8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 20, 2023

WORTHINGTON STEEL, INC.

(Exact name of Registrant as Specified in Its Charter)

Ohio	001-41830	92-2632000
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
100 Old Wilson Bridge Road
Columbus, Ohio		43085
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: 614 438-3210

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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	WS	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ☐

Item 2.02 Results of Operations and Financial Condition.

On December 21, 2023, Worthington Steel, Inc. (“we," "us," "our," "the Company" and "the registrant") issued a news release (the “Financial News Release”) reporting results for the three months ended November 30, 2023 (the second quarter of fiscal 2024) and the six months ended November 30, 2023. A copy of the Financial News Release is included herewith as Exhibit 99.1 and is incorporated herein by reference.

We conducted a conference call on December 22, 2023 to discuss our unaudited financial results for the second quarter of fiscal 2024 ended November 30, 2023 and addressed certain matters related to the outlook for the coming months. A copy of the transcript of the conference call is included herewith as Exhibit 99.2 and is incorporated herein by reference.

On December 21, 2023 the Company issued a press release and on December 22, 2023 the Company conducted a conference call, both of which disclosed the Company’s second quarter fiscal 2024 results. Subsequent to issuing the press release and conducting the conference call, the Company identified an immaterial error in the number of its common shares issued and outstanding as of November 30, 2023. The number of common shares issued and outstanding as of November 30, 2023 included in the press release was 50,025,115. The correct number of common shares issued and outstanding as of November 30, 2023 was 49,286,517. The Company has updated and annotated the press release and the transcript of the conference call, both of which are furnished with this Current Report on Form 8-K, to reflect the correct number of common shares issued and outstanding and the impacted financial items, all of which were immaterial. The correct number of common shares issued and outstanding as of November 30, 2023, as well as the corresponding financial items, will also be reported in the Company’s Quarterly Report on Form 10-Q for the fiscal period ended November 30, 2023, which the Company anticipates filing on or before January 16, 2024.

We have included both financial measures prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and non-GAAP financial measures in the Financial News Release and the conference call to provide investors with additional information that we believe allows for increased comparability of the performance of our ongoing operations from period to period. Please see the Financial News Release for further explanations of why we use the non-GAAP financial measures and the reconciliations to the most comparable GAAP financial measures.

The information contained in this Item 2.02, including Exhibit 99.1 and Exhibit 99.2, is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, unless we specifically state that the information is to be considered “filed” under the Exchange Act or incorporate the information by reference into a filing under the Exchange Act or the Securities Act of 1933, as amended.

Item 8.01 Other Events.

On December 20, 2023, we issued a news release (the “Dividend Release”) reporting that our Board of Directors declared a quarterly cash dividend of $0.16 per common share. The dividend was declared on December 20, 2023, and is payable on March 28, 2024, to our shareholders of record at the close of business on March 14, 2024. A copy of the Dividend Release is filed herewith as Exhibit 99.3.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

Exhibit No.	Description
99.1	News Release issued by Worthington Steel, Inc. on December 21, 2023 (Financial News Release)
99.2	Transcript of Worthington Steel, Inc. Earnings Conference Call for Second Quarter of Fiscal 2024 (Fiscal Quarter Ended November 30, 2023) held on December 22, 2023
99.3	News Release of Worthington Steel, Inc. on December 20, 2023 (Dividend Release)
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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 hereunto duly authorized.

			WORTHINGTON STEEL, INC.
Date:	December 22, 2023	By:	/s/ Michaune D. Tillman
			Michaune D. Tillman Vice President - General Counsel and Secretary

EX-99.1

EXHIBIT 99.1

 

Worthington Steel Reports Second Quarter Fiscal 2024 Results

COLUMBUS, Ohio, December 21, 2023 – Worthington Steel, Inc. (NYSE: WS) today reported financial results for the fiscal 2024 second quarter ended November 30, 2023. The Company operated as part of Worthington Enterprises, Inc. (formerly Worthington Industries, Inc.) for the entire fiscal 2024 second quarter, and historical financial measures presented in this release were derived from Worthington Enterprises, Inc.'s accounting records and are presented on a carve-out basis.

The Company reported net sales of $808.0 million and net loss attributable to controlling interest of $6.0 million, or $0.12 per diluted share, for its fiscal 2024 second quarter ended November 30, 2023. For the second quarter of fiscal 2023, the Company recorded net sales of $868.4 million and net loss attributable to controlling interest of $15.8 million, or $0.32* per diluted share. Results in both the current year quarter and prior year quarter were impacted by certain items, as summarized in the table below.

*Subsequent to the issuance of the initial financial news release, this item has been revised. Previously, it was denoted as a net loss attributable to controlling interest of $0.31 per diluted share.

(U.S. dollars in millions, except per share amounts)

	2Q 2024							2Q 2023
		After-Tax			Per Share			After-Tax			Per Share
Net earnings (loss) attributable to controlling interest		$	(6.0	)	$	(0.12	)	$	(15.8	)	$	(0.32	)	*
Restructuring and other income, net			-			-			(1.8	)		(0.04	)
Separation costs			11.4			0.23			5.9			0.12
Adjusted net earnings (loss) attributable to controlling interest (Non-GAAP)		$	5.4		$	0.11		$	(11.7	)	$	(0.24	)	*

*Subsequent to the issuance of the initial news release, this item has been revised. Previously, the Net earnings (loss) attributable to controlling interest per share was $0.31, and the Adjusted net earnings (loss) attributable to controlling interests (Non-GAAP) per share was $(0.23).

Financial highlights for the current and comparative periods are as follows:

(U.S. dollars in millions, except per share amounts)

	2Q 2024			2Q 2023				6M 2024			6M 2023
Net sales	$	808.0		$	868.4			$	1,713.8		$	1,943.0
Operating income (loss)		(8.8	)		(19.9	)			60.9			21.0
Equity in net income of unconsolidated affiliate		3.8			1.9				12.8			3.7
Net earnings (loss) attributable to controlling interest		(6.0	)		(15.8	)			52.5			14.4
Earnings (loss) per diluted share attributable to controlling interest	$	(0.12	)	$	(0.32	)	*	$	1.07	*	$	0.29

*Subsequent to the issuance of the initial financial news release, this item has been revised. Previously, the Earnings (loss) per diluted share attributable to controlling interest per share was $(0.31) and $1.05 for 2Q 2023 and 6M 2024, respectively.

"It’s an exciting time to be at Worthington Steel. As we begin our journey as a standalone company, our team is experienced, energized and focused on our customers and shareholders,” said Geoff Gilmore, president and chief executive officer of Worthington Steel. “This quarter we saw net income and direct volume improve compared to the prior year quarter, despite headwinds in our

automotive business due to the UAW strike. I want to thank the employees of Worthington Steel. I’m proud of the team for what they have done to help us achieve this milestone.”

Combined Quarterly Results

Net sales for the second quarter of fiscal 2024 were $808.0 million, a decrease of $60.4 million, or 7%, compared to the prior year quarter. The decrease was driven primarily by an 11.5% decline in direct selling prices, partially offset by a 4.4% increase in direct tons sold in the current quarter compared to the prior year quarter. The mix of direct tons versus toll tons processed was 56% to 44% in the current year quarter, compared to 55% to 45% in the prior year quarter.

Gross margin increased by $25.7 million over the prior year quarter to $60.2 million due to improved spreads and higher direct volume. Direct spreads benefited from an $18.3 million favorable change from an estimated $53.1 million inventory holding loss in the prior year quarter to an estimated $34.8 million inventory holding loss in the current year quarter.

