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

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

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

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

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

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

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

On ~~March 31,~~September 29, 2023, the number of common shares, without par value, of the Registrant issued and outstanding was ~~49,755,365~~49,965,441.

Selected statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”), including, without limitation, in “PART I – Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). Forward-looking statements reflect the Company’s current expectations, estimates or projections concerning future results or events. These statements are often identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “should,” “would,” “intend,” “plan,” “will,” “likely,” “estimate,” “project,” ~~“positioned,~~“position,” “strategy,” ~~“targets,~~“target,” ~~“aims,~~“aim,” “seek,” “foresee,” or other similar words or phrases. These forward-looking statements include, without limitation, statements relating to:

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

The Company notes these factors for investors as contemplated by the PSLRA. It is impossible to predict or identify all potential risk factors. Consequently, you should not consider the foregoing list to be a complete set of all potential risks and uncertainties. Any forward-looking statements in this Form 10-Q are based on current information as of the date of this Form 10-Q, and the Company assumes no obligation to correct or update any such statements in the future, except as required by applicable law.

~~Note B – Inventory~~

Due to a decline in steel pricing during the first quarter of fiscal 2023, the net realizable value of our inventory was lower than the cost reflected in our records at August 31, 2022. Accordingly, we recorded a lower of cost or net realizable value adjustment during the first quarter of fiscal 2023 totaling $~~4,488,000~~ ~~to reflect this lower value. The entire amount of the adjustment was attributed to our Steel Processing operating segment and was recorded in cost of goods sold in the~~ consolidated statement of earnings for the three months ended August 31, ~~2022. There was~~ 2023, in the amount of $no6,035 ~~lower of cost or net realizable value adjustment to inventory during either of the three months ended November 30, 2022 or the three months ended February 28, 2023.~~.

Note DC – 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. At February 28, 2023, we held noncontrolling investments in~~method and included the following ~~affiliated companies:~~at August 31, 2023: Clarkwestern Dietrich Building Systems LLC (“ClarkDietrich”) (25%); Serviacero Planos, S. de R. L. de C.V. (“Serviacero Worthington”) (50%); Taxi Workhorse Holdings, LLC (“Workhorse”) (20%); and Worthington Armstrong Venture (“WAVE”) (50%).

~~On August 3, 2022, we sold our~~We also held a 50% noncontrolling equity interest in ArtiFlex Manufacturing, LLC (“ArtiFlex”) to, on a historical basis, through August 3, 2022, when it was purchased by the ~~unaffiliated~~unrelated joint venture ~~member for~~partner. In connection with this transaction, we received net cash proceeds of approximately $~~41,795,000, after adjustments for closing debt and final net working capital. Approximately $6,000,000~~36,095 ~~of the total cash proceeds were attributed to real property in Wooster, Ohio, with a net book value of approximately $6,300,000. This real property was owned by us~~ and ~~leased to ArtiFlex prior to closing of the transaction. For the nine months ended February 28, 2023, we recognized~~realized a pre-tax loss of $~~16,059,000~~15,759 inwithin equity income, ~~related to~~representing the ~~sale, including a loss~~amount by which the book value of $~~300,000~~ ~~for~~our investment exceeded the ~~settlement of final transaction costs related to the sale during the three months ended February 28, 2023.~~net cash proceeds.

~~Table of Contents~~

We received distributions from unconsolidated affiliates totaling $~~189,910,000~~64,606 during the ~~nine~~three months ended ~~February 28,~~August 31, 2023. We have received cumulative distributions from WAVE in excess of our investment balance amounting to $~~116,825,000~~116,377 and $117,297, respectively, at August 31, 2023 and May 31, 2023, which ~~is shown as a separate liability on~~are presented separately within long-term liabilities in our consolidated balance ~~sheet at February 28, 2023.~~sheets. In accordance with the applicable accounting guidance, we have reclassified the negative investment balance to the liabilities section of 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 again be shown as an asset on our consolidated balance sheets. If it becomes probable that any excess distribution may not be returned (upon joint venture liquidation or otherwise), we will 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 ~~received, less distributions received in prior periods that were determined to be returns of investment,~~ 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.

Table of Contents

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


	February 28,		May 31,		August 31,		May 31,
(in thousands)	2023		2022
(In thousands)					2023		2023
Cash and cash equivalents	$	83,482	$	68,563	$	45,766	$	49,185
Other current assets		820,978		1,148,029		862,913		899,913
Noncurrent assets		308,512		369,608		390,681		394,468
Total assets	$	1,212,972	$	1,586,200	$	1,299,360	$	1,343,566

Current liabilities		213,496		345,097		309,692		247,796
Short-term borrowings		10,000		5,943
Current maturities of long-term debt		48,898		33,054		32,151		36,936
Long-term debt		349,161		306,814		348,269		349,215
Other noncurrent liabilities		66,538		76,437		141,328		144,649
Equity		524,879		818,855		467,920		564,970
Total liabilities and equity	$	1,212,972	$	1,586,200	$	1,299,360	$	1,343,566


	Three Months Ended					Nine Months Ended					Three Months Ended
	February 28,					February 28,					August 31,
(in thousands)	2023			2022		2023			2022
(In thousands)											2023		2022
Net sales	$	626,527		$	789,483	$	2,162,134		$	2,392,643	$	720,433	$	823,942
Gross margin		150,698			187,602		479,402			603,778		194,308		181,405
Operating income		107,994			144,575		353,177			475,341		149,409		137,827
Depreciation and amortization		6,774			7,831		21,826			23,907		8,643		8,188
Interest expense		4,607			2,661		11,197			7,833		5,739		2,680
Income tax expense (benefit)		(3,782	)		4,478		(410	)		20,938
Income tax expense												1,646		2,110
Net earnings		111,135			136,346		349,556			449,149		143,566		133,238

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Note ED – Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

~~Fiscal 2023~~: 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 $~~70,000~~ ~~resulting in an impairment charge of $484,000~~ ~~during the three months ended February 28, 2023.~~

During the first quarter of fiscal 2023, we committed to plans to liquidate certain fixed assets at ~~Samuel’s~~our Samuel joint venture’s toll processing facility in Cleveland, Ohio. ~~As all of the criteria for classification as assets held for sale were met, the net assets were presented separately as assets held for sale in our consolidated balance sheet at August 31, 2022.~~ In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair market value less costs to ~~sell. As a result,~~sell resulting in a pre-tax impairment charge of $~~312,000~~312 ~~was recognized during~~.

During the first quarter of fiscal ~~2023, which represents the excess book value~~2024, we lowered our estimate of ~~the asset group over its estimated~~ fair ~~value less cost to sell. The land and building were subsequently sold during the second quarter of fiscal 2023 for net cash proceeds of~~ ~~$3,298,000, with no impact to earnings. Machinery and equipment related to the facility with a net book value of $1,562,000~~ ~~continued to be classified as held for sale at February 28, 2023.~~

~~Fiscal 2022~~: During the third quarter of fiscal 2022, management committed to plans to sell certain production equipment at the Samuel facility in Twinsburg, Ohio. As all of the criteria for classification as assets held for sale were met, the net assets were presented separately as assets held for sale in our consolidated balance sheet at May 31, 2023. In accordance with the applicable accounting guidance, the net assets were written down to the lower of net book value or fair market value less costs to sell ~~resulting in an impairment charge~~to reflect the expected scrap value of the equipment, or $~~3,076,000~~ ~~during the third quarter of fiscal 2022. The assets were subsequently sold during the second quarter of fiscal 2023 for cash proceeds of approximately $1,063,000~~150, resulting in a pre-tax ~~gain~~impairment charge of $~~363,000~~1,401 ~~within restructuring and other expense (income), net.~~.

Note FE – Restructuring and Other ~~Expense (Income),~~Income, 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~~We made severance payments associated with a prior restructuring initiative within Building Products totaling $135 during the three months ended August 31, 2023. As a result, there were no liabilities associated with our restructuring activities ~~combined with a reconciliation to the restructuring~~at August 31, 2023.

Restructuring and other ~~expense (income),~~income, net ~~financial statement caption,~~ in ~~our consolidated statement of earnings for~~ the ~~nine months ended February 28, 2023 is summarized below:~~

(in thousands)

Balance, as of May 31, 2022

Expense
(Income)

Payments

Adjustments

Balance, as of February 28, 2023

Early retirement and severance

$
541

$
908

$
(1,083
)

$
-

$
366

Net gain on sale of assets

(5,466
)

Restructuring and other income, net

$
(4,558
)

•

~~On June 14, 2022, we sold real property in Tulsa, Oklahoma, for net cash proceeds~~prior year quarter of $~~5,775,000~~1,100~~, resulting in a pre-tax gain of $1,177,000. These assets had been excluded~~ resulted primarily from the sale of the remaining real property of our former oil & gas equipment business ~~in January 2021. The assets were classified in assets held~~on June 14, 2022, for ~~sale on the consolidated balance sheets immediately prior to the closing of the sale.~~

•

~~On October 31, 2022, our consolidated steel processing joint venture, WSP, sold its remaining manufacturing facility, located in Jackson, Michigan. Net~~net cash proceeds of $~~21,277,000~~ ~~were realized in connection with the transaction, of which $2,000,000~~ ~~is being held in escrow for contingent indemnification obligations associated with general representations and warranties. The transaction resulted in a pre-tax gain of $3,926,000~~5,775. ~~The assets had a net book value of $14,263,000~~ ~~and were classified as assets held for sale on the consolidated balance sheet as of May 31, 2022.~~

~~The total liability associated with our restructuring activities as of February 28, 2023 is expected to be paid in the next twelve months.~~

~~Table of Contents~~

Note GF – 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 HG – Guarantees

We do not have guarantees that we believe are reasonably likely to have a material current or future effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. However, at August 31, 2023 we ~~had in place $14,137,000~~ ~~of outstanding stand-by letters of credit issued to third-party service providers at February 28, 2023.~~ No ~~amounts~~ were ~~drawn against these stand-by letters of credit at February 28, 2023. We are also~~ party to an operating lease for an aircraft ~~for~~in which we have guaranteed a residual value at the termination of the lease, ~~termination.~~which ends on March 30, 2028. The maximum obligation under the terms of this guarantee was approximately $~~17,180,000~~16,491 at ~~February 28,~~August 31, 2023. Based on current facts and circumstances, we have estimated the likelihood of payment pursuant to this guarantee is not probable and, therefore, no amount has been recognized in our consolidated financial statements.

