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 February 29, 2024
or
☐ 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 April 3, 2024, the number of common shares, without par value, of the Registrant issued and outstanding was 50,146,357.
TABLE OF CONTENTS
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iii |
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Item 1. |
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Consolidated Balance Sheets – February 29, 2024 and May 31, 2023 |
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2 |
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3 |
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4 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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26 |
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Item 3. |
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38 |
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Item 4. |
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38 |
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Item 1. |
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39 |
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Item 1A. |
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39 |
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Item 2. |
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39 |
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Item 3. |
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40 |
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Item 4. |
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40 |
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Item 5. |
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40 |
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Item 6. |
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41 |
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43 |
i
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) |
ArtiFlex |
|
ArtiFlex Manufacturing, LLC |
AR Facility |
|
Our former revolving trade accounts receivable securitization facility |
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 |
Distribution |
|
The pro-rata distribution of all outstanding shares of Worthington Steel whereby each holder of record of Worthington Enterprises common shares received one common share of Worthington Steel for every one common share of Worthington Enterprises held as of the Record Date. |
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 February 29, 2024 |
fiscal 2023 |
|
Our fiscal year ended May 31, 2023 |
fiscal 2024 |
|
Our fiscal year ending May 31, 2024 |
GAAP |
|
U.S. generally accepted accounting principles |
GDP |
|
Gross domestic product |
HPG |
|
Halo Products Group, 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 |
NYSE |
|
New York Stock Exchange |
OCI |
|
Other comprehensive income (loss) |
PSLRA |
|
Private Securities Litigation Reform Act of 1995, as amended |
Record Date |
|
Close of business on November 21, 2023 |
Samuel |
|
Worthington Samuel Coil Processing LLC |
SEC |
|
Securities and Exchange Commission |
Separation |
|
The separation of our Steel Processing business, effective December 1, 2023 |
Serviacero |
|
Serviacero Planos, S. de R. L. de C.V. |
SG&A |
|
Selling, general and administrative expenses |
SOFR |
|
Secured Overnight Financing Rate |
Spartan |
|
Spartan Steel Coating, L.L.C. |
TWB |
|
TWB Company, L.L.C. |
U.S. |
|
United States of America |
Voestalpine |
|
Voestalpine Automotive Components Nagold GmbH & Co. KG |
WAVE |
|
Worthington Armstrong Venture |
Halo |
|
WH Products, LLC |
Worthington Enterprises |
|
Worthington Enterprises, Inc. (formerly known as Worthington Industries, Inc.) |
Workhorse |
|
Taxi Workhorse Holdings, LLC |
Worthington Steel |
|
Worthington Steel, Inc. |
Worthington Steel Credit Facility |
|
Worthington Steel’s $550,000,000 senior secured revolving credit facility with a group of lenders |
WSP |
|
Worthington Specialty Processing |
2023 Form 10-K |
|
Our Annual Report on Form 10-K for fiscal 2023 as filed with the SEC on July 31, 2023 |
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% and were set to mature on August 10, 2024 |
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% and were scheduled to mature on April 15, 2026 |
ii
SAFE HARBORSTATEMENT
Selected statements contained in this Form 10-Q, including, without limitation, in MD&A, constitute “forward-looking statements,” as that term is used in the PSLRA. The Company wishes to take advantage of the safe harbor provisions included in the Act. Forward-looking statements reflect the Company’s current expectations, estimates or projections concerning future results or events. These statements are often identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “should,” “would,” “intend,” “plan,” “will,” “likely,” “estimate,” “project,” “position,” “strategy,” “target,” “aim,” “seek,” “foresee,” or other similar words or phrases. These forward-looking statements include, without limitation, statements relating to:
Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, those that follow:
iii
iv
The Company notes these risk factors for investors as contemplated by the PSLRA. Forward-looking statements should be construed in the light of such risks. It is impossible to predict or identify all potential risk factors. Consequently, 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. The Company does not undertake, and hereby disclaims, 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.
v
USE OF NON-GAAP FINANCIAL MEASURES AND DEFINITIONS
Adjusted EBITDA
Adjusted EBITDA is defined as adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is calculated by adding or subtracting, as appropriate, interest expense, net, income tax expense, depreciation, and amortization to/from net earnings from continuing operations attributable to controlling interest, which 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 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 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 typically excludes 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 measure. Additionally, management believes these non-GAAP financial measures allow for meaningful comparisons and analysis of trends in our businesses and enables investors to evaluate operations and future prospects in the same manner as management.
Exclusions from adjusted EBITDA
Management believes it is useful to exclude the following items from adjusted EBITDA for its own and investors’ assessment of the business for the reasons identified below:
1
PART I. FINANCIAL INFORMATION
Item 1. – Financial Statements
WORTHINGTON ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
(Unaudited) |
|
|
|
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||
|
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February 29, |
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May 31, |
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2024 |
|
|
2023 |
|
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Assets |
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Current assets: |
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|
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Cash and cash equivalents |
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$ |
227,310 |
|
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$ |
422,268 |
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Receivables, less allowances of $750 and $803 at February 29, 2024 and May 31, 2023, respectively |
|
|
219,389 |
|
|
|
224,863 |
|
Inventories: |
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|
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Raw materials |
|
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74,929 |
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91,988 |
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Work in process |
|
|
18,234 |
|
|
|
19,189 |
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Finished products |
|
|
98,553 |
|
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|
83,322 |
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Total inventories |
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191,716 |
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194,499 |
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Income taxes receivable |
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2,398 |
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|
|
1,681 |
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Prepaid expenses and other current assets |
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|
50,298 |
|
|
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46,301 |
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Current assets of discontinued operations |
|
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- |
|
|
|
978,725 |
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Total current assets |
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691,111 |
|
|
|
1,868,337 |
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Investments in unconsolidated affiliates |
|
|
120,707 |
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|
|
138,041 |
|
Operating lease assets |
|
|
21,285 |
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24,686 |
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Goodwill |
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345,445 |
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|
336,178 |
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Other intangible assets, net of accumulated amortization of $82,190 and $73,308 at February 29, 2024 and |
|
|
226,859 |
|
|
|
230,851 |
|
Other assets |
|
|
30,900 |
|
|
|
14,339 |
|
Property, plant and equipment: |
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Land |
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12,203 |
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|
12,120 |
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Buildings and improvements |
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|
142,522 |
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139,514 |
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Machinery and equipment |
|
|
417,777 |
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|
403,885 |
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Construction in progress |
|
|
39,260 |
|
|
|
24,779 |
|
Total property, plant and equipment |
|
|
611,762 |
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|
|
580,298 |
|
Less: accumulated depreciation |
|
|
343,380 |
|
|
|
323,883 |
|
Total property, plant and equipment, net |
|
|
268,382 |
|
|
|
256,415 |
|
Non-current assets of discontinued operations |
|
|
- |
|
|
|
782,071 |
|
Total assets |
|
$ |
1,704,689 |
|
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$ |
3,650,918 |
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Liabilities and equity |
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Current liabilities: |
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Accounts payable |
|
$ |
108,660 |
|
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$ |
126,743 |
|
Accrued compensation, contributions to employee benefit plans and related taxes |
|
|
47,657 |
|
|
|
46,782 |
|
Dividends payable |
|
|
8,916 |
|
|
|
18,330 |
|
Other accrued items |
|
|
29,697 |
|
|
|
37,801 |
|
Current operating lease liabilities |
|
|
6,555 |
|
|
|
6,682 |
|
Income taxes payable |
|
|
536 |
|
|
|
8,918 |
|
Current maturities of long-term debt |
|
|
267 |
|
|
|
264 |
|
Current liabilities of discontinued operations |
|
|
- |
|
|
|
472,038 |
|
Total current liabilities |
|
|
202,288 |
|
|
|
717,558 |
|
Other liabilities |
|
|
76,300 |
|
|
|
71,766 |
|
Distributions in excess of investment in unconsolidated affiliate |
|
|
116,775 |
|
|
|
117,297 |
|
Long-term debt |
|
|
297,695 |
|
|
|
689,718 |
|
Non-current operating lease liabilities |
|
|
15,103 |
|
|
|
18,326 |
|
Deferred income taxes, net |
|
|
82,086 |
|
|
|
82,356 |
|
Non-current liabilities of discontinued operations |
|
|
- |
|
|
|
132,269 |
|
Total liabilities |
|
|
790,247 |
|
|
|
1,829,290 |
|
Shareholders’ equity - controlling interest |
|
|
912,096 |
|
|
|
1,696,011 |
|
Noncontrolling interests |
|
|
2,346 |
|
|
|
125,617 |
|
Total equity |
|
|
914,442 |
|
|
|
1,821,628 |
|
Total liabilities and equity |
|
$ |
1,704,689 |
|
|
$ |
3,650,918 |
|
See condensed notes to consolidated financial statements.
2
WORTHINGTON ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per common share amounts)
(Unaudited)
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net sales |
$ |
316,755 |
|
|
$ |
346,315 |
|
|
$ |
926,902 |
|
|
$ |
1,049,694 |
|
Cost of goods sold |
|
243,643 |
|
|
|
267,344 |
|
|
|
720,882 |
|
|
|
820,266 |
|
Gross profit |
|
73,112 |
|
|
|
78,971 |
|
|
|
206,020 |
|
|
|
229,428 |
|
Selling, general and administrative expense |
|
65,134 |
|
|
|
71,359 |
|
|
|
210,262 |
|
|
|
211,208 |
|
Impairment of long-lived assets |
|
- |
|
|
|
484 |
|
|
|
- |
|
|
|
484 |
|
Restructuring and other expense (income), net |
|
698 |
|
|
|
823 |
|
|
|
704 |
|
|
|
(354 |
) |
Separation costs |
|
2,999 |
|
|
|
2,305 |
|
|
|
12,465 |
|
|
|
3,572 |
|
Operating income (loss) |
|
4,281 |
|
|
|
4,000 |
|
|
|
(17,411 |
) |
|
|
14,518 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
||||
Miscellaneous income (expense), net |
|
(6,995 |
) |
|
|
217 |
|
|
|
(5,983 |
) |
|
|
(4,499 |
) |
Loss on extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
(1,534 |
) |
|
|
- |
|
Interest expense, net |
|
(50 |
) |
|
|
(4,186 |
) |
|
|
(1,596 |
) |
|
|
(15,689 |
) |
Equity in net income of unconsolidated affiliates |
|
43,235 |
|
|
|
37,111 |
|
|
|
127,328 |
|
|
|
102,004 |
|
Earnings before income taxes |
|
40,471 |
|
|
|
37,142 |
|
|
|
100,804 |
|
|
|
96,334 |
|
Income tax expense |
|
18,471 |
|
|
|
7,391 |
|
|
|
34,041 |
|
|
|
20,709 |
|
Net earnings from continuing operations |
|
22,000 |
|
|
|
29,751 |
|
|
|
66,763 |
|
|
|
75,625 |
|
Net earnings from discontinued operations |
|
- |
|
|
|
20,507 |
|
|
|
83,106 |
|
|
|
59,382 |
|
Net earnings |
|
22,000 |
|
|
|
50,258 |
|
|
|
149,869 |
|
|
|
135,007 |
|
Net earnings attributable to noncontrolling interests |
|
- |
|
|
|
3,933 |
|
|
|
7,460 |
|
|
|
8,382 |
|
Net earnings attributable to controlling interest |
$ |
22,000 |
|
|
$ |
46,325 |
|
|
$ |
142,409 |
|
|
$ |
126,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amounts attributable to controlling interest: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings from continuing operations |
$ |
22,000 |
|
|
$ |
29,751 |
|
|
$ |
66,763 |
|
|
$ |
75,625 |
|
Net earnings from discontinued operations |
|
- |
|
|
|
16,574 |
|
|
|
75,646 |
|
|
|
51,000 |
|
Net earnings attributable to controlling interest |
$ |
22,000 |
|
|
$ |
46,325 |
|
|
$ |
142,409 |
|
|
$ |
126,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share from continuing operations - basic |
$ |
0.45 |
|
|
$ |
0.61 |
|
|
$ |
1.36 |
|
|
$ |
1.56 |
|
Earnings per share from discontinued operations - basic |
|
- |
|
|
|
0.34 |
|
|
|
1.54 |
|
|
|
1.05 |
|
Net earnings per share attributable to controlling interest - basic |
$ |
0.45 |
|
|
$ |
0.95 |
|
|
$ |
2.90 |
|
|
$ |
2.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share from continuing operations - diluted |
$ |
0.44 |
|
|
$ |
0.60 |
|
|
$ |
1.33 |
|
|
$ |
1.53 |
|
Earnings per share from discontinued operations - diluted |
|
- |
|
|
|
0.34 |
|
|
|
1.50 |
|
|
|
1.04 |
|
Net earnings per share attributable to controlling interest - diluted |
$ |
0.44 |
|
|
$ |
0.94 |
|
|
$ |
2.83 |
|
|
$ |
2.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding - basic |
|
49,315 |
|
|
|
48,587 |
|
|
|
49,113 |
|
|
|
48,541 |
|
Weighted average common shares outstanding - diluted |
|
50,417 |
|
|
|
49,493 |
|
|
|
50,271 |
|
|
|
49,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash dividends declared per common share |
$ |
0.16 |
|
|
$ |
0.31 |
|
|
$ |
0.80 |
|
|
$ |
0.93 |
|
See condensed notes to consolidated financial statements.
3
WORTHINGTON ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net earnings |
$ |
22,000 |
|
|
$ |
50,258 |
|
|
$ |
149,869 |
|
|
$ |
135,007 |
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation |
|
(700 |
) |
|
|
1,563 |
|
|
|
1,643 |
|
|
|
(7,680 |
) |
Pension liability adjustment |
|
6,805 |
|
|
|
323 |
|
|
|
6,802 |
|
|
|
3,180 |
|
Cash flow hedges |
|
218 |
|
|
|
34,342 |
|
|
|
6,916 |
|
|
|
17,042 |
|
Other comprehensive income |
|
6,323 |
|
|
|
36,228 |
|
|
|
15,361 |
|
|
|
12,542 |
|
Comprehensive income |
|
28,323 |
|
|
|
86,486 |
|
|
|
165,230 |
|
|
|
147,549 |
|
Comprehensive income attributable to noncontrolling interests |
|
- |
|
|
|
3,933 |
|
|
|
7,460 |
|
|
|
8,382 |
|
Comprehensive income attributable to controlling interest |
$ |
28,323 |
|
|
$ |
82,553 |
|
|
$ |
157,770 |
|
|
$ |
139,167 |
|
See condensed notes to consolidated financial statements.
