WORTHINGTON ENTERPRISES, INC. [WOR] Filings

10-Q 1 wor-20240831.htm 10-Q 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended August 31, 2024

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

For the transition period from ___________ to ___________

Commission File Number 001-08399

WORTHINGTON ENTERPRISES, INC.

(Exact name of registrant as specified in its charter)


Ohio		31-1189815
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 West Old Wilson Bridge Road, Columbus, Ohio		43085
(Address of principal executive offices)		(Zip Code)

    (614) 438-3210

   

    (Registrant’s telephone number, including area code)

   

    Not Applicable

   

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

   

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


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

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

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

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


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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

On September 30, 2024, the number of common shares, without par value, of the registrant issued and outstanding was 50,260,265.

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TABLE OF CONTENTS


Commonly Used or Defined Terms			ii
Cautionary Note Regarding Forward-Looking Statements			iii
Use of Non-GAAP Financial Measures and Definitions			1
Part I. Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets – August 31, 2024 and May 31, 2024	3
		Consolidated Statements of Earnings – Three months ended August 31, 2024 and 2023	4
		Consolidated Statements of Comprehensive Income – Three months ended August 31, 2024 and 2023	5
		Consolidated Statements of Cash Flows – Three months ended August 31, 2024 and 2023	6
		Condensed Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4.	Controls and Procedures	29
Part II. Other Information

	Item 1.	Legal Proceedings	30
	Item 1A.	Risk Factors	30
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 3.	Defaults Upon Senior Securities	31
	Item 4.	Mine Safety Disclosures	31
	Item 5.	Other Information	31
	Item 6.	Exhibits	31
Signatures			32

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COMMONLY USED OR DEFINED TERMS

References in this Form 10-Q to “we,” “our,” “us” or the “Company” are collectively to Worthington Enterprises and its consolidated subsidiaries. In addition, the following terms, when used in this Form 10-Q, have the meanings set forth below:


Term		Definition
ABI		Architecture Billings Index
AOCI		Accumulated other comprehensive income (loss)
Board		Board of Directors of Worthington Enterprises, Inc.
CARES Act		Coronavirus Aid, Relief and Economic Security Act
ClarkDietrich		Clarkwestern Dietrich Building Systems LLC
CODM		Chief Operating Decision Maker
common shares		The common shares, no par value, of Worthington Enterprises
COVID-19		The novel coronavirus disease first known to originate in December 2019
Credit Facility		Our $500,000,000 unsecured revolving credit facility with a group of lenders
EPS		Earnings per common share
equity income		Equity in net income of unconsolidated affiliates
Exchange Act		Securities Exchange Act of 1934, as amended
Form 10-Q		Our Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2024
fiscal 2024		Our fiscal year ended May 31, 2024
fiscal 2025		Our fiscal year ended May 31, 2025
first quarter of fiscal 2024		Our fiscal quarter ended August 31, 2023
first quarter of fiscal 2025		Our fiscal quarter ended August 31, 2024
GAAP		U.S. generally accepted accounting principles
GDP		Gross domestic product
Halo		WH Products, LLC
HMI		The National Association of Home Builders/Wells Fargo Housing Market Index
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
New Senior Notes		Collectively, the senior unsecured note issued by Worthington Enterprises on August 23, 2019, in the principal amount of €36,700,000 that bears interest at a rate of 2.06% and is scheduled to be repaid on August 23, 2031, and the senior unsecured notes issued by Worthington Enterprises on August 23, 2019, in the principal amount of €55,000,000 that bear interest at a rate of 2.40% and are scheduled to be repaid on August 23, 2034.
OCI		Other comprehensive income (loss)
PSLRA		Private Securities Litigation Reform Act of 1995, as amended
Ragasco		Hexagon Ragasco AS
SEC		Securities and Exchange Commission
Separation		The separation of our former steel processing business, effective December 1, 2023
SG&A		Selling, general and administrative expenses
SOFR		Secured Overnight Financing Rate
U.S.		United States of America
WAVE		Worthington Armstrong Venture
Workhorse		Taxi Workhorse Holdings, LLC
Worthington Enterprises		Worthington Enterprises, Inc. (formerly known as Worthington Industries, Inc.)
Worthington Steel		Worthington Steel, Inc.
2024 Form 10-K		Our Annual Report on Form 10-K for fiscal 2024 as filed with the SEC on July 30, 2024
2024 Notes		The senior unsecured notes that we issued on August 10, 2012, in the principal amount of $150,000,000, which bore interest at a rate of 4.60%, were set to mature on August 10, 2024, and were paid in full on December 6, 2023.
2026 Notes		The senior unsecured notes that we issued on April 15, 2014, in the principal amount of $250,000,000, which bore interest at a rate of 4.55%, were scheduled to mature on April 15, 2026, and were paid in full on July 28, 2023.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Selected statements contained in this Form 10-Q, including, without limitation, in MD&A and in “Note E – Contingent Liabilities and Commitments,” constitute “forward-looking statements,” as that term is used in the PSLRA. We wish to take advantage of the safe harbor provisions included in the PSLRA. Forward-looking statements reflect our current expectations, estimates or projections concerning future results or events. These statements are often identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “should,” “would,” “intend,” “plan,” “will,” “likely,” “estimate,” “project,” “position,” “strategy,” “target,” “aim,” “seek,” “foresee,” and 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;