At August 31, 2023, 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 guarantee instruments, based on premiums paid, was not material and no amounts were drawn against them at August 31, 2023.

Table of Contents

Note H – Debt and Receivables Securitization

The following table summarizes our long-term debt and short-term borrowings outstanding at August 31, 2023 and May 31, 2023:


	August 31,			May 31,
(In thousands)	2023			2023
Short-term borrowings	$	-		$	2,813
4.60% senior notes due August 10, 2024		150,000			150,000
4.55% senior notes due April 15, 2026		-			243,623
4.30% senior notes due August 1, 2032		200,000			200,000
1.56% Series A senior note due August 23, 2031		39,791			39,226
1.90% Series B senior notes due August 23, 2034		59,634			58,786
Other		401			528
Total debt		449,826			694,976
Unamortized discount and debt issuance costs		(1,475	)		(2,181	)
Total debt, net		448,351			692,795
Less: current maturities and short-term borrowings		150,268			3,077
Total long-term debt	$	298,083		$	689,718

~~Note I –~~Maturities of long-term debt and short-term borrowings in the current fiscal year and next four fiscal years thereafter, are as follows:


(In thousands)
2024	$	133
2025		150,268
2026		-
2027		-
2028		-
Thereafter		299,425
Total	$	449,826

Long-Term Debt

On April 15, 2014, we issued senior unsecured notes in the principal amount of $250,000, which bear interest at a rate of 4.55% and are scheduled to mature on April 15, 2026 (the “2026 Notes”). During fiscal 2023, we purchased approximately $6,377 of 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

We maintain a $~~500,000,000~~500,000 multi-year revolving credit facility scheduled to mature on August 20, 2026 (the “Credit Facility”) with a group of lenders. 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 ~~Daily LIBOR~~Simple SOFR Rate, the Prime Rate of PNC Bank, National Association or the Overnight Bank Funding Rate. ~~The Credit Facility contains customary LIBOR benchmark replacement language.~~ The applicable margin is determined by our credit rating. There were no borrowings outstanding under the Credit Facility at ~~February 28,~~August 31, 2023, leaving $~~500,000,000~~500,000 available for future use.

~~We also maintain~~On May 19, 2022, we entered into a 5-year revolving trade accounts receivable securitization facility ~~(the “AR~~(“AR Facility”)~~. Pursuant~~ that allowed for short-term borrowings of up to $175,000 through the ~~terms~~factoring and subsequent sale, on a revolving basis, of ~~the AR Facility,~~eligible accounts receivable of certain of our subsidiaries ~~sell or contribute all of their eligible accounts receivable and other related assets without recourse, on a revolving basis,~~ to Worthington Receivables Company, LLC, ~~(“WRC”),~~ a wholly-owned, consolidated, bankruptcy-remote indirect subsidiary. ~~In turn, WRC sells, on a revolving basis, up~~On June 29, 2023, we elected to $terminate the AR Facility. ~~175,000,000~~No of undivided ownership interests in this pool of accounts receivable to a third-party bank. We retain an undivided interest in this pool and are subject to risk of loss based on the collectability of the receivables from this retained interest. Because the amount eligible to be sold excludes receivables more than 120 days past due, receivables offset by an allowance for doubtful accounts due to bankruptcyearly termination or other ~~cause, concentrations over certain limits~~similar fees or penalties were paid in connection with ~~specific customers and certain reserve amounts, we believe additional risk of loss is minimal. As of February 28, 2023, there were~~ no ~~borrowings outstanding under~~ the ~~AR Facility, leaving $175,000,000~~ ~~available for future use.~~termination.

~~Tempel Steel Company’s China location (“Tempel China”) has short-term loan facilities that result in the equivalent of $3,605,000~~ ~~outstanding at February 28, 2023. These loans, which are used to finance steel purchases, are collateralized by Tempel China property and equipment and mature in~~ ~~2023. New loans may be entered into as these loans mature. The effective interest rate on the loans outstanding at February 28, 2023 was~~ ~~3.5~~%.

~~During the third quarter of fiscal 2023, we repurchased $5,615,000~~ ~~of the $250,000,000~~ ~~senior notes due~~ ~~April 15, 2026~~ ~~(the “2026 Notes”) through open market purchases. This repurchase activity generated a gain of $77,000, which is recorded in miscellaneous income (expense), net in our consolidated statement of earnings for the three months and nine months ended February 28, 2023.~~

Note KJ – Changes in Equity

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


	Controlling Interest																		Controlling Interest
				Accumulated																		Accumulated
				Other																		Other
	Additional			Comprehensive									Non-						Additional			Comprehensive									Non-
	Paid-in			Income (Loss),			Retained						controlling						Paid-in			Income (Loss),			Retained						controlling
(in thousands)	Capital			Net of Tax			Earnings			Total			Interests			Total
Balance at May 31, 2022	$	273,439		$	(22,850	)	$	1,230,163		$	1,480,752		$	133,210		$	1,613,962
Net earnings		-			-			64,082			64,082			1,162			65,244
Other comprehensive loss		-			(20,462	)		-			(20,462	)		-			(20,462	)
Common shares issued, net of withholding tax		(3,466	)		-			-			(3,466	)		-			(3,466	)
Common shares in non-qualified plans		136			-			-			136			-			136
Stock-based compensation		6,976			-			-			6,976			-			6,976
Cash dividends declared		-			-			(15,418	)		(15,418	)		-			(15,418	)
Balance at August 31, 2022	$	277,085		$	(43,312	)	$	1,278,827		$	1,512,600		$	134,372		$	1,646,972
(In thousands)																			Capital			Net of Tax			Earnings			Subtotal			Interests			Total
Balance at May 31, 2023																			$	290,799		$	(23,179	)	$	1,428,391		$	1,696,011		$	125,617		$	1,821,628
Net earnings		-			-			16,218			16,218			3,287			19,505			-			-			96,106			96,106			3,597			99,703
Other comprehensive loss		-			(3,224	)		-			(3,224	)		-			(3,224	)		-			(5,408	)		-			(5,408	)		-			(5,408	)
Common shares issued, net of withholding tax		(649	)		-			-			(649	)		-			(649	)		(5,130	)		-			-			(5,130	)		-			(5,130	)
Common shares in non-qualified plans		298			-			-			298			-			298			130			-			-			130			-			130
Stock-based compensation		3,620			-			-			3,620			-			3,620			8,995			-			-			8,995			-			8,995
Cash dividends declared		-			-			(15,470	)		(15,470	)		-			(15,470	)		-			-			(16,081	)		(16,081	)		-			(16,081	)
Dividends to noncontrolling interests		-			-			-			-			(11,760	)		(11,760	)		-			-			-			-			(1,921	)		(1,921	)
Balance at November 30, 2022	$	280,354		$	(46,536	)	$	1,279,575		$	1,513,393		$	125,899		$	1,639,292
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
Balance at August 31, 2023																			$	294,794		$	(28,587	)	$	1,508,416		$	1,774,623		$	127,293		$	1,901,916

~~Table of Contents~~


	Controlling Interest																		Controlling Interest
				Accumulated																		Accumulated
				Other																		Other
	Additional			Comprehensive									Non-						Additional			Comprehensive									Non-
	Paid-in			Income (Loss),			Retained						controlling						Paid-in			Income (Loss),			Retained						controlling
(in thousands)	Capital			Net of Tax			Earnings			Total			Interests			Total
Balance at May 31, 2021	$	282,790		$	45,387		$	1,070,016		$	1,398,193		$	153,502		$	1,551,695
(In thousands)																			Capital			Net of Tax			Earnings			Subtotal			Interests		Total
Balance at May 31, 2022																			$	273,439		$	(22,850	)	$	1,230,163		$	1,480,752		$	133,210	$	1,613,962
Net earnings		-			-			132,491			132,491			8,984			141,475			-			-			64,082			64,082			1,162		65,244
Other comprehensive loss		-			(4,274	)		-			(4,274	)		-			(4,274	)		-			(20,462	)		-			(20,462	)		-		(20,462	)
Common shares issued, net of withholding tax		(4,091	)		-			-			(4,091	)		-			(4,091	)		(3,466	)		-			-			(3,466	)		-		(3,466	)
Common shares in non-qualified plans		89			-			-			89			-			89			136			-			-			136			-		136
Stock-based compensation		6,324			-			-			6,324			-			6,324			6,976			-			-			6,976			-		6,976
Purchases and retirement of common shares		(5,477	)		-			(55,408	)		(60,885	)		-			(60,885	)
Cash dividends declared		-			-			(14,504	)		(14,504	)		-			(14,504	)		-			-			(15,418	)		(15,418	)		-		(15,418	)
Dividends to noncontrolling interests		-			-			-			-			(9,197	)		(9,197	)
Balance at August 31, 2021	$	279,635		$	41,113		$	1,132,595		$	1,453,343		$	153,289		$	1,606,632
Net earnings		-			-			110,301			110,301			2,884			113,185
Other comprehensive loss		-			(57,858	)		-			(57,858	)		-			(57,858	)
Common shares issued, net of withholding tax		(2,694	)		-			-			(2,694	)		-			(2,694	)
Common shares in non-qualified plans		257			-			-			257			-			257
Stock-based compensation		3,304			-			-			3,304			-			3,304
Purchases and retirement of common shares		(1,297	)		-			(11,405	)		(12,702	)		-			(12,702	)
Cash dividends declared		-			-			(14,154	)		(14,154	)		-			(14,154	)
Dividends to noncontrolling interests		-			-			-			-			(2,879	)		(2,879	)
Balance at November 30, 2021	$	279,205		$	(16,745	)	$	1,217,337		$	1,479,797		$	153,294		$	1,633,091
Net earnings		-			-			56,342			56,342			2,305			58,647
Other comprehensive loss		-			(19,348	)		-			(19,348	)		-			(19,348	)
Common shares issued, net of withholding tax		269			-			-			269			-			269
Common shares in non-qualified plans		79			-			-			79			-			79
Stock-based compensation		2,889			-			-			2,889			-			2,889
Purchases and retirement of common shares		(5,559	)		-			(48,696	)		(54,255	)		-			(54,255	)
Cash dividends declared		-			-			(14,407	)		(14,407	)		-			(14,407	)
Dividends to noncontrolling interests		-			-			-			-			(3,360	)		(3,360	)
Balance at February 28, 2022	$	276,883		$	(36,093	)	$	1,210,576		$	1,451,366		$	152,239		$	1,603,605
Balance at August 31, 2022																			$	277,085		$	(43,312	)	$	1,278,827		$	1,512,600		$	134,372	$	1,646,972

