provides steel processing services, such as pickling, blanking, slitting, multi-blanking and cutting-to-length, to customers in a variety of industries including automotive, appliance and heavy equipment.

The combined resources, expertise, and shared industry knowledge of Worthington Steel and our selected strategic partners support our market-leading positions across the spectrum of value-added services.


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Our Operating Footprint

Including our consolidated and unconsolidated joint ventures, we operate 31 manufacturing facilities primarily located in North America, as well as in the Asia Pacific region. Twenty-three of our facilities hold ISO 14001 certifications, a highly recognized global standard for an effective Environmental Management System.

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Competitive Landscape

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

We believe our sector expertise, long-standing customer relationships, exceptional product quality, service reliability, innovative price risk management solutions, advantaged supply chains, proximity to suppliers and customers, and experienced workforce are key factors that uphold our competitive position and enable us to be a supplier of choice to our customer base.

Steel Market Dynamics

The market price of our products is closely related to the price of Hot Rolled Coil (“HRC”). The price of benchmark HRC is primarily affected by the demand for steel and the cost of raw materials. Over the past several years, steel prices increased significantly due to supplier consolidation, tight mill orders due to the COVID-19 pandemic, the war in Ukraine and tariffs on foreign steel. More recently, steel prices rapidly decreased before increasing again. To manage our exposure to market risk, we negotiate prices for steel with our suppliers and price products and services to reflect the fluctuations in market prices. We have strong relationships with our mill suppliers, who are able to provide the quality materials required for our products, as well as competitive terms with regard to quality, pricing, and delivery.


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Throughout the cycle of fluctuating steel prices, we have consistently delivered steadily increasing volumes of processed steel:

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Our Customers

Worthington Steel services approximately 1,300 customers in many end markets including automotive, aerospace, agricultural, appliance, construction, container, energy, industrial electric motor, generator, transformer hardware, heavy-truck and HVAC. The automotive industry is one of the largest consumers of flat-rolled steel, and the largest end market for Worthington Steel. For fiscal 2023, Worthington Steel’s top three customers represented approximately % of the operating segment’s total net sales.

Sales for most of our products are generally strongest in our fiscal fourth quarter when our facilities generally operate at seasonal peaks. Historically, sales have generally 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.

Sales and Marketing

Worthington Steel and the joint ventures in which it participates supply various end markets through a direct sales force operating from individual facilities or sales offices. The direct sales channel typically serves large, sophisticated customers and OEMs, but also services medium and small sized customers. We maintain long-standing relationships with leading companies in industries using processed steel products. Supply contracts for certain large customers often extend for the life of the product’s program or platform, given the rigorous specification process associated with our customers’ respective product lines, and the ability to obtain and maintain these qualifications is an important part of doing business with customers. As such, historically there has been a high degree of renewal business with these customers. A customer’s cost to switch and either find a new product or qualify a new supplier can be significant, so it is in both the customer’s and the supplier’s best interest to maintain these relationships.

Sources and Availability of Raw Materials

We have developed strong relationships with our mill suppliers, who provide the quality materials we need, meet our quality and service requirements, and are able to offer competitive terms with regard to quality, pricing, delivery, and volumes purchased.


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The primary raw material we purchase is flat rolled steel. We purchase steel in large quantities at regular intervals from major steel mills, both domestic and foreign. The amount purchased from any supplier varies from year to year depending on a number of factors including market conditions, then-current relationships and prices and terms offered. In nearly all market conditions, steel is available from a few suppliers and generally any supplier relationship or contract can and has been replaced with little or no significant interruption to our business.

Steel is generally purchased based on specific customer orders. We purchase steel primarily on a short-term contractual basis to match customers’ specific requirements based on forecasted and/or historical usage. During fiscal 2023, we purchased steel from the following major suppliers, in alphabetical order: Cleveland-Cliffs Inc.; NLMK USA; North Star BlueScope Steel, LLC; Nucor Corporation; Steel Dynamics, Inc.; and United States Steel Corporation.

For certain raw materials, for example, zinc, there are limited suppliers, and our purchases are generally at market prices. However, historically, we have been able to replace our supplier relationships or contracts with little or no significant interruption to our business. Major suppliers of zinc to Worthington Steel in fiscal 2023 were, in alphabetical order: Glencore Ltd; Teck Resources Limited; and Trafigura Trading LLC. We believe our supplier relationships are generally favorable.

Technical Services

We recognize the importance of the metallurgical and technical aspects of our value-added steel products. We believe we are a leader in the flat rolled steel market for providing metallurgical and steel processing solutions to meet our customers’ customized material needs. We employ a staff of 20+ metallurgical engineers throughout the business and leverage their expertise to offer practical solutions on topics ranging from steelmaking and steel processing through downstream manufacturing. Our metallurgical engineers work in conjunction with internal quality teams to engage customers around problem solving, new product development and education. Laboratory facilities are equipped with a wide range of physical and chemical testing capabilities to support production, development needs, and high-level failure analyses. Tests are performed in accordance with specified industry standards. Data which is secured either through testing or online measurement systems are routed through analytics tools and analyzed by the team for process improvement, product performance and consistent quality.

Technical Service personnel also work in conjunction with the sales force to specify components and materials required to fulfill customer needs. Laboratory facilities also perform metallurgical and chemical testing as dictated by International Organization for Standardization (ISO), ASTM International, and other customer and industry specific requirements.

Environmental Matters

Our manufacturing facilities, like those of similar industries making similar products, are subject to many federal, state, local and foreign laws, and regulations, including those relating to the protection of our employees and the environment. We examine ways to improve safety, reduce emissions and waste, and decrease costs related to compliance with environmental and other government regulations. The cost of compliance or capital expenditures for environmental control facilities necessary to meet regulatory requirements are not anticipated to be material when compared with our overall costs and capital expenditures and, accordingly, are not anticipated to have a material effect on our financial position, results of operations, cash flows or the competitive position.

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.


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Patents, Trademarks and Licenses

We own several patents, trademarks, copyrights, trade secrets, and licenses to intellectual property owned by others. Although our patents, copyrights, trademarks, trade secrets, and other intellectual property rights are important to our success, we do not consider any single patent, trademark, copyright, trade secret or license to be of material importance to our business.

Corporate Responsibility

Human Capital Resources

As of , we had approximately employees and our unconsolidated joint ventures employed approximately additional employees. Approximately % of the employees who make up our consolidated labor force are represented by collective bargaining units, all of which are located outside of the United States and in jurisdictions where collective bargaining arrangements are customary. We believe that our open-door policy has created an environment which fosters open communication and serves to cultivate the good relationships we have with our employees, including those covered by collective bargaining units.

In line with our people-first philosophy, our employees have always been, and will always be, our most important asset. We operate under a set of core values that are rooted in Worthington Steel’s long-standing philosophy, which emphasizes the Golden Rule. These core values guide us as a company, including in our approach to people management. As such, we are continually focused on creating and maintaining a strong culture. Our culture provides employees with opportunities for personal and professional development, as well as community engagement, all of which we believe contribute to our overall success. We have repeatedly been recognized as a top place to work and believe we offer our employees competitive pay and above-market benefits, as compared to others in our industry, all while focusing on safety, wellness, and promoting a diverse and inclusive culture.

Safety, Health, and Wellness

We have always made the safety and well-being of our people a top priority, and we have regularly maintained an industry-leading safety record. For us, safety is about engagement, and our employees have adopted a culture where safety is everyone’s responsibility, not just the safety of our employees, but the safety of everyone who enters our facilities. We also provide our employees and their families with access to what we believe are above-market benefits, as compared to others in our industry, including a parental leave benefit that offers all new parents the opportunity for paid time off. We have a broad array of other employee centered-benefits and wellness programs, including on-site fitness centers, free health screenings, health fairs, and other company-wide and location-specific wellness events and challenges. We believe our investments in safety, health and wellness are key to supporting and protecting our most important asset, our people.

Diversity, Inclusion, and Equity

We believe that diversity, of all types, contributes to our success. We are committed to increasing the diversity of our employee base at all levels of our organization because we believe our differences make us better and that diverse thoughts and experiences drive innovation and produce better results. With Worthington Steel’s Philosophy as our foundation, we are working to build an environment where diversity is valued, and where all employees feel they belong and are empowered to do their best work.

To further such efforts, Worthington established a Diversity, Equity, and Inclusion Council (the “Council”) chaired by a senior officer. The Council developed a strategy where diversity, inclusion and equity efforts are focused on strengthening four primary pillars: workforce, workplace, community, and partnership. These pillars serve as a foundation for continually building and fostering an inclusive culture. We intend to replicate these diversity, equity and inclusion initiatives at Worthington Steel.


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Talent Development and Retention

Our ability to successfully operate, grow our business and implement our business strategies is largely dependent on our ability to attract, train and retain talented personnel at all levels of our organization. As a result, we offer our employees what we believe to be competitive compensation and benefits, as compared to others in our industry, which include opportunities to participate in profit sharing plans. We also strive to provide our employees with continuous opportunities to learn the skills necessary to maximize their performance and develop new skills that allow them to maximize their potential.

Properties

Our principal corporate offices are located in Columbus, Ohio, where we lease office space. At , including our consolidated and unconsolidated joint ventures, we owned or leased more than square feet of space for our operations, most of which is dedicated to manufacturing facilities. More details on these facilities is contained in the table below. We believe these facilities are well maintained and in good operating condition and are sufficient to meet our current needs.


Entity	Type		Location	Number of facilities		Leased		Owned
Samuel		Manufacturing	Ohio (2)		2		1		1
Spartan		Manufacturing	Michigan		1		—		1
TWB		Manufacturing	Kentucky, Michigan (2), Ohio (2), Tennessee (2), Canada, Mexico (3)		11		10		1
Worthington Steel		Manufacturing	Illinois, Indiana, Kentucky, Mexico, Michigan, Ohio (5), New York, Canada, China, India		14		2		12
Serviacero Worthington		Manufacturing	Mexico (3)		3		—		3

Total					31		13		18


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MANAGEMENT

Executive Officers Following the Distribution

The following table sets forth information, as of April 19, 2023 with respect to the individuals who are expected to serve as our executive officers, including their positions, and is followed by a biography of each such individual.


Name	Age	Position
Geoffrey G. Gilmore	51	President, Chief Executive Officer and Director Nominee
Jeff R. Klingler	51	Executive Vice President and Chief Operating Officer
Timothy A. Adams	59	Vice President and Chief Financial Officer
Michaune D. Tillman	51	Vice President and General Counsel

Geoffrey G. Gilmore has served as Executive Vice President and Chief Operating Officer of Worthington since August 2018. Mr. Gilmore served as President of Worthington Cylinder Corporation from June 2016 to August 2018, and as President of The Worthington Steel Company from August 2012 through May 2016. From July 2011 to July 2012, Mr. Gilmore served as Vice President-Purchasing for Worthington. From April 2010 to July 2011, Mr. Gilmore served as General Manager of The Worthington Steel Company’s Delta, Ohio facility; and from June 2006 to February 2010, he served as Director of Automotive Sales for The Worthington Steel Company. Mr. Gilmore also served in various other positions with The Worthington Steel Company from 1998 to June 2006.

Jeff R. Klingler has served as President of The Worthington Steel Company since May 2019. Mr. Klingler served as General Manager of various business units within The Worthington Steel Company from May 2014 until April 2019. Mr. Klingler served as vice president of sales, marketing and procurement for Banner Services Corporation, a supplier and processor of metal bar products, from 2008 until 2014, after serving in numerous capacities with The Worthington Steel Company from 1992 to 2008.

Timothy A. Adams has served as Vice President of Strategy and Business Development of The Worthington Steel Company since 2012. Prior to that, Mr. Adams served as Director of Strategy and Business Development from 2008 to 2012, after initially joining The Worthington Steel Company as a financial analyst in 1998 and serving in multiple roles of increasing responsibility within the Financial Planning and Analysis Group.

Michaune D. Tillman has served as General Counsel of The Worthington Steel Company since October 2020. Ms. Tillman previously served as Secretary, General Counsel & Vice President, Human Resources & Compliance for Worthington Armstrong Venture (WAVE) from October 2014 to October 2020. Prior to her role at WAVE, Ms. Tillman served in various leadership and management capacities at Ricoh Americas Corporation from 2001 to 2014, with the most recent being Deputy General Counsel, Vice President and Ethics Officer.

Board of Directors Following the Distribution

The following table sets forth information, as of April 19, 2023, with respect to the individuals who are expected, as of the date of this information statement, to serve on the Board following the completion of the distribution, and is followed by a biography of each such individual. Additional directors of the Company will be identified prior to completion of the distribution, and the names and biographies of such additional persons will be provided in subsequent amendments to this information statement.


Name	Age	Position
Geoffrey G. Gilmore	51	President, Chief Executive Officer and Director Nominee

The biography of Geoffrey G. Gilmore is set forth under the section entitled “—Executive Officers.”


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Composition of Board

Upon completion of the distribution, our Board is expected to consist of members.

Our amended and restated articles of incorporation and amended and restated code of regulations will provide that our Board will be divided into three classes, denominated as class I, class II, and class III . Members of each class will hold office for staggered three-year terms. The class I directors, whose terms will expire at the first annual meeting of our shareholders following the completion of the distribution, will be . The class II directors, whose terms will expire at the second annual meeting of our shareholders following the completion of the distribution, will be . The class III directors, whose terms will expire at the third annual meeting of our shareholders following the completion of the distribution, will be .

Plurality Voting Standard

Upon completion of the distribution, our amended and restated code of regulations are expected to provide for a plurality voting standard in director elections. This means that at all duly called or convened meetings of shareholders at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director.

Director Independence

The Board has determined that are independent directors under the applicable rules of the NYSE.

The Board will assess on a regular basis, and at least annually, the independence of directors and, based on the recommendation of the Nominating and Governance Committee, will make a determination as to which members are independent.

Committees of the Board of Directors

Effective immediately prior to the commencement of “when issued” trading of common shares on the NYSE, the Board will have a standing Audit Committee, and effective upon the completion of the separation, the Board will have a standing Compensation Committee and a standing Nominating and Governance Committee.

Audit Committee. The initial members of the Audit Committee (the “Audit Committee”) will be will serve as chair of the Audit Committee. The Board has determined that is an “audit committee financial expert” for purposes of the rules of the SEC. In addition, the Board has determined that are independent, as defined by the rules of the NYSE and Section 10A(m)(3) of the Exchange Act. Rule 10A-3 of the Exchange Act and the NYSE rules require that our Audit Committee have at least one independent member upon the listing of our common shares, have a majority of independent members within 90 days of the date of this information statement and be composed entirely of independent members within one year of the date of this information statement. The Audit Committee will be organized and conduct its business pursuant to a written charter. The Audit Committee may meet in executive session, without the presence of management, and will report to the Board on its actions and recommendations at each regularly scheduled Board meeting. The Audit Committee will be responsible, among its other duties and responsibilities, for reviewing, monitoring, and evaluating (a) our consolidated financial statements and the related disclosures, including the integrity and quality of our consolidated financial statements; (b) our compliance with legal and regulatory requirements, including the financial reporting process; (c) our systems of disclosure controls and procedures and internal control over financial reporting and our accounting and financial controls; (d) the performance, qualifications and independence of our independent registered public accounting firm, including the performance and rotation of the lead and concurring partners of that firm; (e) the performance of our internal audit function; (f) the annual independent audit of our consolidated financial statements; (g) financial, reporting and compliance risk management; (h) our overall enterprise risk management program including such matters related to privacy,


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information security, cybersecurity, business conduct, health and safety, compliance, environmental and social aspects; and (i) the administration of our Related Person Transaction Policy and approving, if appropriate, any “related person” transactions with respect to our directors or executive officers. The Audit Committee will also prepare the report that the SEC rules require be included in our annual proxy statement.

Compensation Committee. The initial members of the Compensation Committee (the “Compensation Committee”) will be . The Board has determined that are independent, as defined by the rules of the NYSE and Section 10C(a) of the Exchange Act. In addition, we expect that will qualify as “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act. The Compensation Committee will discharge the Board’s responsibilities relating to the compensation of our executive officers, including setting goals and objectives for, evaluating the performance of, and approving the compensation paid to, our executive officers. The Compensation Committee will be responsible, among its other duties and responsibilities, for determining and approving the compensation and benefits of our Chief Executive Officer and other executive officers, monitoring compensation arrangements applicable to our Chief Executive Officer and other executive officers in light of their performance, effectiveness and other relevant considerations and adopting and administering our equity and incentive plans. The Compensation Committee will have sole authority to retain and terminate any compensation consultant, legal counsel or other advisor, as the Compensation Committee deems appropriate to assist the Compensation Committee in the performance of its duties, including the sole authority to approve the fees and other terms and conditions of retention. Prior to any such retention, the Compensation Committee will assess any factors relevant to such consultant’s, legal counsel’s or other advisor’s independence from management, including the factors specified in NYSE’s Corporate Governance Standards or other listing rules, to evaluate whether the services to be performed will raise any conflict of interest or compromise the independence of such consultant, legal counsel or other advisor.

Nominating and Governance Committee. The initial members of the Nominating and Governance Committee (the “Nominating and Governance Committee”) will be . The Board has determined that are independent, as defined by the rules of the NYSE. The Nominating and Governance Committee will be responsible for recommending candidates for election to the Board. In making its recommendations, the Nominating and Governance Committee will review a candidate’s qualifications and any potential conflicts of interest and assess contributions of current directors in connection with his or her re-nomination. The Nominating and Governance Committee will also be responsible, among its other duties and responsibilities, for making recommendations to the Board or otherwise acting with respect to corporate governance policies and practices, including Board size and membership qualifications, new director orientation, committee structure and membership, related person transactions, and communications with shareholders and other interested parties. The Nominating and Governance Committee will also be responsible for reviewing the Company’s undertakings with respect to environmental, social, and governance matters, including the Company’s role as a corporate citizen and the Company’s policies and programs relating to health, safety and sustainability matters.

The Board is expected to adopt a written charter for each of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. These charters will be posted on our website in connection with the separation.

Compensation Committee Interlocks and Insider Participation

During our fiscal year ended May 31, 2023, we were not a separate or independent company and did not have a Compensation Committee or any other committee serving a similar function. Decisions as to the compensation for that fiscal year of those who will serve as our executive officers were made by Worthington, as described in the section of this information statement captioned “Executive Compensation.”

Board’s Role in Risk Oversight

Our management is principally responsible for defining, identifying and assessing the various risks we face, formulating enterprise risk management policies and procedures and managing our risk exposures on a


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day-to-day basis. A risk committee, comprised of senior executives, directs this process. Management provides an annual risk assessment to the Board, with quarterly updates. The Board’s responsibility is to oversee our risk management processes by understanding and evaluating management’s identification, assessment and management of our critical risks.

The Board as a whole has responsibility for this risk oversight, assisted by the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. Areas of focus include strategic, operational, liquidity, market, financial, reporting, succession, compensation, compliance, privacy, information security, cybersecurity, business conduct, health and safety, environmental, social, governance and other risks. The Audit Committee is tasked with oversight of financial, reporting and compliance risk management, along with our overall risk management program. The Compensation Committee is tasked with oversight of compensation risk management. The Nominating and Governance Committee manages risks associated with corporate governance, Board composition, and the performance of the Board, its committees and directors. The Board as a whole oversees all other risk management.