4
WORTHINGTON ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings |
$ |
22,000 |
|
|
$ |
50,258 |
|
|
$ |
149,869 |
|
|
$ |
135,007 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
11,949 |
|
|
|
28,153 |
|
|
|
68,281 |
|
|
|
84,508 |
|
Impairment of long-lived assets |
|
- |
|
|
|
484 |
|
|
|
1,401 |
|
|
|
796 |
|
Provision for (benefit from) deferred income taxes |
|
4,329 |
|
|
|
(5,525 |
) |
|
|
843 |
|
|
|
(20,198 |
) |
Loss on extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
1,534 |
|
|
|
- |
|
Bad debt expense (income) |
|
24 |
|
|
|
2,346 |
|
|
|
(430 |
) |
|
|
3,786 |
|
Equity in net income of unconsolidated affiliates, net of distributions |
|
(2,926 |
) |
|
|
23,218 |
|
|
|
3,169 |
|
|
|
84,415 |
|
Net loss (gain) on sale of assets |
|
(14 |
) |
|
|
46 |
|
|
|
(348 |
) |
|
|
(4,988 |
) |
Stock-based compensation |
|
2,602 |
|
|
|
4,975 |
|
|
|
13,294 |
|
|
|
13,758 |
|
Changes in assets and liabilities, net of impact of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
||||
Receivables |
|
(18,124 |
) |
|
|
3,382 |
|
|
|
49,737 |
|
|
|
160,475 |
|
Inventories |
|
16,176 |
|
|
|
53,499 |
|
|
|
54,999 |
|
|
|
166,959 |
|
Accounts payable |
|
15,561 |
|
|
|
6,627 |
|
|
|
(59,534 |
) |
|
|
(195,489 |
) |
Accrued compensation and employee benefits |
|
7,190 |
|
|
|
(2,900 |
) |
|
|
(2,030 |
) |
|
|
(33,432 |
) |
Income taxes payable |
|
(725 |
) |
|
|
- |
|
|
|
(7,691 |
) |
|
|
(300 |
) |
Other operating items, net |
|
(7,921 |
) |
|
|
17,588 |
|
|
|
(28,288 |
) |
|
|
833 |
|
Net cash provided by operating activities |
|
50,121 |
|
|
|
182,151 |
|
|
|
244,806 |
|
|
|
396,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Investment in property, plant and equipment |
|
(10,017 |
) |
|
|
(22,748 |
) |
|
|
(72,191 |
) |
|
|
(68,715 |
) |
Acquisitions, net of cash acquired |
|
(8,707 |
) |
|
|
- |
|
|
|
(29,721 |
) |
|
|
(56,088 |
) |
Proceeds from sale of assets, net of selling costs |
|
35 |
|
|
|
51 |
|
|
|
837 |
|
|
|
35,545 |
|
Investment in note receivable |
|
100 |
|
|
|
- |
|
|
|
(14,900 |
) |
|
|
- |
|
Investment in non-marketable equity securities |
|
(75 |
) |
|
|
(20 |
) |
|
|
(1,614 |
) |
|
|
(270 |
) |
Net proceeds from sale of investment in ArtiFlex |
|
- |
|
|
|
(300 |
) |
|
|
- |
|
|
|
35,795 |
|
Excess distributions from unconsolidated affiliate |
|
- |
|
|
|
- |
|
|
|
1,085 |
|
|
|
- |
|
Net cash used by investing activities |
|
(18,664 |
) |
|
|
(23,017 |
) |
|
|
(116,504 |
) |
|
|
(53,733 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
||||
Dividend from Worthington Steel at Separation |
|
150,000 |
|
|
|
- |
|
|
|
150,000 |
|
|
|
- |
|
Distribution to Worthington Steel at Separation |
|
(218,048 |
) |
|
|
- |
|
|
|
(218,048 |
) |
|
|
- |
|
Net proceeds from (repayments of) short-term borrowings (1) |
|
- |
|
|
|
(1,330 |
) |
|
|
172,187 |
|
|
|
(44,392 |
) |
Principal payments on long-term obligations |
|
(150,133 |
) |
|
|
(5,759 |
) |
|
|
(393,890 |
) |
|
|
(5,909 |
) |
Proceeds from issuance of common shares, net of tax withholdings |
|
(1,023 |
) |
|
|
704 |
|
|
|
(15,360 |
) |
|
|
(3,411 |
) |
Payments to noncontrolling interests |
|
- |
|
|
|
- |
|
|
|
(1,920 |
) |
|
|
(11,760 |
) |
Dividends paid |
|
(15,849 |
) |
|
|
(15,101 |
) |
|
|
(48,907 |
) |
|
|
(44,166 |
) |
Net cash used by financing activities |
|
(235,053 |
) |
|
|
(21,486 |
) |
|
|
(355,938 |
) |
|
|
(109,638 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Increase (decrease) in cash and cash equivalents |
|
(203,596 |
) |
|
|
137,648 |
|
|
|
(227,636 |
) |
|
|
232,759 |
|
Cash and cash equivalents at beginning of period |
|
430,906 |
|
|
|
129,596 |
|
|
|
454,946 |
|
|
|
34,485 |
|
Cash and cash equivalents at end of period |
$ |
227,310 |
|
|
$ |
267,244 |
|
|
$ |
227,310 |
|
|
$ |
267,244 |
|
|
The cash flows related to discontinued operations have not been segregated. Accordingly, the consolidated statements of cash flows include the results from continuing and discontinued operations. See “Note B – Discontinued Operations” for a summarization of significant non-cash items related to discontinued operations.
See condensed notes to consolidated financial statements.
5
WORTHINGTON ENTERPRISES, INC.
CONDENSED NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except 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.
Prior to the Separation, we owned controlling interests in the following four joint ventures: Spartan (52%); TWB (55%); Samuel (63%); and WSP (51%). These joint ventures were consolidated with the equity owned by the other joint venture members and shown as noncontrolling interests in our consolidated balance sheet at May 31, 2023, and their portions of net earnings and OCI are shown as net earnings from discontinued operations or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively. As of the Separation, Spartan, TWB, Samuel and WSP became joint ventures of Worthington Steel and are no longer reported in our current results. On February 1, 2024, we acquired an 80% controlling interest in Halo. See further discussion of Halo in “Note P – Acquisitions.”
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 D – 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 three and nine months ended February 29, 2024 are not necessarily indicative of the results that may be expected for fiscal 2024. For further information, refer to the consolidated financial statements and notes thereto included in our 2023 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.
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. There were no contract assets or unbilled receivables at February 29, 2024. Unbilled receivables of $3,708 at May 31, 2023 were attributed to Worthington Steel and recorded in current assets of discontinued operations on the consolidated balance sheet.
The Separation of Worthington Steel
On December 1, 2023, we completed the previously announced Separation of our Steel Processing business segment into a separate public company in a transaction intended to qualify as tax free to our shareholders, which was accomplished via the distribution of 100% of the outstanding common shares of Worthington Steel to holders of record of the Company’s common shares as of the close of business on November 21, 2023. Each holder of record received one share of Worthington Steel for every one share of the Company’s common stock held on the Record Date for the Distribution. Worthington Steel is an independent public company trading under the symbol “WS” on the NYSE.
In connection with the Separation, we entered into several agreements with Worthington Steel, effective November 30, 2023, that, among other things, provide a framework for our relationship with Worthington Steel after the Separation, including a long-term Steel Supply Agreement, a Trademark License Agreement, and Transition Services Agreement.
6
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 three and nine months ended February 29, 2024, totaled $20,274, of which $10,702 was payable at February 29, 2024.
We have incurred direct and incremental costs associated with the Separation, including approximately $30,986 and $15,593 during the nine months ended February 29, 2024, and February 28, 2023, respectively, of which $18,521 and $12,021 have been attributed to discontinued operations. These costs consisted primarily of third-party advisory fees and certain non-recurring employee-related costs and, to the extent not attributed to Worthington Steel, are presented as a separate component of operating expense in our consolidated statements of earnings and held at the corporate level.
Note B - Discontinued Operations
The following table summarizes the assets and liabilities from discontinued operations at May 31, 2023:
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
32,678 |
|
Receivables, less allowances of $2,581 |
|
|
468,024 |
|
Inventories: |
|
|
|
|
Raw materials |
|
|
172,580 |
|
Work in process |
|
|
164,059 |
|
Finished products |
|
|
76,830 |
|
Total inventories |
|
|
413,469 |
|
Income taxes receivable |
|
|
2,517 |
|
Prepaid expenses and other current assets |
|
|
58,656 |
|
Assets held for sale |
|
|
3,381 |
|
Total current assets |
|
|
978,725 |
|
Investments in unconsolidated affiliates |
|
|
114,550 |
|
Operating lease assets |
|
|
75,281 |
|
Goodwill |
|
|
78,642 |
|
Other intangible assets, net of accumulated amortization of $38,894 |
|
|
83,375 |
|
Other assets |
|
|
10,984 |
|
Property, plant and equipment: |
|
|
|
|
Land |
|
|
37,577 |
|
Buildings and improvements |
|
|
169,155 |
|
Machinery and equipment |
|
|
860,077 |
|
Construction in progress |
|
|
20,386 |
|
Total property, plant and equipment |
|
|
1,087,195 |
|
Less: accumulated depreciation |
|
|
667,956 |
|
Total property, plant and equipment, net |
|
|
419,239 |
|
Total assets |
|
$ |
1,760,796 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
402,177 |
|
Short-term borrowings |
|
|
2,813 |
|
Accrued compensation, contributions to employee benefit plans and related taxes |
|
|
47,028 |
|
Other accrued items |
|
|
14,094 |
|
Current operating lease liabilities |
|
|
5,926 |
|
Total current liabilities |
|
|
472,038 |
|
Other liabilities |
|
|
41,520 |
|
Noncurrent operating lease liabilities |
|
|
71,656 |
|
Deferred income taxes, net |
|
|
19,093 |
|
Total liabilities |
|
$ |
604,307 |
|
7
The following table summarizes the financial results from the discontinued operations of Worthington Steel for the periods presented. There were no discontinued operations for the three months ended February 29, 2024.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net sales |
|
$ |
- |
|
|
$ |
757,007 |
|
|
$ |
1,670,027 |
|
|
$ |
2,637,834 |
|
Cost of goods sold |
|
|
- |
|
|
|
692,171 |
|
|
|
1,481,731 |
|
|
|
2,448,319 |
|
Gross profit |
|
|
- |
|
|
|
64,836 |
|
|
|
188,296 |
|
|
|
189,515 |
|
Selling, general and administrative expense |
|
|
- |
|
|
|
34,698 |
|
|
|
74,908 |
|
|
|
106,110 |
|
Impairment of long-lived assets |
|
|
- |
|
|
|
- |
|
|
|
1,401 |
|
|
|
312 |
|
Restructuring and other expense (income) |
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
(4,204 |
) |
Separation costs |
|
|
- |
|
|
|
4,042 |
|
|
|
18,521 |
|
|
|
12,021 |
|
Operating income |
|
|
- |
|
|
|
26,095 |
|
|
|
93,466 |
|
|
|
75,276 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Miscellaneous income, net |
|
|
- |
|
|
|
1,110 |
|
|
|
1,016 |
|
|
|
2,146 |
|
Interest expense, net |
|
|
- |
|
|
|
(1,849 |
) |
|
|
(3,706 |
) |
|
|
(6,557 |
) |
Equity in net income of unconsolidated affiliate |
|
|
- |
|
|
|
(185 |
) |
|
|
12,735 |
|
|
|
3,491 |
|
Earnings before income taxes |
|
|
- |
|
|
|
25,171 |
|
|
|
103,511 |
|
|
|
74,356 |
|
Income tax expense |
|
|
- |
|
|
|
4,664 |
|
|
|
20,405 |
|
|
|
14,974 |
|
Net earnings |
|
|
- |
|
|
|
20,507 |
|
|
|
83,106 |
|
|
|
59,382 |
|
Net earnings attributable to noncontrolling interest |
|
|
- |
|
|
|
3,933 |
|
|
|
7,460 |
|
|
|
8,382 |
|
Net earnings attributable to controlling interest |
|
$ |
- |
|
|
$ |
16,574 |
|
|
$ |
75,646 |
|
|
$ |
51,000 |
|
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 statements of cash flows 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. We did not report any cash flows from discontinued operations during the three months ended February 29, 2024.
The following table summarizes significant non-cash operating items and capital expenditures of discontinued operations included in the consolidated statements of cash flows for the periods presented. There were no discontinued operations for the three months ended February 29, 2024.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Significant non-cash operating items: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
$ |
- |
|
|
$ |
16,260 |
|
|
$ |
32,043 |
|
|
$ |
50,306 |
|
Impairment of long-lived assets |
|
|
- |
|
|
|
- |
|
|
|
1,401 |
|
|
|
312 |
|
Equity in income of unconsolidated affiliate |
|
|
- |
|
|
|
10,185 |
|
|
|
(12,734 |
) |
|
|
6,509 |
|
Net loss (gain) on sale of assets |
|
|
- |
|
|
|
46 |
|
|
|
(412 |
) |
|
|
(3,778 |
) |
Stock-based compensation |
|
|
- |
|
|
|
1,211 |
|
|
|
3,472 |
|
|
|
3,340 |
|
Significant investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment in property, plant and equipment |
|
|
- |
|
|
|
(10,809 |
) |
|
|
(33,457 |
) |
|
|
(36,450 |
) |
Acquisitions, net of cash acquired |
|
|
- |
|
|
|
- |
|
|
|
(21,013 |
) |
|
|
- |
|
Significant financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net proceeds from short-term borrowings |
|
|
- |
|
|
|
- |
|
|
|
172,187 |
|
|
|
- |
|
8
Note C - Inventory
During the third quarter of fiscal 2024, we recognized lower of cost or net realizable charges totaling approximately $1,900 related to propane tanks imported from Europe that had higher than expected transportation costs. These charges were attributed to our Building Products operating segment and were recorded in cost of goods sold in the consolidated statement of earnings during the third quarter of fiscal 2024.
During the second quarter of fiscal 2024, we initiated a recall with the U.S. Consumer Protection Safety Commission for our recently introduced Balloon Time® mini helium tank. We have reserved for the estimated direct and incremental costs expected to be incurred to administer the recall program, which we expect to be immaterial due to the small population of tanks purchased by end consumers. However, we booked a reserve of approximately $3,000 to reflect the impacted inventory at its estimated net realizable value. The adjustment was attributed to our Consumer Products operating segment and was recorded in cost of goods sold in the consolidated statement of earnings during the second quarter of fiscal 2024.
Note D – Investments in Unconsolidated Affiliates
Investments in affiliated companies that we do not control, either through majority ownership or otherwise, are accounted for using the equity method and included the following at February 29, 2024: ClarkDietrich (25%); WAVE (50%); and Workhorse (20%). We held a 50% non-controlling interest in Serviacero prior to the Separation. Equity Income and the related investment have been presented as discontinued operations for all periods presented.
We also held a 50% noncontrolling equity interest in ArtiFlex, through August 3, 2022, when it was purchased by the unrelated joint venture partner. In connection with this transaction, we received net cash proceeds of approximately $35,795 and realized a pre-tax loss of $16,059 within Equity Income, representing the amount by which the book value of our investment exceeded the net cash proceeds.
During the second quarter of fiscal 2024, we recognized a pre-tax gain of $2,780 within Equity Income in connection with the sale of Workhorse’s operations in Brazil.
We received distributions from unconsolidated affiliates totaling $144,317 during the nine months ended February 29, 2024. We have received cumulative distributions from WAVE in excess of our investment balance amounting to $116,775 and $117,297, respectively, at February 29, 2024 and May 31, 2023, which are presented separately within long-term liabilities in our consolidated balance sheets. We will continue to record our equity in the net income of WAVE as a debit to the investment account, and if the investment balance becomes positive, it will be shown as an asset on our consolidated balance sheets. If it becomes probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will recognize any negative investment balance classified as a liability as income immediately.
We use the “cumulative earnings” approach for determining cash flow presentation of distributions from our unconsolidated joint ventures. Distributions received are included in our consolidated statements of cash flows as operating activities, unless the cumulative distributions exceed our portion of the cumulative equity in the net earnings of the joint venture, in which case the “excess” distributions are deemed to be returns of the investment and are classified as investing activities in our consolidated statements of cash flows. During the nine months ended February 29, 2024, we classified $1,085 of “excess” dividends received from WAVE as an investing activity.