The following table summarizes the changes in accumulated OCI for the periods presented:

Accumulated

Foreign

Pension

Other

Currency

Liability

Cash Flow

Comprehensive

(in thousands)

Translation

Adjustment

Hedges

Loss

Balance at May 31, 2022

$
(15,310
)

$
(6,244
)

$
(1,296
)

$
(22,850
)
Other comprehensive loss before reclassifications

(7,549
)

(619
)

(2,999
)

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

-

4,774

24,200

28,974

Income tax effect

(131
)

(975
)

(4,159
)

(5,265
)
Balance at February 28, 2023

$
(22,990
)

$
(3,064
)

$
15,746

$
(10,308
)


										Accumulated												Accumulated
	Foreign			Pension						Other			Foreign			Pension						Other
	Currency			Liability			Cash Flow			Comprehensive			Currency			Liability			Cash Flow			Comprehensive
(in thousands)	Translation			Adjustment			Hedges			Income (Loss)
Balance at May 31, 2021	$	1,779		$	(15,955	)	$	59,563		$	45,387
(In thousands)													Translation			Adjustment			Hedges			Loss
Balance at May 31, 2023													$	(22,123	)	$	(1,730	)	$	674		$	(23,179	)
Other comprehensive income (loss) before reclassifications		(9,473	)		500			11,747			2,774			1,326			-			(2,038	)		(712	)
Reclassification adjustments to net earnings (a)		-			1,200			(107,152	)		(105,952	)		-			-			(6,773	)		(6,773	)
Income tax effect		(851	)		(336	)		22,885			21,698			118			(3	)		1,962			2,077
Balance at February 28, 2022	$	(8,545	)	$	(14,591	)	$	(12,957	)	$	(36,093	)
Balance at August 31, 2023													$	(20,679	)	$	(1,733	)	$	(6,175	)	$	(28,587	)

1110

Table of Contents


										Accumulated
	Foreign			Pension						Other
	Currency			Liability			Cash Flow			Comprehensive
(In thousands)	Translation			Adjustment			Hedges			Loss
Balance at May 31, 2022	$	(15,310	)	$	(6,244	)	$	(1,296	)	$	(22,850	)
Other comprehensive loss before reclassifications		(9,519	)		(1,049	)		(14,207	)		(24,775	)
Reclassification adjustments to net earnings (a)(b)		-			4,774			(2,890	)		1,884
Income tax effect		(581	)		(786	)		3,796			2,429
Balance at August 31, 2022	$	(25,410	)	$	(3,305	)	$	(14,597	)	$	(43,312	)

~~(a)~~

The consolidated statement of earnings classification of amounts reclassified to net ~~earnings~~income include:

~~Pension liability adjustment~~ ~~– During August 2022, we purchased (using pension plan assets) an annuity contract from a third-party insurance company to transfer approximately~~ 31% of the total projected benefit obligation of The Gerstenslager Company Bargaining Unit Employees’ Pension Plan as of the purchase date. As a result of this transaction: 1) we incurred a non-cash settlement charge of $~~4,774,000~~ recorded in miscellaneous income (expense), net in the consolidated statements of earnings; 2) we were relieved of all responsibility for these pension obligations; and 3) the insurance company is now required to pay and administer the retirement benefits owed to ~~220~~ ~~beneficiaries; and~~

2.(a)

Cash flow hedges – See the disclosure in “Note QP – Derivative Financial Instruments and Hedging ~~Activities”.~~ Activities;” and

(b)

Pension liability adjustment – Reflects a non-cash settlement charge of $4,774 recognized in connection with a pension lift-out transaction completed in August 2022 for The Gerstenslager Company Bargaining Unit Employees’ Pension Plan.

Expected volatility is based on the historical volatility of the common shares and the risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the non-qualified stock options. The expected term was developed using historical exercise experience.

During the ~~nine~~three months ended ~~February 28,~~August 31, 2023, we granted an aggregate of ~~345,550~~97 service-based restricted common shares under our stock-based compensation plans, which ~~generally~~cliff vest three years ~~after their~~from the grant date. The fair value of these restricted common shares was equal to the weighted average closing market price of the underlying common shares on the date of grant, or $~~49.49~~69.62 per share. The calculated pre-tax stock-based compensation expense for these restricted common shares iswas $~~17,100,000~~6,757 and will be recognized on a straight-line basis over the three-year service-based vesting period, net of any forfeitures.

~~On June 24, 2022, we granted~~ ~~10,000~~ market-based restricted common shares to one key employee under one of our stock-based compensation plans. Vesting of these restricted common shares is contingent upon the average closing price of the common shares reaching $~~65.00~~ ~~during any~~ 90 consecutive day period during the five-year period following the date of grant and completion of a three-year service vesting period. The grant date fair value of these restricted common shares, as determined by a Monte Carlo simulation model, was $~~35.49~~ ~~per share. The calculated pre-tax stock-based compensation expense for these market-based restricted common shares is $355,000~~ ~~and will be recognized on a straight-line basis over the~~ ~~three-year~~ ~~service-based vesting period.~~ ~~The following assumptions were used to determine the grant-date fair value and the derived service period for these restricted common shares:~~


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

~~Table of Contents~~

We have awarded performance shares to certain key employees under our stock-based compensation plans. These performance shares are earned based on the level of achievement with respect to corporate targets for cumulative corporate economic value added, earnings per share growth and, in the case of business unit executives, a business unit adjusted earnings before interest and taxes (“adjusted EBIT”) target, in each case for the three-year periods ending May 31, ~~2023,~~ 2024, 2025 and ~~2025.~~2026. These performance share awards will be paid, to the extent earned, in common shares in the fiscal quarter following the end of the applicable three-year performance period. The fair values of our performance shares are determined by the closing market prices of the underlying common shares at the respective grant dates of the performance shares and the pre-tax stock-based compensation expense is based on our periodic assessment of the probability of the targets being achieved and our estimate of the number of common shares that will ultimately be issued. During the ~~nine~~three months ended ~~February 28,~~August 31, 2023, we granted performance share awards covering an aggregate of ~~58,100~~47 common shares (at target levels). The calculated pre-tax stock-based compensation expense for these performance shares is $~~2,695,000~~3,235 (at target levels). The ultimate pre-tax stock-based compensation expense to be recognized over the three-year performance period on all tranches will vary based on our periodic assessment of the probability of the targets being achieved.

Table of Contents

Note ML – Income Taxes

Income tax expense for the ~~nine~~three months ended ~~February 28,~~August 31, 2023 and 2022 reflected estimated annual effective income tax rates of ~~22.8~~23.3% and ~~23.2~~23.9%, respectively, and ~~exclude~~excluded any impact from the inclusion of net earnings attributable to noncontrolling interests in our consolidated statements of earnings. Net earnings attributable to noncontrolling interests are primarily a result of our WSP, Spartan, Samuel ~~Spartan,~~and TWB ~~and WSP (through the disposition of its remaining net assets on October 31, 2022)~~ consolidated joint ventures. The net earnings attributable to the noncontrolling interests in WSP, Spartan, Samuel ~~Spartan, TWB~~ and ~~WSP’s~~TWB’s U.S. operations do not generate tax expense to us since the investors in WSP, Spartan, Samuel ~~Spartan, TWB~~ and ~~WSP’s~~TWB’s U.S. operations are taxed directly based on the earnings attributable to them. The tax expense of TWB’s wholly-owned foreign corporations is reported in our consolidated income tax expense. Management is required to estimate the annual effective income tax rate based upon its forecast of annual pre-tax income for domestic and foreign operations. Our actual effective income tax rate for fiscal ~~2023~~2024 could be materially different from the forecasted rate as of ~~February 28,~~August 31, 2023.

Note NM – Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share attributable to controlling interest for the periods presented:


	Three Months Ended				Nine Months Ended				Three Months Ended
	February 28,				February 28,				August 31,
(in thousands, except per share amounts)	2023		2022		2023		2022
(In thousands, except per common share amounts)									2023		2022
Numerator (basic & diluted):
Net earnings attributable to controlling interest -
income available to common shareholders	$	46,325	$	56,342	$	126,625	$	299,134	$	96,106	$	64,082
Denominator:
Denominator for basic earnings per share attributable to
controlling interest - weighted average common shares		48,587		49,749		48,541		50,331
controlling interest – weighted average common shares										48,842		48,478
Effect of dilutive securities		906		892		815		944		1,044		760
Denominator for diluted earnings per share attributable to
controlling interest - adjusted weighted average common shares		49,493		50,641		49,356		51,275
controlling interest – adjusted weighted average common shares										49,886		49,238

Basic earnings per share attributable to controlling interest	$	0.95	$	1.13	$	2.61	$	5.94
Diluted earnings per share attributable to controlling interest	$	0.94	$	1.11	$	2.57	$	5.83
Basic earnings per common share attributable to controlling interest									$	1.97	$	1.32
Diluted earnings per common share attributable to controlling interest									$	1.93	$	1.30

Stock options covering ~~an aggregate of~~ ~~138,100~~37 and ~~53,800~~117 common shares for the three months ended ~~February 28, 2023 and 2022, respectively, and~~ ~~131,000~~ ~~and~~ ~~49,500~~ ~~common shares for the nine months ended February 28,~~August 31, 2023 and 2022, respectively, have been excluded from the computation of diluted earnings per common share because the effect would have been anti-dilutive for those periods.

~~Table of Contents~~

Note ON – Segment Operations

We are an industrial manufacturing company focused on value-added steel processing and manufactured consumer, building, and sustainable mobility products. Our operations are managed principally on a products and services basis and organized under four operating segments: Steel Processing, Consumer Products, Building Products, and Sustainable Energy Solutions. As none of our operating segments have been aggregated for segment reporting purposes, they correspond with our reportable segments. Segment information is prepared on the same basis that our CODM reviews financial information for operational decision-making purposes. Factors used to identify operating segments include the nature of the products and services provided by each business, the management reporting structure, the similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance.