Code of Business Conduct

In connection with the separation, we will adopt a Code of Conduct (the “Code of Conduct”) that is applicable to all directors, officers and employees of the Company. The Code of Conduct will set forth Company policies, expectations and procedures on a number of topics, including but not limited to conflicts of interest, compliance with laws, rules and regulations (including insider trading laws), honesty and ethical conduct, and quality. The Code of Conduct will also set forth procedures for reporting violations of the Code of Conduct and investigations thereof. If the Board grants any waivers from our Code of Conduct to any of our directors or executive officers, or if we amend our Code of Conduct, we will, if required, disclose these matters through our website within four business days following such waiver or amendment. Our website, and the information contained therein, or connected thereto, is not incorporated by reference into this information statement.

Procedures for Treatment of Complaints Regarding Accounting, Internal Accounting Controls and Auditing Matters

In accordance with the Sarbanes-Oxley Act of 2002, our Board will establish a process for shareholders and interested parties to communicate with the Board and to report complaints or concerns relating to our accounting, internal accounting controls or auditing matters. Complaints or concerns relating to our accounting, internal accounting controls or auditing matters will be referred to members of the Audit Committee.

Website Disclosure

The Corporate Governance Guidelines and Code of Conduct are available in the “ ” section of our corporate website: .


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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

We have prepared this discussion in connection with our separation from Worthington. Prior to the separation, the Company has been a subsidiary of Worthington, and therefore, its historical compensation program has been primarily determined by Worthington’s senior management and the Compensation Committee of the Worthington Board (the “Worthington Compensation Committee”). Since the information presented in the compensation tables of this information statement relates to the 2023 fiscal year, which will end on May 31, 2023, this Compensation Discussion and Analysis will focus primarily on Worthington’s compensation programs and decisions as they applied to our executive officers with respect to 2023 and the processes for determining 2023 compensation while we were part of Worthington.

In connection with the seperation, the Board will form the Compensation Committee. Following the seperation, the Compensation Committee will determine the Company’s executive compensation.

This Compensation Discussion and Analysis presents historical compensation information for the following individuals who are expected to serve as our executive officers (our “NEOs”);

•

Geoffrey G. Gilmore who will serve as our Chief Executive Officer or “CEO”;

•

Timothy A. Adams, who will serve as our Vice President and Chief Financial Officer or “CFO”;

•

Jeff R. Klingler,, who will serve as our Executive Vice President and Chief Operating Officer; and

•

Michaune D. Tillman, who will serve as our Vice President and General Counsel.

Anticipated Compensation Program Design Following the Seperation

We are in the process of developing an initial executive compensation program in order to attract and retain talented executives and other key employees to lead us as a stand-alone public company. The Compensation Committee has not yet been established and therefore has not established a specific set of objectives or principles for our executive compensation program. Prior to the separation, the Worthington Compensation Committee will make certain compensation decisions and take actions regarding our compensation program design and following the separation, the Compensation Committee will make additional compensation decisions and actions. It is anticipated that the Worthington Compensation Committee, and after the separation, the Compensation Committee, will establish objectives and principles similar to the objectives and principles that Worthington maintained for its executive compensation program in 2023, as described in this Compensation Discussion and Analysis. However, the Compensation Committee will review the impact of our separation from Worthington and all aspects of compensation and make appropriate adjustments to our compensation programs and practices.

Role of the Compensation Committee

In fiscal 2023, the Worthington Compensation Committee reviewed and administered the compensation for our CEO and other members of our executive management team, including the NEOs. The description of the role of the Worthington Compensation Committee in fiscal 2023, will be described in subsequent amendments to this information statement.

Elements of Compensation

Information regarding the primary elements of the Worthington compensation program that applied to our executive officers in fiscal 2023, including base salary, annual bonus, long-term incentive compensation and certain employee benefits, will be described in subsequent amendments to this information statement.


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Executive Compensation Tables

The executive compensation tables below present historical compensation information for our NEOs reflecting compensation paid by Worthington. The overall historical compensation package described below and in the Compensation Discussion and Analysis above, and the components thereof, may not necessarily be indicative of the compensation our NEOs will receive from us following the separation.

Summary Compensation Table

Non-Equity Incentive Plan
Compensation

Short-Term / Long-Term

Name and Principal
Position(s) During

Fiscal 2023

Fiscal
Year

Salary
($)

Discretionary
Bonus
($)

Stock
Awards
($)

Option
Awards
($)

Annual
Incentive
Bonus Award
($)

3-year Cash
Performance
Award
($)

All Other
Compensation
($)

Total ($)

Geoffrey G. Gilmore

2023

Chief Executive Officer

2022

2021

Timothy��A. Adams

2023

Vice President and Chief Financial Officer

2022

2021

Jeff R. Klingler

2023

Executive Vice President and Chief Operating Officer

2022

2021

Michaune D. Tillman

2023

Vice President and General Counsel

2022

2021

Grants of Plan-Based Awards

Estimated Future Payouts Under
Non-Equity Incentive Plan Awards

Estimated Future Payouts Under
Equity Incentive Plan Awards (5)

All Other
Stock
Awards:

All Other
Option
Awards:
Number of

Exercise
or Base

Grant
Date

Name

Grant
Date

Compensation
Committee
Approval
Date

Threshold
($)

Target
($)

Maximum
($)

Threshold
(# of
Common
Shares)

Target
(# of
Common
Shares)

Maximum
(# of
Common
Shares)

Number
of Shares
of Stock or
Units

Common
Shares
Underlying
Options (6)

Price of
Option
Awards
($/Share)

Fair Value
of Stock
and
Option
Awards ($)

Geoffrey G. Gilmore

Timothy A. Adams

Jeff R. Klingler

Michaune D. Tillman


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Outstanding Equity Awards at Fiscal 2023 Year-End

Option Awards (1)

Stock Awards

Name

No. of
Common
Shares
Underlying
Unexercised
Options (#)
Exercisable

No. of
Common
Shares
Underlying
Unexercised
Options (#)
Unexercisable

Option
Exercise
Price

Option
Expiration
Date

No. of
Shares or
Units of
Stock that
Have Not
Vested (#)
(2)

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
(3)

Equity
Incentive
Plan
Awards:
No. of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#)
(4)

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($)
(4)

Equity
Incentive
Plan
Awards:
Performance
Period
Ending Date

Geoffrey G. Gilmore

Timothy A. Adams

Jeff R. Klingler

Michaune D. Tillman

Option Exercises and Stock Vested

Option Awards Exercised

Stock Awards Vested

Name

Number of Common
Shares Acquired on
Exercise (#)

Value Realized on
Exercise ($)

Number of Common
Shares Acquired on
Vesting (#)

Value Realized on
Vesting ($)

Geoffrey G. Gilmore

Timothy A. Adams

Jeff R. Klingler

Michaune D. Tillman

Non-Qualified Deferred Compensation

Name

Name of Plan

Executive
Contributions
in Fiscal 2023
($)

Company
Contributions
in Fiscal 2023
($)

Aggregate
Earnings
(Loss) in Fiscal
2023($)

Aggregate
Withdrawals/
Distributions
($)

Aggregate
Balance at
May 31, 2023
($)

Geoffrey G. Gilmore

Timothy A. Adams

Jeff R. Klingler

Michaune D. Tillman

Potential Payments Upon Termination or Change in Control

Information regarding the potential payments to which our NEOs may become entitled to receive in the event of certain terminations of employment or a change in control will be described in subsequent amendments to this information statement.


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DIRECTOR COMPENSATION

We have not established a compensation program for our non-employee directors and our directors did not receive any compensation for serving on our Board in fiscal year 2023. Once established, information regarding our non-employee director compensation program will be described in subsequent amendments to this information statement.


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PAY VERSUS PERFORMANCE DISCLOSURE

The following table sets forth information concerning the compensation of our NEOs for the fiscal years ended May 31, 2023 and our financial performance for such fiscal year:

Value of Initial Fixed $100
Investment Based on:

Fiscal Year

Summary
Compensation
Table Total
for PEO ($)

Compensation
Actually Paid
to PEO ($)

Average
Summary
Compensation
Table Total for
Non-PEO NEOs
($)

Average
Compensation
Actually
Paid to Non-
PEO NEOs
($)

Total
Shareholder
Return ($)

Peer Group
Total
Shareholder
Return ($)

Net
Income
($)

Company
Selected
Measure

2023


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EQUITY COMPENSATION PLAN INFORMATION

Our equity incentive plan was adopted by our Board on . We did not have an equity compensation plan in effect as of the last day of our fiscal year ended May 31, 2023.


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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Agreements with New Worthington

Following the separation, we and New Worthington will operate separately, each as an independent public reporting company. We and New Worthington will enter into a separation agreement that will effectuate the separation and distribution. We and New Worthington will also enter into a transition services agreement, a tax matters agreement, an employee matters agreement and other commercial agreements. The separation agreement, transition services agreement, tax matters agreement, employee matters agreement and other commercial agreements will provide a framework for our relationship with New Worthington after the separation and provide for the allocation between Worthington Steel and New Worthington of New Worthington’s assets, liabilities and obligations attributable to periods prior to, at and after our separation from New Worthington. The material terms of these agreements will be described in subsequent amendments to this information statement. The forms of the agreements listed above will be filed as exhibits to the registration statement on Form 10 of which this information statement is a part.

Procedures for Approval of Related Person Transactions

The Board is expected to adopt a written policy on related person transactions. This policy was not in effect when we entered into the transactions described above. Each of the agreements between us and New Worthington and its subsidiaries that have been entered into prior to the distribution, and any transactions contemplated thereby, will be deemed to be approved and not subject to the terms of such policy.

As described in the Code of Conduct, conflicts of interest can arise when an employee’s or a director’s personal or family relationships, financial affairs, an outside business involvement or other private interest may adversely influence the judgment or loyalty required for performance of his or her duties to us. In cases where there is an actual or even the appearance of a conflict of interest, the individual involved is required to notify his or her supervisor or our Ethics Officer. The supervisor will then consult with management or the Ethics Officer, as appropriate. The Code of Conduct provides that any action or transaction in which the personal interest of an executive officer or a director may be in conflict with our interest is to be reported to the Audit Committee. The Audit Committee must investigate and, if it is determined that such action or transaction would constitute a violation of the Code of Conduct, the Audit Committee is authorized to take any action it deems appropriate.

Our written Related Person Transaction Policy (the “RPT Policy”), which supplements the Code of Conduct provisions addressing conflicts of interest, addresses our policy with respect to related person transactions. The RPT Policy was adopted by the Board and is administered by the Audit Committee and our General Counsel. The RPT Policy applies to any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we participate, directly or indirectly, and a related person has, had or will have a direct or indirect material interest. Under the RPT Policy, a “related person” is any person:

•

who is or was our executive officer, director or director nominee, or an immediate family member of any such individual; or

•

who is or was the beneficial owner of more than 5% of our outstanding common shares, or an immediate family member of any such individual.

All related person transactions are to be brought to the attention of management who will then refer each matter to our General Counsel and the Audit Committee. Each director, director nominee or executive officer must notify our General Counsel in writing of any interest that such individual or an immediate family member of such individual has, had or may have, in a related person transaction. In addition, any related person transaction proposed to be entered into by us must be reported to our General Counsel by the employee who has authority over the transaction. On an annual basis, our directors, director nominees and executive officers must complete a questionnaire designed to elicit information about existing and potential related person transactions. Any


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potential related person transaction that is raised will be analyzed by our General Counsel, in consultation with management and with outside counsel, as appropriate, to determine whether the transaction, arrangement or relationship does, in fact, qualify as a related person transaction requiring review by the Audit Committee under the RPT Policy.

Under the RPT Policy, all related person transactions (other than those deemed to be pre-approved or ratified under the terms of the RPT Policy) will be referred to the Audit Committee for approval (or disapproval), ratification, revision or termination. Whenever practicable, a related person transaction is to be reviewed and approved or disapproved by the Audit Committee prior to the effectiveness or consummation of the transaction. If our General Counsel determines that advance consideration of a related person transaction is not practicable, the Audit Committee will review and, in its discretion, may ratify the transaction at the Audit Committee’s next meeting. However, our General Counsel may present a related person transaction arising between meetings of the Audit Committee to the Chair of the Audit Committee who may review and approve (or disapprove) the transaction, subject to ratification by the Audit Committee at its next meeting if appropriate. If we become aware of a related person transaction not previously approved under the RPT Policy, the Audit Committee will review the transaction, including the relevant facts and circumstances, at its next meeting and evaluate all options available to us, including ratification, revision, termination or rescission of the transaction, and take the course of action the Audit Committee deems appropriate under the circumstances.

No director may participate in any approval or ratification of a related person transaction in which the director or an immediate family member of the director is involved. The Audit Committee may only approve or ratify those transactions the Audit Committee determines to be in our best interest. In making this determination, the Audit Committee will review and consider all relevant information available to it, including:

•

the terms (including the amount involved) of the transaction and the related person’s interest in the transaction and the amount of that interest;

•

the business reasons for the transaction and its potential benefits to us, and whether the transaction was undertaken in the ordinary course of our business;

•

whether the terms of the transaction are fair to us and no less favorable to us than terms that could be reached with an unrelated third party;

•

the impact of the transaction on the related person’s independence; and

•

whether the transaction would present an improper conflict of interest for any of our directors, director nominees or executive officers, taking into account the size of the transaction, the overall financial position of the related person, the direct or indirect nature of the related person’s interest in the transaction and the ongoing nature of any proposed relationship and any other factors the Audit Committee deems relevant.

Any related person transaction previously approved or ratified by the Audit Committee or otherwise already existing that is ongoing in nature is to be reviewed by the Audit Committee annually.

Under the terms of the RPT Policy, the following related person transactions are deemed to be pre-approved or ratified (as appropriate) by the Audit Committee even if the aggregate amount involved would exceed $120,000:

•

interests arising solely from ownership of our common shares if all shareholders receive the same benefit on a pro rata basis (i.e., dividends);

•

compensation to an executive officer, as long as the executive officer is not an immediate family member of any of our executive officers or directors and the compensation has been approved by the Compensation Committee or is generally available to our employees;

•

compensation to a director for services as a director if the compensation is required to be reported in our proxy statements;


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•

interests deriving solely from a related person’s position as a director of another entity that is a party to the transaction;

•

interests deriving solely from the related person’s direct or indirect ownership of less than 10% of the equity interest (other than a general partnership interest) in another person that is a party to the transaction; and

•

transactions involving competitive bids.

In addition, the Audit Committee will presume that the following transactions do not involve a material interest:

•

transactions in the ordinary course of business with an entity for which a related person serves as an executive officer, provided (i) the affected related person did not participate in our decision to enter into the transaction, and (ii) the aggregate amount involved in any related category of transactions in a 12-month period is not greater than the least of (a) $1,000,000, or (b) 2% of the other entity’s consolidated gross revenues for such other entity’s most recently completed fiscal year, or (c) 2% of our consolidated gross revenues for our most recently completed fiscal year;

•

donations, grants or membership payments to non-profit organizations, provided (a) the affected related person did not participate in our decision to make such payments, and (b) the aggregate amount in a 12-month period does not exceed the lesser of $500,000 or 1% of the non-profit organization’s consolidated gross revenues for its most recently completed fiscal year; and

•

Our use of facilities (such as dining facilities and clubs) if the charges for such use are consistent with charges paid by unrelated third parties and are fair, reasonable and consistent with those for similar services available at similar facilities.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Before the distribution, all of our outstanding common shares will be owned beneficially and of record by Worthington.

The following tables set forth information with respect to the expected beneficial ownership of our common shares immediately after the distribution by: (1) each person expected to beneficially own more than five percent of our common shares, (2) each expected director and named executive officer, and (3) all of our expected directors and executive officers as a group based upon the distribution ratio. We based the share amounts on each person’s beneficial ownership of Worthington common shares as of , 2023 assuming a distribution ratio of of our common share(s) for every common share(s) of Worthington. Solely for the purposes of this table, we assumed that of our common shares were issued and outstanding as of based on Worthington common shares outstanding as of such date and the distribution ratio. The actual number of our common shares to be outstanding following the distribution will be determined on the record date for the distribution. Except as indicated, the address of each director and executive officer shown in the table below is c/o Worthington Steel, Inc., .


	Common shares beneficially owned before the distribution			Common shares beneficially owned after the distribution
Name and address of beneficial owner	Number	%		Number	%
5% Beneficial Owner
Worthington Industries, Inc.			100
Directors and Executive Officers
Geoffrey G. Gilmore			—
Jeff R. Klingler			—
Timothy A. Adams			—
Michaune D. Tillman			—
			—
			—
All Directors and Executive Officers as a Group ( persons)			—


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THE SEPARATION AND DISTRIBUTION

Background

On September 29, 2022, Worthington announced its intention to separate its steel processing business from the remainder of its businesses.

It is expected that the Worthington Board, or a duly authorized committee thereof, will approve the distribution of 100% of our issued and outstanding common shares on the basis of of our common share(s) for every common share(s) of Worthington held as of the close of business on the record date of .

On , the distribution date, each Worthington shareholder will receive of our common share(s) for every common share(s) of Worthington held at the close of business on the record date for the distribution, as described below. Worthington shareholders will receive cash in lieu of any of our fractional common shares that they would have received after application of this ratio. You will not be required to make any payment, surrender or exchange your Worthington common shares or take any other action to receive your Worthington Steel common shares in the distribution. The distribution of our common shares as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see this section under “—Conditions to the Distribution.”

Reasons for the Separation

•

The Worthington Board also considered the following potentially negative factors in evaluating the separation:

•


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power in procuring certain goods, services and technologies. After the separation, as a separate, independent entity, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those Worthington obtained prior to the separation. We may also incur costs for certain functions previously performed by Worthington, such as accounting, tax, legal, human resources and other general administrative functions, that are higher than the amounts reflected in our historical financial statements, which could cause our profitability to decrease.

•

One-time Costs of the Separation. We (and prior to the separation, Worthington) will incur costs in connection with the transition to being a standalone public company that may include accounting, tax (including transaction taxes), legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel and costs to separate information systems.

•

While all of the bullets above are considered to be potentially negative factors to us, only the second, third and fourth bullets above are considered to be potentially negative factors to Worthington.

Formation of a New Company Prior to the Distribution

We were incorporated in Ohio on February 28, 2023 for the purpose of holding Worthington’s steel processing business. As part of the plan to separate these businesses from the remainder of its businesses, Worthington plans to transfer the equity interests of certain entities that operate the steel processing business and the assets and liabilities of the steel processing business to us, as well as certain other assets and liabilities, as set forth in the separation agreement.

When and How You Will Receive the Distribution

With the assistance of Broadridge, Worthington expects to distribute our common shares on , the distribution date, to all holders of outstanding common shares of Worthington as of the close of business on , the record date for the distribution. Broadridge, which currently serves as the transfer agent and registrar for common shares of Worthington, will serve as the settlement and distribution agent in connection with the distribution and the transfer agent and registrar for our common shares.

If you own common shares of Worthington as of the close of business on the record date for the distribution, our common shares that you are entitled to receive in the distribution will be issued electronically, as of the


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distribution date, to you in direct registration form or to your bank or brokerage firm on your behalf. If you are a registered holder, Broadridge will then mail you a direct registration account statement that reflects your Worthington Steel common shares. If you hold your common shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares. Direct registration form refers to a method of recording share ownership when no physical share certificates are issued to shareholders, as is the case in the distribution. If you sell common shares of Worthington in the “regular-way” market up to and including the distribution date, you will be selling your right to receive our common shares in the distribution.

Commencing on or shortly after the distribution date, if you hold physical share certificates that represent your common shares of Worthington and you are the registered holder of the common shares represented by those certificates, the distribution agent will mail to you an account statement that indicates the number of our common shares that have been registered in book-entry form in your name.