The following tables summarize combined financial information for our unconsolidated affiliates included in continuing operations as of the dates, and for the periods presented:
|
|
|
|
February 29, |
|
|
May 31, |
|
||
(In thousands) |
|
|
|
2024 |
|
|
2023 |
|
||
Cash and cash equivalents |
|
|
|
$ |
86,533 |
|
|
$ |
36,988 |
|
Other current assets |
|
|
|
|
574,099 |
|
|
|
661,700 |
|
Non-current assets |
|
|
|
|
324,793 |
|
|
|
335,567 |
|
Total assets |
|
|
|
$ |
985,425 |
|
|
$ |
1,034,255 |
|
|
|
|
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
312,235 |
|
|
|
176,959 |
|
Current maturities of long-term debt |
|
|
|
|
20,500 |
|
|
|
36,936 |
|
Long-term debt |
|
|
|
|
349,377 |
|
|
|
349,215 |
|
Other non-current liabilities |
|
|
|
|
137,275 |
|
|
|
139,228 |
|
Equity |
|
|
|
|
166,038 |
|
|
|
331,917 |
|
Total liabilities and equity |
|
|
|
$ |
985,425 |
|
|
$ |
1,034,255 |
|
9
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||||
|
February 29, |
|
|
February 28, |
|
February 29, |
|
|
February 28, |
|
||||
(In thousands) |
2024 |
|
|
2023 |
|
2024 |
|
|
2023 |
|
||||
Net sales |
$ |
497,938 |
|
|
$ |
511,663 |
|
$ |
1,579,992 |
|
|
$ |
1,727,225 |
|
Gross profit |
|
171,497 |
|
|
|
154,980 |
|
|
492,812 |
|
|
|
467,664 |
|
Operating income |
|
126,377 |
|
|
|
115,286 |
|
|
376,782 |
|
|
|
349,925 |
|
Depreciation and amortization |
|
6,936 |
|
|
|
5,662 |
|
|
21,737 |
|
|
|
18,559 |
|
Interest expense |
|
4,943 |
|
|
|
4,476 |
|
|
15,220 |
|
|
|
10,920 |
|
Income tax expense |
|
549 |
|
|
|
791 |
|
|
1,900 |
|
|
|
1,604 |
|
Net earnings |
|
119,982 |
|
|
|
111,505 |
|
|
360,748 |
|
|
|
342,574 |
|
Note E – Impairment of Long-Lived Assets
During the third quarter of fiscal 2023, we determined that certain assets associated with a capital project at our Building Products facility in Jefferson, Ohio, were impaired. These assets were determined to have no alternative use and were written down to their estimated salvage value of approximately $70 resulting in an impairment charge of $484 during the three months ended February 28, 2023.
Our Sustainable Energy Solutions business continues to operate in a challenging market, driven by continued weakness in overall economic conditions in Europe as well as slow adoption of hydrogen and CNG transportation applications. Management continues to focus on near term cost controls while making investments necessary to maintain its position as a global solutions provider with the scale and expertise to effectively serve the emerging sustainability economy worldwide. We believe the overall long-term outlook for the business is positive and project sufficient future cash flows to support the current carrying value of the business. However, it is at least reasonably possible that continued lower-than-expected volumes and financial results, or a decision to explore strategic alternatives, could change our determination that the assets are not impaired.
Note F – 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 nine months ended February 28, 2024 is summarized below:
(In thousands) |
|
Balance, as of May 31, 2023 |
|
|
Expense |
|
|
Payments |
|
|
Balance, as of February 29, 2024 |
|
||||
Early retirement and severance |
|
$ |
135 |
|
|
$ |
704 |
|
|
$ |
(253 |
) |
|
$ |
586 |
|
The total liability associated with our restructuring activities as of February 29, 2024 is expected to be paid in the next 12 months.
10
Note G – Contingent Liabilities and Commitments
Legal Proceedings
We are defendants in certain legal actions. In the opinion of management, the outcome of these actions, which is not clearly determinable at the present time, would not significantly affect our consolidated financial position or future results of operations. We also believe that environmental issues will not have a material effect on our capital expenditures, consolidated financial position or future results of operations.
Note H – Guarantees
We do not have guarantees that we believe are reasonably likely to have a material current or future effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. However, at February 29, 2024, we were party to an operating lease for an aircraft in which we have 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 $15,796 at February 29, 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 February 29, 2024, we also had in place $12,137 of outstanding stand-by letters of credit issued to third-party service providers. The fair value of these guaranteed instruments, based on premiums paid, was not material and no amounts were drawn against them at February 29, 2024.
Note I – Debt and Receivables Securitization
The following table summarizes our long-term debt outstanding at February 29, 2024 and May 31, 2023:
|
February 29, |
|
May 31, |
|
||
(In thousands) |
2024 |
|
2023 |
|
||
2024 Notes |
|
- |
|
|
150,000 |
|
2026 Notes |
|
- |
|
|
243,623 |
|
4.30% senior notes due August 1, 2032 |
|
200,000 |
|
|
200,000 |
|
2.06% Series A senior note due August 23, 2031 |
|
39,654 |
|
|
39,226 |
|
2.40% Series B senior notes due August 23, 2034 |
|
59,427 |
|
|
58,786 |
|
Other |
|
267 |
|
|
528 |
|
Total debt |
|
299,348 |
|
|
692,163 |
|
Unamortized discount and debt issuance costs |
|
(1,386 |
) |
|
(2,181 |
) |
Total debt, net |
|
297,962 |
|
|
689,982 |
|
Less: current maturities and short-term borrowings |
|
267 |
|
|
264 |
|
Total long-term debt |
$ |
297,695 |
|
$ |
689,718 |
|
Maturities of long-term debt are as follows:
(In thousands) |
|
|
|
2025 |
$ |
267 |
|
2026 |
|
- |
|
2027 |
|
- |
|
2028 |
|
- |
|
2029 |
|
- |
|
Thereafter |
|
299,081 |
|
Total |
$ |
299,348 |
|
11
Long-Term Debt
On April 15, 2014, we issued the 2026 Notes. During fiscal 2023, we purchased approximately $6,377 of the principal amount of the 2026 Notes in open market transactions, leaving $243,623 within long-term debt at May 31, 2023. On June 29, 2023, we notified the trustee under the indenture to which the 2026 Notes are subject that we had elected to redeem in full the 2026 Notes. On July 28, 2023, we redeemed, in full, the 2026 Notes at a price that approximated the par value of the debt of $243,623. In connection with the debt redemption, we recognized a non-cash loss of $1,534 related primarily to unamortized debt issuance costs and amounts deferred in AOCI associated with an interest rate swap executed prior to the issuance of the 2026 Notes.
Other Financing Arrangements
On September 27, 2023, we amended and restated the Credit Facility, extending the final maturity from August 20, 2026 to September 27, 2028, while keeping in place the $500,000 aggregate commitments under the Credit Facility. 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 Simple SOFR, the Prime Rate of PNC Bank, National Association or the Overnight Bank Funding Rate. The applicable margin is determined by our Total Leverage Ratio. There were no borrowings outstanding under the Credit Facility at February 29, 2024, leaving $500,000 available for use.
On May 19, 2022, we entered into the five-year AR Facility that allowed for short-term borrowings of up to $175,000 through the factoring and subsequent sale, on a revolving basis, of eligible accounts receivable of certain of our subsidiaries to Worthington Receivables Company, LLC, a wholly-owned, consolidated, bankruptcy-remote indirect subsidiary. On June 29, 2023, we elected to terminate the AR Facility. No early termination or other similar fees or penalties were paid in connection with the termination.
Note J – Other Comprehensive Income (Loss)
The following table summarizes the tax effects on each component of OCI for the periods presented:
|
Three Months Ended |
|
|||||||||||||||||||||
|
February 29, 2024 |
|
|
February 28, 2023 |
|
||||||||||||||||||
(In thousands) |
Before-Tax |
|
|
Tax |
|
|
Net-of-Tax |
|
|
Before-Tax |
|
|
Tax |
|
|
Net-of-Tax |
|
||||||
Foreign currency translation |
$ |
(615 |
) |
|
$ |
(85 |
) |
|
$ |
(700 |
) |
|
$ |
1,421 |
|
|
$ |
142 |
|
|
$ |
1,563 |
|
Pension liability adjustment |
|
8,927 |
|
|
|
(2,122 |
) |
|
|
6,805 |
|
|
|
415 |
|
|
|
(92 |
) |
|
|
323 |
|
Cash flow hedges |
|
564 |
|
|
|
(346 |
) |
|
|
218 |
|
|
|
43,963 |
|
|
|
(9,621 |
) |
|
|
34,342 |
|
Other comprehensive income (loss) |
$ |
8,876 |
|
|
$ |
(2,553 |
) |
|
$ |
6,323 |
|
|
$ |
45,799 |
|
|
$ |
(9,571 |
) |
|
$ |
36,228 |
|
|
Nine Months Ended |
|
|||||||||||||||||||||
|
February 29, 2024 |
|
|
February 28, 2023 |
|
||||||||||||||||||
(In thousands) |
Before-Tax |
|
|
Tax |
|
|
Net-of-Tax |
|
|
Before-Tax |
|
|
Tax |
|
|
Net-of-Tax |
|
||||||
Foreign currency translation |
$ |
1,555 |
|
|
$ |
88 |
|
|
$ |
1,643 |
|
|
$ |
(7,549 |
) |
|
$ |
(131 |
) |
|
$ |
(7,680 |
) |
Pension liability adjustment |
|
8,927 |
|
|
|
(2,125 |
) |
|
|
6,802 |
|
|
|
4,155 |
|
|
|
(975 |
) |
|
|
3,180 |
|
Cash flow hedges |
|
9,140 |
|
|
|
(2,224 |
) |
|
|
6,916 |
|
|
|
21,201 |
|
|
|
(4,159 |
) |
|
|
17,042 |
|
Other comprehensive income (loss) |
$ |
19,622 |
|
|
$ |
(4,261 |
) |
|
$ |
15,361 |
|
|
$ |
17,807 |
|
|
$ |
(5,265 |
) |
|
$ |
12,542 |
|
12
Note K – Changes in Equity
The following tables summarize the changes in equity by component and in total for the periods presented:
|
|
Controlling Interest |
|
|
|
|
|
|
|
|||||||||||||||
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
||||||
|
|
Paid-in |
|
|
AOCI, |
|
|
Retained |
|
|
|
|
|
controlling |
|
|
|
|
||||||
(In thousands) |
|
Capital |
|
|
Net of Tax |
|
|
Earnings |
|
|
Subtotal |
|
|
Interests |
|
|
Total |
|
||||||
Balance at May 31, 2023 |
|
$ |
290,799 |
|
|
$ |
(23,179 |
) |
|
$ |
1,428,391 |
|
|
$ |
1,696,011 |
|
|
$ |
125,617 |
|
|
$ |
1,821,628 |
|
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
96,106 |
|
|
|
96,106 |
|
|
|
3,597 |
|
|
|
99,703 |
|
Other comprehensive loss |
|
|
- |
|
|
|
(5,408 |
) |
|
|
- |
|
|
|
(5,408 |
) |
|
|
- |
|
|
|
(5,408 |
) |
Common shares issued, net of withholding tax |
|
|
(5,130 |
) |
|
|
- |
|
|
|
- |
|
|
|
(5,130 |
) |
|
|
- |
|
|
|
(5,130 |
) |
Common shares in non-qualified plans |
|
|
130 |
|
|
|
- |
|
|
|
- |
|
|
|
130 |
|
|
|
- |
|
|
|
130 |
|
Stock-based compensation |
|
|
8,995 |
|
|
|
- |
|
|
|
- |
|
|
|
8,995 |
|
|
|
- |
|
|
|
8,995 |
|
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
(16,081 |
) |
|
|
(16,081 |
) |
|
|
- |
|
|
|
(16,081 |
) |
Dividends to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,921 |
) |
|
|
(1,921 |
) |
Balance at August 31, 2023 |
|
$ |
294,794 |
|
|
$ |
(28,587 |
) |
|
$ |
1,508,416 |
|
|
$ |
1,774,623 |
|
|
$ |
127,293 |
|
|
$ |
1,901,916 |
|
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
24,302 |
|
|
|
24,302 |
|
|
|
3,865 |
|
|
|
28,167 |
|
Other comprehensive income |
|
|
- |
|
|
|
14,446 |
|
|
|
- |
|
|
|
14,446 |
|
|
|
- |
|
|
|
14,446 |
|
Common shares issued, net of withholding tax |
|
|
(9,207 |
) |
|
|
- |
|
|
|
- |
|
|
|
(9,207 |
) |
|
|
- |
|
|
|
(9,207 |
) |
Common shares in non-qualified plans |
|
|
195 |
|
|
|
- |
|
|
|
- |
|
|
|
195 |
|
|
|
- |
|
|
|
195 |
|
Stock-based compensation |
|
|
4,511 |
|
|
|
- |
|
|
|
- |
|
|
|
4,511 |
|
|
|
- |
|
|
|
4,511 |
|
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
(16,061 |
) |
|
|
(16,061 |
) |
|
|
- |
|
|
|
(16,061 |
) |
Dividends to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance at November 30, 2023 |
|
$ |
290,293 |
|
|
$ |
(14,141 |
) |
|
$ |
1,516,657 |
|
|
$ |
1,792,809 |
|
|
$ |
131,158 |
|
|
$ |
1,923,967 |
|
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
22,000 |
|
|
|
22,000 |
|
|
|
- |
|
|
|
22,000 |
|
Other comprehensive income |
|
|
- |
|
|
|
6,323 |
|
|
|
- |
|
|
|
6,323 |
|
|
|
- |
|
|
|
6,323 |
|
Common shares issued, net of withholding tax |
|
|
(1,023 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,023 |
) |
|
|
- |
|
|
|
(1,023 |
) |
Common shares in non-qualified plans |
|
|
53 |
|
|
|
- |
|
|
|
- |
|
|
|
53 |
|
|
|
- |
|
|
|
53 |
|
Stock-based compensation |
|
|
2,071 |
|
|
|
- |
|
|
|
- |
|
|
|
2,071 |
|
|
|
- |
|
|
|
2,071 |
|
Separation of Worthington Steel |
|
|
- |
|
|
|
(717 |
) |
|
|
(901,370 |
) |
|
|
(902,087 |
) |
|
|
(128,812 |
) |
|
|
(1,030,899 |
) |
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
(8,050 |
) |
|
|
(8,050 |
) |
|
|
- |
|
|
|
(8,050 |
) |
Balance at February 29, 2024 |
|
$ |
291,394 |
|
|
$ |
(8,535 |
) |
|
$ |
629,237 |
|
|
$ |
912,096 |
|
|
$ |
2,346 |
|
|
$ |
914,442 |
|
|
|
Controlling Interest |
|
|
|
|
|
|
|
|||||||||||||||
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
||||||
|
|
Paid-in |
|
|
AOCI, |
|
|
Retained |
|
|
|
|
|
controlling |
|
|
|
|
||||||
(In thousands) |
|
Capital |
|
|
Net of Tax |
|
|
Earnings |
|
|
Subtotal |
|
|
Interests |
|
|
Total |
|
||||||
Balance at May 31, 2022 |
|
$ |
273,439 |
|
|
$ |
(22,850 |
) |
|
$ |
1,230,163 |
|
|
$ |
1,480,752 |
|
|
$ |
133,210 |
|
|
$ |
1,613,962 |
|
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
64,082 |
|
|
|
64,082 |
|
|
|
1,162 |
|
|
|
65,244 |
|
Other comprehensive loss |
|
|
- |
|
|
|
(20,462 |
) |
|
|
- |
|
|
|
(20,462 |
) |
|
|
- |
|
|
|
(20,462 |
) |
Common shares issued, net of withholding tax |
|
|
(3,466 |
) |
|
|
- |
|
|
|
- |
|
|
|
(3,466 |
) |
|
|
- |
|
|
|
(3,466 |
) |
Common shares in non-qualified plans |
|
|
136 |
|
|
|
- |
|
|
|
- |
|
|
|
136 |
|
|
|
- |
|
|
|
136 |
|
Stock-based compensation |
|
|
6,976 |
|
|
|
- |
|
|
|
- |
|
|
|
6,976 |
|
|
|
- |
|
|
|
6,976 |
|
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