We have identified our Chief Executive Officer as the chief operating decision maker (“CODM”), ~~who is our Chief Executive Officer,~~as defined in the accounting literature. Our CODM assesses segment operating ~~segment~~ performance and allocates resources based on the profitability measure of adjusted EBIT. ~~EBIT is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest.~~ Adjusted EBIT excludes impairment and restructuring expense (income), but may also exclude other items, as described in the tables below, that management believes are not reflective of, and thus should not be included when evaluating the performance of our ongoing operations. Adjusted EBIT is a non-GAAP financial measure and is used by management to evaluate operating segment performance, engage in financial and operational planning and determine incentive compensation.

Impairment charges are excluded from adjusted EBIT because they do not occur in the ordinary course of our ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, so their exclusion facilitates the comparison of historical, current and forecasted financial results.

Table of Contents

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


	Three Months Ended February 28, 2023																Three Months Ended August 31, 2023
(in thousands)	Steel Processing			Consumer Products			Building Products		Sustainable Energy Solutions			Other			Consolidated
(In thousands)																	Steel Processing		Consumer Products		Building Products		Sustainable Energy Solutions			Other			Consolidated
Net sales	$	757,007		$	162,647		$	151,876	$	31,792		$	-		$	1,103,322	$	881,339	$	149,412	$	133,868	$	28,637		$	-		$	1,193,256
Impairment of long-lived assets		-			-			484		-			-			484		1,401		-		-		-			-			1,401
Restructuring and other expense, net		1			206			617		-			-			824
Separation costs		-			-			-		-			6,347			6,347		-		-		-		-			6,035			6,035
Miscellaneous income (expense), net		1,111			(21	)		130		(37	)		144			1,327		712		31		57		281			(70	)		1,011
Loss on extinguishment of debt																		-		-		-		-			1,534			1,534
Equity income		(185	)		-			37,836		-			(725	)		36,926		8,957		-		45,043		-			381			54,381
Adjusted EBIT (1)		7,788			17,943			51,472		(1,440	)		(4,443	)		71,320		78,002		8,991		54,016		(4,722	)		132			136,419

(1)

Excludes the following:

•

~~A pre-tax benefit~~Impairment of $~~1,050,000~~ ~~within~~long-lived assets resulted from a revision of the estimated fair value, less selling ~~general, and administrative expense (“SG&A”) to reverse the compensation expense accrued during the first six months~~costs of ~~fiscal 2023~~certain production equipment at our consolidated Samuel joint venture that has been classified as held for ~~the anticipated payout under the first annual earnout period ending December 31, 2023 associated with the Level5 acquisition (see the discussion of this acquisition in “Note P – Acquisitions”);~~sale since August 2022;

•

Separation costs ~~of $6,347,000~~ ~~within Other related to~~reflect direct and incremental costs ~~incurred~~ in connection with the anticipated Separation ~~including~~and are held at the corporate level. These costs include fees paid to third-party parties for audit, advisory and legal ~~costs;~~services to effect the Separation, nonrecurring employee-related costs, such as retention bonuses, and nonrecurring functional costs associated with the separation of shared corporate functions;

•

Loss on extinguishment of debt resulted from the redemption of the 2026 Notes, in full, on July 28, 2023, and consisted primarily unamortized debt issuance costs and the remaining loss deferred in AOCI associated with an interest rate swap executed prior to the issuance of the 2026 Notes; and

•

~~A loss~~Noncontrolling interest portion of impairment of long-lived assets of $~~300,000~~517 ~~for the settlement of final transaction costs~~ within ~~Other related to the sale of our~~ 50~~% noncontrolling equity investment in ArtiFlex.~~Steel Processing.


	Three Months Ended February 28, 2022																		Three Months Ended August 31, 2022
(in thousands)	Steel Processing			Consumer Products			Building Products			Sustainable Energy Solutions			Other			Consolidated
(In thousands)																			Steel Processing		Consumer Products			Building Products		Sustainable Energy Solutions			Other			Consolidated
Net sales	$	1,052,562		$	161,692		$	132,944		$	31,037		$	-		$	1,378,235		$	1,038,880	$	188,703		$	150,323	$	30,759		$	-		$	1,408,665
Impairment of long-lived assets		3,076			-			-			-			-			3,076			312		-			-		-			-			312
Restructuring and other expense (income), net		114			-			(35	)		-			(583	)		(504	)		78		-			-		-			(1,178	)		(1,100	)
Miscellaneous income, net		(12	)		(39	)		(3	)		(38	)		485			393			184		(35	)		222		(86	)		(5,371	)		(5,086	)
Equity income		4,692			-			39,978			-			2,796			47,466			1,770		-			43,866		-			(13,924	)		31,712
Adjusted EBIT (2)		7,116			26,674			49,570			(2,801	)		4,039			84,598			34,913		20,934			52,734		(1,393	)		5,145			112,333

(2)

Excludes the ~~noncontrolling interest portion of the impairment~~following:

•

Impairment of long-lived assets resulted from the reclassification of the net assets of the Samuel toll processing facility in Cleveland, Ohio, to assets held for sale during August 2022;

•

Restructuring and ~~restructuring expense within Steel Processing~~other income, net was driven primarily by a gain on the sale of $~~1,139,000~~.

~~Table~~the remaining real property of ~~Contents~~

Nine Months Ended February 28, 2023

(in thousands)
Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Consolidated

Net sales
$
2,637,834

$
505,145

$
443,870

$
100,679

$
-

$
3,687,528

Impairment of long-lived assets

312

-

484

-

-

796

Restructuring and other expense (income), net

(4,204
)

206

617

-

(1,177
)

(4,558
)
Separation costs

-

-

-

-

15,593

15,593

Miscellaneous income (expense), net

2,145

(102
)

428

19

(4,844
)

(2,354
)
Equity income

3,491

-

116,809

-

(14,805
)

105,495

Adjusted EBIT (3)(4)

25,450

52,350

145,431

(1,690
)

(2,588
)

218,953

~~(3)~~

~~Excludes the following:~~our former oil & gas equipment business on June 14, 2022;

•

A non-cash settlement charge of $~~4,774,000~~4,774 in miscellaneous income (expense), net within Other related to the pension lift-out transaction associated with ~~The~~the Gerstenslager Company Bargaining Unit Employees’ Pension ~~Plan and described further in “Note K – Changes in Equity;”~~Plan;

•

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

Table of Contents

•

Incremental compensation expense of $525 within Consumer Products related to the Level5 earnout agreement; and

•

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

~~(4)~~

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

Nine Months Ended February 28, 2022

(in thousands)
Steel Processing

Consumer Products

Building Products

Sustainable Energy Solutions

Other

Consolidated

Net sales
$
2,813,214

$
450,268

$
368,813

$
89,619

$
-

$
3,721,914

Impairment of long-lived assets

3,076

-

-

-

-

3,076

Restructuring and other expense (income), net

(12,199
)

-

(35
)

(143
)

(2,405
)

(14,782
)
Miscellaneous income, net

35

169

141

(16
)

1,734

2,063

Equity income

22,864

-

132,865

-

4,871

160,600

Adjusted EBIT (5)

186,734

64,813

153,042

(4,561
)

5,517

405,545

~~(5)~~

~~Excludes the noncontrolling~~Noncontrolling interest portion of impairment of long-lived assets ~~and restructuring income~~of $115 within Steel Processing ~~of $4,888,000~~.

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


	February 28,		May 31,		August 31,		May 31,
(in thousands)	2023		2022
(In thousands)					2023		2023
Total assets
Steel Processing	$	1,763,730	$	2,082,522	$	1,786,067	$	1,758,981
Consumer Products		636,896		577,026		615,223		615,430
Building Products		647,582		681,188		619,794		635,650
Sustainable Energy Solutions		121,689		114,084		139,147		129,872
Other		327,775		188,203		316,461		510,985
Total assets	$	3,497,672	$	3,643,023	$	3,476,692	$	3,650,918

~~Table of Contents~~

Note PO – Acquisitions

~~Level5®~~Level5 Tools, LLC

On June 2, 2022, we acquired ~~Level5® Tools, LLC (“Level5”),~~Level5, a leading provider of drywall tools and related accessories. The total purchase price was $~~59,321,000~~59,321, including $~~2,000,000~~2,000 attributed to an earnout agreement with the selling shareholders, that provides for up to an additional $~~25,000,000~~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. ~~During the third quarter, a pre-tax benefit~~As of $~~1,050,000~~ ~~was recorded within SG&A in the consolidated statements of earnings to reverse the~~August 31, 2023, no amounts were accrued as compensation expense ~~accrued during the first six months of fiscal 2023~~ for ~~the~~ anticipated ~~payout~~payments under the ~~first~~second earnout period ending December 31, 2023.

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 information included herein has been 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. In connection with the acquisition of Level5, we identified and valued the following intangible assets:


(in thousands)
(In thousands)
Category	Amount		Useful Life (Years)	Amount		Useful Life (Years)
Trade name	$	13,500	Indefinite	$	13,500	Indefinite
Customer relationships		13,300	10		13,300	10
Technological know-how		6,500	20		6,500	20
Non-compete agreement		280	3		280	3
Total acquired identifiable intangible assets	$	33,580		$	33,580

The purchase price includes the fair values of other assets that were not identifiable, not separately recognizable under ~~applicable~~ accounting rules (e.g., assembled workforce) or of immaterial value. The purchase price also includes strategic and synergistic benefits (investment value) specific to us, which resulted in a purchase price in excess of the fair value of the identifiable net assets. This additional investment value resulted in goodwill which will be deductible ~~by us~~ for income tax purposes.