Most Worthington shareholders hold their common shares through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the common shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your common shares of Worthington through a bank or brokerage firm, your bank or brokerage firm will credit your account for our common shares that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm.

Transferability of Common Shares You Receive

Our common shares distributed to holders in connection with the distribution will be transferable without registration under the Securities Act, except for common shares received by persons who may be deemed to be our affiliates. Persons who may be deemed to be our affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with the Company which may include certain Company executive officers, directors or principal shareholders. Securities held by our affiliates will be subject to resale restrictions under the Securities Act. Our affiliates will be permitted to sell our common shares only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.

Number of Our Common Shares You Will Receive

For every common share(s) of Worthington that you own at the close of business on , the record date for the distribution, you will receive of our common share(s) on the distribution date.

Worthington will not distribute any of our fractional common shares to its shareholders. Instead, if you are a registered holder, Broadridge will aggregate fractional common shares into whole common shares, sell the whole common shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and commissions) of the sales pro rata (based on the fractional common share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional common share in the distribution. The transfer agent, in its sole discretion, without any influence by Worthington or us, will determine when, how, through which broker-dealer and at what price to sell the whole common shares. Any broker-dealer used by the transfer agent will not be an affiliate of either Worthington or us. Neither we nor Worthington will be able to guarantee any minimum sale price in connection with the sale of these common shares. Recipients of cash in lieu of fractional common shares will not be entitled to any interest on the amounts of payment made in lieu of fractional common shares.

We estimate that it will take approximately from the distribution date for the distribution agent to complete the distributions of the aggregate net cash proceeds. If you hold your common shares of Worthington through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales and will electronically credit your account for your share of such proceeds.


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Results of the Distribution

After our separation from Worthington, we will be an independent, publicly-traded company. The actual number of common shares to be distributed will be determined at the close of business on , the record date for the distribution. The distribution will not affect the number of outstanding common shares of Worthington or any rights of Worthington shareholders. Worthington will not distribute any of our fractional common shares.

We will enter into a separation agreement and other related agreements with Worthington to effect the separation and provide a framework for our relationship with New Worthington after the separation. These agreements provide for the allocation between New Worthington and us of the assets, liabilities and obligations (including their respective investments, property and employee benefits and tax-related assets and liabilities) of Worthington and its subsidiaries attributable to periods prior to, at and after our separation from Worthington and will govern certain relationships between New Worthington and us after the separation. For a more detailed description of these agreements, please refer to the section entitled “Certain Relationships and Related Person Transactions.”

Market for Our Common Shares

There is currently no public trading market for our common shares. We intend to apply to list our common shares on the NYSE under the symbol “ .” We have not and will not set the initial price of our common shares. The initial price will be established by the public markets.

We cannot predict the price at which our common shares will trade after the distribution. In fact, the combined trading prices of one common share of New Worthington and of our common share(s) after the distribution (representing the number of our common shares to be received per one common share of Worthington in the distribution) may not equal the “regular-way” trading price of a common share of Worthington immediately prior to the distribution. The price at which our common shares trade may fluctuate significantly, particularly until an orderly public market develops. Trading prices for our common shares will be determined in the public markets and may be influenced by many factors. Please refer to the section entitled “Risk Factors—Risks Related to Our Common Shares.”

Trading Between the Record Date and Distribution Date

Beginning on or shortly before the record date for the distribution and continuing up to the distribution date, Worthington expects that there will be two markets in common shares of Worthington: a “regular-way” market and an “ex-distribution” market. Common shares of Worthington that trade on the “regular-way” market will trade with an entitlement to our common shares distributed pursuant to the separation. Common shares of Worthington that trade on the “ex-distribution” market will trade without an entitlement to our common shares distributed pursuant to the distribution. Therefore, if you sell common shares of Worthington in the “regular-way” market up to and including through the distribution date, you will be selling your right to receive our common shares in the distribution. If you own common shares of Worthington at the close of business on the record date and sell those common shares on the “ex-distribution” market up to and including through the distribution date, you will receive the Worthington Steel common shares that you are entitled to receive pursuant to your ownership as of the record date of the common shares of Worthington.

Furthermore, beginning on or shortly before the record date for the distribution and continuing up to the distribution date, we expect that there will be a “when-issued” market in our common shares. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for our common shares that will be distributed to holders of common shares of Worthington on the distribution date. If you owned common shares of Worthington at the close of business on the record date for the distribution, you would be entitled to our common shares distributed pursuant to the distribution. You may trade this entitlement to our common shares, without the


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common shares of Worthington you own, on the “when-issued” market. On the first trading day following the distribution date, “when-issued” trading with respect to our common shares will end, and “regular-way” trading will begin.

“Ex-distribution” and “when-issued” trades are generally settled shortly after the distribution date, but if Worthington determines not to proceed with the distribution following the initiation of the “ex-distribution” and “when-issued” trading markets, trades in the “ex-distribution” and “when-issued” trading markets will be cancelled and, therefore, will not be settled.

Conditions to the Distribution

The distribution will be effective at , on , the distribution date, provided that the following conditions will have been satisfied (or waived by Worthington in its sole discretion):

•

the transfer of assets and liabilities to us in accordance with the separation agreement will have been completed, other than assets and liabilities intended to transfer after the distribution;

•

Worthington will have received an opinion of Latham & Watkins LLP, tax counsel to Worthington, regarding the qualification of the distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code;

•

the SEC will have declared effective the registration statement on Form 10 of which this information statement forms a part, no stop order suspending the effectiveness of the registration statement will be in effect, no proceedings for such purpose will be pending before or threatened by the SEC and this information statement (or a Notice of Internet Availability) will have been mailed to Worthington shareholders;

•

all actions and filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities laws will have been taken and, where applicable, will have become effective or been accepted by the applicable governmental authority;

•

the transaction agreements relating to the separation will have been duly executed and delivered by the parties;

•

no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions will be in effect;

•

our common shares to be distributed will have been approved and accepted for listing on the NYSE, subject to official notice of distribution;

•

Worthington will have entered into a distribution agent agreement with, or provided instructions regarding the distribution to, Broadridge as distribution agent;

•

all material governmental approvals necessary to consummate the distribution and to permit the operation of our business after the separation substantially as it is currently conducted will have been obtained;

•

the financing described in “Description of Certain Indebtedness” will have been completed;

•

the Cash Distribution will have been declared and paid by us to Worthington; and

•

no event or development will have occurred or exist that, in the judgment of the Worthington Board, in its sole discretion, makes it inadvisable to effect the separation, the distribution or the other related transactions.

The satisfaction of the foregoing conditions does not create any obligations on Worthington’s part to effect the separation, and the Worthington Board has reserved the right, in its sole discretion, to abandon, modify or change


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the terms of the separation, including by accelerating or delaying the timing of the consummation of all or part of the separation, at any time prior to the distribution date. To the extent that the Worthington Board determines that any modifications by Worthington materially change the material terms of the distribution, Worthington will notify Worthington shareholders in a manner reasonably calculated to inform them about the modification as may be required by law.


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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION TO U.S. HOLDERS

The following is a summary of the material U.S. federal income tax consequences of the distribution to Worthington common shareholders that are U.S. Holders (as defined below). This summary is based on the Code, the Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS, in each case as of the date of this information statement. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a U.S. Holder. There can be no assurance that the IRS or a court will not take a contrary position to that discussed below.

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of common shares of Worthington that, for U.S. federal income tax purposes, is or is treated as:

•

an individual who is a citizen or resident of the United States;

•

a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

•

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

•

a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more United States persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.

This summary is limited to U.S. Holders who hold common shares of Worthington as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This summary does not address all U.S. federal income tax consequences relevant to a U.S. Holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to U.S. Holders subject to special rules, including, without limitation:

•

U.S. expatriates and former citizens or long-term residents of the United States;

•

dealers or brokers in securities, commodities or currencies;

•

tax-exempt organizations;

•

banks, insurance companies or other financial institutions;

•

mutual funds;

•

regulated investment companies and real estate investment trusts;

•

corporations that accumulate earnings to avoid U.S. federal income tax;

•

holders who hold common shares of Worthington in individual retirement or other tax-deferred accounts;

•

holders who acquired common shares of Worthington pursuant to the exercise of stock options, the settlement of restricted stock units or otherwise as compensation;

•

holders who own, or are deemed to own, at least 10% or more of the common shares of Worthington by vote or value;

•

holders who hold common shares of Worthington as part of a hedge, appreciated financial position, straddle, constructive sale, conversion transaction or other risk reduction transaction;

•

traders in securities who elect to apply a mark-to-market method of accounting;

•

holders who have a functional currency other than the U.S. dollar;


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•

holders who are subject to the alternative minimum tax;

•

holders subject to special tax accounting rules as a result of any item of gross income with respect to common shares of Worthington being taken into account in an applicable financial statement;

•

partnerships or other pass-through entities or investors in such entities; or

•

“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds common shares of Worthington, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding common shares of Worthington and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.

THE FOLLOWING IS A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION TO U.S. HOLDERS UNDER CURRENT LAW. THE FOLLOWING DOES NOT PURPORT TO ADDRESS ALL U.S. FEDERAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OR THAT MAY APPLY TO PARTICULAR CATEGORIES OF SHAREHOLDERS. EACH WORTHINGTON SHAREHOLDER IS ENCOURAGED TO CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION OF U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED BELOW.

U.S. Federal Income Tax Consequences of the Distribution to U.S. Holders Who Receive Common Shares of Worthington Steel

The distribution is conditioned upon, among other things, Worthington’s receipt of an opinion of tax counsel regarding the qualification of the distribution, together with certain related transactions, as a reorganization under Sections 355 and 368(a)(1)(D) of the Code. The opinion of tax counsel will be based on certain factual assumptions and representations and subject to qualifications and limitations. If the distribution qualifies as a reorganization, then for U.S. federal income tax purposes:

•

no gain or loss will be recognized by, or be includible in the income of, a U.S. Holder solely as a result of the receipt of common shares of Worthington Steel in the distribution;

•

the aggregate tax basis of the common shares of New Worthington and common shares of Worthington Steel in the hands of a U.S. Holder immediately after the distribution will be the same as the aggregate tax basis of the common shares of Worthington held by the holder immediately before the distribution, allocated between the common shares of New Worthington and common shares of Worthington Steel, including any fractional share interest for which cash is received, in proportion to their relative fair market values;

•

the holding period with respect to common shares of Worthington Steel received by a U.S. Holder will include the holding period of its common shares of Worthington; and

•

a U.S. Holder who receives cash in lieu of a fractional common share of Worthington Steel in the distribution will be treated as having sold such fractional common share for cash and generally will recognize capital gain or loss in an amount equal to the difference between the amount of cash received and such holder’s adjusted tax basis in the fractional common share. That gain or loss will be long-term capital gain or loss if the holder’s holding period for its common shares of Worthington exceeds one year.


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Treasury Regulations generally provide that if a U.S. Holder holds different blocks of common shares of Worthington (generally common shares of Worthington purchased or acquired on different dates or at different prices), the aggregate basis for each block of common shares of Worthington purchased or acquired on the same date and at the same price will be allocated, to the greatest extent possible, between the common shares of Worthington Steel received in the distribution in respect of such block of common shares of Worthington and such block of common shares of New Worthington, in proportion to their respective fair market values, and the holding period of the common shares of Worthington Steel received in the distribution in respect of such block of common shares of Worthington will include the holding period of such block of common shares of Worthington, provided that such block of common shares of Worthington was held as a capital asset on the date of the distribution. If a U.S. Holder is not able to identify which particular common shares of Worthington Steel are received in the distribution with respect to a particular block of common shares of Worthington, for purposes of applying the rules described above, the U.S. Holder may designate which common shares of Worthington Steel are received in the distribution in respect of a particular block of common shares of Worthington, provided that such designation is consistent with the terms of the distribution. Holders of common shares of Worthington are encouraged to consult their own tax advisors regarding the application of these rules to their particular circumstances.

The opinion Worthington expects to receive from Latham & Watkins LLP will be based on, among other things, certain factual assumptions, representations and undertakings from Worthington and us, including those regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these factual assumptions, representations, or undertakings are incorrect or not satisfied, Worthington may not be able to rely on the opinion. In addition, the opinion will not be binding on the IRS or the courts.

If, notwithstanding the conclusions in the opinion, the distribution is ultimately determined not to qualify as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, Worthington would recognize gain in an amount equal to the excess of the fair market value of the common shares of Worthington Steel distributed to Worthington shareholders on the distribution date over Worthington’s tax basis in such common shares and with respect to the Cash Distribution. In addition, each U.S. Holder who receives common shares of Worthington Steel in the distribution would be treated as receiving a potentially taxable distribution in an amount equal to the fair market value of the common shares of Worthington Steel that was distributed to the U.S. Holder. Specifically, the full value of the common shares of Worthington Steel distributed to a U.S. Holder generally would be treated first as a taxable dividend to the extent of the U.S. Holder’s pro rata share of Worthington’s current and accumulated earnings and profits, then as a non-taxable return of capital to the extent of the U.S. Holder’s basis in the common shares of Worthington, and finally as capital gain from the sale or exchange of common shares of Worthington with respect to any remaining value.

Even if the distribution qualifies as a reorganization under Sections 355 and 368(a)(1)(D) of the Code, the distribution may result in corporate-level taxable gain to Worthington under Section 355(e) of the Code if there is a 50% or greater change in ownership, by vote or value, of shares of Worthington Steel, shares of New Worthington or shares of a predecessor or successor of either occurring as part of a plan or series of related transactions that includes the distribution. For this purpose, any acquisitions or issuances of shares of Worthington within two years before the distribution, and any acquisitions or issuances of shares of Worthington Steel or shares of New Worthington within two years after the distribution, are generally presumed to be part of such a plan, although we or New Worthington may be able to rebut that presumption. If an acquisition or issuance of our shares, shares of New Worthington or shares of a predecessor or successor of either triggers the application of Section 355(e) of the Code, New Worthington would recognize taxable gain as described above and such gain would be subject to U.S. federal income tax.

Information Reporting and Backup Withholding

U.S. Treasury regulations require certain shareholders who receive shares in a distribution to attach to their U.S. federal income tax return for the year in which the distribution occurs a detailed statement setting forth certain


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information relating to the tax-free nature of the distribution. In addition, payments of cash to a Worthington shareholder in lieu of fractional common shares of Worthington Steel in the distribution may be subject to information reporting and backup withholding. Certain U.S. Holders are exempt from backup withholding, including corporations and certain tax-exempt organizations. A U.S. Holder will be subject to backup withholding if such holder is not otherwise exempt and:

•

the U.S. Holder fails to furnish the U.S. Holder’s taxpayer identification number, which for an individual is ordinarily his or her social security number;

•

the U.S. Holder furnishes an incorrect taxpayer identification number;

•

the applicable withholding agent is notified by the IRS that the U.S. Holder previously failed to properly report payments of interest or dividends; or

•

the U.S. Holder fails to certify under penalties of perjury that the U.S. Holder has furnished a correct taxpayer identification number and that the IRS has not notified the U.S. Holder that the U.S. Holder is subject to backup withholding.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS. U.S. Holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or “FATCA”) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or (subject to the proposed Treasury Regulations discussed below) gross proceeds from the sale or other disposition of, our common shares paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on common shares of Worthington. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of shares on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

U.S. Holders should consult their tax advisors regarding the potential application of withholding under FATCA to the distribution.


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DESCRIPTION OF CERTAIN INDEBTEDNESS

We intend to enter into certain financing arrangements prior to or concurrently with the separation and distribution. A description of such financing arrangements will be included in an amendment to the registration statement on Form 10 of which this information statement is a part.


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DESCRIPTION OF CAPITAL STOCK

In connection with the distribution, we will amend and restate our articles of incorporation and our code of regulations. The following is a description of the material terms of, and is qualified in its entirety by, our amended and restated articles of incorporation and our amended and restated code of regulations, each of which will be in effect upon the consummation of the distribution, the forms of which will be filed as exhibits to the registration statement of which this information statement forms a part. Because this is only a summary, it may not contain all the information that is important to you.

Authorized Capital Stock

Under the Company’s amended and restated articles of incorporation, the Company’s authorized capital stock consists of common shares, Class A Preferred Shares, and Class B Preferred Shares.

Common Shares

Holders of the Company’s common shares are entitled to:

•

one vote for each common share held;

•

receive dividends when and as declared by the Company’s Board from funds legally available therefor, subject to the rights of holders of the Company’s Preferred Shares, if any; and

•

share ratably in the Company’s net assets, legally available to the Company’s shareholders in the event of the Company’s dissolution, liquidation or winding up, after provision for distribution to the holders of any Preferred Shares and to the payment in full of all amounts required to be paid to creditors or provision for such payment.

Holders of the Company’s common shares have no preemptive, subscription, redemption, conversion or cumulative voting rights. The Company’s outstanding common shares are fully paid and nonassessable.

Preferred Shares

Under the Company’s amended and restated articles of incorporation, the Board is authorized to issue, without any further vote or action by the Company’s shareholders, subject to certain limitations prescribed by Ohio law and the rules and regulations of the NYSE, up to an aggregate of Class A Preferred Shares and Class B Preferred Shares, in one or more series. The Board is also authorized to fix or change the rights, preferences, qualifications and limitations of each series, including the division of such Preferred Shares into series, the designation and authorized number of Preferred Shares included in each series, dividend and distribution rights, liquidation rights, preferences and price, redemption rights and price, sinking fund requirements, preemptive rights, conversion rights and restrictions on issuance of Preferred Shares. Subject to the provisions of any applicable law, rule or regulation, holders of Class A Preferred Shares and holders of Class B Preferred Shares are entitled to one vote per share and ten votes per share, respectively, on matters to be voted upon by the holders of common shares and Preferred Shares voting together as a single class. Ohio law also entitles the holders of Preferred Shares to exercise a class vote on certain matters.

The Board may authorize the issuance of Preferred Shares with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the Company’s common shares. The issuance of Preferred Shares could have the effect of decreasing the market price of the Company’s common shares. The issuance of Preferred Shares also could have the effect of delaying, deterring or preventing a change in control of the Company without further action by the Company’s shareholders.


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Anti-Takeover Effects of our amended and restated articles of incorporation, our amended and restated code of regulations and Ohio Law

Certain provisions in the Company’s amended and restated articles of incorporation and the Company’s amended and restated code of regulations as well as certain provision of the Ohio Revised Code (“ORC”) could discourage potential takeover attempts and make attempts by shareholders to change management more difficult. A description of these provisions is set forth below.

Classified Board of Directors

The Board is divided into three classes, with three-year staggered terms. This classification system increases the difficulty of replacing a majority of the directors at any one time and may tend to discourage a third party from making a tender offer or otherwise attempting to gain control of the Company. It also may maintain the incumbency of the Board.

Removal of Directors

Under the Company’s amended and restated articles of incorporation, any director, or the entire Board, may be removed from office, with or without cause, only by the affirmative vote of 75% of the voting power of the Company voting together as a single class. However, under current Ohio law, because the Company is an issuing public corporation (as defined in Section 1701.01 of the ORC) and has a classified Board, the directors of the Company may only be removed for cause. Directors may also be removed from office for cause by the affirmative vote of three-fourths of the directors then in office.

Indemnification of Directors and Officers

Ohio General Corporation Law (Chapter 1701 of Ohio Revised Code)

Set forth below is a description of certain provisions of the ORC and the Company’s amended and restated code of regulations, as such provisions relate to the indemnification of the directors and officers of the Company. This description is intended only as a summary and is qualified in its entirety by reference to the ORC and the Company’s amended and restated code of regulations.