Operating loss improved by $11.1 million over the prior year quarter to $8.8 million, primarily due to improved gross margin partially offset by the $11.2 million combined impact of incremental separation costs and lower restructuring gains compared with the prior year quarter. Excluding these items, adjusted operating income was up $22.3 million primarily due to higher gross margin partially offset by slightly higher selling, general and administrative (SG&A) expense. SG&A expense was up primarily due to increased wage and benefit costs resulting from continued inflationary pressures.

Recent Developments

•On November 16, 2023, the Company acquired Voestalpine Automotive Components Nagold GmbH & Co. KG, a facility in Nagold, Germany. The acquisition establishes a footprint in Europe for Worthington Steel and allows the Company to capitalize on the growing EV and industrial motor markets in that region. Total consideration was approximately $21.0 million, net of cash acquired. Total net assets acquired were $20.4 million, subject to closing adjustments.

•On November 30, 2023, the Company entered into a multi-year senior secured revolving credit facility (the “Credit Facility”) scheduled to mature on November 30, 2028, with a group of lenders. The Credit Facility will allow for borrowings of up to $550 million, to the extent secured by eligible accounts receivable and inventory balances at period end, which consist primarily of U.S. Dollar denominated account balances. Amounts drawn under the Credit Facility will have maturities of up to one year and will accrue interest at rates equal to an applicable margin over the SOFR Rate. The Company incurred approximately $2.7 million of issuance costs, of which $2.5 million will be amortized to interest expense over the expected five-year term and are reflected in other assets. As of November 30, 2023, $175 million was outstanding under the Credit Facility, of which $150 million was paid to Worthington Enterprises, Inc. on December 1, 2023, in connection with the separation of the Company from Worthington Enterprises, Inc.

•On December 1, 2023, the previously announced separation of the Company from Worthington Enterprises, Inc. (formerly known as Worthington Industries, Inc.) was completed, and the Company’s common shares began trading on the New York Stock Exchange under the ticker symbol “WS.”

•On December 1, 2023, Worthington Enterprises, Inc., made a pro rata distribution of 100% of the outstanding common shares of the Company to Worthington Enterprises, Inc. shareholders of record as of the close of business on November 21, 2023, in a spin-off that was generally intended to be tax-free to shareholders for U.S. federal income tax purposes.

Outlook

“Our company is performing well,” Gilmore said. “Worthington Steel employees continue to focus on safety and improvements to our business. We have the right team, the right strategy, and we are laser focused on doing the right thing for our employees, customers and shareholders.”

Conference Call

The Company will review fiscal 2024 second quarter results during its quarterly conference call on December 22, 2023, beginning at 8:30 a.m., Eastern Time. Details regarding the conference call are located in the investor section of the Company website at www.WorthingtonSteel.com.

About Worthington Steel

Worthington Steel (NYSE:WS) is a metals processor that partners with customers to deliver highly technical and customized solutions. Worthington Steel’s expertise in carbon flat-roll steel processing, electrical steel laminations and tailor welded solutions are driving steel toward a more sustainable future.

As one of the most trusted metals processors in North America, Worthington Steel and its 4,600 employees harness the power of steel to advance our customers’ visions through value-added processing capabilities including galvanizing, pickling, configured blanking, specialty cold reduction, lightweighting and electrical lamination. Headquartered in Columbus, Ohio, Worthington operates 32 facilities in seven states and six countries. Following a people-first Philosophy, commitment to sustainability and proven business system, Worthington Steel’s purpose is to generate positive returns by providing trusted and innovative solutions for customers, creating opportunities for employees, and strengthening its communities.

Safe Harbor Statement

Selected statements contained in this release constitute “forward-looking statements,” as that term is used in the Private Securities Litigation Reform Act of 1995 (the “Act”). The Company 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,” “anticipate,” “may,” “could,” “should,” “would,” “intend,” “plan,” “will,” “likely,” “expect,” “estimate,” “project,” “position,” “strategy,” “target,” “aim,” “seek,” “foresee” and similar words or phrases. These forward-looking statements include, without limitation, statements relating to: future or expected cash positions, liquidity and ability to access financial markets and capital; outlook, strategy or business plans; the anticipated benefits of the Company’s separation from Worthington Enterprises, Inc. (the “Separation”); the expected financial and operational performance of, and future opportunities for, the Company following the Separation; the tax treatment of the Separation transaction; the leadership of the Company following the Separation; future or expected growth, growth potential, forward momentum, performance, competitive position, sales, volumes, cash flows, earnings, margins, balance sheet strengths, debt, financial condition or other financial measures; pricing trends for raw materials and finished goods and the impact of pricing changes; the ability to improve or maintain margins; expected demand or demand trends for the Company or its markets; additions to product lines and opportunities to participate in new markets; expected benefits from transformation and innovation efforts; the ability to improve performance and competitive position at the Company’s operations; anticipated working capital needs, capital expenditures and asset sales; anticipated improvements and efficiencies in costs, operations, sales, inventory management, sourcing and the supply chain and the results thereof; projected profitability potential; the ability to make acquisitions and the projected timing, results, benefits, costs, charges and expenditures related to acquisitions, joint ventures, headcount reductions and facility dispositions, shutdowns and consolidations; projected capacity and the alignment of operations with demand; the ability to operate profitably and generate cash in down markets; the ability to capture and maintain market share and to develop or take advantage of future opportunities, customer initiatives, new businesses, new products and new markets; expectations for Company and customer inventories, jobs and orders; expectations for the economy and markets or improvements therein; expectations for generating improving and sustainable earnings, earnings potential, margins or shareholder value; effects of judicial rulings; the ever-changing effects of the novel coronavirus (“COVID-19”) pandemic and the various responses of governmental and nongovernmental authorities thereto on economies and markets, and on our customers, counterparties, employees and third-party service providers; and other non-historical matters.

Because they are based on beliefs, estimates and assumptions, forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Any number of factors could affect actual results, including, without limitation, those that follow: our ability to successfully realize the anticipated benefits of the Separation; the effect of conditions in national and worldwide financial markets, including inflation, increases in interest rates and economic recession, and with respect to the ability of financial institutions to provide capital; the impact of tariffs, the adoption of trade restrictions affecting the Company’s products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships; changing oil prices and/or supply; product demand and pricing; changes in product mix, product substitution and market acceptance of the Company’s products; volatility or fluctuations in the pricing, quality or availability of raw materials (particularly steel), supplies, transportation, utilities, labor and other items required by operations (especially in light of Russia’s invasion of Ukraine); effects of sourcing and supply chain constraints; the outcome of adverse claims experience with respect to workers’ compensation, product recalls or product liability, casualty events or other matters; effects of facility closures and the consolidation of operations; the effect of financial difficulties, consolidation and other changes within the steel, automotive, construction and other industries in which the Company participates; failure to maintain appropriate levels of inventories; financial difficulties (including bankruptcy filings) of original equipment manufacturers, end-users and customers, suppliers, joint venture partners and others with whom the Company does business; the ability to realize targeted expense reductions from headcount reductions, facility closures and other cost reduction efforts; the ability to realize cost savings and operational, sales and sourcing improvements and efficiencies, and other expected benefits from transformation initiatives, on a timely basis; the overall success of, and the ability to integrate, newly acquired businesses and joint ventures, maintain and develop their customers, and achieve synergies and other expected benefits and cost savings therefrom; capacity levels and efficiencies, within facilities, within major product markets and within the industries in which the Company