1614

Table of Contents

The following table summarizes the consideration ~~transferred~~paid and the ~~estimated~~final 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 Valuation			Measurement Period Adjustments			Revised Valuation
(In thousands)										Preliminary Valuation			Measurement Period Adjustments			Final Valuation
Cash and cash equivalents	$	1,515		$	-		$	1,515		$	1,515		$	-		$	1,515
Accounts receivable		2,860			-			2,860			2,860			-			2,860
Inventories		9,161			-			9,161			9,161			-			9,161
Prepaid expenses		64			-			64			64			-			64
Property, plant and equipment		273			-			273			273			-			273
Intangible assets		33,580			-			33,580			33,580			-			33,580
Operating lease assets		377			-			377			377			-			377
Total identifiable assets		47,830			-			47,830			47,830			-			47,830
Accounts payable		(3,175	)		-			(3,175	)		(3,175	)		-			(3,175	)
Accrued expenses		(904	)		151			(753	)		(904	)		151			(753	)
Current operating lease liabilities		(111	)		-			(111	)		(111	)		-			(111	)
Noncurrent operating lease liabilities		(266	)		-			(266	)		(266	)		-			(266	)
Net identifiable assets		43,374			151			43,525			43,374			151			43,525
Goodwill		15,947			-			15,947			15,947			-			15,947
Total purchase price		59,321			151			59,472			59,321			151			59,472
Less: Fair value of earnout		(2,000	)		-			(2,000	)		(2,000	)		-			(2,000	)
Plus: Net working capital deficit		282			(151	)		131			282			(151	)		131
Cash purchase price	$	57,603		$	-		$	57,603		$	57,603		$	-		$	57,603

Note QP – Derivative Financial Instruments and Hedging Activities

We utilize derivative financial instruments to primarily manage exposure to certain risks related to our ongoing operations. The primary risks managed through the use of derivative financial instruments include interest rate risk, foreign currency exchange rate risk and commodity price risk. While certain of our derivative financial instruments are designated as hedging instruments, we also enter into derivative financial instruments that are designed to hedge a risk, but are not designated as hedging instruments and, therefore, do not qualify for hedge accounting. These derivative financial instruments are adjusted to current fair value through earnings at the end of each period.

Interest Rate Risk Management – We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps and treasury locks to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.

Foreign Currency Exchange Rate Risk Management – We conduct business in several major international currencies and are, therefore, subject to risks associated with changing foreign currency exchange rates. We enter into various contracts that change in value as foreign currency exchange rates change to manage this exposure. Such contracts limit exposure to both favorable and unfavorable currency exchange rate fluctuations. The translation of foreign currencies into U.S. dollars also subjects us to exposure related to fluctuating currency exchange rates; however, derivative financial instruments are not used to manage this risk.

Commodity Price Risk Management – We are exposed to changes in the price of certain commodities, including steel, natural gas, copper, zinc and other raw materials, and our utility requirements. Our objective is to reduce earnings and cash flow volatility associated with forecasted purchases and sales of these commodities to allow management to focus its attention on business operations. Accordingly, we enter into derivative financial instruments to manage the associated price risk.

~~Table of Contents~~

We are exposed to counterparty credit risk on all of our derivative financial instruments. Accordingly, we have established and maintain strict counterparty credit guidelines. We have credit support agreements in place with certain counterparties to limit our credit exposure. These agreements require either party to post cash collateral if its cumulative market position exceeds a predefined liability threshold. Amounts posted to the margin accounts accrue interest at market rates and are required to be refunded in the period in which the cumulative market position falls below the required threshold. We do not have significant exposure to any one counterparty, and management believes the overall risk of loss is remote and, in any event, would not be material.

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Refer to “Note RQ – Fair Value” for additional information regarding the accounting treatment for our derivative financial instruments, as well as how fair value is determined.

The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at ~~February 28,~~August 31, 2023:

Asset Derivatives

Liability Derivatives

Balance

Balance

Sheet

Fair

Sheet

Fair

(in thousands)

Location

Value

Location

Value

Derivatives designated as hedging instruments:

Commodity contracts

Receivables

$
30,670

Accounts payable

$
1,701

Other assets

1,137

Other liabilities

8

31,807

1,709

Foreign currency exchange contracts

Other assets

273

Accounts payable

-

Total

$
32,080

$
1,709

Derivatives not designated as hedging instruments:

Commodity contracts

Receivables

$
1,410

Accounts payable

$
19,185

Other assets

-

Other liabilities

1,719

1,410

20,904

Foreign currency exchange contracts

Receivables

-

Accounts payable

15

Total

$
1,410

$
20,919

Total derivative financial instruments

$
33,490

$
22,628

The amounts in the table above reflect the fair value of our derivative financial instruments on a net basis where allowable under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been an $~~8,326,000~~ ~~increase in Receivables with a corresponding increase in Accounts payable.~~

~~Table of Contents~~

~~The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at May 31, 2022:~~


		Asset Derivatives			Liability Derivatives				Asset Derivatives			Liability Derivatives
		Balance			Balance				Balance			Balance
		Sheet	Fair		Sheet	Fair			Sheet	Fair		Sheet	Fair
(in thousands)		Location	Value		Location	Value
(In thousands)									Location	Value		Location	Value
Derivatives designated as hedging instruments:
Commodity contracts		Receivables	$	1,040	Accounts payable	$	4,517		Receivables	$	80	Accounts payable	$	9,490
									Other assets		176	Other liabilities		-
		Other assets		-	Other liabilities		48				256			9,490
				1,040			4,565
Foreign currency exchange contracts		Receivables		-	Accounts payable		-		Receivables		-	Accounts payable		63
		Other assets		-	Other liabilities		17				-			63
				-			17
Total			$	1,040		$	4,582
Subtotals										$	256		$	9,553

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Commodity contracts		Receivables	$	11,555	Accounts payable	$	4,142		Receivables	$	976	Accounts payable	$	3,320
		Other assets		48	Other liabilities		24		Other assets		-	Other liabilities		20
				11,603			4,166
Foreign currency exchange contracts		Receivables		-	Accounts payable		255
Total			$	11,603		$	4,421
Subtotals											976			3,340

Total derivative financial instruments			$	12,643		$	9,003			$	1,232		$	12,893

The amounts in the table above reflect the fair value of our derivative financial instruments on a net basis where allowable under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been a $~~6,300,000~~3,791 increase in ~~Receivables~~receivables with a corresponding increase in ~~Accounts~~accounts payable.

The following table summarizes the fair value of our derivative financial instruments and the respective lines in which they were recorded in the consolidated balance sheet at May 31, 2023:


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

Foreign currency exchange contracts	Receivables		-	Accounts payable		33
			-			33

Subtotals		$	71		$	7,161

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

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

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The amounts in the table above reflect the fair value of our derivative financial instruments on a net basis where allowable under master netting arrangements. Had these amounts been recognized on a gross basis, the impact would have been a $7,576 increase in receivables with a corresponding increase in accounts payable.

Cash Flow Hedges

We enter into derivative financial instruments to hedge our exposure to changes in cash flows attributable to commodity price fluctuations associated with certain forecasted transactions. These derivative financial instruments are designated and qualify as cash flow hedges. The earnings effects of these derivative financial instruments are presented in the same statement of earnings line items as the earnings effects of the hedged items. For derivative financial instruments designated as cash flow hedges, we assess hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative financial instruments.

The following table summarizes our cash flow hedges outstanding at ~~February 28,~~August 31, 2023:

Notional

(in thousands)

Amount

Maturity Date

(In thousands)

Amount

Maturity Date

Commodity contracts

136,907

March 2023 - September 2024

63,431

September 2023 - December 2024

Foreign currency exchange contracts

604

March 2023 - July 2023

2,494

September 2023 - November 2023

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The following table summarizes the gain (loss) recognized in OCI and the gain (loss) reclassified from ~~Accumulated Other Comprehensive Income (Loss) (“AOCI”)~~AOCI into net earnings for derivative financial instruments designated as cash flow hedges for the periods presented:


(in thousands)	Gain (Loss) Recognized in OCI			Location of Gain (Loss) Reclassified from AOCI into Net Earnings	Gain (Loss) Reclassified from AOCI into Net Earnings
For the three months ended February 28, 2023:
(In thousands)									Gain (Loss) Recognized in OCI			Location of Gain (Loss) Reclassified from AOCI into Net Earnings	Gain (Loss) Reclassified from AOCI into Net Earnings
For the three months ended August 31, 2023:								For the three months ended August 31, 2023:
Commodity contracts									$	(2,061	)	Cost of goods sold	$	7,330
Interest rate contracts										-		Loss on extinguishment of debt		(641	)
Interest rate contracts										-		Interest expense, net		31
Foreign currency exchange contracts										23		Net sales/Cost of goods sold		53
Total									$	(2,038	)		$	6,773

For the three months ended August 31, 2022:								For the three months ended August 31, 2022:
Commodity contracts	$	32,976		Cost of goods sold	$	(10,980	)		$	(14,045	)	Cost of goods sold	$	2,869
Interest rate contracts		-		Interest expense		(7	)			-		Interest expense		(7	)
Foreign currency exchange contracts		67		Net sales/Cost of goods sold		67				(162	)	Miscellaneous income, net		28
Total	$	33,043			$	(10,920	)		$	(14,207	)		$	2,890

For the three months ended February 28, 2022:
Commodity contracts	$	(2,460	)	Cost of goods sold	$	24,025
Interest rate contracts		-		Interest expense		(7	)
Foreign currency exchange contracts		(71	)	Miscellaneous income, net		(21	)
Total	$	(2,531	)		$	23,997

For the nine months ended February 28, 2023:
Commodity contracts	$	(3,123	)	Cost of goods sold	$	(24,173	)
Interest rate contracts		-		Interest expense		(20	)
Foreign currency exchange contracts		124		Net sales/Cost of goods sold		(7	)
Total	$	(2,999	)		$	(24,200	)

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

The estimated net amount of the ~~gains~~losses recognized in AOCI at ~~February 28,~~August 31, 2023 expected to be reclassified into net earnings within the succeeding twelve months is $~~13,848,000~~7,750 (net of tax of $~~3,313,000~~2,182). This amount was computed using the fair value of the cash flow hedges at ~~February 28,~~August 31, 2023, and will change before actual reclassification from OCI to net earnings during the fiscal years ending May 31, ~~2023~~2024 and May 31, ~~2024.~~2025.

Economic (Non-designated) Hedges

We enter into foreign currency exchange contracts to manage our foreign currency exchange rate exposure related to inter-company and financing transactions that do not meet the requirements for hedge accounting treatment. We also enter into certain commodity contracts that do not qualify for hedge accounting treatment. Accordingly, these derivative financial instruments are adjusted to current market value at the end of each period through gain (loss) recognized in earnings.