Under Section 1701.13(E) of the ORC, directors, officers, employees and agents of Ohio corporations have an absolute right to indemnification for expenses (including attorneys’ fees) actually and reasonably incurred by them in connection with any action, suit or proceeding to the extent they are successful in defense of the action, suit or proceeding, including derivative actions, brought against them, or in defense of any claim, issue or matter asserted in any such action, suit or proceeding. A director, officer, employee or agent is entitled to such indemnification if such person’s success is “on the merits or otherwise.” Directors (but not officers, employees or agents) are entitled to mandatory payment of expenses by a corporation as they are incurred, in advance of the final disposition of the action, suit or proceeding, provided the directors agree to reasonably cooperate with the corporation concerning the matter and to repay the amount advanced if it is proved by clear and convincing evidence that the directors’ act or failure to act was done with deliberate intent to cause injury to the corporation or with reckless disregard for the corporation’s best interests.

Section 1701.13(E) of the ORC permits a corporation to indemnify directors, officers, employees or agents of the corporation or individuals who are or were serving at the request of the corporation as a director, trustee, officer, employee, member, manager or agent of another corporation or entity in circumstances where indemnification is not mandated by the statute if certain statutory standards are satisfied. A corporation may grant indemnification in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, investigative or administrative, other than derivative actions, if the indemnitee acted in good faith and in a manner the indemnitee reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the indemnitee’s conduct was unlawful. Such


		109

indemnification is permitted against expenses (including attorneys’ fees) as well as judgments, fines and amounts paid in settlement actually and reasonably incurred by the indemnitee in connection with the action, suit or proceeding. A corporation may also provide indemnification in derivative actions for expenses (including attorneys’ fees) actually and reasonably incurred in connection with the defense or settlement of an action or suit if the officer, director, employee or agent acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the corporation. Ohio law does not expressly authorize indemnification against judgments, fines and amounts paid in settlement of derivative actions. A corporation may not indemnify a director, officer, employee or agent in derivative actions for expenses (including attorneys’ fees) if such person is adjudged to be liable for negligence or misconduct in the performance of such person’s duties to the corporation unless, and only to the extent that, a court determines that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. In addition, a corporation may not indemnify a director in any action or suit in which the only liability asserted against the director is for approving unlawful loans, dividends or distributions of assets under Section 1701.95 of the ORC.

Section 1701.13(E) of the ORC permits a corporation to pay expenses (including attorneys’ fees) incurred by a director, officer, employee or agent as they are incurred, in advance of the final disposition of the action, suit or proceeding, as authorized by the corporation’s directors and upon receipt of an undertaking by such person to repay such amount if it is ultimately determined that such person is not entitled to indemnification.

Section 1701.13(E) of the ORC states that the indemnification provided thereby is not exclusive of, and is in addition to, any other rights granted to persons seeking indemnification under a corporation’s articles or regulations, any agreement, a vote of the corporation’s shareholders or disinterested directors, or otherwise.

Section 1701.13(E) of the ORC grants express power to a corporation to purchase and maintain insurance or furnish similar protection, including, but not limited to, trust funds, letters of credit and self-insurance, for director, officer, employee or agent liability, regardless of whether that individual is otherwise eligible for indemnification by the corporation.

Code of Regulations of the Company

The Company’s amended and restated code of regulations provides for broader indemnification than specifically afforded under Section 1701.13(E) of the ORC. The Company’s amended and restated code of regulations provide that Company must indemnify officers and directors against expenses (including attorneys’ fees, filing fees, court reporters’ fees and transcript costs), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any pending, threatened or completed action, suit or proceeding (whether criminal, civil, administrative or investigative and whether a derivative action or not) by reason of the fact that any such individual is or was a director, officer, employee, agent or volunteer of Company or is or was serving at the request of the Company as a director, trustee, officer, employee, member, manager, agent or volunteer of another corporation or other entity so long as such individual’s act or omission giving rise to the claim for indemnification was not occasioned by such individual’s intent to cause injury to, or by such individual’s reckless disregard for the best interests of, the Company and, with respect to any criminal matter, such individual had no reasonable cause to believe such individual’s conduct was unlawful. The Company’s amended and restated code of regulations forbid the Company from indemnifying an officer or director in a derivative action if such person is adjudged to be liable for an act or omission occasioned by such person’s deliberate intent to cause injury to, or by such person’s reckless disregard for the best interests of, the Company unless and only to the extent the Court of Common Pleas in Franklin County, Ohio, or the court in which the action was brought, despite such adjudication of liability and in view of all the circumstances, concludes that such person is fairly and reasonably entitled to such indemnity as the court deems proper.

The Company’s amended and restated code of regulations recite a presumption (which may only be rebutted by clear and convincing evidence) that no act or omission by a person claiming indemnification was occasioned by


		110

an intent to cause injury to, or by a reckless disregard for the best interests of, the Company, and with respect to any criminal matter, that such person had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, does not, by itself, rebut this presumption.

The Company’s amended and restated code of regulations state that, to the extent an officer or director is successful on the merits or otherwise in defense of any action, suit or proceeding or in defense of any claim, issue or matter therein, such officer or director must be promptly indemnified by the Company against expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees and transcript costs) actually and reasonably incurred by him or her in connection therewith.

The Company’s amended and restated code of regulations state that an indemnitee’s expenses (including, without limitation, attorneys’ fees, filing fees, court reporters’ fees and transcript costs) must be paid by the Company in advance of the final disposition of the action, suit or proceeding to or on behalf of the officer or director promptly as such expenses are incurred, but only if such officer or director first agrees, in writing, to repay all amounts so paid in respect of any claim, issue or other matter asserted in such action, suit or proceeding in defense of which such person shall have not been successful on the merits or otherwise, if it is proved by clear and convincing evidence in a court of competent jurisdiction that, in respect of any such claim, issue or other matter, such person’s relevant action or failure to act was occasioned by his or her deliberate intent to cause injury to the Company or his or her reckless disregard for the best interests of the Company, unless, and only to the extent that, the Court of Common Pleas of Franklin County, Ohio or the court in which such action or suit was brought determines that, despite such determination and in view of all of the circumstances, such officer or director is fairly and reasonably entitled to all or part of such indemnification.

The Company’s amended and restated code of regulations state that the indemnification provided thereby is not exclusive of, and is in addition to, any other rights to which any person seeking indemnification may be entitled under the Company’s articles or regulations, any agreement, a vote of the Company’s disinterested directors or otherwise. Additionally, the Company’s amended and restated code of regulations provide that the Company may purchase and maintain insurance or furnish similar protection on behalf of any person who is or was a director, officer, employee, agent or volunteer of the Company, or who is or was serving as a director, trustee, officer, employee, member, manager, agent or volunteer of another corporation or entity at the request of the Company, against any liability asserted against such person and incurred by such person in such capacity, or arising out of such person’s status as such, whether or not the Company would have the obligation or power to indemnify such person under the Company’s amended and restated code of regulations. The Company’s amended and restated code of regulations also authorize the Company to purchase and maintain trust funds, letters of credit or self-insurance on behalf of any person who is or was a director, officer, employee, agent or volunteer of the Company or who is serving or has served another entity at the request of the Company.

Indemnification Agreements

The Company has entered into an indemnification agreement with each of its directors and executive officers. The indemnification agreements generally obligate the Company to hold harmless and indemnify such directors and executive officers against specified expenses and liabilities they may incur in the performance of their respective duties to the greatest extent permitted by Ohio law, provided that (1) such directors and executive officers acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe their conduct was unlawful and (2) with respect to proceedings by or in the right of the Company, (a) such executive officers were not adjudged to be liable to the Company for negligence or misconduct in the performance of their duties to the Company or (b) such directors were not adjudged to be liable to the Company for (i) an act or omission undertaken with deliberate intent to cause injury to the Company or with reckless disregard for the best interests of the Company or (ii) approving unlawful loans, dividends or distributions of assets under Section 1701.95 of the ORC. The indemnification agreements also require the Company to advance expenses to a director or


		111

executive officer prior to the final disposition of a proceeding if specified conditions are satisfied. The indemnification agreements provide procedures for determining a director’s or executive officer’s entitlement to indemnification and specify certain remedies relating to indemnification and advancement of expenses. The indemnification agreements do not exclude any other rights to indemnification or advancement of expenses to which a director or an executive officer may be entitled under Company’s amended and restated certificate of incorporation or code of regulations, applicable law (including the ORC), any insurance policy, any contract or otherwise.

Directors and Officers Insurance

The Company maintains, and in the future may continue to maintain, insurance policies under which present or former directors and officers are insured, within the limits and subject to the limitations of such policies, against expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that may be imposed as a result of such actions, suits or proceedings, to which these individuals are parties by reason of being or having been directors or officers of the Company.

Advance Notice Requirements for Shareholder Proposals and Nominations for Election as Directors

Under the Company’s amended and restated code of regulations, shareholders seeking to bring business before an annual meeting of shareholders or to nominate candidates for election as directors at an annual meeting must provide timely notice thereof in writing to the Company.

To be timely, a shareholder’s notice with respect to business to be brought before an annual meeting must be delivered to, or mailed and received at, the principal executive office of the Company not less than 30 days prior to an annual meeting. However, if less than 40 days’ notice or prior public disclosure of the date of the annual meeting is given or made to shareholders, the shareholder’s notice must be received no later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made.

In order to nominate an individual for election as a director at a meeting, a shareholder must give written notice of the shareholder’s intention to make such nomination. The notice must be delivered to, or mailed and received at, the Company’s principal executive office not less than 14 days or more than 50 days prior to any meeting called for the election of directors. However, if notice or public disclosure of the date of the meeting is given or made less than 21 days prior to the meeting, the shareholder notice must be received by the Company not later than the close of business on the seventh day following the day on which notice of the date of the meeting was mailed or publicly disclosed.

No Shareholder Action by Written Consent

Under the Company’s amended and restated articles of incorporation, any action required or permitted to be taken by the Company’s shareholders must be effected at a duly called meeting of the shareholders and may not be effected by an action by written consent of the shareholders. This prevents the Company’s shareholders from initiating or effecting any action by written consent, thereby limiting the ability of shareholders to take actions opposed by the Board.

Special Meetings of Shareholders

The Company’s amended and restated code of regulations provides that special meetings of shareholders may be called only by the chairman of the board, the president (or, in the case of the president’s absence, death or disability, the vice president authorized to exercise the authority of the president), the secretary, the Board at a meeting of the Board, a majority of the directors acting without a meeting or the holders of at least 50% of all shares outstanding and entitled to vote at such special meeting.


		112

Supermajority Voting Provisions

Under Ohio law, in the case of most mergers, sales of all or substantially all the assets of a corporation and amendments to a corporation’s amended and restated articles of incorporation, the affirmative vote of two-thirds of the voting power of the corporation is required unless the corporation’s amended and restated articles of incorporation provide for a lower amount but not less than a majority. The Company’s amended and restated articles of incorporation change the default voting requirement provided by Ohio law to a majority of the voting power, except that the affirmative vote of 75% of the voting power is required with respect to certain transactions between the Company and “substantial shareholders” as described below under the heading “— Transactions With Substantial Shareholders.”

Transactions With Substantial Shareholders

Under the Company’s amended and restated articles of incorporation, certain transactions between the Company and a “substantial shareholder” must be approved by the affirmative vote of the holders of 75% of the voting power of the Company (which vote must also include the affirmative vote of the holders of a majority of the voting power of the Company excluding the substantial shareholder in question). A “substantial shareholder” is defined as any person who beneficially owns, directly or indirectly, more than 15% of the Company’s voting power or is an affiliate of the Company and at any time within the past three years beneficially owned, directly or indirectly, more than 15% of the Company’s voting power, but does not include the Company, any of the Company’s subsidiaries, any employee benefit plan of the Company or of any of the Company’s subsidiaries, the trustees or fiduciaries of any such plan or any affiliate of the Company owning in excess of 10% of the outstanding common shares of the Company on August 3, 1998 (and the respective successors, executors, legal representatives, heirs and legal assigns of such affiliate). Transactions requiring a supermajority shareholder vote include:

•

any merger or consolidation of the Company or any subsidiary of the Company with or into any substantial shareholder or any other corporation which, after such merger or consolidation, would be an affiliate of a substantial shareholder;

•

any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any substantial shareholder of any substantial part of the assets of the Company or any subsidiary of the Company;

•

the issuance or transfer by the Company or any subsidiary of the Company (in one transaction or a series of related transactions) of equity securities of the Company or any subsidiary of the Company to any substantial shareholder for consideration having an aggregate fair market value of $25 million or more;

•

the adoption of any plan or proposal for the liquidation or dissolution of the Company if, as of the record date relating to such event, any person shall be a substantial shareholder; and

•

any reclassification of securities (including any reverse stock split) or recapitalization of the Company, or any reorganization, merger or consolidation of the Company with any of the Company’s subsidiaries or any similar transaction which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding equity securities of the Company or any subsidiary of the Company directly or beneficially owned by any substantial shareholder.

A supermajority shareholder vote is not required, however, with respect to any of the foregoing transactions which is approved by three-fourths of the Board, provided that a majority of the directors in office and acting upon such matter are “continuing directors” (as defined in the Company’s amended and restated articles of incorporation).

Control Share Acquisition Act

Ohio law provides that certain notice and informational filings, and special shareholder meeting and voting processes, must occur prior to any person’s acquisition of an issuing public corporation’s shares that would


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entitle the acquirer to exercise or direct the exercise of the voting power of the issuing public corporation in the election of directors within any of the following ranges:

•

one-fifth or more but less than one-third of such voting power;

•

one-third or more but less than a majority of such voting power; or

•

a majority or more of such voting power.

This provision of Ohio law, which is known as the Control Share Acquisition Act, does not apply to a corporation if its articles of incorporation or code of regulations so provide. The Company has opted out of the application of the Control Share Acquisition Act in the Company’s amended and restated code of regulations.

Merger Moratorium Statute

Chapter 1704 of the ORC, which is known as the Merger Moratorium Statute, generally addresses a wide range of business combinations and other transactions (including mergers, consolidations, asset sales, loans, disproportionate distributions of property and disproportionate issuances or transfers of shares or rights to acquire shares) between an Ohio corporation and an “interested shareholder” who, alone or with others, may exercise or direct the exercise of at least 10% of the voting power of the corporation in the election of directors. The Merger Moratorium Statute does not apply to a corporation if its articles of incorporation so provide. The Company opted out of the application of the Merger Moratorium Statute in the Company’s amended and restated articles of incorporation.

Transfer Agent and Registrar

Broadridge will be the transfer agent and registrar for our common shares.

Listing

We intend to apply to have our common shares authorized for listing on the NYSE under the symbol “ .”


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WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form 10 with respect to our common shares being distributed as contemplated by this information statement. This information statement is a part of, and does not contain all of the information set forth in, the registration statement and the exhibits and schedules to the registration statement. For further information with respect to us and our common shares, please refer to the registration statement, including the exhibits and schedules to the registration statement. Statements made in this information statement relating to any contract or other document are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

As a result of the distribution, we will become subject to the informational requirements of the Exchange Act and will be required to file periodic and current reports, proxy statements and other information with the SEC. We intend to furnish our shareholders with annual reports containing financial statements audited by an independent registered public accounting firm.

In addition, following the completion of the distribution, we will make the information filed with or furnished to the SEC available free of charge through our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference and is not part of this information statement.

You should rely only on the information contained in this information statement or to which this information statement has referred you. We have not authorized any person to provide you with different information or to make any representation not contained in this information statement.


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INDEX TO FINANCIAL STATEMENTS

Page


Report of Independent Registered Public Accounting Firm			F-2
Combined Balance Sheets			F-4
Combined Statements of Earnings			F-6
Combined Statements of Comprehensive Income (Loss)			F-7
Combined Statements of Equity			F-8
Combined Statements of Cash Flows			F-9
Notes to Combined Financial Statements			F-10
Note A – The Proposed Separation, Description of the Business, and Basis of Presentation			F-10
Note B – Summary of Significant Accounting Policies			F-12
Note C – Revenue Recognition			F-20
Note D – Investment in Unconsolidated Affiliate			F-20
Note E – Goodwill and Other Long-Lived Assets			F-21
Note F – Restructuring and Other (Income) Expense, Net			F-22
Note G – Contingent Liabilities and Commitments			F-23
Note H – Debt and Receivables Securitization			F-23
Note I – Comprehensive Income (Loss)			F-24
Note J – Stock-Based Compensation			F-25
Note K – Employee Pension Plans			F-29
Note L – Income Taxes			F-33
Note M – Acquisitions			F-35
Note N – Derivative Financial Instruments and Hedging Activities			F-38
Note O – Fair Value Measurements			F-41
Note P – Leases			F-43
Note Q – Related Party Transactions			F-44
Note R – Subsequent Events			F-46


		F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Worthington Industries, Inc.:

Opinion on the Combined Financial Statements

We have audited the accompanying combined balance sheets of the Steel Processing Business of Worthington Industries, Inc. and subsidiaries (the Company) as of May 31, 2022 and 2021, the related combined statements of earnings, comprehensive income (loss), equity, and cash flows for each of the years in the two-year period ended May 31, 2022, and the related notes and financial statement schedule II (collectively, the combined financial statements). In our opinion, the combined financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended May 31, 2022, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the combined financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the combined financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the combined financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the combined financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the combined financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair value of the customer relationships intangible asset in the acquisition of Tempel Steel Company

As discussed in Note M to the combined financial statements, on December 1, 2021, the Company acquired Tempel Steel Company (“Tempel”) in a business combination for approximately $272,208,000, net of cash acquired plus the assumption of certain long-term liabilities. As a result of the transaction, the Company acquired a customer relationships intangible asset associated with the generation of future revenues. Of the total assets acquired, the fair value assigned to the customer relationships intangible asset amounted to $30,000,000.


		F-2

We identified the evaluation of the fair value of the customer relationships intangible asset acquired in the Tempel business combination as a critical audit matter. There was a high degree of subjective auditor judgment related to significant assumptions used in the valuation model, specifically the forecasted revenue growth rates and the discount rate applied. Changes in these assumptions could have a significant impact on the fair value of the customer relationships intangible asset. Professionals with specialized skill and knowledge were also required to assess the significant assumptions and evaluate the evidence obtained.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the above significant assumptions. We evaluated the amount and timing of forecasted revenue growth rates used by the Company by comparing them to certain publicly available information for comparable companies and industry reports. We performed sensitivity analyses over the Company’s revenue growth rates used to determine the estimated fair value of the customer relationships intangible asset to assess the effect of changes in those assumptions on the Company’s determination of fair value. We also involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the discount rate used in the valuation, by comparing it to a discount range that was independently developed using publicly available market data.

/s/ KPMG LLP

We have served as the Company’s auditor since 2022.