participates as a whole; the effect of disruption in the business of suppliers, customers, facilities and shipping operations due to adverse weather, casualty events, equipment breakdowns, labor shortages, interruption in utility services, civil unrest, international conflicts (especially in light of Russia’s invasion of Ukraine), terrorist activities or other causes; changes in customer demand, inventories, spending patterns, product choices, and supplier choices; risks associated with doing business internationally, including economic, political and social instability (especially in light of Russia’s invasion of Ukraine), foreign currency exchange rate exposure and the acceptance of the Company’s products in global markets; the ability to improve and maintain processes and business practices to keep pace with the economic, competitive and technological environment; the effect of inflation, interest rate increases and economic recession, as well as potential adverse impacts as a result of the Inflation Reduction Act of 2022, which may negatively impact the Company’s operations and financial results; deviation of actual results from estimates and/or assumptions used by the Company in the application of its significant accounting policies; the level of imports and import prices in the Company’s markets; the impact of environmental laws and regulations or the actions of the United States Environmental Protection Agency or similar regulators which increase costs or limit the Company’s ability to use or sell certain products; the impact of increasing environmental, greenhouse gas emission and sustainability regulations and considerations; the impact of judicial rulings and governmental regulations, both in the United States and abroad, including those adopted by the United States Securities and Exchange Commission (“SEC”) and other governmental agencies as contemplated by the Coronavirus Aid, Relief and Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; the effect of healthcare laws in the United States and potential changes for such laws, which may increase the Company’s healthcare and other costs and negatively impact the Company’s operations and financial results; the effect of tax laws in the United States and potential changes for such laws, which may increase the Company's costs and negatively impact its operations and financial results; cyber security risks; the effects of privacy and information security laws and standards; and other risks described from time to time in the Company’s filings with the SEC, including those described in the “Risk Factors” section of the information statement filed as Exhibit 99.1 to the Company’s Amendment No. 3 to its registration statement on Form 10 filed with the SEC on November 14, 2023.

Forward-looking statements should be construed in the light of such risks. The Company notes these factors for investors as contemplated by the Act. It is impossible to predict or identify all potential risk factors. Consequently, you should not consider the foregoing list to be a complete set of all potential risks and uncertainties. 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.

WORTHINGTON STEEL, INC.CONDENSED COMBINED STATEMENTS OF EARNINGS(In millions, except per share amounts)

(Unaudited)

	Three Months Ended								Six Months Ended
	November 30,								November 30,
	2023				2022				2023				2022
Net sales	$	808.0			$	868.4			$	1,713.8			$	1,943.0
Cost of goods sold		747.8				833.9				1,525.1				1,819.9
Gross margin		60.2				34.5				188.7				123.1
Selling, general and administrative expense		54.1				50.7				107.9				98.0
Impairment of long-lived assets		-				-				1.4				0.3
Restructuring and other income, net		-				(4.3	)			-				(4.2	)
Separation costs		14.9				8.0				18.5				8.0
Operating income (loss)		(8.8	)			(19.9	)			60.9				21.0
Other income (expense):
Miscellaneous income (expense), net		0.6				0.9				1.5				1.1
Interest expense, net		(0.2	)			(0.9	)			(0.7	)			(2.2	)
Equity in net income of unconsolidated affiliate		3.8				1.9				12.8				3.7
Earnings (loss) before income taxes		(4.6	)			(18.0	)			74.5				23.6
Income tax expense (benefit)		(2.5	)			(5.5	)			14.5				4.8
Net earnings (loss)		(2.1	)			(12.5	)			60.0				18.8
Net earnings (loss) attributable to noncontrolling interests		3.9				3.3				7.5				4.4
Net earnings (loss) attributable to controlling interest	$	(6.0	)		$	(15.8	)		$	52.5			$	14.4
Basic
Weighted average common shares outstanding(1)		49.3		*		49.3		*		49.3		*		49.3		*
Earnings (loss) per share attributable to controlling interest	$	(0.12	)		$	(0.32	)	*	$	1.07		*	$	0.29
Diluted
Weighted average common shares outstanding(1)		49.3		*		49.3		*		49.3		*		49.3		*
Earnings (loss) per share attributable to controlling interest	$	(0.12	)		$	(0.32	)	*	$	1.07		*	$	0.29
Common shares outstanding at end of period(1)		49.3		*		49.3		*		49.3		*		49.3		*
Cash dividends declared per share	n/a				n/a				n/a				n/a

(1)Reported Weighted average common shares outstanding and Common shares outstanding at end of period reflect basic shares at the Separation date (December 1, 2023). This share amount is being utilized for the calculation of basic and diluted Earnings (loss) per share for periods presented through the Separation date.

*Subsequent to the issuance of the initial financial news release, this item has been revised. Previously, the Weighted average common shares outstanding (Basic and Diluted) was 50.0 for all periods presented, and the Common shares outstanding at end of period was 50.0 for all periods presented. Additionally, the Earnings (loss) per share attributable to controlling interest (Basic and Diluted) was $(0.31) for the three months ended November 30, 2022, and the Earnings (loss) per share attributable to controlling interest (Basic and Diluted) was $1.05 for the six months ended November 30, 2023.

WORTHINGTON STEEL, INC.CONDENSEDCOMBINED BALANCE SHEETS(In millions, except share amounts)

(Unaudited)

	November 30,		May 31,
	2023		2023
Assets
Current assets:
Cash and cash equivalents	$	214.4	$	32.7
Receivables, less allowances of $2.2 and $2.6 at November 30, 2023 and May 31, 2023, respectively		426.0		468.0
Inventories
Raw materials		160.1		173.9
Work in process		137.3		164.1
Finished products		76.4		76.8
Total inventories		373.8		414.8
Income taxes receivable		4.1		4.3
Assets held for sale		1.8		3.4
Prepaid expenses and other current assets		66.4		57.7
Total current assets		1,086.5		980.9
Investment in unconsolidated affiliate		127.4		114.6
Operating lease assets		72.1		75.3
Goodwill		79.2		78.6
Other intangible assets, net of accumulated amortization of $42.1 and $38.9 at November 30, 2023
and May 31, 2023, respectively		80.2		83.4
Deferred tax asset		6.3		6.3
Other assets		12.3		10.9
Property, plant and equipment:
Land		38.7		37.6
Buildings and improvements		171.5		168.6
Machinery and equipment		868.6		847.5
Construction in progress		42.1		20.3
Total property, plant and equipment		1,120.9		1,074.0
Less: accumulated depreciation		687.5		659.6
Total property, plant and equipment, net		433.4		414.4
Total assets	$	1,897.4	$	1,764.4
Liabilities and equity
Current liabilities:
Accounts payable	$	349.9	$	402.2
Short-term borrowings		175.0		2.8
Accrued compensation, contributions to employee benefit plans and related taxes		29.9		31.9
Other accrued items		14.7		15.6
Current operating lease liabilities		5.8		5.9
Current maturities of long-term debt due to Worthington Enterprises, Inc.		20.0		20.0
Total current liabilities		595.3		478.4
Other liabilities		34.6		33.6
Noncurrent operating lease liabilities		69.0		71.7
Deferred income taxes		27.0		26.1
Total liabilities		725.9		609.8
Preferred shares, without par value; authorized - 1,000,000 shares at November 30, 2023;
no shares issued or outstanding		-		-
Common shares, without par value; authorized - 150,000,000 shares at November 30, 2023; issued
and outstanding 49,286,517* shares and 100 shares at November 30, 2023 and May 31, 2023, respectively		-		-
Net Worthington Enterprises, Inc. investment		1,039.5		1,031.1
Accumulated other comprehensive income (loss), net of taxes of $(3.5) and $(2.6) at November 30, 2023
and May 31, 2023, respectively		0.8		(2.1	)
Total equity - controlling interest		1,040.3		1,029.0
Noncontrolling interests		131.2		125.6
Total equity		1,171.5		1,154.6
Total liabilities and equity	$	1,897.4	$	1,764.4

*Subsequent to the issuance of the initial financial news release, this item has been revised. Previously, the Common Shares - issued and outstanding at November 30, 2023 was 50,025,115.