(15,418 |
) |
|
|
(15,418 |
) |
|
|
- |
|
|
|
(15,418 |
) |
Balance at August 31, 2022 |
|
$ |
277,085 |
|
|
$ |
(43,312 |
) |
|
$ |
1,278,827 |
|
|
$ |
1,512,600 |
|
|
$ |
134,372 |
|
|
$ |
1,646,972 |
|
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
16,218 |
|
|
|
16,218 |
|
|
|
3,287 |
|
|
|
19,505 |
|
Other comprehensive loss |
|
|
- |
|
|
|
(3,224 |
) |
|
|
- |
|
|
|
(3,224 |
) |
|
|
- |
|
|
|
(3,224 |
) |
Common shares issued, net of withholding tax |
|
|
(649 |
) |
|
|
- |
|
|
|
- |
|
|
|
(649 |
) |
|
|
- |
|
|
|
(649 |
) |
Common shares in non-qualified plans |
|
|
298 |
|
|
|
- |
|
|
|
- |
|
|
|
298 |
|
|
|
- |
|
|
|
298 |
|
Stock-based compensation |
|
|
3,620 |
|
|
|
- |
|
|
|
- |
|
|
|
3,620 |
|
|
|
- |
|
|
|
3,620 |
|
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
(15,470 |
) |
|
|
(15,470 |
) |
|
|
- |
|
|
|
(15,470 |
) |
Dividends to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(11,760 |
) |
|
|
(11,760 |
) |
Balance at November 30, 2022 |
|
$ |
280,354 |
|
|
$ |
(46,536 |
) |
|
$ |
1,279,575 |
|
|
$ |
1,513,393 |
|
|
$ |
125,899 |
|
|
$ |
1,639,292 |
|
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
46,325 |
|
|
|
46,325 |
|
|
|
3,933 |
|
|
|
50,258 |
|
Other comprehensive income |
|
|
- |
|
|
|
36,228 |
|
|
|
- |
|
|
|
36,228 |
|
|
|
- |
|
|
|
36,228 |
|
Common shares issued, net of withholding tax |
|
|
704 |
|
|
|
- |
|
|
|
- |
|
|
|
704 |
|
|
|
- |
|
|
|
704 |
|
Common shares in non-qualified plans |
|
|
107 |
|
|
|
- |
|
|
|
- |
|
|
|
107 |
|
|
|
- |
|
|
|
107 |
|
Stock-based compensation |
|
|
3,818 |
|
|
|
- |
|
|
|
- |
|
|
|
3,818 |
|
|
|
- |
|
|
|
3,818 |
|
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
(15,149 |
) |
|
|
(15,149 |
) |
|
|
- |
|
|
|
(15,149 |
) |
Balance at February 28, 2023 |
|
$ |
284,983 |
|
|
$ |
(10,308 |
) |
|
$ |
1,310,751 |
|
|
$ |
1,585,426 |
|
|
$ |
129,832 |
|
|
$ |
1,715,258 |
|
13
The following table summarizes the changes in AOCI for the periods presented:
|
|
Foreign |
|
|
Pension |
|
|
|
|
|
|
|
||||
|
|
Currency |
|
|
Liability |
|
|
Cash Flow |
|
|
|
|
||||
(In thousands) |
|
Translation |
|
|
Adjustment |
|
|
Hedges |
|
|
AOCI |
|
||||
Balance at May 31, 2023 |
|
$ |
(22,123 |
) |
|
$ |
(1,730 |
) |
|
$ |
674 |
|
|
$ |
(23,179 |
) |
Other comprehensive income before reclassifications |
|
|
1,555 |
|
|
|
60 |
|
|
|
14,893 |
|
|
|
16,508 |
|
Reclassification adjustments to net earnings (a)(b) |
|
|
- |
|
|
|
8,867 |
|
|
|
(5,753 |
) |
|
|
3,114 |
|
Income tax effect |
|
|
88 |
|
|
|
(2,125 |
) |
|
|
(2,224 |
) |
|
|
(4,261 |
) |
Separation of Worthington Steel |
|
|
10,874 |
|
|
|
(5,984 |
) |
|
|
(5,607 |
) |
|
|
(717 |
) |
Balance at February 29, 2024 |
|
$ |
(9,606 |
) |
|
$ |
(912 |
) |
|
$ |
1,983 |
|
|
$ |
(8,535 |
) |
|
|
Foreign |
|
|
Pension |
|
|
|
|
|
|
|
||||
|
|
Currency |
|
|
Liability |
|
|
Cash Flow |
|
|
|
|
||||
(In thousands) |
|
Translation |
|
|
Adjustment |
|
|
Hedges |
|
|
AOCI |
|
||||
Balance at May 31, 2022 |
|
$ |
(15,310 |
) |
|
$ |
(6,244 |
) |
|
$ |
(1,296 |
) |
|
$ |
(22,850 |
) |
Other comprehensive loss before reclassifications |
|
|
(7,549 |
) |
|
|
(619 |
) |
|
|
(2,999 |
) |
|
|
(11,167 |
) |
Reclassification adjustments to net earnings (a)(b) |
|
|
- |
|
|
|
4,774 |
|
|
|
24,200 |
|
|
|
28,974 |
|
Income tax effect |
|
|
(131 |
) |
|
|
(975 |
) |
|
|
(4,159 |
) |
|
|
(5,265 |
) |
Balance at February 28, 2023 |
|
$ |
(22,990 |
) |
|
$ |
(3,064 |
) |
|
$ |
15,746 |
|
|
$ |
(10,308 |
) |
The consolidated statement of earnings classification of amounts reclassified to net income include:
Note L – Stock-Based Compensation
The Separation of the Steel Processing Business
In connection with the Separation, we adjusted our outstanding share-based awards in accordance with the terms of the Employee Matters Agreement. Adjustments to the underlying shares and terms of outstanding non-qualified stock options, services-based restricted common shares, and performance share awards were made to preserve the intrinsic value of the awards immediately before the Separation. The adjustment of the underlying shares and exercise prices, as applicable, was determined using a ratio based on the relative values of our pre-Distribution common share price and our post-Distribution common share price.
Non-Qualified Stock Options
The table below summarizes our stock option activity during the nine months ended February 29, 2024:
|
|
|
|
Weighted |
|
||
|
|
|
|
Average |
|
||
|
Stock |
|
|
Exercise |
|
||
(In thousands, except per common share amounts) |
Options |
|
|
Price |
|
||
Outstanding - June 1, 2023 |
|
573 |
|
|
$ |
42.61 |
|
Converted to Worthington Steel common shares (1) |
|
(61 |
) |
|
|
51.44 |
|
Separation related adjustment |
|
254 |
|
|
|
- |
|
Granted |
|
58 |
|
|
|
68.68 |
|
Exercised |
|
(126 |
) |
|
|
39.73 |
|
Forfeited |
|
(7 |
) |
|
|
45.91 |
|
Outstanding - February 29, 2024 |
|
691 |
|
|
$ |
28.83 |
|
|
14
During the nine months ended February 29, 2024, we granted non-qualified stock options covering a total of 58 common shares under our stock-based compensation plans. For each grant, the exercise price was equal to the closing market price of the underlying common shares at the respective grant date. The weighted average fair value of these non-qualified stock options, based on the Black-Scholes option-pricing model, calculated at the grant date, was $25.61 per share. The calculated pre-tax stock-based compensation expense for these non-qualified stock options was $1,485 and will be recognized on a straight-line basis over the three-year vesting period, net of any forfeitures. The weighted average fair value of stock options granted during the nine months ended February 29, 2024 was based on the following assumptions:
Dividend yield |
|
|
2.34 |
% |
Expected volatility |
|
|
42.62 |
% |
Risk-free interest rate |
|
|
4.04 |
% |
Expected term (years) |
|
|
6.0 |
|
Expected volatility is based on the historical volatility of the common shares and the risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the non-qualified stock options. The expected term was developed using historical exercise experience.
Service-Based Restricted Common Shares
During the nine months ended February 29, 2024, we granted an aggregate of 214 service-based restricted common shares under our stock-based compensation plans, which cliff vest three years from the grant date. The fair value of these restricted common shares was equal to the weighted average closing market price of the underlying common shares on the grant date, or $64.57 per share. The calculated pre-tax stock-based compensation expense for these restricted common shares was $13,831 and will be recognized on a straight-line basis over the three-year vesting period, net of any forfeitures.
The table below sets forth the service-based restricted common shares for the nine months ended February 29, 2024:
|
|
|
|
Weighted |
|
||
|
Restricted |
|
|
Average |
|
||
|
Common |
|
|
Grant Date |
|
||
(In thousands, except per common share amounts) |
Shares |
|
|
Fair Value |
|
||
Outstanding - June 1, 2023 |
|
800 |
|
|
$ |
47.39 |
|
Converted to Worthington Steel common shares (1) |
|
(296 |
) |
|
|
55.70 |
|
Separation related adjustment |
|
220 |
|
|
|
- |
|
Granted |
|
214 |
|
|
|
64.57 |
|
Vested |
|
(337 |
) |
|
|
39.17 |
|
Forfeited |
|
(20 |
) |
|
|
47.07 |
|
Outstanding - February 29, 2024 |
|
581 |
|
|
$ |
36.34 |
|
|
Performance Share Awards
We have awarded performance shares to certain key employees under our stock-based compensation plans. These performance shares are earned based on the level of achievement with respect to corporate targets for cumulative corporate economic value added, EPS growth and, in the case of business unit executives, a business unit adjusted EBITDA target, in each case for the three-year periods ending May 31, 2024, 2025 and 2026. These performance share awards will be paid, to the extent earned, in common shares in the fiscal quarter following the end of the applicable three-year performance period. The fair values of our performance shares are determined by the closing market prices of the underlying common shares at the respective grant dates of the performance shares and the pre-tax stock-based compensation expense is based on our periodic assessment of the probability of the targets being achieved and our estimate of the number of common shares that will ultimately be issued. The ultimate pre-tax stock-based compensation expense to be recognized over the three-year performance period on all tranches will vary based on our periodic assessment of the probability of the targets being achieved.
15
The table summarizes our performance activity for the nine months ended February 29, 2024.
|
|
|
|
Weighted |
|
||
|
Restricted |
|
|
Average |
|
||
|
Common |
|
|
Grant Date |
|
||
(In thousands, except per common share amounts) |
Shares |
|
|
Fair Value |
|
||
Outstanding - June 1, 2023 |
|
172 |
|
|
$ |
46.37 |
|
Converted to Worthington Steel common shares (1) |
|
(39 |
) |
|
|
56.99 |
|
Separation related adjustment |
|
58 |
|
|
|
- |
|
Granted |
|
113 |
|
|
|
52.73 |
|
Vested |
|
(131 |
) |
|
|
39.93 |
|
Forfeited |
|
(25 |
) |
|
|
36.02 |
|
Outstanding - February 29, 2024 |
|
148 |
|
|
$ |
37.70 |
|
|
Note M – Income Taxes
Income tax expense for the nine months ended February 29, 2024 and February 28, 2023 reflected estimated annual effective income tax rates of 30.8% and 22.6%, respectively. Income tax expense in the current year period was impacted by certain discrete tax items triggered by the Separation, which were primarily non-deductible transaction costs. Our actual effective income tax rate for fiscal 2024 could be materially different from the forecasted rate as of February 29, 2024.
Note N – Earnings per Share
The following table sets forth the computation of basic and diluted EPS attributable to controlling interest for the periods presented:
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
February 29, |
|
|
February 28, |
|
|
February 29, |
|
|
February 28, |
|
||||
(In thousands, except per common share amounts) |
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator (basic & diluted): |
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings from continuing operations |
$ |
22,000 |
|
|
$ |
29,751 |
|
|
$ |
66,763 |
|
|
$ |
75,625 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator for basic EPS from continuing operations - |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares |
|
49,315 |
|
|
|
48,587 |
|
|
|
49,113 |
|
|
|
48,541 |
|
Effect of dilutive securities |
|
1,102 |
|
|
|
906 |
|
|
|
1,158 |
|
|
|
815 |
|
Denominator for diluted EPS from continuing operations - |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares |
|
50,417 |
|
|
|
49,493 |
|
|
|
50,271 |
|
|
|
49,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic EPS from continuing operations |
$ |
0.45 |
|
|
$ |
0.61 |
|
|
$ |
1.36 |
|
|
$ |
1.56 |
|
Diluted EPS from continuing operations |
$ |
0.44 |
|
|
$ |
0.60 |
|
|
$ |
1.33 |
|
|
$ |
1.53 |
|
Stock options covering an aggregate of 55 and 94 common shares for the three months ended February 29, 2024 and February 28, 2023, respectively, and 61 and 89 common shares for the nine months ended February 29, 2024 and February 28, 2023, respectively, have been excluded from the computation of diluted EPS because the effect would have been anti-dilutive for those periods.
Note O – Segment Operations
Our operations are managed principally on a products and services basis. Factors used to identify reportable segments include the nature of the products and services provided by each business, the management reporting structure, similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance. Our operations are organized under three operating segments: Consumer Products, Building Products, and Sustainable Energy Solutions, none of which are aggregated for segment reporting purposes. In prior quarters, we also presented an additional operating segment, Steel Processing, which is no longer a reportable segment as a result of the Separation. The related segment disclosures herein have been updated accordingly, including recasting prior period information to reflect the Steel Processing business as discontinued operations.
16
Segment information is prepared on the same basis that our CODM reviews financial information for operational decision-making purposes. We have identified our Chief Executive Officer as our CODM. Factors used to identify operating segments include the nature of the products and services provided by each business, the management reporting structure, the similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance.
In connection with the Separation, our CODM began evaluating segment operating performance on the basis of adjusted EBITDA, as previously described in the “Use of Non-GAAP Financial Measures and Definitions” section preceding Part I, Item 1 of this Form 10-Q. At the operating segment level, adjusted EBITDA excludes public company and other governance-related costs. Effective December 1, 2023, we also realigned management responsibilities and the internal reporting of our liquified petroleum gas propane tank manufacturing facility in Westerville, Ohio, to fall under our Building Products segment (from Consumer Products). Previously reported results have been recast to reflect these changes.