The following table summarizes our economic (non-designated) derivative financial instruments outstanding at ~~February 28,~~August 31, 2023:

Notional

(in thousands)

Amount

Maturity Date(s)
Commodity contracts

$
2,439

February 2023 - December 2024
Foreign currency exchange contracts

$
2,138

March 2023 - July 2023

2017

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The following table summarizes the gain (loss) recognized in earnings for economic (non-designated) derivative financial instruments for the periods presented:

Gain (Loss) Recognized

In Earnings for the

Location of Gain (Loss)

Three Months Ended February 28,

(in thousands)

Recognized in Earnings

2023

2022

Commodity contracts

Cost of goods sold

$
(6,523
)

$
(4,694
)
Foreign currency exchange contracts

Miscellaneous income, net

79

(23
)
Total

$
(6,444
)

$
(4,717
)

Gain (Loss) Recognized

in Earnings for the

Location of Gain (Loss)

Nine Months Ended February 28,

(in thousands)

Recognized in Earnings

2023

2022

Commodity contracts

Cost of goods sold

$
(6,428
)

$
14,698

Foreign currency exchange contracts

Miscellaneous income, net

32

226

Total

$
(6,396
)

$
14,924


		Loss Recognized
		In Earnings for the
	Location of Loss	Three Months Ended August 31,
(In thousands)	Recognized in Earnings	2023			2022
Commodity contracts	Cost of goods sold	$	(1,019	)	$	(1,577	)

Note RQ – 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.

Recurring Fair Value Measurements

At ~~February 28,~~August 31, 2023, our assets and liabilities measured at fair value on a recurring basis were as follows:


			Significant								Significant
	Quoted Prices		Other		Significant				Quoted Prices		Other		Significant
	in Active		Observable		Unobservable				in Active		Observable		Unobservable
	Markets		Inputs		Inputs				Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
(In thousands)									(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative financial instruments (1)	$	-	$	33,490	$	-	$	33,490	$	-	$	1,232	$	-	$	1,232
Total assets	$	-	$	33,490	$	-	$	33,490	$	-	$	1,232	$	-	$	1,232

Liabilities
Derivative financial instruments (1)	$	-	$	22,628	$	-	$	22,628	$	-	$	12,893	$	-	$	12,893
Total liabilities	$	-	$	22,628	$	-	$	22,628	$	-	$	12,893	$	-	$	12,893

(1)

The fair value of our derivative financial instruments is based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows. Refer to “Note QP – Derivative Financial Instruments and Hedging Activities” for additional information regarding our use of derivative financial instruments.

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At May 31, ~~2022,~~2023, our assets and liabilities measured at fair value on a recurring basis were as follows:


			Significant								Significant
	Quoted Prices		Other		Significant				Quoted Prices		Other		Significant
	in Active		Observable		Unobservable				in Active		Observable		Unobservable
	Markets		Inputs		Inputs				Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
(In thousands)									(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative financial instruments (1)	$	-	$	12,643	$	-	$	12,643	$	-	$	2,610	$	-	$	2,610
Total assets	$	-	$	12,643	$	-	$	12,643	$	-	$	2,610	$	-	$	2,610

Liabilities
Derivative financial instruments (1)	$	-	$	9,003	$	-	$	9,003	$	-	$	15,800	$	-	$	15,800
Total liabilities	$	-	$	9,003	$	-	$	9,003	$	-	$	15,800	$	-	$	15,800

(1)

Non-Recurring Fair Value Measurements

At ~~February 28,~~August 31, 2023, our assets measured at fair value on a non-recurring basis were as follows:


			Significant								Significant
	Quoted Prices		Other		Significant				Quoted Prices		Other		Significant
	in Active		Observable		Unobservable				in Active		Observable		Unobservable
	Markets		Inputs		Inputs				Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
(In thousands)									(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Long-lived assets held and used (1)	$	-	$	70	$	-	$	70
Long-lived assets held for sale (1)									$	-	$	150	$	-	$	150
Total assets	$	-	$	70	$	-	$	70	$	-	$	150	$	-	$	150

(1)

~~During the three months ended February 28, 2023, we recognized a pre-tax impairment charge~~Comprised of $~~484,000~~ ~~related to certain assets associated with a capital project~~production equipment at our ~~Building Products~~former toll processing facility in ~~Jefferson, Ohio, that were determined~~Cleveland, Ohio. Refer to ~~have no alternative use and written down to their estimated salvage value~~“Note D – Impairment of ~~approximately $70,000~~.Long-Lived Assets” for additional information.

At May 31, ~~2022,~~2023, our assets measured at fair value on a non-recurring basis were as follows:


			Significant								Significant
	Quoted Prices		Other		Significant				Quoted Prices		Other		Significant
	in Active		Observable		Unobservable				in Active		Observable		Unobservable
	Markets		Inputs		Inputs				Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
(In thousands)									(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Long-lived assets held for sale (1)	$	-	$	700	$	-	$	700	$	-	$	2,623	$	-	$	2,623
Long-lived assets held and used (2)										-		70		-		70
Total assets	$	-	$	700	$	-	$	700	$	-	$	2,693	$	-	$	2,693

2219

Table of Contents

(1)

Comprised of ~~production~~the following: (1) idled equipment at ~~our Samuel~~the manufacturing facility in ~~Twinsburg,~~Taylor, Michigan; and (2) the net assets of our former toll processing facility in Cleveland, Ohio.

(2)

Comprised of certain assets associated with a capital project at our Building Products facility in Jefferson, Ohio ~~facility with an~~which were written down to their estimated ~~fair market~~salvage value of $~~700,000.~~70 ~~Refer to “Note E – Impairment of Long-Lived Assets” for additional information.~~.

The fair value of non-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables, income taxes receivable, other assets, accounts payable, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities approximate carrying value due to their short-term nature. The fair value of long-term debt, including current maturities, based upon models utilizing market observable (Level 2) inputs and credit risk, was $~~638,163,000~~395,987 and $~~684,830,000~~639,948 at ~~February 28,~~August 31, 2023 and May 31, ~~2022,~~2023, respectively. The carrying amount of long-term debt, including current maturities, was $~~689,600,000~~448,351 and $~~696,610,000~~689,982 at ~~February 28,~~August 31, 2023 and May 31, ~~2022,~~2023, respectively.

23Note R – Subsequent Events

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.

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

Selected statements contained in this “Item 2. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” constitute “forward-looking statements” as that term is used in the PSLRA. Such forward-looking statements are based, in whole or in part, on management’s beliefs, estimates, assumptions and currently available information. For a more detailed discussion of what constitutes a forward-looking statement and of some of the factors that could cause actual results to differ materially from such forward-looking statements, please refer to the “Safe Harbor Statement” in the beginning of this Form 10-Q and “Part I – Item 1A. – Risk Factors” of the ~~2022~~2023 Form 10-K.

Unless otherwise indicated, all Note references contained in this “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” refer to the Condensed Notes to Consolidated Financial Statements included in “Part I – Item 1. – Financial Statements” of this Form 10-Q.

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 ~~2022~~2023 Form 10-K includes additional information about our business, operations and consolidated financial position and should be read in conjunction with this Form 10-Q. 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. This MD&A is divided into seven main sections:

•

Planned Separation of the Steel Processing Business;

•

Business Overview;

•

Recent Business Developments;

•

Trends and Factors Impacting our Performance;

•

Results of Operations;

•

Liquidity and Capital Resources; and

•

Critical Accounting Estimates

Planned Separation of the Steel Processing Business

On September 29, 2022, we announced our intention to complete the Separation, a spin-off of Worthington Steel, our existing Steel Processing business, into a stand-alone publicly traded company through a generally tax-free pro rata distribution of 100% of the common shares of Worthington Steel to Worthington Industries’ shareholders. New Worthington, the remaining company, is expected to be comprised of our Consumer Products, Building Products and Sustainable Energy Solutions operating segments. While we currently intend to effect the distribution, subject to satisfaction of certain conditions, we have no obligation to pursue or consummate any dispositions of our ownership interest in Worthington Steel, including through the completion of the distribution, by any specified date or at all. The distribution is subject to various conditions, including final approval by the Board; the completion of the transfer of assets and liabilities to Worthington Steel in accordance with the separation agreement; due execution and delivery of the agreements relating to the Separation; no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition being in effect preventing the consummation of the Separation, the distribution or any of the related transactions; acceptance for listing on the NYSE of the common shares of Worthington Steel to be distributed, subject to official notice of distribution; completion of financing for Worthington Steel, and no other event or development having occurred or being in existence that, in the judgment of the Board, in its sole discretion, makes it inadvisable to effect the Separation, the distribution or the other related transactions.

Business Overview

We are an industrial manufacturing company focused on value-added steel processing and manufactured consumer, building, and sustainable mobility products. Our operations are managed principally on a products and services ~~basis.~~basis and organized under four operating segments: Steel Processing, Consumer Products, Building Products, and Sustainable Energy Solutions. Segment information is prepared on the same basis that our CODM reviews financial information for operational decision-making purposes. Factors used to identify operating segments include the nature of the products and services provided by each business, the management reporting structure, the similarity of economic characteristics and certain quantitative measures, as prescribed by authoritative accounting guidance.

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~~As of February 28, 2023, we held equity positions in seven operating joint ventures and one non-operating joint venture.~~

We own controlling interests in ~~four of these~~the following consolidated operating joint ~~ventures, including the~~ventures: Spartan, Samuel and TWB. We also own a controlling interest in WSP, which became a non-operating joint venture on October 31, 2022, when we completed the sale of its remaining net assets. The net assets and ~~they~~operating results of these four joint ventures are consolidated ~~within the Steel Processing operating segment. When we own controlling interests in a joint venture,~~with the equity owned by the ~~other~~minority joint venture ~~member(s) is~~member shown as ~~noncontrolling interests~~“noncontrolling interests” in our consolidated balance sheets, and ~~other joint venture members’ portions of~~the noncontrolling interest in net earnings and OCI ~~are~~ shown as net earnings or comprehensive income attributable to noncontrolling interests in our consolidated statements of earnings and consolidated statements of comprehensive income, respectively. We ~~hold~~also own noncontrolling equity investments ~~in the remaining~~if four ~~of our~~unconsolidated joint ventures: ClarkDietrich (25%), Serviacero Worthington (50%), WAVE (50%) and Workhorse (20%). These joint ventures ~~and they~~ are accounted for using the equity ~~method.~~method, as described further in “Note C – Investments in Unconsolidated Affiliates.” We also held a noncontrolling equity method investment in ArtiFlex Manufacturing, LLC (“ArtiFlex”) prior to the August 3, 2022 sale of our 50% ownership interest to our former partner in the joint venture.