WORTHINGTON STEEL, INC.CONDENSED COMBINED STATEMENTS OF CASH FLOWS(In millions)

(Unaudited)

	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2023			2022			2023			2022
Operating activities:
Net earnings (loss)	$	(2.1	)	$	(12.5	)	$	60.0		$	18.8
Adjustment to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization		16.4			17.8			33.3			35.5
Impairment of long-lived assets		-			-			1.4			0.3
Benefit from deferred income taxes		(0.1	)		(0.1	)		(0.2	)		(0.2	)
Bad debt expense (income)		0.3			1.0			(0.4	)		1.3
Equity in net income of unconsolidated affiliate, net of distributions		(3.8	)		(1.9	)		(12.8	)		(3.7	)
Net gain on sale of assets		(0.4	)		(3.8	)		(0.4	)		(3.8	)
Stock-based compensation		3.3			2.5			6.1			4.8
Changes in assets and liabilities, net of impact of acquisitions:
Receivables		89.4			98.9			56.5			114.0
Inventories		91.5			86.9			48.3			145.1
Accounts payable		(53.5	)		(84.4	)		(49.9	)		(176.1	)
Accrued compensation and employee benefits		0.8			1.3			(2.7	)		(5.5	)
Other operating items, net		(1.9	)		(2.4	)		(20.0	)		(13.0	)
Net cash provided by operating activities		139.9			103.3			119.2			117.5
Investing activities:
Investment in property, plant and equipment		(18.9	)		(14.5	)		(36.2	)		(25.6	)
Proceeds from sale of assets, net of selling costs		0.8			23.2			0.8			23.2
Acquisitions, net of cash acquired		(21.0	)		-			(21.0	)		-
Net cash provided by (used in) investing activities		(39.1	)		8.7			(56.4	)		(2.4	)
Financing activities:
Transfers to Worthington Enterprises, Inc., net		(88.8	)		(75.3	)		(51.4	)		(39.2	)
Proceeds from (repayment of) short-term borrowings		175.0			(10.6	)		172.2			(43.1	)
Principal payments on long-term debt		-			(10.0	)		-			(10.0	)
Payments to noncontrolling interests		-			(11.8	)		(1.9	)		(11.8	)
Net cash provided by (used in) financing activities		86.2			(107.7	)		118.9			(104.1	)
Increase (decrease) in cash and cash equivalents		187.0			4.3			181.7			11.0
Cash and cash equivalents at beginning of period		27.4			26.8			32.7			20.1
Cash and cash equivalents at end of period	$	214.4		$	31.1		$	214.4		$	31.1

WORTHINGTON STEEL, INC.NON-GAAP FINANCIAL MEASURES / SUPPLEMENTAL DATA(In millions, except volume and per share amounts)

The Company reports its financial results in accordance with accounting principles generally accepted in the United States (GAAP). The Company also presents certain non-GAAP financial measures including (a) adjusted operating income, (b) adjusted earnings before income taxes, (c) adjusted income tax expense (benefit), (d) adjusted net earnings attributable to controlling interest (e) adjusted net earnings per diluted share attributable to controlling interest, (f) adjusted net earnings before interest and taxes attributable to controlling interest (“adjusted EBIT”), (g) adjusted net earnings before interest, taxes, depreciation and amortization attributable to controlling interest (“adjusted EBITDA”), (h) pro forma adjusted net earnings before interest and taxes attributable to controlling interest ("pro forma adjusted EBIT") and (i) free cash flow.

These non-GAAP financial measures typically exclude impairment and restructuring charges (gains), but may also exclude other items that management believes are not reflective of, and thus should not be included when evaluating the performance of the Company’s ongoing operations. Management uses these non-GAAP financial measures to evaluate the Company’s performance, engage in financial and operational planning, and determine incentive compensation and believes these non-GAAP financial measures provide useful information to investors because they provide additional perspective of the performance of the Company’s ongoing operations. Additionally, management believes these non-GAAP financial measures provide useful information to investors because they allow for meaningful comparisons and analysis of trends in the Company’s businesses and enables investors to evaluate operations and future prospects in the same manner as management.

For the purposes of the subsequent tables, the below non-GAAP measures have been adjusted for the reasons identified below:

•Impairment of long-lived assets - impairments are excluded because they do not occur in the ordinary course of the Registrant’s ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, so their exclusion facilitates the comparison of historical and current financial results.

•Restructuring activities - these activities consist of established programs that are not part of the Company's ongoing operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions).

•Separation Costs - direct and incremental costs incurred in connection with the Separation from Worthington Enterprises, Inc., including audit, legal, and other fees paid to third-party advisors as well as direct and incremental costs associated with the separation of shared corporate functions which are not part of the Registrant’s ongoing operations.

The following provides a reconciliation to adjusted operating income (loss), adjusted earnings (loss) before income taxes, adjusted income tax expense (benefit), adjusted net earnings (loss) attributable to controlling interest and adjusted net earnings (loss) per diluted share attributable to controlling interest from the most comparable GAAP measures for the three months ended November 30, 2023 and November 30, 2022.

	Three Months Ended November 30, 2023
	Operating Income (Loss)			Earnings (Loss) Before Income Taxes			Income Tax Expense (Benefit)			Net Earnings (Loss) Attributable to Controlling Interest			Net Earnings (Loss) per Diluted Share Attributable to Controlling Interest
GAAP	$	(8.8	)	$	(4.6	)	$	(2.5	)	$	(6.0	)	$	(0.12	)
Separation costs		14.9			14.9			(3.5	)		11.4			0.23
Non-GAAP	$	6.1		$	10.3		$	(6.0	)	$	5.4		$	0.11

	Three Months Ended November 30, 2022
	Operating Income (Loss)			Earnings (Loss) Before Income Taxes			Income Tax Expense (Benefit)			Net Earnings (Loss) Attributable to Controlling Interest			Net Earnings (Loss) per Diluted Share Attributable to Controlling Interest
GAAP	$	(19.9	)	$	(18.0	)	$	(5.5	)	$	(15.8	)	$	(0.32	)	*
Restructuring and other income, net		(4.3	)		(4.3	)		0.6			(1.8	)		(0.04	)
Separation costs		8.0			8.0			(2.1	)		5.9			0.12
Non-GAAP	$	(16.2	)	$	(14.3	)	$	(7.0	)	$	(11.7	)	$	(0.24	)	*

*Subsequent to the issuance of the initial financial news release, this item has been revised. Previously, the Net earnings (loss) per Diluted Share Attributable to Controlling Interest (GAAP) was $(0.31), and Net earnings (loss) per Diluted Share Attributable to Controlling Interest (Non-GAAP) was $(0.23).

The following provides a reconciliation to adjusted operating income, adjusted earnings before income taxes, adjusted income tax expense, adjusted net earnings attributable to controlling interest and adjusted net earnings per diluted share attributable to controlling interest from the most comparable GAAP measures for the six months ended November 30, 2023 and November 30, 2022.

	Six Months Ended November 30, 2023
	Operating Income (Loss)		Earnings (Loss) Before Income Taxes		Income Tax Expense (Benefit)			Net Earnings (Loss) Attributable to Controlling Interest		Net Earnings (Loss) per Diluted Share Attributable to Controlling Interest
GAAP	$	60.9	$	74.5	$	14.5		$	52.5	$	1.07	*
Impairment of long-lived assets		1.4		1.4		(0.2	)		0.7		0.01
Separation costs		18.5		18.5		(4.3	)		14.2		0.28
Non-GAAP	$	80.8	$	94.4	$	10.0		$	67.4	$	1.36	*

*Subsequent to the issuance of the initial financial news release, this item has been revised. Previously, the Net earnings (loss) per Diluted Share Attributable to Controlling Interest (GAAP) was $1.05, and Net earnings (loss) per Diluted Share Attributable to Controlling Interest (Non-GAAP) was $1.34.