The following tables presents summarized financial information for our reportable segments for the periods indicated.
|
Three Months Ended February 29, 2024 |
|
||||||||||||||||
(In thousands) |
Consumer Products |
|
|
Building Products |
|
|
Sustainable Energy Solutions |
|
Unallocated Corporate and Other |
|
|
Consolidated (5) |
|
|||||
Net sales |
$ |
133,181 |
|
|
$ |
148,190 |
|
|
$ |
35,384 |
|
$ |
- |
|
|
$ |
316,755 |
|
Restructuring and other expense, net |
|
- |
|
|
|
84 |
|
|
|
- |
|
|
614 |
|
|
|
698 |
|
Separation costs |
|
- |
|
|
|
- |
|
|
|
- |
|
|
2,999 |
|
|
|
2,999 |
|
Miscellaneous income (expense), net |
|
12 |
|
|
|
154 |
|
|
|
328 |
|
|
(7,489 |
) |
|
|
(6,995 |
) |
Equity Income |
|
- |
|
|
|
43,813 |
|
|
|
- |
|
|
(578 |
) |
|
|
43,235 |
|
Adjusted EBITDA (1) |
|
25,649 |
|
|
|
53,059 |
|
|
|
(2,667 |
) |
|
(9,170 |
) |
|
|
66,871 |
|
|
Three Months Ended February 28, 2023 |
|
||||||||||||||||
(In thousands) |
Consumer Products |
|
|
Building Products |
|
|
Sustainable Energy Solutions |
|
Unallocated Corporate and Other |
|
|
Consolidated (5) |
|
|||||
Net sales |
$ |
130,684 |
|
|
$ |
183,839 |
|
|
$ |
31,792 |
|
$ |
- |
|
|
$ |
346,315 |
|
Impairment of long-lived assets |
|
- |
|
|
|
484 |
|
|
|
- |
|
|
- |
|
|
|
484 |
|
Restructuring and other expense, net |
|
206 |
|
|
|
617 |
|
|
|
- |
|
|
- |
|
|
|
823 |
|
Separation costs |
|
- |
|
|
|
- |
|
|
|
- |
|
|
2,305 |
|
|
|
2,305 |
|
Miscellaneous income (expense), net |
|
(12 |
) |
|
|
122 |
|
|
|
(37 |
) |
|
144 |
|
|
|
217 |
|
Equity Income |
|
- |
|
|
|
37,836 |
|
|
|
- |
|
|
(725 |
) |
|
|
37,111 |
|
Adjusted EBITDA (2)(4) |
|
21,100 |
|
|
|
58,097 |
|
|
|
212 |
|
|
(9,193 |
) |
|
|
70,216 |
|
|
Nine Months Ended February 29, 2024 |
|
||||||||||||||||
(In thousands) |
Consumer Products |
|
|
Building Products |
|
|
Sustainable Energy Solutions |
|
Unallocated Corporate and Other |
|
|
Consolidated (5) |
|
|||||
Net sales |
$ |
369,923 |
|
|
$ |
465,421 |
|
|
$ |
91,558 |
|
$ |
- |
|
|
$ |
926,902 |
|
Restructuring and other expense, net |
|
- |
|
|
|
84 |
|
|
|
- |
|
|
620 |
|
|
|
704 |
|
Separation costs |
|
- |
|
|
|
- |
|
|
|
- |
|
|
12,465 |
|
|
|
12,465 |
|
Miscellaneous income (expense), net |
|
49 |
|
|
|
452 |
|
|
|
1,165 |
|
|
(7,649 |
) |
|
|
(5,983 |
) |
Loss on extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
(1,534 |
) |
|
|
(1,534 |
) |
Equity Income |
|
- |
|
|
|
124,032 |
|
|
|
- |
|
|
3,296 |
|
|
|
127,328 |
|
Adjusted EBITDA (1)(2)(3)(4) |
|
52,537 |
|
|
|
158,501 |
|
|
|
(6,434 |
) |
|
(16,775 |
) |
|
|
187,829 |
|
17
|
Nine Months Ended February 29, 2023 |
|
||||||||||||||||
(In thousands) |
Consumer Products |
|
|
Building Products |
|
|
Sustainable Energy Solutions |
|
Unallocated Corporate and Other |
|
|
Consolidated (5) |
|
|||||
Net sales |
$ |
406,479 |
|
|
$ |
542,536 |
|
|
$ |
100,679 |
|
$ |
- |
|
|
$ |
1,049,694 |
|
Impairment of long-lived assets |
|
- |
|
|
|
484 |
|
|
|
- |
|
|
- |
|
|
|
484 |
|
Restructuring and other expense (income), net |
|
206 |
|
|
|
617 |
|
|
|
- |
|
|
(1,177 |
) |
|
|
(354 |
) |
Separation costs |
|
- |
|
|
|
- |
|
|
|
- |
|
|
3,572 |
|
|
|
3,572 |
|
Miscellaneous income (expense), net |
|
(78 |
) |
|
|
405 |
|
|
|
19 |
|
|
(4,845 |
) |
|
|
(4,499 |
) |
Equity Income |
|
- |
|
|
|
116,809 |
|
|
|
- |
|
|
(14,805 |
) |
|
|
102,004 |
|
Adjusted EBITDA (1)(2)(4) |
|
67,846 |
|
|
|
157,458 |
|
|
|
2,932 |
|
|
(15,948 |
) |
|
|
212,288 |
|
|
Total assets for each of our reportable segments at the dates indicated were as follows:
|
February 29, |
|
|
May 31, |
|
||
(In thousands) |
2024 |
|
|
2023 |
|
||
Consumer Products |
$ |
566,715 |
|
|
$ |
544,911 |
|
Building Products |
|
678,699 |
|
|
|
706,169 |
|
Sustainable Energy Solutions |
|
144,543 |
|
|
|
129,872 |
|
Unallocated Corporate and Other |
|
314,732 |
|
|
|
509,170 |
|
Total assets of continuing operations |
$ |
1,704,689 |
|
|
$ |
1,890,122 |
|
18
Note P – Acquisitions
Halo
On February 1, 2024, we acquired an 80% controlling interest in a newly formed joint venture with HPG for total cash consideration of $9,386, of which $679 related to a customer overpayment and was held back at closing. The remaining 20% noncontrolling interest was retained by HPG. Halo is an asset-light business with technology-enabled solutions in the outdoor cooking space with products that include HaloTM branded pizza ovens, pellet grills, griddles and other accessories. Halo is being operated as part of the Consumer Products operating segment and its operating results have been included in our consolidated statement of earnings since the date of acquisition. Pro forma results, including the acquired business since the beginning of fiscal 2023, would not be materially different than the reported results.
The information included herein is based on the preliminary allocation of the purchase price using estimates of the fair value and useful lives of the assets acquired. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets acquired is fully evaluated by us, including but not limited to, the fair value accounting.
The assets acquired and liabilities assumed were recognized at their estimated acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. 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 (i.e., investment value) specific to us, which resulted in a purchase price in excess of the fair value of the identifiable net assets. This additional investment value resulted in goodwill which will be deductible by us for income tax purposes.
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 Halo, we identified and valued the following intangible assets:
|
|
Amount |
|
|
Useful Life |
|
Category |
|
(In thousands) |
|
|
(Years) |
|
Trade name |
|
$ |
3,500 |
|
|
10 |
Product design/Know-how |
|
|
800 |
|
|
8 |
Customer relationships |
|
|
200 |
|
|
8 |
Total acquired identifiable intangible assets |
|
$ |
4,500 |
|
|
|
The following table summarizes the consideration transferred and the estimated fair value assigned to the assets acquired and liabilities assumed at the acquisition date. These amounts reflect various preliminary fair value estimates and assumptions, including preliminary work performed by a third-party valuation specialist, and are subject to change within the measurement period as the valuation is finalized. The primary areas of preliminary purchase price allocation subject to change relate to the valuation of acquired tangible assets and liabilities, identification and valuation of residual goodwill and tax effects of acquired assets and assumed liabilities.
(In thousands) |
|
Preliminary |
|
|
Accounts receivable |
|
$ |
88 |
|
Inventories |
|
|
5,511 |
|
Property, plant and equipment |
|
|
1,732 |
|
Intangible assets |
|
|
4,500 |
|
Total identifiable assets |
|
|
11,831 |
|
Accounts payable |
|
|
(7,293 |
) |
Other accrued items |
|
|
(1,099 |
) |
Net identifiable assets |
|
|
3,439 |
|
Goodwill |
|
|
8,294 |
|
Net assets |
|
|
11,733 |
|
Noncontrolling interest |
|
|
(2,347 |
) |
Total cash consideration |
|
$ |
9,386 |
|
19
Level5
On June 2, 2022, we acquired Level5, a leading provider of drywall tools and related accessories. The total purchase price was $59,321, including $2,000 attributed to an earnout agreement with the selling shareholders, which provides for up to an additional $25,000 of cash consideration should certain earnings targets be met annually through calendar year 2024. The earnout agreement also requires continued employment of a selling shareholder during the duration of the earnout period. Accordingly, payments to this key employee, to the extent earned, will be accounted for as post-combination compensation expense. As of February 29, 2024, no amounts were accrued as compensation expense for anticipated payments under the second earnout period ending December 31, 2023 or the third earnout period ending December 31, 2024.
Level5 is being operated as part of the Consumer Products operating segment and its results have been included in our consolidated statements of earnings since the date of acquisition. Proforma results, including the acquired business since the beginning of fiscal 2022, would not be materially different from the reported results.
The assets acquired and liabilities assumed were recognized at their estimated acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of Level5, we identified and valued the following intangible assets:
|
|
Amount |
|
|
Useful Life |
|
Category |
|
(In thousands) |
|
|
(Years) |
|
Trade name |
|
$ |
13,500 |
|
|
Indefinite |
Customer relationships |
|
|
13,300 |
|
|
10 |
Technological know-how |
|
|
6,500 |
|
|
20 |
Non-compete agreement |
|
|
280 |
|
|
3 |
Total acquired identifiable intangible assets |
|
$ |
33,580 |
|
|
|
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 (i.e., 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 |
|
|
Measurement |
|
|
Final |
|
|||
Cash and cash equivalents |
|
$ |
1,515 |
|
|
$ |
- |
|
|
$ |
1,515 |
|
Accounts receivable |
|
|
2,860 |
|
|
|
- |
|
|
|
2,860 |
|
Inventories |
|
|
9,161 |
|
|
|
- |
|
|
|
9,161 |
|
Prepaid expenses |
|
|
64 |
|
|
|
- |
|
|
|
64 |
|
Property, plant and equipment |
|
|
273 |
|
|
|
- |
|
|
|
273 |
|
Intangible assets |
|
|
33,580 |
|
|
|
- |
|
|
|
33,580 |
|
Operating lease assets |
|
|
377 |
|
|
|
- |
|
|
|
377 |
|
Total identifiable assets |
|
|
47,830 |
|
|
|
- |
|
|
|
47,830 |
|
Accounts payable |
|
|
(3,175 |
) |
|
|
- |
|
|
|
(3,175 |
) |
Accrued expenses |
|
|
(904 |
) |
|
|
151 |
|
|
|
(753 |
) |
Current operating lease liabilities |
|
|
(111 |
) |
|
|
- |
|
|
|
(111 |
) |
Noncurrent operating lease liabilities |
|
|
(266 |
) |
|
|
- |
|
|
|
(266 |
) |
Net identifiable assets |
|
|
43,374 |
|
|
|
151 |
|
|
|
43,525 |
|
Goodwill |
|
|
15,947 |
|
|
|
- |
|
|
|
15,947 |
|
Total purchase price |
|
|
59,321 |
|
|
|
151 |
|
|
|
59,472 |
|
Less: Fair value of earnout |
|
|
(2,000 |
) |
|
|
- |
|
|
|
(2,000 |
) |
Plus: Net working capital deficit |
|
|
282 |
|
|
|
(151 |
) |
|
|
131 |
|
Cash purchase price |
|
$ |
57,603 |
|
|
$ |
- |
|
|
$ |
57,603 |
|
20
Note Q – Derivative Financial Instruments and Hedging Activities
We utilize derivative financial instruments to primarily manage exposure to certain risks related to our ongoing operations. The primary risks managed through the use of derivative financial instruments include interest rate risk, foreign currency exchange rate risk and commodity price risk. While certain of our derivative financial instruments are designated as hedging instruments, we also enter into derivative financial instruments that are designed to hedge a risk, but are not designated as hedging instruments and, therefore, do not qualify for hedge accounting. These derivative financial instruments are adjusted to current fair value through earnings at the end of each period.
Interest Rate Risk Management – We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps and treasury locks to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.
Foreign Currency Exchange Rate Risk Management – We conduct business in several major international currencies and are, therefore, subject to risks associated with changing foreign currency exchange rates. We enter into various contracts that change in value as foreign currency exchange rates change to manage this exposure. Such contracts limit exposure to both favorable and unfavorable currency exchange rate fluctuations. The translation of foreign currencies into U.S. dollars also subjects us to exposure related to fluctuating currency exchange rates; however, derivative financial instruments are not used to manage this risk.
Commodity Price Risk Management – We are exposed to changes in the price of certain commodities, including steel, natural gas, copper, zinc, aluminum 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 overall risk of loss is remote and, in any event, would not be material.
Refer to “Note R – Fair Value” for additional information regarding the accounting treatment for our derivative financial instruments, as well as how fair value is determined. The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at February 29, 2024 and May 31, 2023:
|
|
Fair Value of Assets |
|
|
Fair Value of Liabilities |
|
||||||||||||||
|
|
Balance |
|
|
|
|
|
|
|
Balance |
|
|
|
|
|
|
||||
|
|
Sheet |
|
February 29, |
|
|
May 31, |
|
|
Sheet |
|
February 29, |
|
|
May 31, |
|
||||
(In thousands) |
|
Location |
|
2024 |
|
|
2023 |
|
|
Location |
|
2024 |
|
|
2023 |
|
||||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commodity contracts |
|
Receivables |
|
$ |
1,064 |
|
|
$ |
20 |
|
|
Accounts payable |
|
$ |
115 |
|
|
$ |
4,069 |
|
Commodity contracts |
|
Other assets |
|
|
26 |
|
|
|
- |
|
|
Other liabilities |
|
|
- |
|
|
|
237 |
|
Foreign currency exchange contracts |
|
Receivables |
|
|
- |
|
|
|
- |
|
|
Accounts payable |
|
|
- |
|
|
|
33 |
|
Subtotal |
|
|
|
$ |
1,090 |
|
|
$ |
20 |
|
|
|
|
$ |
115 |
|
|
$ |
4,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commodity contracts |
|
Receivables |
|
$ |
308 |
|
|
$ |
294 |
|
|
Accounts payable |
|
$ |
445 |
|
|
$ |
1,609 |
|
Foreign currency exchange contracts |
|
Receivables |
|
|
- |
|
|
|
- |
|
|
Accounts payable |
|
|
3 |
|
|
|
- |
|
Subtotal |
|
|
|
$ |
308 |
|
|
$ |
294 |
|
|
|
|
$ |
448 |
|
|
$ |
1,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivative financial instruments |
|
|
|
$ |
1,398 |
|
|
$ |
314 |
|
|
|
|
$ |
563 |
|
|
$ |
5,948 |
|
The amounts in the table above reflect the fair value of our derivative financial instruments on a net basis where allowable under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been an increase in receivables with a corresponding increase in accounts payable of $174 and $272 at February 29, 2024 and May 31, 2023, respectively.