•

anticipated benefits of the Separation;

•

expected financial and operational performance, and future opportunities, following the Separation;

•

performance on a pro forma basis to illustrate the estimated effects of the Separation on historical periods;

•

the tax treatment of the Separation transaction;

•

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;

•

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;

•

anticipated working capital needs, capital expenditures and asset sales;

•

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

•

projected profitability potential;

•

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

•

projected capacity and the alignment of operations with demand;

•

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

•

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

•

expectations for inventories, jobs and orders;

•

expectations for the economy and markets or improvements therein;

•

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

•

effects of judicial rulings, laws and regulations;

•

effects of cybersecurity breaches and other disruptions to information technology infrastructure;

•

the lingering effects of COVID-19 on economies and markets, and on our customers, counterparties, employees and third-party service providers; and

•

other non-historical matters.

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

•

the ability to successfully realize the anticipated benefits of the Separation;

•

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

•

the impact of tariffs, the adoption of trade restrictions affecting our 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 prices and/or supply of steel, natural gas, oil, copper, zinc, and other raw materials;

•

product demand and pricing;

•

changes in product mix, product substitution and market acceptance of our products;

iii

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•

volatility or fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities, labor and other items required by operations;

•

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 construction and other industries in which we participate;

•

failure to maintain appropriate levels of inventories;

•

financial difficulties (including bankruptcy filings) of end-users and customers, suppliers, joint venture partners and others with whom we do business;

•

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

•

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

•

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

•

capacity levels and efficiencies, within facilities, within major product markets and within the industries in which we participate;

•

the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, labor shortages, interruption in utility services, civil unrest, international conflicts, terrorist activities, or other causes;

•

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

•

risks associated with doing business internationally, including economic, political and social instability, foreign currency exchange rate exposure and the acceptance of our products in global markets;

•

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

•

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

•

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

•

the level of imports and import prices in our markets;

•

the effect of national, regional and global economic conditions generally and within major product 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 our ability to use or sell certain products;

•

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

•

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 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 which may increase our healthcare and other costs and negatively impact our operations and financial results;

•

the effects of tax laws in the U.S and potential changes for such laws, which may increase our costs and negatively impact our operations and financial results;

•

cyber security risks;

•

the effects of privacy and information security laws and standards;

•

the seasonality of our operations; and

•

other risks described from time to time in our filings with the SEC, including those described in “Part I – Item 1A. – Risk Factors” of the 2024 Form 10-K.

We note these risk factors for investors as contemplated by the PSLRA. Forward-looking statements should be construed in the light of such risks. It is impossible to predict or identify all potential risk factors. Consequently, readers should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. We do not undertake, and hereby disclaim, any obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.

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USE OF NON-GAAP FINANCIAL MEASURES AND DEFINITIONS

(In thousands, except per common share amounts)

NON-GAAP FINANCIAL MEASURES. This Form 10-Q includes certain financial measures that are not calculated and presented in accordance with GAAP. Non-GAAP financial measures typically exclude items that management believes are not reflective of, and thus should not be included when evaluating the performance of our ongoing operations. Management uses the non-GAAP financial measures to evaluate our performance, engage in financial and operational planning, and determine incentive compensation. Management believes these non-GAAP financial measures provide useful supplemental information and additional perspective on the performance of our ongoing operations and should not be considered as an alternative to the comparable GAAP financial measure. Additionally, management believes these non-GAAP financial measures allow for meaningful comparisons and analysis of trends in our business and enables investors to evaluate our operations and future prospects in the same manner as management.