	Six Months Ended November 30, 2022
	Operating Income (Loss)			Earnings (Loss) Before Income Taxes			Income Tax Expense (Benefit)			Net Earnings (Loss) Attributable to Controlling Interest			Net Earnings (Loss) per Diluted Share Attributable to Controlling Interest
GAAP	$	21.0		$	23.6		$	4.8		$	14.4		$	0.29
Impairment of long-lived assets		0.3			0.3			(0.1	)		0.1			-
Restructuring and other income, net		(4.2	)		(4.2	)		0.6			(1.7	)		(0.03	)
Separation costs		8.0			8.0			(2.1	)		5.9			0.12
Non-GAAP	$	25.1		$	27.7		$	3.2		$	18.7		$	0.38

To further assist in the analysis of results for the periods presented, the following volume and net sales information for three and six months ended November 30, 2023 and November 30, 2022 has been provided below along with a reconciliation of adjusted EBIT and adjusted EBITDA to the most comparable GAAP measure, which is net earnings (loss) attributable to controlling interests. Adjusted EBIT margin is calculated by dividing adjusted EBIT by net sales. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by net sales.

	Three Months Ended
	November 30,
	2023			2022
Volume (tons)		968,595			952,888
Net Sales	$	808.0		$	868.4
Net earnings (loss) attributable to controlling interest	$	(6.0	)	$	(15.8	)
Interest expense, net		0.2			0.9
Income tax expense (benefit)		(2.5	)		(5.5	)
Restructuring and other income, net(1)		-			(2.5	)
Separation costs		14.9			8.0
Adjusted EBIT		6.6			(14.9	)
Depreciation and amortization		16.4			17.8
Adjusted EBITDA	$	23.0		$	2.9
Adjusted EBIT margin		0.8	%		-1.7	%
Adjusted EBITDA margin		2.8	%		0.3	%

	Six Months Ended
	November 30,
	2023			2022
Volume (tons)		1,992,140			1,956,796
Net Sales	$	1,713.8		$	1,943.0
Net earnings (loss) attributable to controlling interest	$	52.5		$	14.4
Interest expense, net		0.7			2.2
Income tax expense (benefit)		14.5			4.8
Impairment of long-lived assets(2)		0.9			0.1
Restructuring and other income, net(1)		-			(2.4	)
Separation costs		18.5			8.0
Adjusted EBIT		87.1			27.1
Depreciation and amortization		33.3			35.5
Adjusted EBITDA	$	120.4		$	62.6
Adjusted EBIT margin		5.1	%		1.4	%
Adjusted EBITDA margin		7.0	%		3.2	%

(1)Excludes the noncontrolling interest portion of restructuring and other income, net of $(1.8) million in both the prior year quarter and prior year period.

(2)Excludes the noncontrolling interest portion of impairment of long-lived assets of $0.5 million and $0.2 million in the current year period and prior year period, respectively.

The table below provides a reconciliation from net earnings (loss) attributable to controlling interest (the most comparable GAAP financial measure) to the non-GAAP financial measures, EBITDA and adjusted EBITDA, for the three months ended November 30, 2023 and November 30, 2022, and the twelve months ended November 30, 2023.

	Second			First		Fourth		Third		Second
	Quarter			Quarter		Quarter		Quarter		Quarter
	2024			2024		2023		2023		2023
Net earnings (loss) attributable to controlling interest	$	(6.0	)	$	58.5	$	67.3	$	5.4	$	(15.8	)
Interest expense, net		0.2			0.5		0.4		0.5		0.9
Income tax expense (benefit)		(2.5	)		17.0		23.4		0.8		(5.5	)
Depreciation and amortization		16.4			16.9		17.1		17.0		17.8
EBITDA		8.1			92.9		108.2		23.7		(2.6	)
Impairment of long-lived assets		-			0.9		1.8		-		-
Restructuring and other income, net		-			-		-		-		(2.5	)
Separation costs		14.9			3.6		5.5		4.0		8.0
Adjusted EBITDA	$	23.0		$	97.4	$	115.5	$	27.7	$	2.9
Trailing twelve months adjusted EBITDA	$	263.6

The following provides a reconciliation of net cash provided by operating activities (the most comparable GAAP financial measure) to free cash flow for the three months and the twelve months ended November 30, 2023. Free cash flow is a non-GAAP financial measure that management believes measures the Company's ability to generate cash beyond what is required for its business operations and capital expenditures.

	Second			First			Fourth			Third
	Quarter			Quarter			Quarter			Quarter
	2024			2024			2023			2023
Net cash provided by (used by) operating activities	$	139.9		$	(20.7	)	$	79.2		$	118.3
Investment in property, plant and equipment		(18.9	)		(17.3	)		(9.0	)		(10.9	)
Free cash flow	$	121.0		$	(38.0	)	$	70.2		$	107.4
Trailing twelve months free cash flow	$	260.6

To further assist in the analysis of results for the periods presented, the following information for the three and six months ended November 30, 2023 and November 30, 2022 has been provided below along with a reconciliation of net earnings (loss) attributable to controlling interest to pro forma adjusted EBIT. Pro forma adjusted EBIT is a non-GAAP financial measure that management believes includes incremental and on-going impacts to the Company's operating results as a stand-alone public company resulting from the separation from Worthington Enterprises, Inc. The pro forma financial information assumes the separation occurred on June 1, 2022, the first day of our fiscal 2023.

This pro forma financial information has been prepared based upon the best available information and management estimates and is subject to assumptions and adjustments described in the accompanying footnotes. It is not intended to be a complete presentation of the Company’s financial position or results of operations had the separation occurred as of and for the periods indicated. In addition, the pro forma financial information is being provided for informational purposes only, and is not necessarily indicative of the Company’s future results of operations or financial condition had the separation and related transactions been completed on the dates assumed. Management believes these assumptions and estimates are reasonable, given the information available on the filing date.

	Three Months Ended
	November 30,
	2023			2022
Net earnings (loss) attributable to controlling interest	$	(6.0	)	$	(15.8	)
Interest expense, net		0.2			0.9
Income tax expense (benefit)		(2.5	)		(5.5	)
Restructuring and other income, net(3)		-			(2.5	)
Separation costs		14.9			8.0
Adjusted EBIT		6.6			(14.9	)
Pro Forma Adjustments:
Incremental steel supply agreement margin(1)		1.0			1.0
Incremental stand-alone corporate costs(2)		(4.1	)		(3.4	)
Total Pro Forma Adjustments		(3.1	)		(2.4	)
Pro Forma Adjusted EBIT	$	3.5		$	(17.3	)

	Six Months Ended
	November 30,
	2023			2022
Net earnings (loss) attributable to controlling interest	$	52.5		$	14.4
Interest expense, net		0.7			2.2
Income tax expense (benefit)		14.5			4.8
Impairment of long-lived assets(4)		0.9			0.1
Restructuring and other income, net(3)		-			(2.4	)
Separation costs		18.5			8.0
Adjusted EBIT		87.1			27.1
Pro Forma Adjustments:
Incremental steel supply agreement margin(1)		1.9			1.9
Incremental stand-alone corporate costs(2)		(8.5	)		(6.7	)
Total Pro Forma Adjustments		(6.6	)		(4.8	)
Pro Forma Adjusted EBIT	$	80.5		$	22.3

(1)Reflects the incremental margin on sales to Worthington Enterprise, Inc. under the steel supply agreement between the Company and Worthington Enterprise, Inc.