21
Cash Flow Hedges
We enter into derivative financial instruments to hedge our exposure to changes in cash flows attributable to commodity price fluctuations associated with certain forecasted transactions. These derivative financial instruments are designated and qualify as cash flow hedges. The earnings effects of these derivative financial instruments are presented in the same statement of earnings line items as the earnings effects of the hedged items. For derivative financial instruments designated as cash flow hedges, we assess hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative financial instruments.
The following table summarizes our cash flow hedges outstanding at February 29, 2024:
|
|
Notional |
|
|
|
|
(In thousands) |
|
Amount |
|
|
Maturity Date(s) |
|
Commodity contracts |
|
$ |
9,113 |
|
|
March 2024 - June 2025 |
The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from AOCI into net earnings for derivative financial instruments designated as cash flow hedges for the periods presented:
(In thousands) |
|
Gain (Loss) |
|
|
Location of Gain (Loss) |
|
Gain (Loss) Reclassified |
|
||
For the three months ended February 29, 2024: |
|
|||||||||
Commodity contracts |
|
$ |
1,944 |
|
|
Cost of goods sold |
|
$ |
1,328 |
|
Interest rate contracts |
|
|
- |
|
|
Interest expense, net |
|
|
52 |
|
Total |
|
$ |
1,944 |
|
|
|
|
$ |
1,380 |
|
|
|
|
|
|
|
|
|
|
||
For the three months ended February 28, 2023: |
|
|||||||||
Commodity contracts |
|
$ |
7,093 |
|
|
Cost of goods sold |
|
$ |
(4,858 |
) |
Interest rate contracts |
|
|
- |
|
|
Interest expense |
|
|
(7 |
) |
Foreign currency exchange contracts |
|
|
66 |
|
|
Miscellaneous income, net |
|
|
67 |
|
Total |
|
$ |
7,159 |
|
|
|
|
$ |
(4,798 |
) |
|
|
|
|
|
|
|
|
|
||
For the nine months ended February 29, 2024: |
|
|||||||||
Commodity contracts |
|
$ |
3,553 |
|
|
Cost of goods sold |
|
$ |
(921 |
) |
Interest rate contracts |
|
|
- |
|
|
Loss on extinguishment of debt |
|
|
(642 |
) |
Interest rate contracts |
|
|
- |
|
|
Interest expense |
|
|
136 |
|
Foreign currency exchange contracts |
|
|
(11 |
) |
|
Cost of goods sold |
|
|
(44 |
) |
Total |
|
$ |
3,542 |
|
|
|
|
$ |
(1,471 |
) |
|
|
|
|
|
|
|
|
|
||
For the nine months ended February 28, 2023: |
|
|||||||||
Commodity contracts |
|
$ |
(7,770 |
) |
|
Cost of goods sold |
|
$ |
(10,925 |
) |
Interest rate contracts |
|
|
- |
|
|
Interest expense |
|
|
(20 |
) |
Foreign currency exchange contracts |
|
|
124 |
|
|
Miscellaneous income, net |
|
|
(7 |
) |
Total |
|
$ |
(7,646 |
) |
|
|
|
$ |
(10,952 |
) |
The estimated net amount of the losses recognized in AOCI at February 29, 2024 expected to be reclassified into net earnings within the succeeding twelve months is $903 (net of tax of $232). This amount was computed using the fair value of the cash flow hedges at February 29, 2024, and will change before actual reclassification from OCI to net earnings during the fiscal years ending May 31, 2024 and May 31, 2025.
22
Economic (Non-designated) Hedges
We enter into foreign currency exchange contracts to manage our foreign currency exchange rate exposure related to inter-company and financing transactions that do not meet the requirements for hedge accounting treatment. We also enter into certain commodity contracts that do not qualify for hedge accounting treatment. Accordingly, these derivative financial instruments are adjusted to current market value at the end of each period through gain (loss) recognized in earnings.
The following table summarizes our economic (non-designated) derivative financial instruments outstanding at February 29, 2024:
|
|
Notional |
|
|
|
|
(In thousands) |
|
Amount |
|
|
Maturity Date(s) |
|
Commodity contracts |
|
$ |
1,648 |
|
|
March 2024 - December 2024 |
Foreign currency exchange contracts |
|
$ |
7,034 |
|
|
March 2024 |
The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments for the periods presented:
|
|
|
|
Gain Recognized |
|
|||||
|
|
|
|
in Earnings for the |
|
|||||
|
|
|
|
Three Months Ended |
|
|||||
|
|
Location of Gain (Loss) |
|
February 29, |
|
|
February 28, |
|
||
(In thousands) |
|
Recognized in Earnings |
|
2024 |
|
|
2023 |
|
||
Commodity contracts |
|
Cost of goods sold |
|
$ |
311 |
|
|
$ |
2,613 |
|
Foreign currency exchange contracts |
|
Miscellaneous income, net |
|
|
(82 |
) |
|
|
79 |
|
Total |
|
|
|
$ |
229 |
|
|
$ |
2,692 |
|
|
|
|
|
Gain (Loss) Recognized |
|
|||||
|
|
|
|
in Earnings for the |
|
|||||
|
|
|
|
Nine Months Ended |
|
|||||
|
|
Location of Gain (Loss) |
|
February 29, |
|
|
February 28, |
|
||
(In thousands) |
|
Recognized in Earnings |
|
2024 |
|
|
2023 |
|
||
Commodity contracts |
|
Cost of goods sold |
|
$ |
(832 |
) |
|
$ |
4,841 |
|
Foreign currency exchange contracts |
|
Miscellaneous income, net |
|
|
(3 |
) |
|
|
32 |
|
Total |
|
|
|
$ |
(835 |
) |
|
$ |
4,873 |
|
Note R – Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is an exit price concept that assumes an orderly transaction between willing market participants and is required to be based on assumptions that market participants would use in pricing an asset or a liability. Current accounting guidance establishes a three-tier fair value hierarchy as a basis for considering such assumptions and for classifying the inputs used in the valuation methodologies. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:
Level 1 – Observable prices in active markets for identical assets and liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
23
Recurring Fair Value Measurements
At February 29, 2024, our assets and liabilities measured at fair value on a recurring basis were as follows:
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
||||
|
|
Quoted Prices |
|
|
Other |
|
|
Significant |
|
|
|
|
||||
|
|
in Active |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
||||
|
|
Markets |
|
|
Inputs |
|
|
Inputs |
|
|
|
|
||||
(In thousands) |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
||||
Assets (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative financial instruments |
|
$ |
- |
|
|
$ |
1,398 |
|
|
$ |
- |
|
|
$ |
1,398 |
|
Total assets |
|
$ |
- |
|
|
$ |
1,398 |
|
|
$ |
- |
|
|
$ |
1,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative financial instruments |
|
$ |
- |
|
|
$ |
563 |
|
|
$ |
- |
|
|
$ |
563 |
|
Total liabilities |
|
$ |
- |
|
|
$ |
563 |
|
|
$ |
- |
|
|
$ |
563 |
|
|
At May 31, 2023, our assets and liabilities measured at fair value on a recurring basis were as follows:
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
||||
|
|
Quoted Prices |
|
|
Other |
|
|
Significant |
|
|
|
|
||||
|
|
in Active |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
||||
|
|
Markets |
|
|
Inputs |
|
|
Inputs |
|
|
|
|
||||
(In thousands) |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
||||
Assets (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative financial instruments |
|
$ |
- |
|
|
$ |
314 |
|
|
$ |
- |
|
|
$ |
314 |
|
Total assets |
|
$ |
- |
|
|
$ |
314 |
|
|
$ |
- |
|
|
$ |
314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative financial instruments |
|
$ |
- |
|
|
$ |
5,948 |
|
|
$ |
- |
|
|
$ |
5,948 |
|
Total liabilities |
|
$ |
- |
|
|
$ |
5,948 |
|
|
$ |
- |
|
|
$ |
5,948 |
|
|
Non-Recurring Fair Value Measurements
At February 29, 2024, there were no assets measured at fair value on a non-recurring basis on our consolidated balance sheet.
At May 31, 2023, our assets measured at fair value on a non-recurring basis were as follows:
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
||||
|
|
Quoted Prices |
|
|
Other |
|
|
Significant |
|
|
|
|
||||
|
|
in Active |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
||||
|
|
Markets |
|
|
Inputs |
|
|
Inputs |
|
|
|
|
||||
(In thousands) |
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Totals |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-lived assets held and used (1) |
|
|
- |
|
|
|
70 |
|
|
|
- |
|
|
|
70 |
|
Total assets |
|
$ |
- |
|
|
$ |
70 |
|
|
$ |
- |
|
|
$ |
70 |
|
|
24
The fair value of non-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables, income taxes receivable, other assets, accounts payable, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities approximate carrying value due to their short-term nature. The fair value of long-term debt, including current maturities, based upon models utilizing market observable (Level 2) inputs and credit risk, was $227,908 and $639,948 at February 29, 2024 and May 31, 2023, respectively. The carrying amount of long-term debt, including current maturities, was $297,962 and $689,982 at February 29, 2024 and May 31, 2023, respectively.
25
Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Selected statements contained in this MD&A constitute “forward-looking statements” as that term is used in the PSLRA. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Safe Harbor Statement” in the beginning of this Form 10-Q and “Part I – Item 1A. – Risk Factors” of the 2023 Form 10-K.
Unless otherwise indicated, all Note references contained in this MD&A refer to the Condensed Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q.
Introduction
The following discussion and analysis of market and industry trends, business developments, and the results of our operations and financial position, should be read in conjunction with our consolidated financial statements and notes thereto included in “Part I – Item 1. – Financial Statements” of this Form 10-Q. The 2023 Form 10-K includes additional information about our business, operations and consolidated financial position and should be read in conjunction with this Form 10-Q. This MD&A is designed to provide a reader with material information relevant to an assessment of our financial condition and results of operations and to allow investors to view the Company from the perspective of management. The results of operations contained in this MD&A include all of our operations, including our former Steel Processing business. Beginning in the third quarter of fiscal 2024, our historical results have been restated to reflect the operations of Worthington Steel as a discontinued operation in periods prior to the December 1, 2023 Separation. This MD&A is divided into six main sections:
Separation of the Steel Processing Business
On December 1, 2023, we completed the previously announced Separation of our Steel Processing business segment into a separate public company in a transaction intended to qualify as tax free to our shareholders, which was accomplished via the distribution of 100% of the outstanding common shares of Worthington Steel to holders of record of the Company’s common shares as of the Record Date. Worthington Steel is an independent public company trading under the symbol “WS” on the NYSE. Following the Separation, Worthington Industries, Inc. changed its name to Worthington Enterprises, Inc. and its common shares continue trading on the NYSE under the ticker symbol “WOR.” Worthington Enterprises is comprised of the Building Products, Consumer Products and Sustainable Energy Solutions businesses. In connection with the Separation, we received a one-time cash dividend of $150.0 million from Worthington Steel to finalize each company’s respective capital structure. The dividend was funded by cash drawn on Worthington Steel Credit Facility of $175.0 million immediately prior to the Distribution.
26
Recent Business Developments
Trends and Factors Impacting our Performance
End Markets and Competition
We sell our products and services to a diverse customer base and a broad range of end markets. These end markets include residential construction, nonresidential construction, and repair and remodel, which drives demand in our Building Products operating segment, including WAVE and ClarkDietrich, our unconsolidated joint ventures; general consumer and outdoor recreation, which drives demand in our Consumer Products operating segment; and renewable energy, which drives demand in our Sustainable Energy Solutions operating segment. Given the broad base of products and services offered, specific competitors vary based on the target industry, product type, service type, size of program and geography. Competition is primarily on the basis of price, product quality and the ability to meet delivery requirements. Our products are priced competitively, primarily based on market factors, including, among other things, market pricing, the cost and availability of raw materials, transportation and shipping costs, and overall economic conditions in the U.S. and abroad. Sales to one customer within Consumer Products represented 12.4% of consolidated net sales during the third quarter of fiscal 2024.
General Economic and Market Conditions
U.S. GDP growth rate trends are generally indicative of the strength in demand and, in many cases, pricing for our products. A year-over-year increase in U.S. GDP growth rates is generally indicative of a stronger economy, which generally increases demand and pricing for our products. Conversely, declining U.S. GDP growth rates generally indicate a weaker economy, which decreases demand and pricing for our products. Changes in U.S. GDP growth rates can also signal changes in conversion costs related to production and in SG&A.
We also closely monitor other publicly available macroeconomic trends that provide insight into the activity in our end markets, including, but not limited to the ABI, the Dodge Momentum Index, the HMI, steel prices, retail sales, state and local government spending, interest rate environment and inflation metrics. Current macro-economic trends within our end markets are described in additional detail below.
Residential Construction: The residential construction sector has demonstrated positive year-over-year growth, with an overall increase in spending since its relative low in the spring of 2023. New housing starts and housing permits issued have also increased during the current year period. The HMI for February 2024 was up for the fourth consecutive month and was at its highest level since August 2023, suggesting improving builder sentiment. Fixed mortgage rates remain too high for many buyers to enter the market; however, data gathered from the Federal Reserve Economic Database, shows a recent decline in the 30-year fixed rate mortgage from 7.22% at November 30, 2023 to 6.94% at February 29, 2024, which may allow more buyers to enter the market.
Non-residential Construction: Non-residential construction spending has shown consistent year-over-year growth. However, the near-term outlook appears to be mixed due to a rise in on-hold projects and delayed bids. Commercial real estate remains generally weak, with notable softness for office buildings, partially offset by strong demand for data centers and manufacturing facilities. The ABI continued to decline in February 2024. However, the decline was the most modest easing in billings since July 2023, suggesting that the recent slowdown may be receding.
Repair and Remodel: Spending on home improvement is expected to decline in the near term, as existing home sales are at multi-decade lows; however, the long-term outlook remains strong due to the aging housing stock, higher interest rates, and tightening of lending policies.
27
General Consumer: Consumer income and debt-to-income ratios are gradually returning to pre-pandemic levels and inflation has moderated recently. However, consumer spending on discretionary items is expected to continue to be under pressure as a higher proportion of income is spent on essential purchases and mortgage payments.
Outdoor: Participation in outdoor recreation is beginning to normalize to pre-pandemic levels as new U.S. camping households, a measure of first time campers, has steadily declined from a high in 2020. The long-term fundamentals in the outdoor category remain strong as outdoor recreation and camping participation continue to grow despite broader economic headwinds.
Renewable Energy: The impact of unprecedented investment in renewable infrastructure will likely become more apparent over the next several years as many jurisdictions around the world have mandated clean energy standards and policies. While regulation could lay the foundation for strong long-term fundamentals, the near-term outlook is mixed, especially in Europe as economies continue to be challenged by the conflict in Ukraine.
Seasonality
Historically, sales tend to be stronger in the third and fourth quarters of our fiscal year for our Consumer Products operating segment when our facilities perform at seasonal peaks, matching consumer demand. Sales in our Building Products operating segment are generally stronger in the first and fourth quarters of our fiscal year due to weather conditions, customer business cycles, and the timing of renovation and new construction projects. Sustainable Energy sales are typically at greater levels during our fiscal fourth quarter due to customer business cycles.
Furthermore, post-pandemic market dynamics, including the impact of pent-up demand as COVID restrictions were eased, resulted in higher-than-normal inventory levels at some of our larger retail and wholesale customers, which has temporarily impacted demand for some of our products in the form of destocking.