The following provides an explanation of each non-GAAP measure presented in this Form 10-Q:

Adjusted operating income (loss) is defined as operating income (loss) excluding the items listed below, to the extent naturally included in operating income (loss).

Adjusted earnings per diluted share from continuing operations is defined as adjusted net earnings from continuing operations divided by diluted weighted-average shares outstanding.

EBITDA from continuing operations is defined as earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA from continuing operations is further adjusted to exclude impairment and restructuring charges (gains) as well as other items that management believes are not reflective of, and thus should not be included when evaluating the performance of its ongoing operations, as outlined below. Adjusted EBITDA from continuing operations also excludes stock-based compensation due to its non-cash nature, which is consistent with how management assesses operating performance. At the segment level, adjusted EBITDA from continuing operations includes expense allocations for centralized corporate back-office functions that exist to support the day-to-day business operations. Public company and other governance costs are held at the corporate level.

Adjusted EBITDA from continuing operations margin is calculated by dividing adjusted EBITDA from continuing operations by net sales.

EXCLUSIONS FROM NON-GAAP FINANCIAL MEASURES

Management believes it is useful to exclude the following items from its non-GAAP measures for its own and investors’ assessment of the business for the reasons identified below:

•

Impairment charges are excluded because they do not occur in the ordinary course of our ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, which we believe facilitates the comparison of historical, current and forecasted financial results.

•

Restructuring and other expense (income), net, which can result in both discrete gains and/or losses, consist of established programs that are not part of our ongoing operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions). These items are excluded because they are not part of the ongoing operations of our underlying business.

•

Separation costs, which consist of direct and incremental costs incurred in connection with the completed Separation, are excluded as they are one-time in nature and are not expected to occur in periods following the Separation. These costs include fees paid to third-party advisors, such as investment banking, audit and other advisory services as well as direct and incremental costs associated with the separation of shared corporate functions. Results in fiscal 2024 also include incremental compensation expense associated with the modification of unvested short and long-term incentive compensation awards, as required under the employee matters agreement executed in conjunction with the Separation.

•

Loss on extinguishment of debt is excluded because it does not occur in the normal course of business and may obscure analysis of trends and financial performance. Additionally, the amount and frequency of this type of charge is not consistent and is significantly impacted by the timing and size of debt extinguishment transactions.

•

Pension settlement charges are excluded because of their non-cash nature and the fact that they do not occur in the normal course of business and may obscure analysis of trends and financial performance. These transactions typically result from the transfer of all or a portion of the total projected benefit obligation to third-party insurance companies.

•

Corporate costs eliminated at Separation reflect certain corporate overhead costs that no longer exist post-Separation. These costs were included in continuing operations as they represent general corporate overhead that was historically allocated to our former steel processing business but did not meet the requirements to be presented as discontinued operations.

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A reconciliation of the following non-GAAP financial measures from their most comparable GAAP financial measure for the three months ended August 31, 2024 and August 31, 2023 is presented below.


	Three Months Ended August 31, 2024
									Net Earnings		Diluted
				Earnings		Income			from		EPS -
	Operating			Before		Tax			Continuing		Continuing
	Loss			Income		Expense			Operations (1)		Operations
GAAP	$	(4,699	)	$	30,790	$	6,782		$	24,253		0.48
Restructuring and other expense, net		1,158			1,158		(290	)		868		0.02
Non-GAAP	$	(3,541	)	$	31,948	$	7,072		$	25,121	$	0.50


	Three Months Ended August 31, 2023
									Net Earnings		Diluted
				Earnings		Income			from		EPS -
	Operating			Before		Tax			Continuing		Continuing
	Loss			Income		Expense			Operations (1)		Operations
GAAP	$	(7,324	)	$	35,791	$	8,960		$	26,831	$	0.54
Corporate costs eliminated at Separation		9,672			9,672		(2,271	)		7,401		0.15
Separation costs		2,410			2,410		(566	)		1,844		0.04
Loss on extinguishment of debt		-			1,534		(360	)		1,174		0.02
Non-GAAP	$	4,758		$	49,407	$	12,157		$	37,250	$	0.75

——————————————————

(1)

Excludes the impact of noncontrolling interest.

The following table presents a reconciliation from the GAAP financial measure of earnings before income taxes to the non-GAAP financial measure of adjusted EBITDA from continuing operations for the periods presented.