Recent Business Developments

•

On June ~~2, 2022,~~29, 2023, we ~~acquired Level5, a leading provider of drywall tools and related accessories. The total purchase price was approximately $59.3 million,~~terminated our revolving trade accounts receivable securitization facility allowing us to borrow up to $175.0 million. No early termination or other similar fees or penalties were paid in connection with ~~a potential earnout based on performance through 2024. Refer to~~the termination. See “Note ~~P – Acquisitions”~~H– Debt” for additional information.

•

On August 3, 2022, we sold our 50% noncontrolling equity interest in ArtiFlex to the unaffiliated joint venture member for net proceeds of approximately $41.8 million, after adjustments for closing debt and final net working capital. Approximately $6.0 million of the total cash proceeds were attributed to real property in Wooster, Ohio, with a net book value of $6.3 million. This real property was owned by us and leased to ArtiFlex prior to closing of the transaction. For the nine months ended FebruaryJuly 28, 2023, we ~~recognized~~redeemed in full our $243.6 million aggregate principal amount of senior unsecured notes due April 15, 2026, resulting in a ~~pre-tax~~non-cash loss of ~~$16.1~~approximately $1.5 million related primarily to unamortized issuance costs and the remaining loss associated with an interest rate swap deferred in ~~equity income related to the sale, including a loss of $0.3 million for the settlement of final transaction costs related to the sale during the three months ended February 28, 2023.~~

•

On September 29, 2022, we announced that the Board approved a plan to pursue the Separation of our Steel Processing business which we expect to complete by early 2024. This plan is referred to as “Worthington 2024.” Worthington 2024 will result in two independent, publicly-traded companies that are more specialized and fit-for purpose, with enhanced prospects for growth and value creation. We plan to effect the Separation via a distribution of stock of the Steel Processing business, which is expected to be tax-free to shareholders for U.S. federal income tax purposes. Refer toAOCI at redemption. See “Note AH – ~~Basis of Presentation”~~Debt” for additional information.

•

~~On October 31, 2022,~~

Trends and Factors Impacting our ~~consolidated joint venture, WSP, sold its remaining manufacturing facility, located~~Performance

The industries in ~~Jackson, Michigan, for net proceeds~~which we participate are fragmented and highly competitive. Given the broad base of ~~approximately $21.3 million, resulting~~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 ~~a pre-tax gain of $3.9 million within Restructuring~~the U.S. and ~~other expense (income), net. Refer to “Note F – Restructuring and Other Expense (Income), Net” for additional information.~~

•abroad.

On January 5, 2023, we announced the implementation of a Board transition plan, pursuant to which John H. McConnell II was appointed as a member of the Board, effective on January 4, 2023, and John P. McConnell intends to step down in June 2023.

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•

~~On February 2, 2023, we announced the senior leadership teams for New Worthington and Worthington Steel which will be effective upon the completion of the planned Separation.~~

•

~~On March 22, 2023, the Board declared a quarterly dividend of $0.31 per share payable on June 29, 2023, to shareholders of record on June 15, 2023.~~

General Economic and Market Conditions

We sell our products and services to a diverse customer base and a broad range of end markets. The breakdown of net sales by end market for the ~~third~~first quarter of each of fiscal ~~2023~~2024 and fiscal ~~2022~~2023 is illustrated in the following chart:

The automotive industry is one of the largest consumers of flat-rolled steel, and thus the largest end market for our Steel Processing operating segment. Approximately ~~53%~~55% of Steel Processing’s net sales are to the automotive market. North American vehicle production, primarily by ~~Ford, General Motors and Stellantis North America (the “Detroit~~the Detroit Three ~~automakers”),~~automakers, has a considerable impact on the activity within the Steel Processing operating ~~segment. The majority of the net sales of one of our~~segment, including its unconsolidated joint ~~ventures,~~venture, Serviacero ~~Worthington, is also to the automotive market.~~Worthington.

Approximately 12% of the net sales of our Steel Processing operating segment are to the construction market. The construction market is also the predominant end market for our unconsolidated joint ventures within the Building Products operating segment, WAVE and ClarkDietrich. While the market price of steel significantly impacts these businesses, there are other key indicators that are meaningful in analyzing construction market demand, including the U.S. gross domestic product (“U.S. GDP”), the Dodge Index of construction contracts and, in the case of ClarkDietrich, trends in the relative prices of framing lumber and steel.

Substantially all of the net sales of our Consumer Products, Building Products, and Sustainable Energy Solutions operating segments and approximately ~~35%~~33% of the net sales of our Steel Processing operating segment are to other markets such as agricultural, appliance, consumer products, heavy-truck, industrial products, including the industrial electric motor, generator, and transformer end markets, and lawn and garden. Given the many different products that make up these net sales and the wide variety of end markets, it is very difficult to detail the key market indicators that drive these portions of our business. However, we believe that the trend in U.S. GDP growth is a good economic indicator for analyzing the demand of these end markets.

~~Table of Contents~~

U.S. GDP growth rate trends are generally indicative of the strength in demand and, in many cases, pricing for our products. A year-over-year increase in U.S. GDP growth rates is generally indicative of a stronger economy, which generally increases demand and pricing for our products. Conversely, declining U.S. GDP growth rates generally indicate a weaker economy, which generally decreases demand and pricing for our products. Changes in U.S. GDP growth rates can also signal changes in conversion costs related to production and in selling, general, and administrative expense (“SG~~&A.~~&A”).

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Inflation ~~has accelerated~~ and government deficits and debt ~~levels~~ remain at high ~~levels in many major markets. Inflationary~~levels. Although inflationary pressures have ~~been~~abated somewhat from the levels experienced throughout fiscal 2022 and into fiscal 2023, they continue to be felt across our business in the form of higher year-over-year input and conversion costs as well as higher overall SG~~&A.~~&A expense. The U.S. Federal Reserve has pushed interest rates to the highest level in more than 15 years in an attempt to slow growth and reduce inflation. The impact of ~~rising~~high interest rates could ~~cause~~have a ~~significant~~negative impact on economic ~~downturn and impact several~~conditions, including consumer demand in the various end markets ~~that~~ we serve, as well as ~~overall~~domestic steel demand for our products and services. Despite the economic headwinds presented by a rising interest rate environment, demand remained steady through the third quarter of fiscal 2023 in most of our end markets and we believe pent-up demand continues to exist in certain markets, like automotive, due to lingering supply chain effects brought on by the COVID-19 pandemic.overall.

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


	Three Months Ended									Nine Months Ended									Three Months Ended
	February 28,									February 28,									August 31,
	2023			2022			Inc / (Dec)			2023			2022			Inc / (Dec)			2023			2022 (1)			Inc/ (Dec)
U.S. GDP (% growth year-over-year) ~~(1)~~		1.2	%		6.0	%		(4.8	%)		1.8	%		5.3	%		(3.5	%)		2.2	%		1.8	%		0.4	%
Hot-Rolled Steel ($ per ton) (2)	$	720		$	1,421		$	(701	)	$	814		$	1,690		$	(876	)	$	879		$	978		$	(99	)
Detroit Three Auto Build (000's vehicles) (3)		1,614			1,522			92			5,086			4,378			708			1,791			1,729			62
No. America Auto Build (000's vehicles) (3)		3,448			3,215			233			10,789			9,628			1,161			4,028			3,638			390
Zinc ($ per pound) (4)	$	1.44		$	1.60		$	(0.16	)	$	1.45		$	1.47		$	(0.02	)	$	1.09		$	1.55		$	(0.46	)
Natural Gas ($ per mcf) (5)	$	3.94		$	4.18		$	(0.24	)	$	6.19		$	4.37		$	1.82		$	2.57		$	7.87		$	(5.30	)
On-Highway Diesel Fuel Prices ($ per gallon) (6)	$	4.57		$	3.80		$	0.77		$	5.05		$	3.57		$	1.48		$	4.02		$	5.42		$	(1.40	)

(1)

2022 figures are based on revised ~~actuals;~~ actuals

(2)

CRU Hot-Rolled ~~Index,~~Index: period ~~average;~~ average

(3)

IHS ~~Global;~~ Global (S&P)

(4)

LME ~~Zinc,~~Zinc; period ~~average;~~ average

(5)

NYMEX Henry Hub Natural ~~Gas,~~Gas; period ~~average;~~ average

(6)

Energy Information ~~Administration,~~Administration; period average

Sales to one Steel Processing customer in the automotive industry represented 12.5% and ~~12.3%~~11.2% of consolidated net sales during the ~~third~~first quarter of fiscal ~~2023~~2024 and the ~~third~~first quarter of fiscal ~~2022,~~2023, respectively. While our automotive business is largely driven by the production schedules of the Detroit Three automakers, our customer base is much broader and includes other domestic manufacturers and many of their suppliers. During the ~~third~~first quarter of fiscal ~~2023,~~2024, vehicle production for the Detroit Three automakers and the North American vehicle production was up 6%4% and 7%11%, respectively, over the ~~prior year quarter.~~first quarter of fiscal 2023.

Sales for most of our products are generally strongest in our fiscal fourth quarter when our facilities operate at seasonal peaks. Historically, sales have been weaker in our fiscal third quarter, primarily due to reduced seasonal activity in the building and construction industry, as well as customer plant shutdowns due to holidays, particularly in the automotive industry. We do not believe backlog is a significant indicator of our business.

Impact of Raw Material Prices

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

~~Table of Contents~~

producers. When steel prices fall, we typically have higher-priced material flowing through cost of goods sold, while selling prices compress to what the market will bear, negatively impacting our results. On the other hand, in a rising price environment, our results are generally favorably impacted, as lower-priced material purchased in previous periods flows through cost of goods sold, while our selling prices increase at a faster pace to cover current replacement costs. ~~Based~~Steel prices declined throughout most of fiscal 2023 before increasing significantly in the fourth quarter on ~~current~~production cuts at major steel mills and the replenishing of inventories in major end markets, then decreased again in the first quarter of fiscal 2024. This run up in steel prices resulted in estimated inventory holding gains of $32.6 million and $15.5 million during the fourth quarter of fiscal 2023 and the first quarter of fiscal 2024, respectively. However, as a result of the more recent price ~~levels,~~declines, we expect to have meaningful inventory holding ~~gains in~~losses during the ~~fourth~~second quarter of fiscal ~~2023.~~2024.