(2)Includes an increase in SG&A expense for the three and six months ended November 30, 2023 and November 30, 2022 respectively, to capture the effects of recurring and ongoing costs required to operate our stand-alone corporate functions as well as public company costs, offset by lower corporate profit sharing and bonus expense post-separation than what was allocated to the Company in the combined financial statements due to the employee matters agreement.

(3)Excludes the noncontrolling interest portion of restructuring and other income, net of $(1.8) million in both the prior year quarter and prior year period.

(4)Excludes the noncontrolling interest portion of impairment of long-lived assets of $0.5 million and $0.2 million in the current year period and prior year period, respectively.

###

EX-99.2

EXHIBIT 99.2

TRANSCRIPT

12 - 22 - 2023

The Worthington Steel Company

Q2 2024 Earnings Call

TOTAL PAGES: 13

The Worthington Steel Company

Q2 2024 Earnings Call

CORPORATE SPEAKERS:

Melissa Dykstra

The Worthington Steel Company; Corporate Communications & Investor Relations

Geoff Gilmore

The Worthington Steel Company; President & Chief Executive Officer

Jeff Klingler

The Worthington Steel Company; Executive Vice President & Chief Operating Officer

Tim Adams

The Worthington Steel Company; Vice President & Chief Financial Officer

PARTICIPANTS:

Martin Englert

Seaport Research Partners; Analyst

John Tumazos

John Tumazos Very Independent Research; Analyst

PRESENTATION:

Operator^ Good morning, and welcome to The Worthington Steel Second Quarter Fiscal 2024 Earnings Conference Call. This conference is being recorded at the request of Worthington Steel. If anyone objects, you may disconnect at this time.

I’d now like to introduce Melissa Dykstra, Corporate Communications and Investor Relations Officer. Ms. Dykstra, you may begin.

Melissa Dykstra^ Good morning, everyone, and welcome to Worthington Steel’s second quarter fiscal 2024 earnings call and our first earnings call as a standalone company.

On our call today, we have Geoff Gilmore, Worthington Steel’s President and Chief Executive Officer; Jeff Klingler, Executive Vice President and Chief Operating Officer; and Tim Adams, Vice President and Chief Financial Officer.

Before we get started, I’d like to remind everyone that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ from those suggested.

We issued our earnings release yesterday after the market close. Please refer to it for more detail on those factors that could cause actual results to differ materially. Unless noted as reported, today’s discussion will reference non-GAAP financial measures, which adjusts for certain items included in our GAAP results and which are presented on a standalone basis. You can find definitions of each non-GAAP measure and GAAP to non-GAAP reconciliations within our earnings release.

Today’s call is being recorded and a replay will be made available on our website at worthingtonsteel.com.

The Worthington Steel Company

Q2 2024 Earnings Call

At this time, I’ll turn it over to Geoff Gilmore.

Geoff Gilmore^ Thank you, Melissa. Good morning, everyone, and welcome to the first earnings call for Worthington Steel. As you know, December 1 marked our legal separation from Worthington Industries and our first day of trading as a standalone company. Wednesday, we held our first board meeting and solidified our plans for the remainder of fiscal year 2024 and into fiscal year 2025. I am confident in our experienced leadership team guided by our highly-qualified board as we begin our journey as Worthington Steel. I look forward to working with our Executive Chair, John Blystone; Lead Independent Director, George Stoe; and the rest of our board.

I’d like to thank our employees across the organization for the work they’ve done to get us to this exciting time in our history. Our teams continue to prove they're outstanding and dedicated to supporting our customers, suppliers, shareholders, and each other every day at Worthington Steel. I’m proud to say I've seen examples throughout the company reflecting how we continue to use our philosophy and golden rule principles and The Worthington Business System of transformation, innovation and acquisitions to drive growth and shareholder value.

Overall, we are feeling positive as we enter our first full quarter as a standalone company. We are focused on continuing to serve our customers and well positioned to capitalize on key end market trends, including the decarbonization of transportation, the transition to renewable energy and modernization of our infrastructure.

Now, I’ll turn it over to COO, Jeff Klingler, for a look at our operational highlights.

Jeff Klingler^ Thanks, Geoff, and good morning. First, I would like to thank our employees for their ongoing commitment to safety. Our teams continuously work on ways to systematically reduce injuries using data analytics, ergonomic measurement tools, and best practice sharing. Our facility leaders are involved in our efforts daily. Their focus and accountability is motivating our teams to double down on their own commitment.

Our philosophy guides our daily work and our focus on keeping people safe. Further, we believe and have seen evidence that a safe environment is a more productive environment. Worthington Steel employees have a similar focus on quality, guided by our continuous improvement program, which you will hear us reference often as the transformation. We continue to improve in this area as well. We are always aiming to exceed the expectations set by our customers and the goals we set for ourselves.

Results from this effort have led to one of our best performance periods for quality in the past several years. A highlight of the second quarter for us was the acquisition of the Nagold, Germany facility from Voestalpine, which establishes an electrical steel footprint in Europe for Worthington Steel. This is an important next step in our global strategy to capitalize on the growing industrial and EV motor markets.

I’d like to commend the employees at the Nagold facility for what they’ve built there and welcome them to The Worthington Steel family. We have teams on the ground working with our employees to begin to integrate our businesses.

The Worthington Steel Company

Q2 2024 Earnings Call

Recently, we announced the expansion of our electrical steel facility in Mexico. Work is underway at the site as we reengineer our existing production area and add more capacity. This includes a significant expansion of our focused factory, which produces highly engineered traction motor lamination cores for electric vehicles. This expansion will create our largest global production site for motor and transformer laminations. We are targeting a startup near the end of calendar year 2024.

Our expansion in Canada to support the growing demand for large transformers remains on time and on budget. We have placed orders for the long lead time equipment and expect to begin production near the end of calendar 2025.

Our commercial and operation teams continue to look for new ways to improve, partner with our customers, and provide the best quality of service, all while maintaining inventory control and ensuring the safety of all. I am proud of what our team continues to accomplish.

I’ll now hand things over to Chief Financial Officer, Tim Adams.

Tim Adams^ Thanks, Jeff. I would also like to thank our employees for staying focused on serving our customers during the second quarter. Our results reflect the hard work put in by all of you.

As a reminder, the quarterly and six-month results are prepared on a carve-out basis, which will differ from the segment results reported by Worthington Enterprises. On a carve-out basis, we are reporting a loss of $6 million or $0.12 per share in the second quarter as compared with a $15.8 million loss or $0.32* per share in the prior year quarter.

There were several unique items that impacted our quarterly results, including the following. First, we incurred pretax separation expenses of $14.9 million or $0.23 per share, as compared with $8 million or $0.12 per share in the prior year quarter. Additionally, the prior year included a restructuring gain of approximately $0.04 per share related to the divestiture of the historical WSP joint venture’s remaining operating facility. Excluding these items, we generated earnings of $0.11 per share in the current quarter compared to a loss of $0.24* per share in the prior year quarter. In addition, in the current quarter, we had estimated pretax inventory holding losses of $34.8 million or $0.53* per share compared to estimated pretax inventory holding losses of $53.1 million or $0.81* per share in the prior year quarter, a favorable swing of $18.3 million or $0.28 per share.

In Q2, we reported adjusted EBIT of $6.6 million, which was up $21.5 million from the adjusted EBIT loss of $14.9 million in the prior year quarter. This is primarily due to higher gross profit offset by increased SG&A expense, largely wages and profit sharing.