	Three Months Ended
	August 31,
	2024			2023
Earnings before income taxes (GAAP)	$	30,790		$	35,791
Less: net loss attributable to noncontrolling interest		(245	)		-
Net earnings before income taxes attributable to controlling interest		31,035			35,791
Interest expense, net		489			1,074
EBIT (2)		31,524			36,865
Corporate costs eliminated at Separation		-			9,672
Restructuring and other expense, net		1,158			-
Separation costs		-			2,410
Loss on extinguishment of debt		-			1,534
Adjusted EBIT (2)		32,682			50,481
Depreciation and amortization		11,830			12,075
Stock-based compensation		3,925			3,359
Adjusted EBITDA from continuing operations (non-GAAP)	$	48,437		$	65,915

Earnings before income taxes margin (GAAP)		12.0	%		11.5	%
Adjusted EBITDA margin from continuing operations (non-GAAP)		18.8	%		21.1	%

——————————————————

(2)

EBIT and adjusted EBIT are non-GAAP financial measures. However, these measures are not used by management to evaluate the Company's performance, engage in financial and operational planning, or determine incentive compensation. Instead, they are included as subtotals in the reconciliation of earnings before income taxes to adjusted EBITDA from continuing operations, which is a non-GAAP financial measure used by management.

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PART I. FINANCIAL INFORMATION

Item 1. – Financial Statements

WORTHINGTON ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)


	(Unaudited)
	August 31,		May 31,
	2024		2024
Assets
Current assets:
Cash and cash equivalents	$	178,547	$	244,225
Receivables, less allowances of $508 and $343, respectively		168,497		199,798
Inventories:
Raw materials		77,577		66,040
Work in process		10,053		11,668
Finished products		99,669		86,907
Total inventories		187,299		164,615
Income taxes receivable		4,711		17,319
Prepaid expenses and other current assets		37,383		47,936
Total current assets		576,437		673,893
Investments in unconsolidated affiliates		140,467		144,863
Operating lease assets		27,109		18,667
Goodwill		373,375		331,595
Other intangible assets, net of accumulated amortization of $87,024 and $83,242, respectively		250,376		221,071
Other assets		21,611		21,342
Property, plant and equipment:
Land		8,676		8,657
Buildings and improvements		129,254		123,478
Machinery and equipment		344,250		321,836
Construction in progress		33,841		24,504
Total property, plant and equipment		516,021		478,475
Less: accumulated depreciation		260,125		251,269
Total property, plant and equipment, net		255,896		227,206
Total assets	$	1,645,271	$	1,638,637

Liabilities and equity
Current liabilities:
Accounts payable	$	82,768	$	91,605
Accrued compensation, contributions to employee benefit plans and related taxes		30,536		41,974
Dividends payable		9,443		9,038
Other accrued items		34,486		29,061
Current operating lease liabilities		7,353		6,228
Income taxes payable		1,652		470
Total current liabilities		166,238		178,376
Other liabilities		57,918		62,243
Distributions in excess of investment in unconsolidated affiliate		110,522		111,905
Long-term debt		300,009		298,133
Noncurrent operating lease liabilities		20,166		12,818
Deferred income taxes, net		87,177		84,150
Total liabilities		742,030		747,625
Shareholders’ equity - controlling interest		901,353		888,879
Noncontrolling interests		1,888		2,133
Total equity		903,241		891,012
Total liabilities and equity	$	1,645,271	$	1,638,637

See condensed notes to consolidated financial statements.

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WORTHINGTON ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per common share amounts)

(Unaudited)


	Three Months Ended
	August 31,
	2024			2023
Net sales	$	257,308		$	311,918
Cost of goods sold		194,813			242,288
Gross profit		62,495			69,630
Selling, general and administrative expense		66,036			74,544
Restructuring and other expense, net		1,158			-
Separation costs		-			2,410
Operating loss		(4,699	)		(7,324	)
Other income (expense):
Miscellaneous income, net		486			299
Loss on extinguishment of debt		-			(1,534	)
Interest expense, net		(489	)		(1,074	)
Equity in net income of unconsolidated affiliates		35,492			45,424
Earnings before income taxes		30,790			35,791
Income tax expense		6,782			8,960
Net earnings from continuing operations		24,008			26,831
Net earnings from discontinued operations		-			72,872
Net earnings		24,008			99,703
Net earnings (loss) attributable to noncontrolling interests		(245	)		3,597
Net earnings attributable to controlling interest	$	24,253		$	96,106