Columbus, Ohio

April 19, 2023


		F-3

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

COMBINED BALANCE SHEETS

(In thousands)


	May 31,
	2022		2021
ASSETS
Current assets:
Cash and cash equivalents	$	20,052	$	17,459
Receivables, less allowances of $789 and $108 at May 31, 2022 and May 31, 2021, respectively		600,424		405,048
Inventories
Raw materials		216,127		199,801
Work in process		234,947		169,973
Finished products		118,423		73,157

Total inventories		569,497		442,931
Income taxes receivable		474		168
Assets held for sale		15,719		33,400
Prepaid expenses and other current assets		60,934		41,114

Total current assets		1,267,100		940,120
Investment in unconsolidated affiliate		119,325		92,038
Operating lease assets		70,000		7,599
Goodwill		80,033		20,218
Other intangible assets, net of accumulated amortization of $32,550 and $27,779 at May 31, 2022 and May 31, 2021, respectively		89,718		17,400
Deferred income taxes		3,999		1,704
Other assets		12,792		11,591
Property, plant and equipment Land		39,262		8,889
Buildings and improvements		167,653		140,082
Machinery and equipment		820,707		692,584
Construction in progress		22,834		15,785

Total property, plant and equipment		1,050,456		857,340
Less: accumulated depreciation		609,397		581,356

Total property, plant and equipment, net		441,059		275,984

Total assets	$	2,084,026	$	1,366,654

See notes to combined financial statements


		F-4

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

COMBINED BALANCE SHEETS

(In thousands)


	May 31,
	2022		2021
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	524,119	$	452,264
Short-term borrowings		47,997		—
Accrued compensation, contributions to employee benefit plans and related taxes		37,741		40,448
Other accrued items		27,449		9,247
Current operating lease liabilities		5,643		2,929
Income taxes payable		—		1,215
Current maturities of long-term debt due to Parent		15,000		—

Total current liabilities		657,949		506,103
Other liabilities		38,966		6,483
Long-term debt due to Parent		20,000		—
Noncurrent operating lease liabilities		65,261		5,178
Deferred income taxes		35,489		34,058

Total liabilities		817,665		551,822

Equity:
Net parent investment		1,131,303		622,945
Accumulated other comprehensive income, net of taxes of $(1,710) and $(11,964) at May 31, 2022 and May 31, 2021, respectively		1,848		38,385

Total equity - controlling interest		1,133,151		661,330
Noncontrolling interests		133,210		153,502

Total equity		1,266,361		814,832

Total liabilities and equity		2,084,026		1,366,654

See notes to combined financial statements


		F-5

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

COMBINED STATEMENTS OF EARNINGS

(In thousands)


	Fiscal Years Ended May 31,
	2022			2021
Net sales	$	4,068,934		$	2,127,404
Cost of goods sold		3,673,474			1,756,564

Gross margin		395,460			370,840
Selling, general and administrative expense		180,288			147,435
Impairment of long-lived assets		3,076			—
Restructuring and other (income) expense, net		(14,480	)		1,883

Operating income		226,576			221,522
Other income (expense)
Miscellaneous income (expense), net		870			(347	)
Interest (expense) income, net		(3,024	)		12
Equity in net income of unconsolidated affiliate		29,787			15,965

Earnings before income taxes		254,209			237,152
Income tax expense		53,956			48,483

Net earnings		200,253			188,669
Net earnings attributable to noncontrolling interests		19,878			17,655

Net earnings attributable to controlling interest	$	180,375		$	171,014

See notes to combined financial statements


		F-6

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)


	Fiscal Years Ended May 31,
	2022			2021
Net earnings	$	200,253		$	188,669
Other comprehensive income (loss):
Foreign currency translation		(3,340	)		—
Pension liability adjustment, net of tax		6,632			—
Cash flow hedges, net of tax		(39,829	)		41,413

Other comprehensive income (loss):		(36,537	)		41,413

Comprehensive income		163,716			230,082
Comprehensive income attributable to noncontrolling interests		19,878			17,655

Comprehensive income attributable to controlling interest	$	183,594		$	247,737

See notes to combined financial statements


		F-7

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

COMBINED STATEMENTS OF EQUITY

(In thousands)


	Net Parent Investment			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total			Noncontrolling Interests			Total
Balance at May 31, 2020	$	544,838		$	(3,028	)	$	541,810		$	145,612		$	687,422
Net earnings		171,014			—			171,014			17,655			188,669
Other comprehensive income		—			41,413			41,413			—			41,413
Transfers to Parent, net		(92,907	)		—			(92,907	)		—			(92,907	)
Dividends to noncontrolling interest		—			—			—			(10,690	)		(10,690	)
Partner contribution to Worthington Samuel Coil Processing LLC		—			—			—			925			925

Balance at May 31, 2021	$	622,945		$	38,385		$	661,330		$	153,502		$	814,832

Net earnings		180,375			—			180,375			19,878			200,253
Other comprehensive loss		—			(36,537	)		(36,537	)		—			(36,537	)
Transfers from Parent, net		327,983			—			327,983			—			327,983
Dividends to noncontrolling interest		—			—			—			(35,160	)		(35,160	)
Purchase of noncontrolling interest in Worthington Taylor, LLC		—			—			—			(5,010	)		(5,010	)

Balance at May 31, 2022	$	1,131,303		$	1,848		$	1,133,151		$	133,210		$	1,266,361

See notes to combined financial statements


		F-8

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

COMBINED STATEMENTS OF CASH FLOWS

(In thousands)


	Fiscal Years Ended May 31,
	2022			2021
Operating activities:
Net earnings	$	200,253		$	188,669
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		59,501			44,951
Impairment of long-lived assets		3,076			—
Provision for deferred income taxes		13,644			(5,187	)
Bad debt expense (income)		740			(183	)
Equity in net income of unconsolidated affiliate, net of distributions		(27,287	)		(13,465	)
Net (gain) loss on sale of assets		(15,123	)		377
Stock-based compensation		8,668			10,136
Changes in assets and liabilities, net of impact of acquisitions:
Receivables		(109,691	)		(220,586	)
Inventories		(50,669	)		(178,377	)
Accounts payable		(14,946	)		293,083
Accrued compensation and employee benefits		(12,288	)		25,538
Income taxes payable		(3,873	)		409
Other operating items, net		(12,514	)		7,185

Net cash provided by operating activities		39,491			152,550

Investing activities:
Investment in property, plant and equipment		(36,442	)		(28,801	)
Acquisitions, net of cash acquired		(376,713	)		925
Proceeds from sale of assets, net of selling costs		24,619			186
Purchase of noncontrolling interest in Worthington Taylor, LLC		(6,811	)		—

Net cash used by investing activities		(395,347	)		(27,690	)

Financing activities:
Transfers from (to) Parent, net		316,883			(105,986	)
Net proceeds from short-term borrowings		41,726			—
Proceeds from long-term debt from Parent		50,000			—
Principal payments on long-term debt to Parent		(15,000	)		—
Payments to noncontrolling interests		(35,160	)		(10,690	)

Net cash provided (used) by financing activities		358,449			(116,676	)

Increase in cash and cash equivalents		2,593			8,184
Cash and cash equivalents at beginning of period		17,459			9,275

Cash and cash equivalents at end of period	$	20,052		$	17,459

See notes to combined financial statements

F-9

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

Note A – The Proposed Separation, Description of the Business, and Basis of Presentation

The Proposed Separation

On September 29, 2022, Worthington Industries, Inc. (“Worthington” or “Parent”) announced its intention to spin off its existing Steel Processing business (“Worthington Steel,” the “Company,” “we,” or “our”) into a stand-alone publicly traded company through a generally tax-free pro rata distribution of 100% of the common shares of Worthington Steel (the “Distribution”) to Parent’s shareholders. While Parent currently intends to effect the distribution, subject to satisfaction of certain conditions, it has no obligation to pursue or consummate any dispositions of its ownership interest in us, including through the distribution, by any specified date or at all. The distribution is subject to various conditions, including the transfer of assets and liabilities to us in accordance with the separation agreement; the making of a cash distribution from Worthington Steel to the Parent as partial consideration for the contribution of the assets; receipt of any necessary regulatory or other approvals; due execution and delivery of the agreements relating to the separation; no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition in effect preventing the consummation of the separation, the distribution or any of the related transactions; acceptance for listing on the NYSE of the our common shares to be distributed, subject to official notice of distribution; completion of the financing described under the section entitled “Description of Certain Indebtedness” and no other event or development having occurred or in existence that, in the judgment of the Board, in its sole discretion, makes it inadvisable to effect the separation, the distribution or the other related transactions.

The conditions to the distribution may not be satisfied, Worthington may decide not to consummate the distribution even if the conditions are satisfied or Worthington may decide to waive one or more of these conditions and consummate the distribution even if all of the conditions are not satisfied. There can be no assurance whether or when any such transaction will be consummated or as to the final terms of any such transaction.

Description of the Business

F-10

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Basis of Presentation

Worthington Steel, Inc., which was established on February 28, 2023, will be Worthington Steel’s new ultimate parent company upon completion of the Distribution. Worthington Steel, Inc. has engaged in no business activities to date and has no assets or liabilities of any kind, other than those incident to its formation. Throughout the period covered by the combined financial statements, Worthington Steel operated as a business of Parent. The combined financial statements of the Company are prepared on a carve-out basis using the consolidated financial statements and accounting records of Parent in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Such combined financial statements include the historical operations that comprise the Worthington Steel business and reflect significant assumptions and allocations as well as certain assets and liabilities that have historically been held at Parent’s corporate level but are specifically identifiable or otherwise attributable to the Company. The carve-out financial statements may not include all expenses that would have been incurred had the Company existed as a separate, stand-alone entity during the periods presented.

The combined financial statements include the accounts of Worthington Steel and its consolidated subsidiaries. Investments in unconsolidated affiliates are accounted for using the equity method. Material intercompany accounts and transactions are eliminated.

We own controlling interests in the following consolidated operating joint ventures: Spartan Steel Coating, L.L.C. (“Spartan”) (52%), TWB Company, L.L.C. (“TWB”) (55%), Worthington Samuel Coil Processing (“Samuel”) (63%), and Worthington Specialty Processing (“WSP”) (51%). These joint ventures are consolidated with the equity owned by the other joint venture members shown as noncontrolling interests in our combined balance sheets, and their portions of net earnings and other comprehensive income (loss) (“OCI”) shown as net earnings or comprehensive income attributable to noncontrolling interests in our combined statements of earnings and comprehensive income, respectively.

Our operations are managed principally on a products and services basis under a single group organizational structure. As such, the financial information reviewed by the Company’s Chief Operating Decision Maker (“CODM”) for the purpose of assessing performance and allocating resources is presented as a single component, or operating segment, and comprises all of the Company’s operations. The Company’s CODM is its Chief Executive Office (“CEO”).

The income tax provision in the carve-out statement of earnings has been calculated as if Worthington Steel was operating on a stand-alone basis and filed separate tax returns in the jurisdictions in which it operates. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of the Company’s actual tax balances prior to or subsequent to the carve-out.

In addition, transactions and accounts which have occurred within the Company have been eliminated, based on historical intracompany activity. Parent’s net investment in these operations, including intercompany transactions between Parent and the Company, are reflected as net parent investment on the accompanying combined financial statements. Certain situations require management to make estimates based on judgments and assumptions, which may affect the reported amounts of assets and respective disclosures at the date of the financial statements. Management’s judgements and assumptions may also affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates made by Management.

The combined financial statements of Worthington Steel include certain costs of doing business incurred by Parent at the corporate level. These corporate costs are for certain support functions provided on a centralized

F-11

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

basis such as expenses related to corporate functional and department costs, including information technology, human resources, finance, and corporate operations, amongst others, profit sharing and bonuses, and respective surpluses and shortfalls of various planned insurance expenses and they are included in the combined statements of earnings, primarily within selling, general, and administrative expense. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remaining allocated using related drivers associated with the nature of the business, such as, headcount or profitability, considering the characteristics of each respective cost. Management believes the assumptions regarding the allocation of Parent’s general corporate expenses are reasonable.

As further described in “Note H—Debt and Receivables Securitization,” the Company, through its bankruptcy-remote indirect subsidiary (Worthington Receivables Corp. (“WRC”)), is party to a revolving trade accounts receivable securitization facility. As the Company is the legal obligor of this arrangement, borrowings against the facility and the corresponding interest expense have been attributed to the Company. All other third party-debt and related interest expense not directly attributable to the Company have been excluded from the combined financial statements because the Company is not the legal obligor of the debt and the borrowings are not specifically identifiable to the Company. Additionally, as described in “Note Q—Related Party Transactions,” debt and related interest expense between Parent and our TWB joint venture has been attributed to the Company, as the Company is both the legal obligor and directly benefited from the borrowings. In connection with the planned Separation, the Company expects to incur indebtedness and such indebtedness would cause the Company to record additional interest expense in future periods.

These combined financial statements may not include all of the actual expenses that would have been incurred and may not reflect our combined results of earnings, balance sheet, and cash flows had we operated as a stand-alone company during the periods presented. Management considers these cost allocations to be reasonably reflective of the Company’s utilization of Parent’s corporate support services. Actual costs that would have been incurred if Worthington Steel had been a stand-alone company may have been different than these estimates during the periods presented.

Parent utilizes a centralized cash management program to manage cash for the majority of its entities. For entities that are enrolled in the program, all cash is swept into a cash pool. Accordingly, the cash and cash equivalents held by Parent at the corporate level were not attributed to the Company for any of the periods presented. The foreign operations of TWB and Tempel do not participate in the centralized cash management program. These cash amounts are specifically attributable to Worthington Steel and therefore are reflected in the accompanying combined balance sheets. Transfers of cash, both to and from Parent’s centralized cash management program, are reflected as a component of net parent investment on the accompanying combined balance sheets and as a financing activity on the accompanying combined statements of cash flows.

Note B – Summary of Significant Accounting Policies

Net Parent Investment: Net parent investment on the combined balance sheets and combined statements of equity represents Parent’s historical investment in the Company, the net effect of transactions with and allocations from Parent, and the Company’s accumulated earnings. All intercompany transactions effected through net parent investment were considered cash receipts and payments and are reflected in financing activities in the accompanying combined statements of cash flows. See Note Q – “Related Party Transactions” of the combined financial statements for further information regarding transactions between the Company and Parent.

Earnings per share: Earnings or loss per share data has not been presented in the accompanying combined financial statements because the Company does not operate as a separate legal entity with its own capital structure and therefore has no share capital and reserves in its own right.

F-12

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Minority buy-out of Worthington Taylor: On May 2, 2022, we purchased the 49% noncontrolling interest in Worthington Taylor, LLC from a subsidiary of U.S. Steel, which also owns the noncontrolling interest in WSP. The purchase price for the noncontrolling interest in Worthington Taylor, the entity which owned the assets of WSP’s Taylor, Michigan facility, was $6,811,000. As a result of this transaction, Worthington Taylor became one of our wholly owned subsidiaries. Due to our existing controlling interest in the assets, the transaction was accounted for within equity, with the difference between the purchase price and the book value of the noncontrolling interest included in transfers from Parent. As of May 31, 2022, we were actively marketing the remaining net assets of WSP, comprised of the operations of the Jackson, Michigan, facility. These net assets are classified as assets held for sale in our combined balance sheets as of May 31, 2022 and 2021.

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

Cash and Cash Equivalents: We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Inventories: Inventories are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for all inventories. The assessment of net realizable value requires the use of estimates to determine cost to complete, normal profit margin and the ultimate selling price of inventory.

Derivative Financial Instruments: 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 foreign currency exchange risk and commodity price risk. All derivative financial instruments are accounted for using mark-to-market accounting. The accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. Gains and losses on fair value hedges are recognized in current period earnings in the same line as the underlying hedged item. Gains and losses on cash flow hedges are deferred as a component of accumulated other comprehensive income or loss (“AOCI”) and recognized in earnings at the time the hedged item affects earnings, in the same financial statement caption as the underlying hedged item. Classification in the combined statements of earnings of gains and losses related to derivative financial instruments that do not qualify for hedge accounting is determined based on the underlying intent of the instruments. Cash flows related to derivative financial instruments are generally classified as operating activities in our combined statements of cash flows.

In order for hedging relationships to qualify for hedge accounting under current accounting guidance, we formally document each hedging relationship and its risk management objective. Derivative financial instruments are executed only with highly-rated counterparties. No credit loss is anticipated on existing instruments, and no material credit losses have been experienced to date. We monitor our positions, as well as the credit ratings of counterparties to those positions.

We discontinue hedge accounting when it is determined that the derivative financial instrument is no longer highly effective in offsetting the hedged risk, expires or is sold, is terminated or is no longer designated as a hedging instrument because it is unlikely that a forecasted transaction will occur or we determine that designation of the hedging instrument is no longer appropriate. In all situations in which hedge accounting is discontinued and the derivative financial instrument is retained, we continue to carry the derivative financial instrument at its fair value on the combined balance sheet and recognize any subsequent changes in its fair value in net earnings immediately. When it is probable that a forecasted transaction will not occur, we discontinue hedge accounting and immediately recognize the gains and losses that were accumulated in AOCI.

F-13

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Refer to “Note N – Derivative Financial Instruments and Hedging Activities” for additional information regarding the combined balance sheet location and the risk classification of our derivative financial instruments.

Risks and Uncertainties: As of May 31, 2022, excluding our joint ventures, we operated 14 manufacturing facilities worldwide. We also held equity positions in five joint ventures, which operated 17 manufacturing facilities worldwide, as of May 31, 2022. Our largest end market is the automotive industry, which comprised 48% and 55% of our combined net sales in fiscal 2022 and fiscal 2021, respectively. As of May 31, 2022, approximately 20% of our consolidated labor force was represented by collective bargaining units, all of which are located in jurisdictions outside the U.S. where collective bargaining arrangements are customary. The concentration of credit risks from financial instruments related to the markets we serve is not expected to have a material adverse effect on our combined financial position, cash flows or future results of operations.

In fiscal 2022, our largest customer accounted for approximately 17% of our combined net sales, and our ten largest customers accounted for approximately 43% of our combined net sales. In fiscal 2021, our largest customer accounted for approximately 17% of our combined net sales, and our ten largest customers accounted for approximately 45% of our combined net sales. In both fiscal 2022 and 2021, net sales to Parent accounted for approximately 3% of our combined net sales. A significant loss of, or decrease in, business from any of these customers could have an adverse effect on our combined net sales and financial results if we were not able to obtain replacement business. Also, due to consolidation within the industries we serve, including the construction and automotive industries, our sales may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments with respect to, one or more of our largest customers.

Our principal raw material is flat-rolled steel, which we purchase from multiple North American steel mills . The 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, in general, 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 source of steel than in the past.

Receivables: We review our receivables on an ongoing basis to ensure that they are properly valued and collectible. With the adoption of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as discussed further below in “Recently Adopted Accounting Standards”, expected lifetime credit losses on receivables are recognized at the time of origination. We estimate the allowance for credit losses based on the expected future credit losses using the internal historical loss information and observable and forecasted macroeconomic data.

The allowance for doubtful accounts is used to record the estimated risk of loss related to our customers’ inability to pay. This allowance is maintained at a level that we consider appropriate based on factors that affect collectability, such as the financial health of our customers, historical trends of charge-offs and recoveries and current economic and market conditions. As we monitor our receivables, we identify customers that may have payment problems, and we adjust the allowance accordingly, with the offset to selling, general and administrative (“SG&A”) expense. Account balances are charged off against the allowance when recovery is considered remote. The allowance for doubtful accounts increased approximately $681,000 during fiscal 2022 to $789,000.

F-14

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

While we believe our allowance for doubtful accounts is adequate, changes in economic conditions, the financial health of customers and bankruptcy settlements could impact our future earnings. If the economic environment and market conditions deteriorate, particularly in the automotive and construction end markets where our exposure is greatest, additional reserves may be required.

Property and Depreciation: Property, plant and equipment are carried at cost and depreciated using the straight-line method. Buildings and improvements are depreciated over 10 to 40 years and machinery and equipment over 3 to 20 years. Depreciation expense, including amounts allocated by Parent for shared assets, was $54,193,000 and $42,626,000 during fiscal 2022 and 2021, respectively. Accelerated depreciation methods are used for income tax purposes.