Results of Operations
Third Quarter – Fiscal 2024 Compared to Fiscal 2023
The following discussion provides a review of results for the three months ended February 29, 2024 and February 28, 2023:
|
|
Three Months Ended |
|
|||||||||
|
|
February, 29 |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions, except per common share amounts) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Net sales |
|
$ |
316.8 |
|
|
$ |
346.3 |
|
|
$ |
(29.5 |
) |
Operating income |
|
|
4.3 |
|
|
|
4.0 |
|
|
|
0.3 |
|
Equity Income |
|
|
43.2 |
|
|
|
37.1 |
|
|
|
6.1 |
|
Net earnings from continuing operations |
|
|
22.0 |
|
|
|
29.8 |
|
|
|
(7.8 |
) |
EPS from continuing operations - diluted |
|
$ |
0.44 |
|
|
$ |
0.60 |
|
|
$ |
(0.16 |
) |
Net Sales and Volume
The following table provides a breakdown of our consolidated net sales by operating segment for the periods indicated:
|
|
Three Months Ended |
|
|||||||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|
|
|
||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|
% Inc/(Dec) |
|
||||
Consumer Products |
|
$ |
133.2 |
|
|
$ |
130.7 |
|
|
$ |
2.5 |
|
|
|
1.9 |
% |
Building Products |
|
|
148.2 |
|
|
|
183.8 |
|
|
|
(35.6 |
) |
|
|
(19.4 |
%) |
Sustainable Energy Solutions |
|
|
35.4 |
|
|
|
31.8 |
|
|
|
3.6 |
|
|
|
11.3 |
% |
Consolidated Net Sales |
|
$ |
316.8 |
|
|
$ |
346.3 |
|
|
$ |
(29.5 |
) |
|
|
(8.5 |
%) |
28
The following table provides volume (in units) by operating segment for the periods presented:
|
|
Three Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
|
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Consumer Products |
|
|
19,009,883 |
|
|
|
18,154,053 |
|
|
|
855,830 |
|
Building Products |
|
|
3,422,475 |
|
|
|
3,498,992 |
|
|
|
(76,517 |
) |
Sustainable Energy Solutions |
|
|
142,878 |
|
|
|
122,139 |
|
|
|
20,739 |
|
Gross profit
|
|
Three Months Ended |
|
|||||||||||||||||
|
|
February 29, |
|
|
% of |
|
|
February 28, |
|
|
% of |
|
|
Increase/ |
|
|||||
(In millions) |
|
2024 |
|
|
Net sales |
|
|
2023 |
|
|
Net sales |
|
|
(Decrease) |
|
|||||
Gross profit |
|
$ |
73.1 |
|
|
|
23.1 |
% |
|
$ |
79.0 |
|
|
|
22.8 |
% |
|
$ |
(5.9 |
) |
SG&A
|
|
Three Months Ended |
|
|||||||||||||||||
|
|
February 29, |
|
|
% of |
|
|
February 28, |
|
|
% of |
|
|
Increase/ |
|
|||||
(In millions) |
2024 |
|
|
Net sales |
|
|
2023 |
|
|
Net sales |
|
|
(Decrease) |
|
||||||
SG&A |
|
$ |
65.1 |
|
|
|
20.5 |
% |
|
$ |
71.4 |
|
|
|
20.6 |
% |
|
$ |
(6.3 |
) |
Other operating items
|
|
Three Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Impairment of long-lived assets |
|
$ |
- |
|
|
$ |
0.5 |
|
|
$ |
(0.5 |
) |
Restructuring and other expense, net |
|
|
0.7 |
|
|
|
0.8 |
|
|
|
(0.1 |
) |
Separation costs |
|
$ |
3.0 |
|
|
$ |
2.3 |
|
|
$ |
0.7 |
|
29
Miscellaneous expense (income), net
|
|
Three Months Ended |
|
|||||||||
|
|
February, 29 |
|
|||||||||
|
|
|
|
|
|
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Miscellaneous expense (income), net |
|
$ |
7.0 |
|
|
$ |
(0.2 |
) |
|
$ |
7.2 |
|
Interest expense, net
|
|
Three Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Interest expense, net |
|
$ |
0.1 |
|
|
$ |
4.2 |
|
|
$ |
(4.1 |
) |
Equity Income
|
|
Three Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
WAVE |
|
$ |
26.0 |
|
|
$ |
18.9 |
|
|
$ |
7.1 |
|
ClarkDietrich |
|
|
17.8 |
|
|
|
18.9 |
|
|
|
(1.1 |
) |
ArtiFlex |
|
|
- |
|
|
|
(0.3 |
) |
|
|
0.3 |
|
Workhorse |
|
|
(0.6 |
) |
|
|
(0.4 |
) |
|
|
(0.2 |
) |
Total Equity Income |
|
$ |
43.2 |
|
|
$ |
37.1 |
|
|
$ |
6.1 |
|
Income Taxes
|
|
Three Months Ended |
|
|||||||||||||||||
|
|
|
|
|
Estimated |
|
|
|
|
|
Estimated |
|
|
|
|
|||||
|
|
February 29, |
|
|
Effective |
|
|
February 28, |
|
|
Effective |
|
|
Increase/ |
|
|||||
(In millions) |
|
2024 |
|
|
Tax Rate |
|
|
2023 |
|
|
Tax Rate |
|
|
(Decrease) |
|
|||||
Income tax expense |
|
$ |
18.5 |
|
|
|
30.8 |
% |
|
$ |
7.4 |
|
|
|
22.6 |
% |
|
$ |
11.1 |
|
30
Adjusted EBITDA
The following table provides a reconciliation of net earnings from continuing operations (the most comparable GAAP financial measure) to the non-GAAP financial measure of adjusted EBITDA for the periods presented. For additional information regarding our use of non-GAAP financial measures, refer to the “Use of Non-GAAP Financial Measures and Definitions” section preceding Part I, Item 1 of this Form 10-Q.
|
|
Three Months Ended |
|
|||||
|
|
February 29, |
|
|
February 28, |
|
||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Net earnings from continuing operations (GAAP) |
|
$ |
22.0 |
|
|
$ |
29.8 |
|
Interest expense, net |
|
|
0.1 |
|
|
|
4.2 |
|
Income tax expense |
|
|
18.5 |
|
|
|
7.4 |
|
EBIT (subtotal) |
|
|
40.6 |
|
|
|
41.4 |
|
Impairment of long-lived assets |
|
|
- |
|
|
|
0.5 |
|
Restructuring and other income, net |
|
|
0.7 |
|
|
|
0.8 |
|
Separation costs |
|
|
3.0 |
|
|
|
2.3 |
|
True-up of Level5 earnout accrual (1) |
|
|
- |
|
|
|
(1.1 |
) |
Pension settlement charge (2) |
|
|
8.1 |
|
|
|
|
|
Loss on investment in ArtiFlex (3) |
|
|
- |
|
|
|
0.3 |
|
Corporate costs eliminated at Separation (4) |
|
|
- |
|
|
|
10.3 |
|
Adjusted EBIT (subtotal) |
|
|
52.4 |
|
|
|
54.5 |
|
Depreciation and amortization |
|
|
11.9 |
|
|
|
11.9 |
|
Stock-based compensation |
|
|
2.6 |
|
|
|
3.8 |
|
Adjusted EBITDA (non-GAAP) |
|
$ |
66.9 |
|
|
$ |
70.2 |
|
|
The following table provides a summary of adjusted EBITDA by reportable segment, along with the respective percentage of consolidated net sales of each, for the periods presented.
|
|
Three Months Ended |
|
|||||||||||||||||
|
|
February 29, |
|
|
% of |
|
|
February 28, |
|
|
% of |
|
|
Increase/ |
|
|||||
(In millions) |
|
2024 |
|
|
Net sales |
|
|
2023 |
|
|
Net sales |
|
|
(Decrease) |
|
|||||
Consumer Products |
|
$ |
25.6 |
|
|
|
8.1 |
% |
|
$ |
21.1 |
|
|
|
6.1 |
% |
|
$ |
4.5 |
|
Building Products |
|
|
53.1 |
|
|
|
16.8 |
% |
|
|
58.1 |
|
|
|
16.8 |
% |
|
|
(5.0 |
) |
Sustainable Energy Solutions |
|
|
(2.7 |
) |
|
|
(0.9 |
%) |
|
|
0.2 |
|
|
|
0.1 |
% |
|
|
(2.9 |
) |
Unallocated Corporate and Other |
|
|
(9.1 |
) |
|
|
(2.9 |
%) |
|
|
(9.2 |
) |
|
|
(2.7 |
%) |
|
|
0.1 |
|
Total Adjusted EBITDA |
|
$ |
66.9 |
|
|
|
21.1 |
% |
|
$ |
70.2 |
|
|
|
20.3 |
% |
|
$ |
(3.3 |
) |
31
Nine Months Year-to-Date - Fiscal 2024 compared to Fiscal 2023
The following discussion provides a review of results for the nine months ended February 29, 2024 and February 28, 2023.
|
|
Nine Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions, except per common share amounts) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Net sales |
|
$ |
926.9 |
|
|
$ |
1,049.7 |
|
|
$ |
(122.8 |
) |
Operating income (loss) |
|
|
(17.4 |
) |
|
|
14.5 |
|
|
|
(31.9 |
) |
Equity Income |
|
|
127.3 |
|
|
|
102.0 |
|
|
|
25.3 |
|
Net earnings from continuing operations |
|
|
66.8 |
|
|
|
75.6 |
|
|
|
(8.8 |
) |
EPS from continuing operations - diluted |
|
$ |
1.33 |
|
|
$ |
1.53 |
|
|
$ |
(0.20 |
) |
Net Sales and Volume
The following table provides a breakdown of our consolidated net sales by operating segment for the periods indicated:
|
|
Nine Months Ended |
|
|||||||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|
|
|
||||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|
% Inc/(Dec) |
|
||||
Consumer Products |
|
$ |
369.9 |
|
|
$ |
406.5 |
|
|
$ |
(36.6 |
) |
|
|
(9.0 |
%) |
Building Products |
|
|
465.4 |
|
|
|
542.5 |
|
|
|
(77.1 |
) |
|
|
(14.2 |
%) |
Sustainable Energy Solutions |
|
|
91.6 |
|
|
|
100.7 |
|
|
|
(9.1 |
) |
|
|
(9.0 |
%) |
Consolidated Net Sales |
|
$ |
926.9 |
|
|
$ |
1,049.7 |
|
|
$ |
(122.8 |
) |
|
|
(11.7 |
%) |
The following table provides volume by operating segment for the periods presented:
|
|
Nine Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
|
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Consumer Products |
|
|
50,972,515 |
|
|
|
55,067,624 |
|
|
|
(4,095,109 |
) |
Building Products |
|
|
10,578,278 |
|
|
|
10,842,022 |
|
|
|
(263,744 |
) |
Sustainable Energy Solutions |
|
|
363,247 |
|
|
|
410,959 |
|
|
|
(47,712 |
) |
32
Gross Profit
|
|
Nine Months Ended |
|
|||||||||||||||||
|
|
February 29, |
|
|
% of |
|
|
February 28, |
|
|
% of |
|
|
Increase/ |
|
|||||
(In millions) |
|
2024 |
|
|
Net sales |
|
|
2023 |
|
|
Net sales |
|
|
(Decrease) |
|
|||||
Gross profit |
|
$ |
206.0 |
|
|
|
22.2 |
% |
|
$ |
229.4 |
|
|
|
21.9 |
% |
|
$ |
(23.4 |
) |
SG&A
|
|
Nine Months Ended |
|
|||||||||||||||||
|
|
February 29, |
|
|
% of |
|
|
February 28, |
|
|
% of |
|
|
Increase/ |
|
|||||
(In millions) |
2024 |
|
|
Net sales |
|
|
2023 |
|
|
Net sales |
|
|
(Decrease) |
|
||||||
SG&A |
|
$ |
210.3 |
|
|
|
22.7 |
% |
|
$ |
211.2 |
|
|
|
20.1 |
% |
|
$ |
(0.9 |
) |
|
|
Nine Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Impairment of long-lived assets |
|
$ |
- |
|
|
$ |
0.5 |
|
|
$ |
(0.5 |
) |
Restructuring and other expense (income), net |
|
|
0.7 |
|
|
|
(0.4 |
) |
|
|
1.1 |
|
Separation costs |
|
$ |
12.5 |
|
|
$ |
3.6 |
|
|
$ |
8.9 |
|
33
Miscellaneous expense, net
|
|
Nine Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Miscellaneous expense, net |
|
$ |
6.0 |
|
|
$ |
4.5 |
|
|
$ |
1.5 |
|
Loss on extinguishment of debt
|
|
Nine Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Loss on extinguishment of debt |
|
$ |
1.5 |
|
|
$ |
- |
|
|
$ |
1.5 |
|
Interest Expense, net
|
|
Nine Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
Interest expense, net |
|
$ |
1.6 |
|
|
$ |
15.7 |
|
|
$ |
(14.1 |
) |
Equity Income
|
|
Nine Months Ended |
|
|||||||||
|
|
February 29, |
|
|
February 28, |
|
|
Increase/ |
|
|||
(In millions) |
|
2024 |
|
|
2023 |
|
|
(Decrease) |
|
|||
WAVE |
|
$ |
75.8 |
|
|
$ |
61.7 |
|
|
$ |
14.1 |
|
ClarkDietrich |
|
|
48.3 |
|
|
|
55.1 |
|
|
|
(6.8 |
) |
ArtiFlex |
|
|
- |
|
|
|
(13.7 |
) |
|
|
13.7 |
|
Workhorse |
|
|
3.3 |
|
|
|
(1.1 |
) |
|
|
4.4 |
|
Total Equity Income |
|
$ |
127.4 |
|
|
$ |
102.0 |
|
|
$ |
25.4 |
|
34
Income Taxes
|
|
Nine Months Ended |
|
|||||||||||||||||
|
|
|
|
|
Estimated |
|
|
|
|
|
Estimated |
|
|
|
|
|||||
|
|
February 29, |
|
|
Effective |
|
|
February 28, |
|
|
Effective |
|
|
Increase/ |
|
|||||
(In millions) |
|
2024 |
|
|
Tax Rate |
|
|
2023 |
|
|
Tax Rate |
|
|
(Decrease) |
|
|||||
Income tax expense |
|
$ |
34.0 |
|
|
|
30.8 |
% |
|
$ |
20.7 |
|
|
|
22.6 |
% |
|
$ |
13.3 |
|
Adjusted EBITDA
The following table provides a reconciliation of net earnings from continuing operations (the most comparable GAAP financial measure) to adjusted EBITDA for the periods presented. For additional information regarding our use of non-GAAP financial measures refer to the “Use of Non-GAAP Financial Measures and Definitions” section preceding Part I, Item 1 of this Form 10-Q.