Amounts attributable to controlling interest:
Net earnings from continuing operations	$	24,253		$	26,831
Net earnings from discontinued operations		-			69,275
Net earnings attributable to controlling interest	$	24,253		$	96,106

Earnings per share from continuing operations - basic	$	0.49		$	0.55
Earnings per share from discontinued operations - basic		-			1.42
Net earnings per share attributable to controlling interest - basic	$	0.49		$	1.97

Earnings per share from continuing operations - diluted	$	0.48		$	0.54
Earnings per share from discontinued operations - diluted		-			1.39
Net earnings per share attributable to controlling interest - diluted	$	0.48		$	1.93

Weighted average common shares outstanding - basic		49,487			48,842
Weighted average common shares outstanding - diluted		50,365			49,886

Cash dividends declared per common share	$	0.17		$	0.32

See condensed notes to consolidated financial statements.

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WORTHINGTON ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended
	August 31,
	2024			2023
Net earnings	$	24,008		$	99,703
Other comprehensive income (loss), net of tax
Foreign currency translation		541			1,444
Pension liability adjustment		(7	)		(3	)
Cash flow hedges		(50	)		(6,849	)
Other comprehensive income (loss), net of tax		484			(5,408	)
Comprehensive income		24,492			94,295
Comprehensive income (loss) attributable to noncontrolling interests		(245	)		3,597
Comprehensive income attributable to controlling interest	$	24,737		$	90,698

See condensed notes to consolidated financial statements.

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WORTHINGTON ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended
	August 31,
	2024			2023
Operating activities:
Net earnings	$	24,008		$	99,703
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		11,830			28,325
Impairment of long-lived assets		-			1,401
Benefit from deferred income taxes		(5,537	)		(5,453	)
Loss on extinguishment of debt		-			1,534
Bad debt income		(8	)		(799	)
Equity in net income of unconsolidated affiliates, net of distributions		3,453			10,225
Net loss (gain) on sale of assets		(18	)		105
Stock-based compensation		3,925			4,516
Changes in assets and liabilities, net of impact of acquisitions:
Receivables		28,166			(8,843	)
Inventories		(6,406	)		(64,327	)
Accounts payable		(13,093	)		278
Accrued compensation and employee benefits		(11,445	)		(12,014	)
Other operating items, net		6,271			5,045
Net cash provided by operating activities		41,146			59,696

Investing activities:
Investment in property, plant and equipment		(9,629	)		(29,298	)
Acquisitions, net of cash acquired		(88,887	)		-
Proceeds from sale of assets, net of selling costs		11,769			51
Investment in non-marketable equity securities		(2,000	)		(40	)
Investment in note receivable		-			(15,000	)
Net cash used by investing activities		(88,747	)		(44,287	)

Financing activities:
Dividends paid		(8,116	)		(15,725	)
Repurchase of common shares		(6,803	)		-
Proceeds from issuance of common shares, net of tax withholdings		(3,158	)		(5,130	)
Net repayments of short-term borrowings		-			(2,813	)
Principal payments on long-term obligations		-			(243,757	)
Payments to noncontrolling interests		-			(1,921	)
Net cash used by financing activities		(18,077	)		(269,346	)

Decrease in cash and cash equivalents		(65,678	)		(253,937	)
Cash and cash equivalents at beginning of period		244,225			454,946
Cash and cash equivalents at end of period	$	178,547		$	201,009

The cash flows related to discontinued operations have not been segregated in our consolidated statements of cash flows. See “Note B – Discontinued Operations” for a summarization of significant non-cash items related to discontinued operations.

See condensed notes to consolidated financial statements.

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WORTHINGTON ENTERPRISES, INC.

CONDENSED Notes to Consolidated Financial Statements (UNAUDITED)

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

Note A – Basis of Presentation

Basis of Presentation

These interim unaudited consolidated financial statements include the accounts of Worthington Enterprises and its consolidated subsidiaries. Significant intercompany accounts and transactions have been eliminated.

We own an 80% controlling interest in Halo, which was acquired on February 1, 2024. Halo is consolidated with the equity owned by the other joint venture members shown as “noncontrolling interests” in our consolidated balance sheets, and the other joint venture members’ portions of net earnings and OCI are shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively.