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


(in thousands)	2022		2021
North America	$	404,124	$	275,984
International		36,935		—

Total	$	441,059	$	275,984

Goodwill and Other Long-Lived Assets: We use the purchase method of accounting for all business combinations and recognize amortizable and indefinite-lived intangible assets separately from goodwill. The acquired assets and assumed liabilities in an acquisition are measured and recognized based on their estimated fair values at the date of acquisition, with goodwill representing the excess of the purchase price over the fair value of the identifiable net assets. A bargain purchase may occur, wherein the fair value of identifiable net assets exceeds the purchase price, and a gain is then recognized in the amount of that excess. Goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, during the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that impairment may be present. Application of goodwill impairment testing involves judgment, including but not limited to, the identification of reporting units and estimation of the fair value of each reporting unit. A reporting unit is defined as an operating segment or one level below an operating segment. Prior to fiscal 2022, our operations were comprised of a single reporting unit (“Flat Rolled Steel Processing”). The additions of Tempel and Shiloh Industries’ U.S. BlankLight^® business (“Shiloh”) in fiscal 2022 resulted in two additional reporting units: 1) Electrical Steel (comprised of the Tempel business) and 2) Laser Welding (comprised of the TWB business). Accordingly, Refer to “Note E – Goodwill and Other Long-Lived Assets” for additional information on the goodwill impairment.

For goodwill and indefinite-lived intangible assets, we test for impairment by first evaluating qualitative factors including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. If there are no potential impairments raised from this evaluation, no further testing is performed. If however, our qualitative analysis indicates it is more likely than not that the fair value is less than the carrying amount, a quantitative analysis is performed. The quantitative analysis compares the fair value of each reporting unit or indefinite-lived intangible asset to the related carrying amount, and an impairment loss is recognized in our combined statements of earnings equivalent to the excess of the carrying amount over the fair value. Fair value is determined based on discounted cash flows or appraised values, as appropriate.

We review the carrying value of our long-lived assets, including intangible assets with finite useful lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Impairment testing involves a comparison of the sum of the undiscounted future cash flows of the asset or asset group to its respective carrying amount. If the sum of the undiscounted future

F-15

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

cash flows exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the sum of the undiscounted future cash flows, then a second step is performed to determine the amount of impairment, if any, to be recognized. The impairment loss recognized is equal to the amount that the carrying value of the asset or asset group exceeds its fair value. Long-lived assets held for sale are reported at the lower of cost or fair value less costs to sell and are recorded in a single line in the combined balance sheets. We classify assets as held for sale if we commit to a plan to sell the assets within one year and actively market the assets in their current condition for a price that is reasonable in comparison to their estimated fair value.

Our impairment testing for both goodwill and other long-lived assets, including intangible assets with finite useful lives, is largely based on cash flow models that require significant judgment and require assumptions about future volume trends, revenue and expense growth rates; and, in addition, external factors such as changes in economic trends and cost of capital. Significant changes in any of these assumptions could impact the outcomes of the tests performed. Our qualitative review of goodwill and Other Long-Lived Assets for fiscal 2022 and 2021 did not indicate any impairment. See “Note E – Goodwill and Other Long-Lived Assets” for additional details regarding these assets and related impairment testing.

Equity method investments: Investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity method. We review our equity method investment in Serviacero Worthington for impairment whenever events or changes in circumstances indicate that the carrying value of the investment might not be recoverable. Events and circumstances can include, but are not limited to: evidence we do not have the ability to recover the carrying value; the inability of the investee to sustain earnings; the current fair value of the investment is less than the carrying value; and other investors cease to provide support or reduce their financial commitment to the investee. If the fair value of the investment is less than the carrying value, and the investment will not recover in the near term, then other-than-temporary impairment may exist. When the loss in value of an investment is determined to be other-than-temporary, we recognize an impairment in the period the conclusion is made.

Leases: We account for leases in accordance with U.S. GAAP, ASU 2016-02, Leases (Topic 842) (“Topic 842”). Under Topic 842, leases are categorized as operating or financing leases upon inception. Lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right of use (“ROU”) assets include any initial direct costs and prepayments less lease incentives. Lease terms include options to renew or terminate the lease when it is reasonably certain that we will exercise such options. As most of our leases do not include an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date, in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of goods sold or SG&A expense depending on the underlying nature of the leased assets. For operating leases with variable payments dependent upon an index or rate that commenced subsequent to adoption of Topic 842, we apply the active index or rate as of the lease commencement date. Variable lease payments not based on an index or rate are not included in the operating lease liability as they cannot be reasonably estimated and are recognized in the period in which the obligation for those payments is incurred. Leases with a term of twelve months or less upon the commencement date are considered short-term leases and are not included on the combined balance sheets and are expensed on a straight-line basis over the lease term. Refer to “Note P – Leases” for additional information on the adoption and impact of Topic 842.

Stock-Based Compensation: Certain employees of the Company participate in Parent’s stock-based compensation plans which are described more fully in “Note J – Stock-Based Compensation.” The combined statements of earnings reflect 100% of the expense associated with stock-based awards held by employees of Worthington Steel. A portion of the expense associated with stock-based awards held by corporate employees of Parent have

F-16

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

been allocated to the Company based on profitability. All stock-based compensation, including grants of stock options and restricted common shares, are recorded as selling, general and administrative expense in the combined statements of earnings over the vesting period based on their grant-date fair values. Forfeitures are recognized as they occur.

Revenue Recognition: Revenue is recognized in accordance with U.S. GAAP, ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”). Under this accounting guidance, we recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive for those goods or services, including any variable consideration.

Returns and allowances are used to record estimates of returns or other allowances resulting from quality, delivery, discounts or other issues and are estimated based on historical trends and current market conditions, with the offset to net sales.

Shipping and handling costs charged to customers are treated as fulfillment activities and are recorded in both net sales and cost of goods sold at the time control is transferred to the customer. Due to the short-term nature of our contracts with customers, we have elected to apply the practical expedients under Topic 606 to: (1) expense as incurred, incremental costs of obtaining a contract; and (2) not adjust the consideration for the effects of a significant financing component for contracts with an original expected duration of one year or less. When we satisfy (or partially satisfy) a performance obligation, prior to being able to invoice the customer, we recognize an unbilled receivable when the right to consideration is unconditional and a contract asset when the right to consideration is conditional. Unbilled receivables and contract assets are included in receivables and prepaid expenses and other current assets, respectively, on the combined balance sheets. Additionally, we do not maintain contract liability balances, as performance obligations are satisfied prior to customer payment for product. Payments from customers are generally due within 30 to 60 days of invoicing, which generally occurs upon shipment or delivery of the goods.

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

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

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

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

Certain contracts contain variable consideration, which is not constrained, and primarily include estimated sales returns, customer rebates, and sales discounts which are recorded on an expected value basis. These estimates are

F-17

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

based on historical returns, analysis of credit memo data and other known factors. We account for rebates by recording reductions to revenue for rebates in the same period the related revenue is recorded. The amount of these reductions is based upon the terms agreed to with the customer. We do not exercise significant judgments in determining the timing of satisfaction of performance obligations or the transaction price. Refer to “Note C – Revenue Recognition” for additional information.

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


(in thousands)	2022		2021
North America	$	4,006,971	$	2,126,202
International		61,963		1,202

Total	$	4,068,934	$	2,127,404

Income Taxes: Our operating results are included in the income tax returns of Parent. We account for income taxes using the asset and liability method. The asset and liability method requires the recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between the tax basis and the financial reporting basis of our assets and liabilities. We evaluate the deferred tax assets to determine whether it is more likely than not that all, or a portion, of the deferred tax assets will not be realized and provide a valuation allowance as appropriate.

Our income tax provision was prepared following the separate return method, which applies Accounting Standards Codification (“ASC”) 740 to the standalone financial statements of each member of the combined group as if the group member were a separate and standalone enterprise. Due to this treatment, tax transactions included in the consolidated financial statements of Parent may not be included in the separated combined financial statements of the Company. Similarly, there may be certain tax attributes within the combined financial statements of the Company which would not be found in the consolidated financial statements and tax returns of Parent. Examples of such items include net operating losses, tax credits carry forwards and valuation allowances, which may exist in the standalone financial statements but not in the Parent’s consolidated financial statements.

Tax benefits from uncertain tax positions that are recognized in the combined financial statements are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

We have reserves for income taxes and associated interest and penalties that may become payable in future years as a result of audits by taxing authorities. It is our policy to record these in income tax expense. While we believe the positions taken on previously filed tax returns are appropriate, we have established the tax and interest/penalties reserves in recognition that various taxing authorities may challenge our positions. These reserves are analyzed periodically, and adjustments are made as events occur to warrant adjustment to the reserves, such as lapsing of applicable statutes of limitations, conclusion of tax audits, additional exposure based on current calculations, identification of new issues and release of administrative guidance or court decisions affecting a particular tax issue.

Employee Pension Plans: Defined benefit pension and other post-employment benefit (“OPEB”) plan obligations, which were assumed in conjunction with the Tempel acquisition, are remeasured at least annually as of May 31 based on the present value of projected future benefit payments for all participants for services rendered to date. The measurement of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by the plan, and other key measurement assumptions. Net periodic benefit costs, including service cost, interest cost, and expected return on assets, are determined using

F-18

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

assumptions regarding the benefit obligation and the fair value of plan assets as of the beginning of each year. The funded status of the benefit plans, which represents the difference between the benefit obligation and the fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded status are determined using assumptions as of the end of each year. Net periodic benefit cost is included in other income (expense) in our combined statements of earnings, except for the service cost component, which is recorded in SG&A expense. Refer to Note K – Employee Pension Plans for additional information.

Business Combinations: We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of fair values of identifiable assets and liabilities requires significant judgments and estimates and the use of valuation techniques when market value is not readily available. For the valuation of intangible assets acquired in a business combination, we typically use an income approach. The purchase price allocated to the intangible assets is based on unobservable assumptions, inputs and estimates, including but not limited to, forecasted revenue growth rates, projected expenses, discount rates, customer attrition rates, royalty rates, and useful lives, among others. The excess of the purchase price over the fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Refer to “Note M – Acquisitions” for additional detail.

Self-Insurance Reserves: Risks associated with product, cyber, environmental, workers’ compensation, general and automobile, and property liabilities, and for employee medical claims are self-insured by Parent. In order to reduce risk and better manage overall loss exposure, Parent purchases stop-loss insurance that covers individual claims in excess of the deductible amounts. We establish and reassess reserves for the estimated cost to resolve open claims that have been made against us, as well as an estimate of the cost of claims that have been incurred but not reported (“IBNR”). Loss exposure related to known events are established based on our assessment of the likelihood of an unfavorable outcome and the estimated range of potential loss. IBNR reserves are established based on actuarial valuations that take into consideration the historical average claim volume, the average cost for settled claims, current trends in claim costs, changes in our business and workforce, general economic factors and other assumptions believed to be reasonable under the circumstances. The estimated reserves for these liabilities could be affected if future occurrences and claims differ from the assumptions used and historical trends. Exposures for employee medical costs and workers’ compensation have had and will continue to have a material impact on our operations. All other loss exposures were immaterial for the periods presented.

Recently Adopted Accounting Standards: On June 1, 2021, we adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within Topic 740 and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The adoption of the accounting standard did not have a material impact on our consolidated financial position, results of operations, or cash flows.

On June 1, 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and additional related ASUs which introduced an expected credit loss model for impairment of financial assets measured at amortized cost, including trade receivables. The model replaces the probable, incurred loss model for those assets and broadens the information an entity must consider when developing its expected credit loss estimate for assets measured at amortized cost. The adoption of the accounting standard did not have a material impact on our consolidated financial position, results of operations or cash flows.

F-19

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The significant accounting policies discussed herein are not intended to represent a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP, with a lesser need for our judgment in their application. There are also areas in which our judgment in selecting an available alternative would not produce a materially different result.

Note C – Revenue Recognition

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

The Company generates revenue by processing steel to the precise type, thickness, length, width, shape, and surface quality required by customer specification. It also toll processes steel for steel mills, large end-users, service centers and other processors. Toll processing revenue is recognized over time. All other revenue is recognized at a point in time, generally upon shipment.

The following table summarizes net sales by product class for the fiscal years ended May 31, 2022 and 2021:


	Fiscal Year Ended May 31,
(in thousands)	2022		2021
Product class
Direct	$	3,923,057	$	1,994,856
Toll		145,877		132,548

Total	$	4,068,934	$	2,127,404

The following table summarizes the unbilled receivables and contract assets at the dates indicated:


		May 31,
(in thousands)	Balance Sheet Classification	2022 ⁽¹⁾		2021 ⁽¹⁾
Unbilled receivables	Receivables	$	5,001	$	5,317

(1)	There were no contract assets at either of the dates indicated above.

Note D – Investment in Unconsolidated Affiliate

We account for our 50% noncontrolling equity investment in Serviacero Worthington using the equity method of accounting. Serviacero Worthington provides steel processing services, such as pickling, blanking, slitting, multi-blanking and cutting-to-length, to customers in a variety of industries including automotive, appliance and heavy equipment.

We received distributions from Serviacero Worthington totaling $2,500,000 in both fiscal 2022 and fiscal 2021.

F-20

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The following table presents the financial position of our unconsolidated affiliate accounted for using the equity method as of May 31, 2022 and 2021:


(in thousands)	2022		2021
Cash	$	7,390	$	5,370
Other current assets		284,484		177,201
Noncurrent assets		60,554		64,064

Total assets	$	352,428	$	246,635

Current liabilities	$	109,178	$	56,743
Current maturities of long-term debt		—		666
Other noncurrent liabilities		5,648		6,401
Equity		237,602		182,825

Total liabilities and equity	$	352,428	$	246,635

The following tables present summarized financial information for our unconsolidated affiliate as of, and for the fiscal years ended May 31, 2022 and 2021.


(in thousands)	2022		2021
Net sales	$	620,312	$	311,543
Gross margin		96,918		51,253
Operating income		87,342		43,075
Depreciation and amortization		4,300		4,305
Interest expense		180		42
Income tax expense		25,079		11,341

Note E – Goodwill and Other Long-Lived Assets

Goodwill

The following table summarizes the changes in the carrying amount of goodwill during fiscal 2022 and fiscal 2021:


(in thousands)	Carrying Amount
Balance at May 31, 2020	$	19,695
Purchase accounting adjustments⁽¹⁾		523

Balance at May 31, 2021		20,218
Acquisitions and purchase accounting adjustments ⁽¹⁾		60,115
Translation adjustments		(300	)

Balance at May 31, 2022	$	80,033

(1)	For additional information regarding our acquisitions, refer to “Note M – Acquisitions”.

F-21

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Other Intangible Assets

Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives, which range from 3 to 20 years. The following table summarizes other intangible assets by class as of May 31, 2022 and 2021:


	2022				2021
(in thousands)	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Indefinite-lived intangible assets:
Trademarks	$	5,220	$	—	$	5,220	$	—
In-process research & development		1,300		—		—		—

Total indefinite-lived intangible assets		6,520		—		5,220		—
Definite-lived intangible assets:
Customer relationships	$	102,788	$	30,093	$	38,289	$	26,109
Non-compete agreements		1,960		1,767		1,670		1,670
Technology/know-how		11,000		690		—		—

Total definite-lived intangible assets		115,748		32,550		39,959		27,779

Total intangible assets	$	122,268	$	32,550	$	45,179	$	27,779

Amortization expense totaled $4,771,000 and $1,788,000 in fiscal 2022 and fiscal 2021, respectively:

Amortization for each of the next five fiscal years is estimated to be:


(in thousands)
2023	$	6,344
2024	$	6,344
2025	$	6,068
2026	$	5,817
2027	$	5,817

Impairment of Long-Lived Assets

Fiscal 2022: During the third quarter of fiscal 2022, management committed to plans to sell certain production equipment at the Samuel facility in Twinsburg, Ohio. As all of the criteria for classification of assets held for sale were met, the net assets have been presented separately as assets held for sale in our combined balance sheets. In accordance with the applicable accounting guidance, the net assets were written down to the estimated fair value less costs to sell, resulting in an impairment charge of $3,076,000 in fiscal 2022.

Fiscal 2021: None.

Note F – Restructuring and Other (Income) Expense, Net

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

F-22

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The total liability as of May 31, 2022 is expected to be paid in the immediately following twelve months.


(in thousands)	Beginning Balance		Expense (Income)			Payments			Adjustments		Ending Balance
Early retirement and severance	$	21	$	610		$	(228	)	$	138	$	541
Facility exit and other costs		—		—			—			—		—

	$	21		610		$	(228	)	$	138	$	541

Net gain on sale of assets				(15,090	)

Restructuring and other income, net			$	(14,480	)

During fiscal 2022, the following actions were taken related to our restructuring activities:

•

On June 9, 2021, our historical consolidated joint venture, WSP, sold the remaining assets of its Canton, Michigan, facility with a net book value of $7,606,000 for net cash proceeds of $19,850,000, resulting in a pre-tax gain of $12,244,000.

•

We completed our exit of the Decatur, Alabama Steel Processing facility and sold the remaining fixed assets with a net book value of $1,366,000 for net cash proceeds of $4,000,000, resulting in a pre-tax gain of $2,634,000.

A progression of the liabilities associated with our restructuring activities, combined with a reconciliation to the restructuring and other income, net financial statement caption in our combined statement of earnings for fiscal 2021, is summarized below:


(in thousands)	Beginning Balance		Expense (Income)		Payments			Adjustments			Ending Balance
Early retirement and severance	$	1,848	$	1,515	$	(3,281	)	$	(61	)	$	21
Facility exit and other costs		52		368		(420	)		—			—

Restructuring and other expense, net	$	1,900		1,883	$	(3,701	)	$	(61	)	$	21

Note G – Contingent Liabilities and Commitments

Legal Proceedings

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

Note H – Debt and Receivables Securitization

Term Loan Facility with Parent

On June 8, 2021, our consolidated TWB joint venture entered into a $50,000,000 term loan agreement (the “TWB Term Loan”) with a subsidiary of Parent that matures on May 31, 2024. The notes accrue interest at a rate of 5.0% per annum and are to be repaid in annual installments of 30.0%, 30.0%, and 40.0% of original principal. The borrowings are the legal obligation of TWB and will continue to be repaid, in cash, in accordance with the loan agreement. As such, the debt and related interest have been attributed to the Company in the combined financial statements. The proceeds were used by TWB to finance the minority joint venture members’ portion of the Shiloh U.S. BlankLight^® purchase price. Refer to Note M – Acquisitions for additional information relating to the Shiloh acquisition.

F-23

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Tempel China

At May 31, 2022, Tempel China had $16,487,000 of short-term borrowing capacity available under a rolling short-term loan facility that is used to meet short-term liquidity needs. Borrowing outstanding under the facility, which totaled $4,497,000 at May 31, 2022, generally mature three to six months from issuance. These loans, which are used to finance steel purchases, are collateralized by Tempel property and equipment. New loans will be entered into as these loans mature. The effective interest rate on these loans was 3.72% at May 31, 2022.