Steel pricing reached a calendar-year low in October, and since that time the price of steel has increased $400 per ton to almost $1,100 per ton. We expect estimated inventory holding losses in Q2 will flip to inventory holding gains in Q3 and anticipate those gains will be slightly larger than the gains in our Q1 results.

Net sales in the quarter were $808 million, down 7% from the prior year quarter, primarily due to lower average selling prices, partially offset by higher direct volumes. During the quarter, the price of hot roll coil fell to approximately $660 per ton, its lowest level in calendar 2023, resulting in an 11% decrease in our average

The Worthington Steel Company

Q2 2024 Earnings Call

direct selling prices. We shipped 969,000 tons during the quarter, which was up 2% compared with the prior year quarter.

Direct sale tons made up 56% of our mix compared to 55% in the prior year quarter. Toll tons were down 2% year-over-year, primarily due to the divestiture of the historical WSP joint venture’s remaining operating facility. Excluding the impact of the divestiture, toll tons were up 6% as compared with the prior year quarter, primarily due to increased tolling volumes with the mills.

Direct sale tons were up 4% over the prior year quarter despite the UAW strike at the Detroit Three, which began in mid-September and was not completely settled until early November. Our commercial team did a nice job of securing additional volumes in other markets to minimize any impact of the UAW action.

We increased shipments to the construction market, which were partially offset by decreases in shipments to the ag and heavy truck markets. On a year-over-year basis, our automotive shipments were actually flat.

Turning to cash flows in the balance sheet, cash flow from operations was $139.9 million and free cash flow was $121 million. During the quarter, we spent $18.9 million on capital expenditures, with a majority of that going towards the previously announced electrical steel expansions in Mexico and Canada.

As Jeff Klingler noted, we also acquired an electrical steel lamination facility in Nagold, Germany for approximately $21 million.

On a trailing 12-month basis, we have generated $261 million in free cash flow, and Wednesday, we announced a quarterly dividend of $0.16 per share payable on March 28, 2024 to shareholders of record March 14, 2024.

Regarding our balance sheet, our teams managed operating working capital very well during the quarter, delivering $127 million of cash from receivables, inventory, and accounts payable. During the quarter, we finalized a five-year, $550 million revolving credit facility. We borrowed on that credit facility on November 30 in anticipation of issuing a $150 million cash dividend to Worthington Enterprises on December 1 in connection with the separation.

In summary, Worthington Steel had an excellent second quarter and all of our teams performed at high levels. We navigated the UAW strike very well and continue to meet our customers’ needs as the Detroit OEMs return to normal build schedules. I’m proud of our teams for their dedication and for their continued commitment to safety.

At this point, I will turn it back to Geoff Gilmore.

Geoff Gilmore^ Thanks, Tim. As you heard, it’s an exciting time to be at Worthington Steel. We have defined strategy with a strong focus on organic growth, strategic M&A, and driving continuous improvement using our proven transformation process, and we already have taken action on that strategy.

The Worthington Steel Company

Q2 2024 Earnings Call

We believe our expansions in Mexico and Canada, along with our acquisition in Nagold, Germany, will accelerate our growth in several key markets. Worthington Steel is truly a unique steel processor with highly technical, value-added products and services. We are a market-leading supplier to attractive end markets, and we are driving that strategy with a strong, experienced leadership team. We have the right team, the right strategy, and a laser-light focus on doing the right thing for our employees, customers, and shareholders.

Now we’ll open it up for questions.

Operator^ (Operator Instructions) Your first question comes from the line of Martin Englert of Seaport Research Partners. Your line is open.

Martin Englert^ Hello. Good morning, everyone.

Geoff Gilmore^ Hey, Martin.

Jeff Klingler^ Good morning.

Martin Englert^ For the quarter, any estimated volume impact from the strike? From your comments, it sounds like there was quite a bit of offset with your gaining volumes elsewhere, but maybe more specifically just on the automotive front.

Geoff Gilmore^ Yes. Martin, Geoff Gilmore here. Your assumption is correct. Fortunately, impact from the automotive strikes were relatively insignificant. I think there’s probably pull ahead in anticipation of the strike. Fortunately, a lot of the Tier 1s and 2s used that as an opportunity to catch up and get inventories right-sized at their facilities, so we continue to see orders there. And we also saw a pick up from some of our automotive customers that are not on strike.

But I think the most important thing we would like to highlight is just the great work of our analytics team and our commercial team. Because of that targeted approach that the union was taking with the strikes, we were able to quickly identify, obviously, which facilities were going on strike, more importantly, what vehicles are they producing and parts. Are we producing some of the steel going into those vehicles and parts? If we are, at what facility? And will there be holes in the order book?

So we were able to quickly do that with our analytics group, and then we were able to get our commercial team very focused on those facilities, where there was open capacity, and they did an excellent job going out to different customers and different markets and offsetting that loss volume.

Martin Englert^ Thank you for all the color there. It’s helpful. Question on the Voestalpine Automotive acquisition, how did the annual volumes look there and profitability?

Tim Adams^ Martin, it’s -- this is Tim. It’s a relatively small facility. What we’re trying to do is just get a footprint there, so it’s a -- the facility, it’s about 60,000 square feet and it’s got about 130 people, so it’s a relatively small facility. And we’ll be ramping up volumes there as we win business. We’ve been asked to be

The Worthington Steel Company

Q2 2024 Earnings Call

in Europe for a long time. Tempel’s been asked for years to be there, so we’re just starting to go through the integration part of that, but we’ll let you know on volumes in the future.

Martin Englert^ Okay. Any comment on profitability for the business?

Tim Adams^ No. I would say it’s in electrical steel, so it’s a similar profitability to Tempel.

Martin Englert^ Okay. Within the release, there’s a steel supply agreement. $1 million was booked in the pro forma adjustment. Can you provide some more details on that agreement, such as duration? You know, is the margin variable, or is it something that’s fixed, and, you know, related volumes are on this annually?

Geoff Gilmore^ Yes. Martin, obviously we’ll have a multiyear agreement with Worthington Enterprises. We’re excited to continue supporting them as a customer of ours. You know, they will consistently be a top 10 customer to us.

As far as profitability, that’s not something that we would answer for any of our customers. And, you know, as everybody should know and understand, all those agreements are put in place at a -- at an arm’s length, but we’re certainly excited about supporting them.

Martin Englert^ Are you able to comment as a percentage of group sales, what they would have accounted for on a pro forma basis?

Geoff Gilmore^ You know, I don't know a percentage off the top of my head. I’d just would tell you I’d go back to, again, consistently they’ll be in our top 10 as far as volume shift.

Martin Englert^ Okay. Appreciate it. If I could one last one here. What’s your read on customer sentiment and their budget looking ahead to calendar 2024?

Jeff Klingler^ Hi, Martin. This is Jeff Klingler. Good morning. You know, I think from a high level, you know, our customers from the automotive standpoint, the -- you know, with the strike activities behind us, they are looking forward to production returning to more of a normalized level and increasing in 2024 by 6% to 7%.

In other markets, you know, we do expect construction to improve modestly on a year-over-year basis. And then, our other two major markets, heavy truck and ag, they're coming off several record years in a row. So, we do see a little bit of softness going into the year in both those sectors.

Martin Englert^ Okay, but in general, your largest end markets here expecting growth to some degree.

Geoff Gilmore^ That's right, Martin, as Jeff said, we're anticipating automotive up anywhere from 5% to 7%, which would put automotive build rates at 16.3 million. So obviously, would be a bright spot for us.