Investments in unconsolidated affiliates that we do not control are accounted for using the equity method with our proportionate share of income or loss recognized within equity income in our consolidated statements of earnings. See further discussion of our unconsolidated affiliates in “Note C – Investments in Unconsolidated Affiliates.”

These interim unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, which are of a normal and recurring nature except those which have been disclosed elsewhere in this Form 10-Q, necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included. Operating results for the first quarter of fiscal 2025 are not necessarily indicative of the results that may be expected for the full fiscal year. For further information, refer to the consolidated financial statements and notes thereto included in the 2024 Form 10-K.

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

Separation of the Steel Processing Business

On December 1, 2023, we completed the spin-off of our former steel processing business into an independent publicly traded company, Worthington Steel, on a tax-free basis. Accordingly, the operating results of the former steel processing business are reported as discontinued operations for all periods presented, as discussed in further detail in “Note B – Discontinued Operations.” All discussion within this Form 10-Q, including amounts, percentages and disclosures for all periods presented, reflect only our continuing operations unless otherwise noted.

In connection with the Separation, we entered into several agreements with Worthington Steel that govern our ongoing relationships, the most significant of which is the long-term Steel Supply Agreement. Other agreements include a long-term Steel Supply Agreement, a Trademark License Agreement, and Transition Services Agreement. Amounts under the Trademark License Agreement and Transition Services Agreement were not significant during the first quarter of fiscal 2025.

Pursuant to the long-term Steel Supply Agreement, Worthington Steel manufactures and supplies to us, at reasonable market rates, certain flat rolled steel products, and will provide us with certain related support services such as design, engineering/technical services, price risk management, scrap management, steel purchasing, supply chain optimization and product rework services, and other services at our request that are ancillary to the supply of the flat rolled steel products. Purchases from Worthington Steel under this agreement for the first quarter of fiscal 2025, totaled $28,431, of which $7,424 was payable at August 31, 2024.

Revenue Recognition

We recognize all 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.

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Note B – Discontinued Operations

The following table summarizes the financial results from the discontinued operations of Worthington Steel for the three months ended August 31, 2023.


Net sales	$	881,338
Cost of goods sold		753,479
Gross profit		127,859
Selling, general and administrative expense		37,802
Impairment of long-lived assets		1,401
Separation costs		3,626
Operating income		85,030
Other income (expense):
Miscellaneous income, net		710
Interest expense, net		(2,009	)
Equity in net income of unconsolidated affiliate		8,957
Earnings before income taxes		92,688
Income tax expense		19,816
Net earnings		72,872
Net earnings attributable to noncontrolling interest		3,597
Net earnings attributable to controlling interest	$	69,275

As permitted under GAAP, the cash flows related to discontinued operations have not been segregated in our consolidated statements of cash flows. Accordingly, the consolidated statement of cash flows for the three months ended August 31, 2023 include the results from both continuing and discontinued operations and amounts for certain captions will not agree with respective data in the consolidated balance sheet.

The following table summarizes significant non-cash operating items and capital expenditures of discontinued operations included in the consolidated statement of cash flows for the three months ended August 31, 2023.


Significant non-cash operating items:
Depreciation and amortization	$	16,250
Impairment of long-lived assets		1,401
Equity in income of unconsolidated affiliate		(8,957	)
Stock-based compensation		1,157
Significant investing activities:
Investment in property, plant and equipment		(19,775	)

Note C – Investments in Unconsolidated Affiliates

Investments in joint ventures that we do not control, either through majority ownership or otherwise, are unconsolidated and accounted for using the equity method. At August 31, 2024, we held investments in the following unconsolidated joint ventures: ClarkDietrich (25%); Sustainable Energy Solutions (49%); WAVE (50%); and Workhorse (20%).

We received distributions from unconsolidated affiliates totaling $38,945 during the three months ended August 31, 2024. We have received cumulative distributions from WAVE in excess of our investment balance, which resulted in a negative asset balance of $110,522 and $111,905 at August 31, 2024 and May 31, 2024, respectively. In accordance with the applicable accounting guidance, we have reclassified the negative balances to distributions in excess of investment in unconsolidated affiliate within our consolidated balance sheets. We will continue to record our equity in the net income of WAVE as a debit to the investment account, and if it becomes positive, it will again be shown as an asset on our consolidated balance sheets. If it becomes probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will immediately recognize any balance classified as a liability as income.