Accounts Receivable Securitization

On May 19, 2022, we entered into a revolving trade accounts receivable securitization facility (the “AR Facility”). Pursuant to the terms of the AR Facility, certain of our subsidiaries sell or contribute all of their eligible accounts receivable and other related assets without recourse, on a revolving basis, to WRC, a wholly-owned, consolidated, bankruptcy-remote indirect subsidiary. In turn, WRC sells, on a revolving basis, up to $175,000,000 of undivided ownership interests in this pool of accounts receivable to a third-party bank. We retain an undivided interest in this pool and are subject to risk of loss based on the collectability of the receivables from this retained interest. Because the amount eligible to be sold excludes receivables more than 120 days past due, receivables offset by an allowance for doubtful accounts due to bankruptcy or other cause, concentrations over certain limits with specific customers and certain reserve amounts, we believe additional risk of loss is minimal. As of May 31, 2022, borrowings outstanding under the AR Facility totaled $43,500,000, leaving $131,500,000 available for future use. Fees incurred to facilitate the securitization were $547,000 and will be deferred and amortized on a straight-line basis through May 2024. Facility fees will be expensed as incurred through interest expense in our combined statements of earnings.

Note I – Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss): The following table summarizes the tax effects of each component of other comprehensive income (loss) for fiscal years ended May 31, 2022 and 2021:


	2022									2021
(in thousands)	Before- Tax			Tax			Net-of- Tax			Before- Tax		Tax			Net-of- Tax
Foreign currency translation	$	(3,340	)	$	—		$	(3,340	)	$	—	$	—		$	—
Pension liability adjustment		8,615			(1,983	)		6,632			—		—			—
Cash flow hedges		(52,066	)		12,237			(39,829	)		54,166		(12,753	)		41,413

Other comprehensive income (loss)	$	(46,791	)	$	10,254		$	(36,537	)	$	54,166	$	(12,753	)	$	41,413

F-24

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Income (Loss): The components of the changes in accumulated other comprehensive income (loss) for the fiscal years ended May 31, 2022 and May 31, 2021 were as follows:


(in thousands)	Foreign Currency Translation			Pension Liability Adjustment			Cash Flow Hedges			Accumulated Other Comprehensive Income (Loss)
Balance at May 31, 2020	$	(473	)	$	—		$	(2,555	)	$	(3,028	)
Other comprehensive income before reclassifications		—			—			61,363			61,363
Reclassification adjustments to income ⁽¹⁾		—			—			(7,197	)		(7,197	)
Income tax effect		—			—			(12,753	)		(12,753	)

Balance at May 31, 2021	$	(473	)	$	—		$	38,858		$	38,385

Other comprehensive income (loss) before reclassifications		(3,340	)		8,615			8,557			13,832
Reclassification adjustments to income ⁽¹⁾		—			—			(60,623	)		(60,623	)
Income tax effect		—			(1,983	)		12,237			10,254

Balance at May 31, 2022	$	(3,813	)	$	6,632		$	(971	)	$	1,848

(1)	Cash flow hedges—disclosed in “Note N—Derivative Financial Instruments and Hedging Activities.”

Note J – Stock-Based Compensation

Until consummation of the separation, Worthington Steel’s employees will continue to participate in Parent’s stock-based compensation plans. For the periods presented, stock-based compensation expense includes the 100% of the expense associated with unvested stock-based awards granted to employees historically attributable to Worthington Steel’s operations. Stock-based compensation also includes an indirect allocation of stock-based expense of Parent for centralized corporate functions and shared services. See Note A – Description of the Business and Basis of Presentation for further discussion on corporate cost allocations.

Under Parent’s employee and non-employee director stock-based compensation plans (the “Plans”), we may grant incentive or non-qualified stock options, restricted common shares and performance shares to employees and non-qualified stock options and restricted common shares to non-employee directors. We classify stock-based compensation expense within SG&A expense to correspond with the same financial statement caption as the majority of the cash compensation paid to employees who have been awarded common shares.

We recognized pre-tax stock-based compensation expense of $8,668,000 ($6,674,000 after-tax) and $10,136,000 ($7,896,000 after-tax), under the Plans during fiscal 2022 and fiscal 2021, respectively. At May 31, 2022, the total unrecognized compensation cost related to non-vested awards held by employees directly attributable to the Company was $3,228,000, which will be expensed over the next three fiscal years. A detailed discussion of the various awards that may be granted under the Plans is provided below along with the activity associated with employees directly attributable to the Company.

Non-Qualified Stock Options

Stock options may be granted to purchase common shares at not less than 100% of the fair market value of the underlying common shares on the date of the grant. All outstanding stock options are non-qualified stock options. The exercise price of all stock options granted has been set at 100% of the fair market value of the underlying

F-25

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

common shares on the date of grant. Generally, stock options granted to employees vest and become exercisable at the rate of 33% per year beginning one year from the date of grant, and expire ten years after the date of grant. Non-qualified stock options granted to non-employee directors vest and become exercisable on the earlier of (a) the first anniversary of the date of grant or (b) the date on which the next annual meeting of shareholders of Parent is held following the date of grant for any stock option granted as of the date of an annual meeting of shareholders of Parent. Stock options can be exercised through net-settlement, at the election of the option holder.

U.S. GAAP requires that all stock-based awards be recorded as expense in the statement of earnings based on their grant-date fair value. We calculate the fair value of our non-qualified stock options using the Black-Scholes option pricing model and certain assumptions. The computation of fair values for all stock options incorporates the following assumptions: expected volatility (based on the historical volatility of the common shares); risk-free interest rate (based on the U.S. Treasury strip rate for the expected term of the stock options); expected term (based on historical exercise experience); and dividend yield (based on annualized current dividends and an average quoted price of the common shares over the preceding annual period).

The table below sets forth the non-qualified stock options granted during each of the last two fiscal years ended May 31. For each grant, the exercise price was equal to the closing market price of the underlying common shares at the respective grant date. The fair values of these stock options were based on the Black-Scholes option pricing model, calculated at the respective grant dates. The calculated pre-tax stock-based compensation expense for these stock options will be recognized on a straight-line basis over the three-year vesting period of the stock options.


(in thousands, except per share amounts)	2022		2021
Granted		6		14
Weighted average exercise price, per share	$	60.19		36.93
Weighted average grant date fair value, per share	$	19.76		10.48
Pre-tax stock-based compensation	$	126		143

The weighted average fair value of stock options granted in fiscal 2022 and fiscal 2021 was based on the following weighted average assumptions:


	2022			2021
Dividend yield		2.10	%		2.94	%
Expected volatility		41.62	%		40.82	%
Risk-free interest rate		1.10	%		0.43	%
Expected life (years)		6.0			6.0

F-26

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The following tables summarize our stock option activity for the fiscal years ended May 31:


	2022					2021
(in thousands, except per share amounts)	Stock Options			Weighted Average Exercise Price		Stock Options			Weighted Average Exercise Price
Outstanding, beginning of year		49		$	34.09		145		$	26.20
Granted		6			60.19		14			36.93
Exercised		(4	)		20.47		(109	)		24.14
Forfeited		—			—		(1	)		12.05

Outstanding at end of year		51		$	38.43		49		$	34.09

Exercisable at end of year		33		$	34.59		29		$	31.52


	Number of Stock Options (in thousands)		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
May 31, 2022
Outstanding		51		5.38	$	509
Exercisable		33		3.79	$	401
May 31, 2021
Outstanding		49		5.46	$	1,571
Exercisable		29		3.21	$	1,001

The total intrinsic value of stock options exercised during fiscal 2022 was $137,000 and the related excess tax benefit realized from stock-based payment awards was $586,000.

The following table summarizes information about non-vested option awards for the fiscal year ended May 31, 2022:


	Number of Stock Options (in thousands)			Weighted Average Grant Date Fair Value Per Share
Non-vested, beginning of year		20		$	10.54
Granted		6			19.76
Vested		(8	)		10.70
Forfeited		—			—

Non-vested, end of year		18		$	13.74

Service-Based Restricted Common Shares

Under the Plans of Parent, restricted common shares may be awarded to certain employees and non-employee directors that contain service-based vesting conditions. Service-based restricted common shares granted to employees cliff vest three years from the date of grant. Service-based restricted common shares granted to non-employee directors vest under the same parameters as discussed above with respect to non-qualified stock option grants. All service-based restricted common shares are valued at the closing market price of the common shares on the date of the grant.

F-27

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The table below sets forth the service-based restricted common shares granted under the Plans during each of fiscal 2022 and fiscal 2021. The calculated pre-tax stock-based compensation expense for these restricted common shares will be recognized on a straight-line basis over their respective three-year service periods.


(in thousands, except per share amounts)	2022		2021
Granted		39		65
Weighted average grant date fair value, per share	$	54.15	$	39.50
Pre-tax stock compensation	$	2,134	$	2,585

The following table summarizes the activity for service-based restricted common shares for the fiscal years ended May 31:


	2022					2021
(in thousands, except per share amounts)	Restricted Common Shares			Weighted Average Grant Date Fair Value		Restricted Common Shares			Weighted Average Grant Date Fair Value
Outstanding, beginning of year		122		$	40.68		67		$	42.79
Granted		39			54.15		65			39.50
Vested		(39	)		43.75		(9	)		47.69
Forfeited		(3	)		44.28		(1	)		42.99

Outstanding, end of year		119		$	44.03		122		$	40.68

Weighted average remaining contractual life of outstanding restricted common shares (in years)		1.45					1.49
Aggregate intrinsic value of outstanding restricted common shares		5,534				$	8,092
Aggregate intrinsic value of restricted common shares vested during the year		2,126				$	353

Market-Based Restricted Common Shares

On June 25, 2020, an aggregate of 10,000 market-based restricted common shares were granted under the Plans to a key employee of Worthington Steel. Vesting of this share-based award is contingent upon the average closing price of the common shares of Parent 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 $20.87 per share. The calculated pre-tax stock-based compensation expense on the grant date was $209,000 and will continue to be amortized over the remaining service period. The following assumptions were used to determine the grant-date fair value and the derived service period for these restricted common shares:


Dividend yield	2.71	%
Expected volatility	41.50	%
Risk-free interest rate	0.32	%

Performance Shares

Certain performance shares have been awarded under the Plans to key employees of the Company that are contingent (i.e., vest) based upon the level of achievement with respect to corporate targets for cumulative

F-28

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

corporate economic value added, earnings per share growth and, in the case of business unit executives, business unit operating income targets for the three-fiscal-year periods ended or ending May 31, 2022, 2023 and 2024. These performance share awards will be paid, to the extent earned, in common shares of Parent in the fiscal quarter following the end of the applicable three-fiscal-year performance period. The fair value of performance share awards is determined by the closing market price of the underlying common shares at the respective grant dates of the awards 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.

The table below sets forth the performance shares granted to our employees under the Plans during fiscal 2022 and fiscal 2021 (at target levels):


(in thousands, except per share amounts)	2022		2021
Granted		4		8
Weighted average grant date fair value, per share	$	60.19	$	36.93
Pre-tax stock-based compensation	$	265	$	288

The following table summarizes the activity associated with these performance awards for the fiscal years ended May 31:


	2022					2021
(in thousands, except per share amounts)	Restricted Common Shares			Weighted Average Grant Date Fair Value		Restricted Common Shares			Weighted Average Grant Date Fair Value
Outstanding, beginning of year		17		$	38.87		12		$	42.15
Granted		4			60.19		8			36.93
Vested		(4	)		42.91		—			—
Forfeited		—			—		(3	)		47.76

Outstanding, end of year		17		$	43.28		17		$	38.87

Weighted average remaining contractual life of outstanding performance shares (in years)		1.00					1.31
Aggregate intrinsic value of outstanding performance shares	$	835				$	1,142
Aggregate intrinsic value of performance shares vested during the year	$	393				$	—

Note K – Employee Pension Plans

Defined benefit pension and other post-employment benefit (“OPEB”) plan obligations are remeasured at least annually as of May 31 based on the present value of projected future benefit payments for all participants for services rendered to date. The measurement of projected future benefits is dependent on the provisions of each specific plan, demographics of the group covered by the plan, and other key measurement assumptions.

Net periodic benefit costs, including service cost, interest cost, and expected return on assets, are determined using assumptions regarding the benefit obligation and the fair value of plan assets as of the beginning of each year. The funded status of the benefit plans, which represents the difference between the benefit obligation and the fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded

F-29

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

status are determined using assumptions as of the end of each year. Net periodic benefit cost is included in other income (expense) in our combined statements of earnings, except for the service cost component, which is recorded in SG&A expense.

Defined Contribution Retirement Plans

Employees of Worthington Steel have historically received benefits through Parent’s defined contribution retirement plans. Worthington Steel generally expects to adopt benefit plans that are similar to those in effect at Parent before the planned separation.

Defined Benefit Pension Plans

As a result of the acquisition of Tempel on December 1, 2021, we assumed approximately $40,160,000 of net pension and other postretirement benefit obligations under Tempel’s defined benefit domestic funded pension plan, an unfunded supplemental executive retirement (SERP) plan, and a domestic unfunded postretirement plan. Effective December 31, 2010, Tempel froze its defined benefit domestic funded pension plan. Participants will receive the benefit they had accrued as of July 16, 2018 upon their retirement. No further pension benefit will be earned by the participants of this plan after December 31, 2010. See “Note M – Acquisitions” for additional information related to the acquisition of Tempel.

There was no activity related to defined benefit pension plans prior to the acquisition of Tempel, as reflected in the tables below.

Net Periodic Pension Costs

The following table summarizes the components of net periodic pension for our defined benefit pension and other postretirement benefit plans for the fiscal years ended May 31, 2022 and 2021:


(in thousands)	2022			2021
Defined benefit plans:
Interest cost	$	1,447		$	—
Return on plan assets		(2,145	)		—
Defined contribution plans		8,808			8,039

Net periodic benefit cost	$	8,110		$	8,039

Weighted Average Rates

The following weighted average assumptions were used to determine the unfunded benefit obligation and net periodic benefit cost at May 31, 2022:


	2022
Benefit obligation:
Discount rate		4.32	%
Net periodic pension cost:
Discount rate		2.66	%
Expected long-term rate of return		6.50	%

F-30

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Funded Status

The following tables provide a reconciliation of the changes in the projected benefit obligation and the fair value of plan assets and the funded status of our defined benefit plans at May 31, 2022.


	Pension Benefits			Other Benefits
(in thousands)	2022
Change in benefit obligation
Benefit obligation, beginning of year	$	—		$	—
Acquisition of Tempel		101,946			4,982
Service cost		—			15
Interest cost		1,447			70
Actuarial gain		(18,083	)		(873	)
Benefits paid		(2,997	)		(125	)
Participant contributions		—			8

Benefits obligation, end of year	$	82,313		$	4,077

Change in plan assets
Fair value, beginning of year	$	—		$	—
Plan assets acquired		66,768			—
Return on plan assets		(8,196	)		—
Company contributions		608			117
Benefits paid		(2,997	)		(125	)
Participant contributions		—			8
Fair value, end of year		56,183			—

Funded status	$	(26,130	)	$	(4,077	)

Amounts recognized in the combined balance sheets consist of:
Other liabilities	$	(26,130	)	$	(4,077	)
Accumulated other comprehensive income		(7,742	)		(873	)
Amounts recognized in accumulated other comprehensive loss consist of:
Net income		(7,742	)		(873	)

Total	$	(7,742	)	$	(873	)

The following table shows other changes in plan assets and benefit obligations recognized in OCI during the fiscal year ended May 31, 2022:


	Pension Benefits			Other Benefits
Net gain recognized in other comprehensive (income) loss	$	(7,742	)	$	(873	)
Total recognized in net periodic benefit cost and other comprehensive income	$	(8,388	)	$	(787	)

F-31

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Fair Value of Plan Assets

Fair Value Hierarchy Categories

Valuations of Level 1 assets for all classes are based on quoted closing market prices from the principal exchanges where the individual securities are traded. Cash is valued at cost, which approximates fair value. There were no valuations of Level 2 or Level 3 assets at May 31, 2022, as shown in the table below.

The following table sets forth, by level within the fair value hierarchy, a summary of the defined benefit plans’ assets measured at fair value on a recurring basis at May 31, 2022:


(in thousands)	Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment:
Cash and cash equivalents	$	913	$	913	$	—	$	—
Equity funds		24,700		24,700		—		—
Commingled fund investments measured at net asset value ⁽¹⁾:
Fixed-income funds		21,056		—		—		—
Hedge funds		9,514		—		—		—

Total	$	56,183	$	25,613	$	—	$	—

(1)	Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient have not been categorized in the fair value hierarchy.

Estimated Future Benefits Payments

The following estimated future benefits, which reflect expected future service, as appropriate, are expected to be paid under the defined benefit and other postretirement plans during the fiscal years as follows:


(in thousands)	Pension Benefits		Other Benefits
2023	$	5,960	$	387
2024	$	5,590	$	368
2025	$	5,727	$	355
2026	$	5,866	$	336
2027	$	6,147	$	316
2028-2032	$	28,728	$	1,372

F-32

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Note L – Income Taxes

Earnings before income taxes for the fiscal years ended May 31 included the following components:


(in thousands)	2022		2021
U.S. based operations	$	208,009	$	209,269
Non—U.S. based operations		46,200		27,883

Earnings before income taxes		254,209		237,152
Less: Net earnings attributable to noncontrolling interests*		19,878		17,655

Earnings before income taxes attributable to controlling interest.	$	234,331	$	219,497

*	Net earnings attributable to noncontrolling interests are not taxable to us.

Significant components of income tax expense (benefit) for the fiscal years ended May 31 were as follows:


(in thousands)	2022		2021
Current
Federal	$	30,218	$	45,008
State and local		5,052		6,546
Foreign		5,042		2,116

		40,312		53,670

Deferred
Federal		12,227		(5,185	)
State and local		1,133		(698	)
Foreign		284		696

		13,644		(5,187	)

	$	53,956	$	48,483

A reconciliation of the federal statutory corporate income tax rate to total tax provision follows:


	2022			%			2021			%
Federal statutory corporate income tax rate	$	49,210			21.0	%	$	46,094			21.0	%
State and local income taxes, net of federal tax benefit		4,866			2.1	%		4,735			2.2	%
Non-U.S. income taxes at other than federal statutory rate		(3,840	)		-1.6	%		(2,184	)		-1.0	%
Nondeductible executive compensation		2,582			1.1	%		2,417			1.1	%
Other		1,138			0.5	%		(2,579	)		-1.2	%

Effect tax rate attributable to controlling interest	$	53,956			23.1	%	$	48,483			22.1	%

The above effective tax rate attributable to controlling interest excludes any impact from the inclusion of net earnings attributable to noncontrolling interests in our consolidated statements of earnings. The effective tax rates upon inclusion of net earnings attributable to noncontrolling interests were 21.5% and 20.8% for fiscal 2022 and fiscal 2021 respectively. Net earnings attributable to noncontrolling interests are primarily a result of our Samuel, WSP, Spartan, and TWB consolidated joint ventures. The earnings attributable to the noncontrolling interests in Samuel, WSP, Spartan and TWB’s U.S. operations do not generate tax expense to us since the investors in

F-33

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Samuel, WSP, Spartan and TWB’s U.S. operations are taxed directly based on the earnings attributable to them. The tax expense of TWB’s wholly-owned foreign corporations is reported in our consolidated tax expense.