Martin Englert^ Okay, excellent. I appreciate all the comments, and congratulations on the separation.

Jeff Klingler^ Thank you very much.

The Worthington Steel Company

Q2 2024 Earnings Call

Operator^ Your next question comes from the line of John Tumazos of John Tumazos Very Independent Research. Your line is open.

John Tumazos^ Congratulations. I feel like I'm 40 years younger, and it's the old Worthington.

Geoff Gilmore^ We're glad you're excited. Clearly, we are as well.

John Tumazos^ I want to try to understand the higher math of the balance sheet. So, the balance sheet is November 30. On December 1, that cash goes down $150 million. And the shareholders equity to controlling interest goes down $150 million is the offsetting item, but the debt doesn't change, right?

Tim Adams^ That is correct.

John Tumazos^ So with the gain in steel prices, and inventories and receivables going up in the next quarter, and maybe payables going up. In the February balance sheet, should we expect for example 40% larger inventories and receivables and 40% larger payables?

Tim Adams^ I don't know that I would peg it at 40%. But yes, you will see an increase in inventory receivables and payables. Just the opposite, as the price of steel runs up, that's just what happens, as you know.

John Tumazos^ So debt might be $150 million more on February 30, or something like that.

Tim Adams^ I don't know if it'll be $150 million more, but that will be up to fund those. Yes. I mean, that's the beauty of having an ABL. Right. It's -- it moves and gives you the ability as steel prices move up. Right, you -- you're just, relying on your revolver to fund us.

John Tumazos^ In terms of the balance sheet, I think the value of the Company is more than tangible net worth. And I'm going to ask a series of questions trying to flush out those values, some of those underlying values. How much of the $159.4 million goodwill and intangibles is temple steel?

Tim Adams^ I would say the vast majority of that is Tempel Steel.

John Tumazos^ So Tempel Steel is at least $100 million of the $159.4 million?

Tim Adams^ I would say that's accurate. I don't have the data in front of me but that seems about right.

John Tumazos^ How much would be Shiloh blanking?

Tim Adams^ Probably most of the rest of that. Most of the rest of the difference.

John Tumazos^ So anything else is insignificant, less than $5 million?

The Worthington Steel Company

Q2 2024 Earnings Call

Tim Adams^ Again, I can't tell you the numbers. But all I can tell you is those are the most recent acquisitions. Those were the biggest acquisitions we've ever done. We

did the Rome acquisition in 2015. We did the acquisition of the cold rolled strip assets from Gibraltar in 2010. So those will -- there will be some leftover goodwill from those items. But the two biggest ones we've done would be the Shiloh, and the Tempel acquisition. So those would represent the vast majority of what's in goodwill.

John Tumazos^ Those Rome and Gibraltar might have been near or below historic book value. They were not glamour businesses per se, right?

Tim Adams^ They were solid businesses.

John Tumazos^ They weren't sexy like Electrical Steel today.

Tim Adams^ You could say that, I suppose. That's one way to look at it.

Geoff Gilmore^ It seemed sexy back then.

Tim Adams^ And those are good businesses.

John Tumazos^ So I'm looking at the accumulated depreciation account of [687]. And the old Worthington spent about $700 million in CapEx '99, '96 to '99. So I think the biggest CapEx of history, and maybe $400 million was the Delta, Ohio, galvanizing line, which, from '96, to present, probably we'd be fully depreciated.

What do you think are the two or three biggest pieces of the accumulated depreciation account? I'm sure your Delta galvanizing lines a big part of your business. And if it's depreciated to zero, it's probably worth a lot more than zero.

Tim Adams^ It's not depreciated to zero, we're constantly refreshing that. So, it is not like you build it and you don't continue to upgrade it and expand capacity. So, we've done a number of projects at Delta, and Spartan and all of our facilities over the years to keep the -- we've said before, we want to keep our assets and market ready condition. So, because of the success of Delta, we're constantly looking -- constantly looking for ways to increase efficiency and spend capital to do that so we can get more capacity out of it.

John Tumazos^ I wasn't trying to say it was a dog shit asset, excuse me. How much (multiple speakers) --

Tim Adams^ No, no. Not all. We don't --

John Tumazos^ -- depreciation is Delta and Spartan?

Tim Adams^ That sounds a lot to circle back to you on. I don't know that number off the top of my head.

John Tumazos^ The reason I'm asking the question, I was thinking back to one of LTV’s emergence from bankruptcy, not to use that as a bad comparison. And in fresh start accounting, one of the adjustments they did

The Worthington Steel Company

Q2 2024 Earnings Call

is they just added back the accumulated depreciation. So, I'm looking as though there's some value in that accumulated depreciation account, but I'm not sure. I don't think it's 100 cents on the dollar, but it's something.

So, I'm trying to reconcile between the tangible book value and the book value adding back accumulated depreciation. And that steel price rebound interim [to the] quarter [two] after November 30 books. I’m just trying to figure out if the tangible book value is $15 or the adjusted book value is $30. And where's the good value to buy the stock, Tim? That's all. Thank you very much.

Tim Adams^ Yes. You bet. Thank you.

Operator^ There are no further questions at this time. I will now turn the call over to Geoff Gilmore for some closing remarks.

Geoff Gilmore^ I just wanted to thank everybody for participating and showing interest in Worthington Steel. We’ll look forward to talking to you again in a few months and wish everybody a Merry Christmas. Thank you.

Operator^ This concludes today's conference call. You may now disconnect.

*Subsequent to the conference call on December 22, 2023 to discuss unaudited financial results, this item has been revised.

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EX-99.3

EXHIBIT 99.3

 

COLUMBUS, Ohio, December 20, 2023 – The board of directors of Worthington Steel, Inc. (NYSE: WS) has declared a quarterly dividend of $0.16 per common share. The dividend is payable on March 28, 2024, to shareholders of record March 14, 2024. This marks the first dividend paid by Worthington Steel since the business separated from the former Worthington Industries, now Worthington Enterprises (NYSE: WOR), on December 1, 2023.

About Worthington Steel

Worthington Steel (NYSE:WS) is a metals processor that partners with customers to deliver highly technical and customized solutions. Worthington Steel’s expertise in carbon flat-roll steel processing, electrical steel laminations and tailor welded solutions are driving steel toward a more sustainable future.

As one of the most trusted metals processors in North America, Worthington Steel and its 4,600 employees harness the power of steel to advance our customers’ visions through value-added processing capabilities including galvanizing, pickling, configured blanking, specialty cold reduction, lightweighting and electrical lamination. Headquartered in Columbus, Ohio, Worthington operates 32 facilities in seven states and six countries. Following a people-first Philosophy, commitment to sustainability and proven business system, Worthington Steel’s purpose is to generate positive returns by providing trusted and innovative solutions for customers, creating opportunities for employees, and strengthening its communities.

Safe Harbor Statement

Worthington Steel wishes to take advantage of the Safe Harbor provisions included in the Private Securities Litigation Reform Act of 1995 (the “Act"). Statements by Worthington Steel which are not historical information constitute "forward looking statements" within the meaning of the Act. All forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those projected. Factors that could cause actual results to differ materially include risks, uncertainties and impacts described from time to time in Worthington Steel’s filings with the Securities and Exchange Commission.

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Document And Entity Information	Dec. 20, 2023
Cover [Abstract]
Document Type	8-K
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Document Period End Date	Dec. 20, 2023
Entity Registrant Name	WORTHINGTON STEEL, INC.
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Entity File Number	001-41830
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Entity Tax Identification Number	92-2632000
Entity Address, Address Line One	100 Old Wilson Bridge Road
Entity Address, City or Town	Columbus
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Title of 12(b) Security	Common Shares, without par value
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