We use the cumulative earnings approach to determine the cash flow presentation of distributions from our unconsolidated joint ventures. Distributions received are included in our consolidated statements of cash flows as operating activities unless the cumulative distributions exceed our share of the cumulative equity in the net earnings of the joint venture. In such cases, the excess distributions are considered returns of investment and are classified as investing activities in our consolidated statements of cash flows. No distributions exceeded our share in any of our unconsolidated joint ventures during the first quarter of fiscal 2025.

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


	August 31,		May 31,
	2024		2024
Cash and cash equivalents	$	43,939	$	36,163
Other current assets		566,270		605,043
Noncurrent assets		368,543		360,261
Total assets	$	978,752	$	1,001,467

Current liabilities		216,817		264,963
Current maturities of long-term debt		6,583		13,450
Long-term debt		356,485		349,431
Other noncurrent liabilities		146,754		146,984
Equity		252,113		226,639
Total liabilities and equity	$	978,752	$	1,001,467


	Three Months Ended
	August 31,
	2024		2023
Net sales	$	515,673	$	568,584
Gross profit		134,335		173,017
Operating income		94,346		131,447
Depreciation and amortization		8,006		7,576
Interest expense		4,758		5,739
Income tax expense		645		909
Net earnings		90,682		125,653

Note D – Restructuring and Other Expense, Net

We consider restructuring activities to be programs whereby we fundamentally change our operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions).

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 consolidated statement of earnings for the three months ended August 31, 2024 is summarized below:


	Balance at							Balance at
	May 31, 2024		Expense		Payments			August 31, 2024
Early retirement and severance	$	188	$	435	$	(423	)	$	200
Loss on sale of assets				723
Restructuring and other expense, net			$	1,158

The total liability associated with our restructuring activities as of August 31, 2024 is expected to be paid in the next 12 months.

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Note E – Contingent Liabilities and Commitments

Legal Proceedings

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

Note F – Guarantees

We do not have guarantees that we believe are reasonably likely to have a material current or future effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. However, at August 31, 2024, we were party to an operating lease for an aircraft in which we guaranteed a residual value at the termination of the lease on March 30, 2028. The maximum obligation under the terms of this guarantee was approximately $15,095 at August 31, 2024. Based on current facts and circumstances, we have estimated the likelihood of payment pursuant to this guarantee is not probable and, therefore, no amount has been recognized in our consolidated financial statements.

At August 31, 2024, we also had in place $10,500 of outstanding stand-by letters of credit issued to third-party service providers. The fair value of these guaranteed instruments, based on premiums paid, was not material and no amounts were drawn against them at August 31, 2024.

Note G – Debt

Our multi-year revolving Credit Facility is scheduled to mature on September 27, 2028. Borrowings under the Credit Facility have maturities of up to one year. We have the option to borrow at rates equal to an applicable margin over the Overnight Bank Funding Rate, the Prime Rate of PNC Bank, National Association or the Adjusted Daily Simple SOFR. The applicable margin is determined by our total leverage ratio. There were no borrowings outstanding under the Credit Facility at August 31, 2024 or May 31, 2024, leaving $500,000 available for use.

Note H – Other Comprehensive Income (Loss)

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


	Three Months Ended
	August 31,
	2024								2023
	Before-Tax			Tax		Net-of-Tax			Before-Tax			Tax			Net-of-Tax
Foreign currency translation	$	(12	)	$	553	$	541		$	1,326		$	118		$	1,444
Pension liability adjustment		(7	)		-		(7	)		-			(3	)		(3	)
Cash flow hedges		(65	)		15		(50	)		(8,811	)		1,962			(6,849	)
Other comprehensive income (loss)	$	(84	)	$	568	$	484		$	(7,485	)	$	2,077		$	(5,408	)

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Note I – Changes in Equity

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


	Controlling Interest
	Additional
	Paid-in			AOCI,		Retained					Noncontrolling
	Capital			Net of Tax		Earnings		Subtotal			Interests			Total
Balance at May 31, 2024	$	299,033		$	454	$	589,392	$	888,879		$	2,133		$	891,012
Net earnings (loss)		-			-		24,253		24,253			(245	)		24,008
Other comprehensive income		-			484		-		484			-			484
Common shares issued, net of withholding tax		(3,158	)		-		-		(3,158	)		-			(3,158	)
Common shares in non-qualified plans		32			-		-		32			-			32
Stock-based compensation