Under applicable accounting guidance, a tax benefit may be recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Any tax benefits recognized in our financial statements from such a position were measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

A tabular reconciliation of unrecognized tax benefits follows:


(in thousands)	2022			2021
Balance at beginning of the year	$	105		$	529
Decreases—tax positions taken in prior years		—			(374	)
Increases—current tax positions		1,187			—
Lapse of statutes of limitations		(53	)		(50	)

Balance at the end of the year	$	1,239		$	105

The amount of unrecognized tax benefits for the years ended May 31, 2022 and 2021, that, if recognized would affect the effective tax rate, was not material. During the year ended May 31, 2022, and 2021, the Company recognized an immaterial amount of tax related interest on unrecognized tax benefits. Management estimates the reasonably possible changes to unrecognized tax benefits during the next twelve months to be immaterial and is currently unaware of any issues under review that could result in significant additional payments, accruals, or other material deviation in this estimate. However, the Company would not be liable for any incremental taxes payable, interest or penalties, which remain Parent’s obligation.

The following is a summary of the tax years open to examination by major tax jurisdiction:

•

U.S. Federal – 2019 and forward

•

U.S. State and Local – 2018 and forward

•

Canada – 2017 and forward

•

China – 2021 and forward

•

India – 2017 and forward

•

Mexico – 2008, 2009, 2016 and forward

F-34

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The components of our deferred tax assets and liabilities as of May 31 were as follows:


(in thousands)	2022			2021
Deferred Tax Assets
Accounts Receivable	$	946		$	662
Inventories		3,598			2,690
Accrued Expenses		12,410			5,620
Net operating loss carry forwards		—			17
Stock-based compensation		2,901			3,296
Operating lease—ROU liability		3,499			1,199
Derivative Contracts		308			—

Deferred tax assets before valuation allowance		23,662			13,484
Less: Valuation allowance		—			—

Total Deferred Tax Assets	$	23,662		$	13,484

Deferred Tax Liabilities
Property, plant, and equipment	$	(33,837	)	$	(26,969	)
Investment in affiliated companies, principally due to undistributed earnings		(14,573	)		(8,954	)
Operating lease—ROU asset		(3,468	)		(1,138	)
Derivative Contracts		—			(7,745	)
Other		(3,274	)		(1,032	)

Total Deferred Tax Liabilities	$	(55,152	)	$	(45,838	)

Net Deferred Tax Asset (Liability)	$	(31,490	)	$	(32,354	)

Based on our history of profitability, the scheduled reversal of deferred tax liabilities, and taxable income projections, Management believes that recognized deferred tax assets are more likely than not to be realized based on expectations as to future taxable income in the jurisdictions in which the Company operates.

Note M – Acquisitions

Shiloh Industries’ U.S. BlankLight^®

On June 8, 2021, Steel Processing, along with our 55% consolidated joint venture TWB, acquired certain assets of Shiloh’s U.S. BlankLight^® business. The purchase price for the acquisition was cash consideration of approximately $104,506,000, after closing adjustments. The Shiloh business is being primarily operated by TWB and is part of the Steel Processing segment and the operating results of the Shiloh business have been included in our combined statement of earnings since the date of acquisition. Proforma results of the Shiloh business, including the acquired business since the beginning of fiscal 2021, would not be materially different than the reported results. Net sales and net earnings since the beginning of fiscal 2021, would not be materially different than the reported results.

The acquisition consisted of three laser welding facilities that are being operated as part of our TWB joint venture and one blanking facility that is being operated as part of our flat rolled steel processing operations. Approximately $19,500,000 of the total goodwill relates to TWB, which will be treated as a separate reporting unit for purposes of goodwill impairment testing.

F-35

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The assets acquired and liabilities assumed were recognized at their estimated acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of Shiloh, we identified and valued the following intangible assets:


(in thousands)
Category	Amount		Useful Life (Years)
Customer relationships	$	34,500		15-20
Non-compete agreement		290		3
In-process research & development		1,300		Indefinite

Total acquired identifiable intangible assets	$	36,090

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

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


(in thousands)	Preliminary Valuation			Measurement Period Adjustments			Final Valuation
Accounts receivable	$	44,191		$	(496	)	$	43,695
Inventories		13,971			1,999			15,970
Property, plant, and equipment		30,461			(1,104	)		29,357
Intangible assets		34,280			1,810			36,090
Operating lease assets		59,905			—			59,905

Total identifiable assets		182,808			2,209			185,017
Accounts payable		(44,822	)		(72	)		(44,894	)
Current operating lease liabilities		(1,555	)		—			(1,555	)
Noncurrent operating lease liabilities		(58,350	)		—			(58,350	)

Net identifiable assets		78,081			2,137			80,218
Goodwill		26,669			(2,381	)		24,288

Purchase price	$	104,750		$	(244	)	$	104,506

Tempel Steel Company

On December 1, 2021, Steel Processing completed its acquisition of Tempel, a leading global manufacturer of precision motor and transformer laminations for the electrical steel market that includes transformers, industrial motors and electric vehicle (EV) motors for cash consideration of $272,208,000, net of cash acquired, plus the assumption of certain long-term liabilities. Total acquisition-related expenses of $1,924,000 were incurred in fiscal 2022.

F-36

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The assets acquired and liabilities assumed were recognized at their estimated acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of Tempel, we identified and valued the following intangible assets:


(in thousands)
Category	Amount		Useful Life (Years)
Customer relationships	$	30,000		17
Technological know how		11,000		6-8

Total acquired identifiable intangible assets	$	41,000

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


(in thousands)	Preliminary Valuation			Measurement Period Adjustments			Revised Valuation
Cash	$	17,098		$	—		$	17,098
Accounts receivable		88,672			—			88,672
Inventories		59,927			—			59,927
Other current assets		10,666			(18	)		10,648
Property, plant and equipment		147,441			—			147,441
Intangible assets		41,000			—			41,000
Operating lease assets		4,098			—			4,098

Total identifiable assets		368,902			(18	)		368,884
Accounts payable		(49,777	)		—			(49,777	)
Notes payable		(6,270	)		—			(6,270	)
Accrued liabilities		(17,501	)		64			(17,437	)
Current operating lease liabilities		(1,614	)		—			(1,614	)
Noncurrent operating lease liabilities		(2,484	)		—			(2,484	)
Other non-current liabilities ⁽¹⁾		(40,110	)		2,287			(37,823	)

Net identifiable assets		251,146			2,333			253,479
Goodwill		38,462			(2,635	)		35,827

Purchase price	$	289,608		$	(302	)	$	289,306

(1)

Includes approximately $40,160,000 of net pension and other postretirement benefit obligations assumed as part of the Tempel acquisition. The excess of projected benefit obligations over the fair value of the plans’ assets was recognized as a liability in accordance with ASC 715 using key inputs including, but not limited to, discount rates and expected rates of return on the plans’ assets. See “Note K—Employee Pension Plans” for additional information.

Operating results of Tempel have been included in our combined statement of earnings since December 1, 2021, the date of acquisition. During the fiscal 2022, Tempel contributed net sales of $278,182,000 and operating

F-37

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

income of $8,609,000, which included acquisition-related costs of approximately $1,924,000 and incremental cost of goods sold of $3,820,000 due to the write-up of inventory to its estimated acquisition-date fair value.

The following unaudited pro forma information presents combined financial information as if Tempel had been acquired at the beginning of fiscal 2021. Depreciation and amortization expense included in the pro forma results reflect the acquisition-date fair values assigned to the definite-lived intangible assets and fixed assets of Tempel assuming a June 1, 2020 acquisition date. Adjustments have been made to remove acquisition-related costs and the acquisition date fair value adjustment to acquired inventories. The pro forma adjustments noted above have been adjusted for the applicable income tax impact. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on June 1, 2020.


	Fiscal Years Ended May 31,
	2022		2021
Net sales	$	4,307,812	$	2,446,142
Net earnings attributable to controlling interest	$	199,351	$	171,850

Note N – 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 foreign currency exchange 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.

Commodity Price Risk Management – We are exposed to changes in the price of certain commodities, including steel, scrap, 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.

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 risk of loss is remote and, in any event, would not be material.

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

F-38

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

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


	Asset Derivatives				Liability Derivatives
(in thousands)	Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value
Derivatives designated as hedging instruments:
Commodity contracts		Receivables	$	74		Accounts payable	$	2,818

Total			$	74			$	2,818

Derivatives not designated as hedging instruments:
Commodity contracts		Receivables	$	7,435		Accounts payable	$	3,708
		Other assets		48		Other liabilities		24

Total			$	7,483			$	3,732

Total derivative financial instruments			$	7,557			$	6,550

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 $4,431,000 increase in receivables with a corresponding increase in 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 combined balance sheet at May 31, 2021:


	Asset Derivatives				Liability Derivatives
(in thousands)	Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value
Derivatives designated as hedging instruments:
Commodity contracts		Receivables	$	31,891		Accounts payable	$	—
		Other assets		37		Other liabilities		—

Totals			$	31,928			$	—

Derivatives not designated as hedging instruments:
Commodity contracts		Receivables	$	21,938		Accounts payable	$	14,547
		Other assets		379		Other liabilities		—

			$	22,317			$	14,547
Foreign currency exchange contracts		Receivables		—		Accounts payable		254

Totals			$	22,317			$	14,801

Total derivative financial instruments			$	54,245			$	14,801

F-39

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

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 $15,387,000 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 interest rate and commodity price fluctuations associated with certain forecasted transactions. These derivative financial instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on each of these derivative financial instruments is reported as a component of OCI and reclassified into earnings in the same line associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative financial instrument is recognized in earnings immediately.

The following table summarizes our cash flow hedges outstanding at May 31, 2022:


(in thousands)	Notional Amount		Maturity Date
Commodity contracts	$	57,370	June 2022 - July 2023

The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from AOCI into earnings for derivative financial instruments designated as cash flow hedges during fiscal 2022 and fiscal 2021:


(in thousands)	Gain Recognized in OCI		Location of Gain Reclassified from AOCI into Net Earnings	Gain Reclassified from AOCI into Net Earnings
For the fiscal year ended May 31, 2022:
Commodity contracts	$	8,557	Cost of goods sold	$	60,623

Total	$	8,557		$	60,623

For the fiscal year ended May 31, 2021:
Commodity contracts	$	61,363	Cost of goods sold	$	7,197

Totals	$	61,363		$	7,197

The estimated net amount of the losses recognized in AOCI at May 31, 2022, expected to be reclassified into net earnings within the succeeding twelve months is $959,000 (net of tax of $286,000). This amount was computed using the fair value of the cash flow hedges at May 31, 2022, and will change before actual reclassification from other comprehensive income to net earnings during fiscal 2023.

F-40

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Economic (Non-designated) Hedges

We enter into foreign currency exchange contracts to manage our foreign currency exchange rate exposure related to intercompany 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 earnings.

The following table summarizes our economic (non-designated) derivative financial instruments outstanding at May 31, 2022:


(in thousands)	Notional Amount		Maturity Date
Commodity contracts	$	30,675	June 2022 - July 2023

The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments during fiscal 2022 and fiscal 2021:


		Gain Recognized in Earnings
	Location of Gain Recognized in Earnings	Fiscal Year Ended May 31,
(in thousands)	Location of Gain Recognized in Earnings	2022		2021 ⁽¹⁾
Commodity contracts	Cost of goods sold	$	16,465	$	38,930

(1)	Includes a mark-to-market loss of $6,024,000 in fiscal 2021 related to a derivative instrument between Worthington Steel and Parent to hedge the price of steel.

Note O – Fair Value Measurements

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.

F-41

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Recurring Fair Value Measurements

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


	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Totals
Assets
Derivative financial instruments ⁽¹⁾	$	—	$	7,557	$	—	$	7,557

Total assets	$	—	$	7,557	$	—	$	7,557

Liabilities
Derivative financial instruments ⁽¹⁾	$	—	$	6,550	$	—	$	6,550

Total assets	$	—	$	6,550	$	—	$	6,550

(1)

The fair value of our derivative financial instruments was 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 N – Derivative Financial Instruments and Hedging Activities” for additional information regarding our use of derivative financial instruments.

At May 31, 2021, our financial assets and liabilities measured at fair value on a recurring basis were as follows:


	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Totals
Assets
Derivative financial instruments ⁽¹⁾	$	—	$	54,245	$	—	$	54,245

Total assets	$	—	$	54,245	$	—	$	54,245

Liabilities
Derivative financial instruments ⁽¹⁾	$	—	$	14,801	$	—	$	14,801

Total assets	$	—	$	14,801	$	—	$	14,801

(1)

F-42

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Non-Recurring Fair Value Measurements

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


	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Totals
Assets
Long-lived assets held for sale ⁽¹⁾	$	—	$	700	$	—	$	700

Total assets	$	—	$	700	$	—	$	700

(1)	Comprised of production equipment at our Twinsburg, Ohio facility with an estimated fair market value of $700,000. Refer to “Note E – Goodwill and Other Long-Lived Assets” for additional information.

At May 31, 2021, there were no assets measured at fair value on a non-recurring basis on the Company’s consolidated balance sheet.

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, short-term borrowings, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities approximate carrying value due to their short-term nature. Market pricing for the Company’s long-term debt with Parent is not available; however, based on the stated interest rate and tenor as well as the market movements since issuance, we do not believe fair value would be materially different from the carrying value of the notes (including current maturities), which was $35,000,000 at May 31, 2022.

Note P – Leases

We lease office space, warehouses, vehicles, and equipment. Leases have remaining lease terms of 1 year to 20 years, some of which have renewal and termination options. Termination options are exercisable at our option. The lease terms used to recognize right-of-use assets and lease liabilities include periods covered by options to extend the lease where we are reasonably certain to exercise that option and periods covered by an option to terminate the lease if we are reasonably certain not to exercise that option. The majority of the Company’s leases are operating leases. Finance leases are immaterial to the combined financial statements.

We determine if an arrangement meets the definition of a lease at inception. Operating lease ROU assets include any initial direct costs and prepayments less lease incentives. Lease terms include options to renew or terminate the lease when it is reasonably certain we will exercise such options. As most of our leases do not include an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date, in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of goods sold or SG&A expense depending on the underlying nature of the leased assets.

We lease certain property and equipment from third parties under non-cancellable operating lease agreements. Certain lease agreements provide for payment of property taxes, maintenance and insurance by us. Under Topic 842, we elected the practical expedient to account for lease and non-lease components as a single component for all asset classes. Certain leases include variable lease payments based on usage or an index or rate.

F-43

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

The components of lease expense for fiscal 2022 and fiscal 2021 were as follows:


(in thousands)	2022		2021
Operating lease expense:	$	8,594	$	4,034
Short-term lease expense		1,029		98
Variable lease expense		300		314

Total lease expense	$	9,923	$	4,446

Supplemental cash flow information for the fiscal years ended May 31, 2022 and 2021, is provided below:


(in thousands)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	5,937	$	3,920
ROU assets obtained in exchange for lease liabilities
Operating leases	$	67,997	$	182

Weighted average remaining lease terms and discount rates for operating leases for the fiscal years ended May 31, 2022 and 2021, is provided below:


	2022			2021
Weighted-average remaining lease term (in years)		16.39			3.42
Weighted-average discount rate		3.00	%		2.84	%

Future minimum lease payments for non-cancelable operating leases having an initial or remaining term in excess of one year at May 31, 2022, were as follows:


(in thousands)	Operating Leases
2023	$	7,711
2024		6,516
2025		5,682
2026		5,276
2027		4,486
Thereafter		61,872

Total	$	91,543
Less: imputed interest		(20,639	)

Present value of lease liabilities	$	70,904

Note Q – Related Party Transactions

Historically, the Company has been managed and operated in the normal course of business by Parent. Transactions between the Company and Parent have been presented as related party transactions on the accompanying combined financial statements.

F-44

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Allocation of General Corporate Costs

Certain support functions are provided to the Company on a centralized basis from Parent, including information technology, human resources, finance, and corporate operations, amongst others, profit sharing and bonuses, and respective surpluses and shortfalls of various planned insurance expenses. For purposes of these combined financial statements, these corporate and other shared costs have been attributed to the Company on the basis of direct usage when identifiable, with the remaining allocated using related drivers associated with the nature of the business, such as, headcount or profitability, considering the characteristics of each respective cost. Management believes the assumptions regarding the allocation of Parent’s general corporate expenses and financing costs are reasonable. Nevertheless, the combined financial statements may not include all of the actual expenses that would have been incurred and may not reflect combined results of operations, financial position and cash flows had it been a stand-alone public company during the periods presented. Substantially all of the allocated corporate costs are included in SG&A expense in the combined statements of earnings.

The Company’s allocated expenses from Parent, which are substantially recording in SG&A expense in the combined statements of earnings, are $70,087,000 and $72,052,000 for the fiscal years ended May 31, 2022 and 2021, respectively.

Sales to Parent

Net sales to Parent for fiscal 2022 and fiscal 2021 totaled $135,648,000 and $68,371,000, respectively. Sales between the Company and Parent have been presented as net sales to Parent in the combined statements of earnings.

Due to/from Parent

Given that cash is managed centrally, long-term intercompany financing arrangements are used to fund expansion or certain working capital needs. Excluding the TWB Term Loan disclosed in “Note H – Debt and Receivables Securitization,” debt resulting from these long-term intercompany financing arrangements have been reflected in net parent investment within equity.

Amounts due to Parent under the TWB Term Loan totaled $35,000,000 at May 31, 2022, including current maturities of $15,000,000. The corresponding interest expense, which accrues at a rate of 5.0% per annum, was $2,438,000 in fiscal 2022. Refer to Note H – Debt and Receivables Securitization for additional information.

Transactions with Affiliated Companies

We purchase from, and sell to, affiliated companies (primarily the unconsolidated joint ventures of Parent) certain raw materials and services at prevailing market prices. Net sales to affiliated companies during fiscal 2022 and fiscal 2021 totaled $82,447,000 and $41,408,000, respectively. Purchases from affiliated companies for fiscal 2022 and fiscal 2021 totaled $9,698,000 and $2,761,000, respectively. Account Receivable and Account Payable from affiliated companies were not significant at either May 31, 2022 or May 31, 2021.

Net Parent Investment

Related party transactions between the Company and Parent have been included within net parent investment in the combined balance sheets in the historical periods presented as these related party transactions were part of the centralized cash management program and were not settled in cash. Net parent investment in the combined balance sheet and combined statement of equity represents Parent’s historical investment in the Company, the net effect of transactions with and allocations from Parent, and the Company’s retained earnings.

F-45

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)

Net transfers from Worthington are included within Net parent investment. The reconciliation of total net transfers to and from Parent to the corresponding amount presented in the Combined Statement of Cash Flows are as follows:


	Fiscal Year Ended May 31,
(in thousands)	2022		2021
Total net transfers from (to) parent per combined statements of equity	$	327,983	$	(92,907	)
Less: depreciation expense allocated from Parent		3,083		3,310
Less: stock-based compensation		8,017		9,769

Total net transfers from parent per combined statement of cash flows	$	316,883	$	(105,986	)

Note R – Subsequent Events

On October 31, 2022, the Company’s consolidated joint venture, WSP, sold its remaining manufacturing facility, located in Jackson, Michigan, for net proceeds of approximately $21,277,000, resulting in a pre-tax gain of $3,926,000 within restructuring and other income, net.

F-46

STEEL PROCESSING BUSINESS OF WORTHINGTON INDUSTRIES, INC.

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS


Description	Balance at Beginning of Period		Charged to Costs and Expenses			Uncollectable Accounts Charged to Allowance			Balance at End of Period
Fiscal 2022:
Deducted from asset accounts: Allowance for possible losses on trade accounts receivable	$	108,000	$	739,000		$	(58,000	)	$	789,000

Fiscal 2021:
Deducted from asset accounts: Allowance for possible losses on trade accounts receivable	$	316,000	$	(183,000	)	$	(25,000	)	$	108,000

F-47

Worthington Steel (WS) DRSDraft registration statement