|
|
Nine Months Ended |
|
|||||
|
|
February 29, |
|
|
February 28, |
|
||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Net earnings from continuing operations (GAAP) |
|
$ |
66.8 |
|
|
$ |
75.6 |
|
Interest expense, net |
|
|
1.6 |
|
|
|
15.7 |
|
Income tax expense |
|
|
34.0 |
|
|
|
20.7 |
|
EBIT (subtotal) |
|
|
102.4 |
|
|
|
112.0 |
|
Impairment of long-lived assets |
|
|
- |
|
|
|
0.5 |
|
Restructuring and other income, net |
|
|
0.7 |
|
|
|
(0.4 |
) |
Separation costs |
|
|
12.5 |
|
|
|
3.6 |
|
Pension settlement charge (1) |
|
|
8.1 |
|
|
|
4.8 |
|
Loss on sale of investment in ArtiFlex (2) |
|
|
- |
|
|
|
16.1 |
|
Loss on extinguishment of debt (3) |
|
|
1.5 |
|
|
|
- |
|
Corporate costs eliminated at Separation (4) |
|
|
19.4 |
|
|
|
31.1 |
|
Gain on sale of assets in Equity Income (5) |
|
|
(2.8 |
) |
|
|
- |
|
Adjusted EBIT (Subtotal) |
|
|
141.8 |
|
|
|
167.7 |
|
Depreciation and amortization |
|
|
36.2 |
|
|
|
34.2 |
|
Stock-based compensation |
|
|
9.8 |
|
|
|
10.4 |
|
Adjusted EBITDA (non-GAAP) |
|
$ |
187.8 |
|
|
$ |
212.3 |
|
|
35
The following table provides a summary of adjusted EBITDA by reportable segment, along with the respective percentage of consolidated net sales of each, for the periods presented.
|
|
Nine Months Ended |
|
|||||||||||||||||
|
|
February 29, |
|
|
% of |
|
|
February 28, |
|
|
% of |
|
|
Increase/ |
|
|||||
(In millions) |
|
2024 |
|
|
Net sales |
|
|
2023 |
|
|
Net sales |
|
|
(Decrease) |
|
|||||
Consumer Products |
|
$ |
52.5 |
|
|
|
5.7 |
% |
|
$ |
67.8 |
|
|
|
6.5 |
% |
|
$ |
(15.3 |
) |
Building Products |
|
|
158.5 |
|
|
|
17.1 |
% |
|
|
157.5 |
|
|
|
15.0 |
% |
|
|
1.0 |
|
Sustainable Energy Solutions |
|
|
(6.4 |
) |
|
|
(0.7 |
%) |
|
|
2.9 |
|
|
|
0.3 |
% |
|
|
(9.3 |
) |
Unallocated Corporate and Other |
|
|
(16.8 |
) |
|
|
(1.8 |
%) |
|
|
(15.9 |
) |
|
|
(1.5 |
%) |
|
|
(0.9 |
) |
Total Adjusted EBITDA |
|
$ |
187.8 |
|
|
|
20.3 |
% |
|
$ |
212.3 |
|
|
|
20.2 |
% |
|
$ |
(24.5 |
) |
Liquidity and Capital Resources
During the nine months ended February 29, 2024, we generated $244.8 million of cash from operating activities, invested $72.2 million in property, plant and equipment, and spent $29.7 million on acquisitions, which included Worthington Steel’s purchase of Voestalpine for $21.0 million. In connection with the Separation, we distributed $68.0 million to Worthington Steel, net of the $150.0 million one-time special dividend received from Worthington Steel at Separation and funded by the Worthington Steel Credit Facility. Additionally, we redeemed, in full, the 2024 Notes and the 2026 Notes for an aggregate of $393.9 million and paid dividends of $48.9 million on our common shares.
The following table summarizes our consolidated cash flows for the periods presented:
|
|
Nine Months Ended |
|
|||||
(In millions) |
|
2024 |
|
|
2023 |
|
||
Net cash provided by operating activities |
|
$ |
244.8 |
|
|
$ |
396.1 |
|
Net cash used by investing activities |
|
|
(116.5 |
) |
|
|
(53.7 |
) |
Net cash used by financing activities |
|
|
(355.9 |
) |
|
|
(109.6 |
) |
Increase (decrease) in cash and cash equivalents |
|
|
(227.6 |
) |
|
|
232.8 |
|
Cash and cash equivalents at beginning of period |
|
|
454.9 |
|
|
|
34.4 |
|
Cash and cash equivalents at end of period |
|
$ |
227.3 |
|
|
$ |
267.2 |
|
We believe that the available borrowing capacity of the Credit Facility is sufficient to meet the needs of our existing businesses for normal operating costs, mandatory capital expenditures, debt redemptions, dividend payments, working capital, to the extent not funded by cash provided by operating activities, for at least 12 months and for the foreseeable future thereafter. Our resources include cash and cash equivalents and unused committed lines of credit. There were no borrowings outstanding under the Credit Facility at February 29, 2024, leaving up to $500.0 million available for future use.
Although we do not currently anticipate a need, we believe that we could access the financial markets to be in a position to sell long-term debt or equity securities. However, the continuation of soft economic conditions and an uncertain interest rate environment could create volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so.
36
We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. Should we seek additional capital, there can be no assurance that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing shareholders and/or increase our interest costs. We may also from time to time seek to retire or repurchase our outstanding debt through cash purchases, in open-market purchases, privately-negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transaction may or may not be material. To facilitate our post-Separation capital structure, during the first quarter of fiscal 2024, we redeemed in full our 2026 Notes for $243.8 million followed by the early redemption of the 2024 Notes for $150.0 million on December 6, 2023, as further discussed in “Note I – Debt and Receivables Securitization.”
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 arise during periods of increased economic activity or increasing raw material prices, requiring higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.
Net cash provided by operating activities was $244.8 million during the nine months ended February 29, 2024, compared to $396.1 million during the prior year period. This change was primarily due to an $86.7 million increase in net operating working capital (accounts receivable, inventories, and accounts payable) requirements over the prior year period and a decrease in dividends received from our unconsolidated affiliates, down $21.9 million from the prior year period on lower equity earnings.
Investing Activities
Net cash used by investing activities was $116.5 million during the nine months ended February 29, 2024, compared to $53.7 million during the prior year period. Net cash used by investing activities in the current year period resulted primarily from capital expenditures of $72.2 million, investment in notes receivable of $14.9 million, and the acquisitions of Halo and Voestalpine for cash consideration of $8.7 million and $21.0 million, respectively. Net cash used by investing activities in the prior year period resulted from the purchase of the Level5 business on June 2, 2022, for $56.1 million, and capital expenditures of $68.7 million, partially offset by combined cash proceeds of $71.3 million from the sale of our 50% noncontrolling equity investment in ArtiFlex, and the sale of the remaining net assets of our former WSP Jackson, Michigan facility and other long-lived assets.
Investment activities are largely discretionary, and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant. We assess acquisition opportunities as they arise, and such opportunities may require additional financing. There can be no assurance, however, that any such opportunities will arise, that any such acquisition opportunities will be consummated, or that any needed additional financing will be available on satisfactory terms if required.
Financing Activities
Net cash used by financing activities was $355.9 million during the nine months ended February 29, 2024, compared to $109.6 million in the prior year period. The change was primarily due to activity related to the Separation transaction including the net distribution of $68.0 million to Worthington Steel and net proceeds of $172.2 million under Worthington Steel’s short-term credit facilities, which were assumed by Worthington Steel. To facilitate our post-Separation capital structure, we redeemed in full our 2026 Notes for $243.8 million and our 2024 Notes for $150.0 million, as further discussed in “Note I - Debt and Receivables Securitization.”
Common shares – On March 20, 2024, the Board declared a quarterly dividend of $0.16 per common share payable on June 28, 2024, to shareholders of record at the close of business on June 14, 2024.
On March 20, 2019, the Board authorized the repurchase of up to 6.6 million common shares.
On March 24, 2021, the Board authorized the repurchase of up to an additional 5.6 million common shares, increasing the total number of common shares then authorized for repurchase to 10.0 million. As of February 29, 2024, 6.1 million common shares remained available for repurchase under these two authorizations.
37
The common shares may be repurchased under these authorizations from time to time, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flows from operations, general economic conditions and other relevant considerations. Repurchases may be made on the open market or through privately negotiated transactions.
Long-term debt and short-term borrowings – As of February 29, 2024, we were in compliance with the financial covenants of our short-term and long-term debt agreements. Our debt agreements do not include credit rating triggers or material adverse change provisions. There were no outstanding borrowings drawn against the Credit Facility at February 29, 2024, leaving the full borrowing capacity of $500.0 million available for future use.
Dividend Policy
We currently have no material contractual or regulatory restrictions on the payment of dividends. Dividends are declared at the discretion of the Board. The Board reviews the dividend quarterly and establishes the dividend rate based upon our consolidated financial condition, results of operations, capital requirements, current and projected cash flows, business prospects, and other relevant factors. While we have paid a dividend every quarter since becoming a public company in 1968, there is no guarantee that payments of dividends will continue in the future.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates, including those related to our valuation of receivables, inventories, intangible assets, accrued liabilities, income and other tax accruals, contingencies and litigation, and business combinations. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. These results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical accounting policies are defined as those that reflect our significant judgments and uncertainties that could potentially result in materially different results under different assumptions and conditions. Although actual results historically have not deviated significantly from those determined using our estimates, our consolidated financial position or results of operations could be materially different if we were to report under different conditions or to use different assumptions in the application of such policies. Our critical accounting policies have not significantly changed from those discussed in “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of the 2023 Form 10-K.
Item 3. – Quantitative and Qualitative Disclosures About Market Risk
Market risks have not materially changed from those disclosed in “Part II – Item 7A. – Quantitative and Qualitative Disclosures About Market Risk” of the 2023 Form 10-K.
Item 4. – Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports that Worthington Enterprises files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including Worthington Enterprises’ principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management, under the supervision of and with the participation of Worthington Enterprises’ principal executive officer and principal financial officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q (the quarterly period ended February 29, 2024). Based on that evaluation, Worthington Enterprises’ principal executive officer and principal financial officer have concluded that such disclosure controls and procedures were effective at a reasonable assurance level as of the end of the quarterly period covered by this Form 10-Q.
Changes in Internal Control Over Financial Reporting
There were no changes that occurred during the period covered by this Form 10-Q (the quarterly period ended February 29, 2024) in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
PART II. OTHER INFORMATION
Item 1. – Legal Proceedings
We are involved in various judicial and administrative proceedings, as both plaintiff and defendant, arising in the ordinary course of business. We do not believe that any such proceedings will have a material adverse effect on our business, financial position, results of operation or cash flows.
Item 1A. – Risk Factors
There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In “PART I – Item 1A. – Risk Factors” of the 2023 Form 10-K, as filed with the SEC on July 31, 2023, and available at www.sec.gov or at www.worthingtonenterprises.com, we included a detailed discussion of our risk factors. Other than as noted below, our risk factors have not changed significantly from those disclosed in the 2023 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and investments in the common shares and in connection with the forward-looking statements and other information contained in this Form 10-Q. Any of the risks described in the 2023 Form 10-K, as well as the risk described below, could materially affect our business, consolidated financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. The risk factors described in the 2023 Form 10-K and the risk described below are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, consolidated financial condition and/or future results.
Item 2. – Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
There were no equity securities of Worthington Enterprises sold by Worthington Enterprises during the nine months ended February 29, 2024 that were not registered under the Securities Act of 1933, as amended.
Issuer Purchases of Equity Securities
Common shares withheld to cover tax withholding obligations in connection with the vesting of restricted common shares are treated as common share repurchases. Those withheld common shares are not considered common share repurchases under an authorized common share repurchase plan. The table below provides information regarding common shares withheld from our employees to satisfy minimum statutory tax withholding obligations arising from the vesting of restricted common shares. The presentation of the table below and related footnote represents full common share amounts.
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
||||
|
|
|
|
|
|
|
|
Common Shares |
|
|
|
|
||||
|
|
|
|
|
|
|
|
Purchased as |
|
|
Maximum Number of |
|
||||
|
|
Total Number |
|
|
Average Price |
|
|
Part of Publicly |
|
|
Common Shares that |
|
||||
|
|
of Common |
|
|
Paid per |
|
|
Announced |
|
|
May Yet Be |
|
||||
|
Shares |
|
|
Common |
|
|
Plans or |
|
|
Purchased Under the |
|
|||||
Period |
|
Purchased |
|
|
Share |
|
|
Programs |
|
|
Plans or Programs (1) |
|
||||
December 1-31, 2023 |
|
23,602 |
|
|
$ |
51.17 |
|
|
|
- |
|
|
|
6,065,000 |
|
|
January 1-31, 2024 |
|
50 |
|
|
|
57.04 |
|
|
|
- |
|
|
|
6,065,000 |
|
|
February 1-29, 2024 |
|
336 |
|
|
|
62.19 |
|
|
|
- |
|
|
|
6,065,000 |
|
|
Total |
|
|
23,988 |
|
|
$ |
65.72 |
|
|
|
- |
|
|
|
|
|
39
Item 3. – Defaults Upon Senior Securities
Not applicable.
Item 4. – Mine Safety Disclosures
Not applicable.
Item 5. – Other Information
During the quarter ended February 29, 2024, no director or officer (as defined under Rule 16a-1 of the Exchange Act) adopted or terminated any Rule 10b5-1 trading arrangements or any non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
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Item 6. – Exhibits
Exhibit No. |
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Description |
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2.1 |
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3.1 |
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3.2 |
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4.1 |
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4.2 |
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4.3 |
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4.4 |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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10.5 |
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Exhibit No. |
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Description |
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10.6 |
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31.1 |
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Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Executive Officer) * |
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31.2 |
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Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Financial Officer) * |
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32.1 |
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32.2 |
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101.INS |
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XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. |
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104 |
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Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2024, formatted in Inline XBRL (is included within the Exhibit 101 attachments). |
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* Filed herewith.
** Furnished herewith.
† Indicates a management contract or compensatory plan or arrangement.
# Attached as Exhibit 101 to this Form 10-Q are the following documents formatted in Inline XBRL (Extensible Business Reporting Language):
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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WORTHINGTON ENTERPRISES, INC. |
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Date: April 9, 2024 |
By: |
/s/ Joseph B. Hayek |
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Joseph B. Hayek, |
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Vice President and Chief Financial Officer |
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(On behalf of the Registrant as Duly Authorized Officer and as Principal Financial Officer) |
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Exhibit 31.1
RULE 13a-14(a) / 15d-14(a)
CERTIFICATIONS (PRINCIPAL EXECUTIVE OFFICER)
CERTIFICATIONS
I, B. Andrew Rose, certify that:
Date: April 9, 2024 |
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By: |
/s/ B. Andrew Rose |
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B. Andrew Rose, |
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Chief Executive Officer and President |
Exhibit 31.2
RULE 13a-14(a) / 15d-14(a)
CERTIFICATIONS (PRINCIPAL FINANCIAL OFFICER)
CERTIFICATIONS
I, Joseph B. Hayek, certify that:
Date: April 9, 2024 |
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By: |
/s/ Joseph B. Hayek |
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Joseph B. Hayek, |
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Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*
In connection with the Quarterly Report of Worthington Enterprises, Inc. (the “Company”) on Form 10-Q for the quarterly period ended February 29, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, B. Andrew Rose, Chief Executive Officer and President of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
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/s/ B. Andrew Rose |
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Printed Name: B. Andrew Rose |
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Title: Chief Executive Officer and President |
Date: April 9, 2024 |
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*These certifications are being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. These certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Worthington Enterprises, Inc. specifically incorporates these certifications by reference.
Exhibit 32.2
CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*
In connection with the Quarterly Report of Worthington Enterprises, Inc. (the “Company”) on Form 10-Q for the quarterly period ended February 29, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph B. Hayek, Vice President and Chief Financial Officer of the Company, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
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/s/ Joseph B. Hayek |
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Printed Name: Joseph B. Hayek |
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Title: Vice President and Chief Financial Officer |
Date: April 9, 2024 |
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*These certifications are being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. These certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Worthington Enterprises, Inc. specifically incorporates these certifications by reference.