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The following table presents the average quarterly market price per ton of hot-rolled steel during fiscal ~~2023~~2024 (first ~~second and third quarters)~~quarter), fiscal ~~2022~~2023 and fiscal ~~2021:~~2022:


	Fiscal Year						Fiscal Year
(Dollars per ton)(1)	2023		2022		2021		2024		2023		2022
1st Quarter	$	978	$	1,762	$	475	$	879	$	978	$	1,762
2nd Quarter	$	742	$	1,888	$	625	N/A		$	742	$	1,888
3rd Quarter	$	720	$	1,421	$	1,016	N/A		$	720	$	1,421
4th Quarter	N/A		$	1,280	$	1,358	N/A		$	1,116	$	1,280
Annual Avg.	$	813	$	1,588	$	869	$	879	$	889	$	1,588

(1)

CRU Hot-Rolled Index, period average

No matter how efficient, our operations, which use steel as a raw material, create some amount of scrap. The expected price of scrap compared to the price of the steel raw material is factored into pricing. Generally, as the price of steel increases, the price of scrap increases by a similar amount. When increases in scrap prices do not keep pace with the increases in the price of the steel raw material, it can have a negative impact on our margins. We refer to this effect as the “scrap gap,” which has narrowed in recent years from historically high levels, including quarter-over-quarter declines in the current period.

Certain other commodities, such as zinc, natural gas and diesel fuel, represent a significant portion of our cost of goods sold, both directly through our plant operations and indirectly through transportation and freight expense.

Results of Operations

~~Third~~First Quarter – Fiscal ~~2023~~2024 Compared to Fiscal ~~2022~~2023

The following discussion provides a review of results for the three months ended ~~February 28,~~August 31, 2023 and 2022.


	Three Months Ended							Three Months Ended
	February 28,							August 31,
(In millions, except per share amounts)	2023		2022		Increase/ (Decrease)
(In millions, except per common share amounts)								2023		2022		Increase/ (Decrease)
Net sales	$	1,103.3	$	1,378.2	$	(274.9	)	$	1,193.3	$	1,408.7	$	(215.4	)
Operating income		30.1		37.6		(7.5	)		77.7		66.7		11.0
Equity income		36.9		47.5		(10.6	)		54.4		31.7		22.7
Net earnings attributable to controlling interest		46.3		56.3		(10.0	)		96.1		64.1		32.0
Earnings per diluted share attributable to controlling interest	$	0.94	$	1.11	$	(0.17	)
Earnings per diluted common share attributable to controlling interest								$	1.93	$	1.30	$	0.63

Net Sales and Volume

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


	Three Months Ended													Three Months Ended
	February 28,													August 31,
			% of					% of			Increase/					% of					% of			Increase/
(In millions)	2023		Net sales			2022		Net sales			(Decrease)			2023		Net sales			2022		Net sales			(Decrease)
Steel Processing	$	757.0		68.6	%	$	1,052.6		76.4	%	$	(295.6	)	$	881.3		73.9	%	$	1,038.9		73.7	%	$	(157.6	)
Consumer Products		162.6		14.7	%		161.7		11.7	%		0.9			149.4		12.5	%		188.7		13.4	%		(39.3	)
Building Products		151.9		13.8	%		132.9		9.6	%		19.0			133.9		11.2	%		150.3		10.7	%		(16.4	)
Sustainable Energy Solutions		31.8		2.9	%		31.0		2.2	%		0.8			28.7		2.4	%		30.8		2.2	%		(2.1	)
Consolidated Net Sales	$	1,103.3		100.0	%	$	1,378.2		100.0	%	$	(274.9	)	$	1,193.3		100.0	%	$	1,408.7		100.0	%	$	(215.4	)

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


	Three Months Ended							Three Months Ended
	February 28,							August 31,
					Increase/							Increase/
	2023		2022		(Decrease)			2023		2022		(Decrease)
Steel Processing (Tons)		917,670		998,590		(80,920	)		999,658		974,649		25,009
Consumer Products (Units)		19,158,164		20,297,372		(1,139,208	)		17,068,945		22,383,341		(5,314,396	)
Building Products (Units)		2,494,881		2,786,560		(291,679	)		2,771,458		2,922,163		(150,705	)
Sustainable Energy Solutions (Units)		122,139		144,108		(21,969	)		106,306		133,133		(26,827	)

•

Steel Processing – Net sales ~~decreased $295.6~~totaled $881.3 million ~~from~~in the ~~prior year quarter. The decrease was~~first quarter of fiscal 2024, down $157.6 million, compared to the first quarter of fiscal 2023, driven almost entirely by lower average selling prices asdue to lower year-over-year steel prices declined significantly from the prior year quarter. Volume also declined during the quarter, but the decrease was isolated to toll processing sales, which were impacted by the divestiture of the operating assets of WSP and therefore was not a significant driver of the decrease in net sales. Direct volume, which results in significantly higher sales dollars, was up slightly over the prior year quarter.market prices. The mix of direct versus toll tons processed was 56% to 44% in the ~~current~~first quarter of fiscal 2024, compared to ~~51%~~58% to ~~49%~~42% in the prior year quarter. ~~The shift~~Excluding the impact of the prior year divestiture of the remaining WSP toll processing facility in ~~mix towards~~Jackson, Michigan, toll volumes were up 19% and direct tons ~~was driven primarily by lower tolling volume with our mill customers and the sale of WSP’s remaining manufacturing facility on October 31, 2022.~~were down slightly.

•

Consumer Products – Net sales ~~increased 0.6%~~totaled $149.4 million in the first quarter of fiscal 2024, down 21%, or ~~$0.9~~$39.3 million ~~over~~compared to the ~~prior year~~first quarter ~~due to higher average~~of 2023, as the impact of lower volumes with our retail customers more than offset modest improvements in both product mix and selling ~~prices, partially offset by lower volume and an unfavorable change in product mix.~~prices.

•

Building Products – Net sales ~~increased 14.3%~~totaled $133.9 million in the first quarter of fiscal 2024, down 11%, or ~~$19.0~~$16.4 million, ~~over~~from the ~~prior year quarter. The increase was~~first quarter of fiscal 2023, driven by ~~a favorable change in product mix~~lower volume and ~~higher~~lower average selling ~~prices, partially offset by lower overall volumes.~~prices.

•

Sustainable Energy Solutions – Net sales totaled $28.7 million in the first quarter of fiscal 2024, down 7%, or $2.1 million, from the first quarter of fiscal 2023, as lower volumes more than offset the impact of higher average selling prices.

Gross margin


	Three Months Ended
	August 31,
			% of					% of			Increase/
(In millions)	2023		Net sales			2022		Net sales			(Decrease)
Gross Margin	$	197.5		16.6	%	$	169.4		12.0	%	$	28.1

Gross margin increased ~~$0.8~~$28.1 million ~~or 2.6%,~~over the prior year quarter to $197.5 million, as higher direct spreads drove a $39.7 million increase in gross margin at Steel Processing, more than offsetting the impact of lower volumes in Consumer Products. Direct spreads in Steel Processing benefited from an estimated $17.0 million favorable swing from $1.5 million estimated inventory holding losses in the prior year quarter to estimated gains of $15.5 million in the current quarter.

Selling, general and administrative expense


	Three Months Ended
	August 31,
			% of					% of			Increase/
(In millions)	2023		Net sales			2022		Net sales			(Decrease)
Selling, general and administrative expense	$	112.3		9.4	%	$	103.4		7.3	%	$	8.9

•

SG&A increased $8.9 million over the prior year quarter primarily due to higher ~~average selling prices.~~healthcare and other benefit-related costs, and, to a lesser extent, higher wages.

~~Gross Margin~~

Three Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Gross Margin
$
143.8

13.0
%

$
143.1

10.4
%

$
0.7

•

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

~~Selling, General and Administrative Expense~~

Three Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Selling, general and administrative expense
$
106.1

9.6
%

$
102.9

7.5
%

$
3.2

•

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

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Other ~~Operating Items~~operating items

Three Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Impairment of long-lived assets
$
0.5

$
3.1

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

0.8

(0.5
)

1.3

Separation costs

6.3

-

6.3


	Three Months Ended
	August 31,
						Increase/
(In millions)	2023		2022			(Decrease)
Impairment of long-lived assets	$	1.4	$	0.3		$	1.1
Restructuring and other income, net		-		(1.1	)		1.1
Separation costs		6.0		-			6.0

•

Impairment of long-lived assets in both the current year ~~quarter~~and prior year quarters was ~~due to~~driven by changes in the ~~intended use of certain fixed assets at our Building Products facility in Jefferson, Ohio. Impairment charges in the prior year quarter were due~~estimated fair market value less cost to ~~the write-down of~~sell related to ongoing efforts to divest certain production equipment atof our ~~Samuel~~former toll processing facility in ~~Twinsburg, Ohio facility that was determined to be below fair market value.~~Cleveland, Ohio. Refer to “Note ED – Impairment of ~~Long-Lived Assets”~~long-lived assets” for additional information.

•

~~Restructuring activity during the current year quarter related primarily to a reduction in workforce at our Columbus, Ohio facility and organizational realignment within Building Products.~~ Restructuring activity in the prior year quarter was driven by a ~~$0.7 million~~pre-tax gain recognized on the sale of ~~our Wooster, Ohio facility~~real property in Tulsa, Oklahoma that was ~~previously leased to ArtiFlex. Refer to “Note F – Restructuring and Other Expense (Income), net” for additional information.~~excluded from the sale of our former oil & gas equipment business in January 2021.

•

Separation costs of ~~$6.3~~$6.0 million in the first quarter of fiscal 2024 reflect direct and incremental costs incurred in connection with the planned Separation, including ~~audit,~~third-party advisory fees, certain employee-related costs and ~~legal costs. Refer to “Note A - Basis~~non-recurring costs associated with the separation of ~~Presentation” for additional information.~~shared corporate functions.

Miscellaneous ~~Income,~~income (expense), net


	Three Months Ended						Three Months Ended
	February 28,						August 31,
					Increase/							Increase/
(In millions)	2023		2022		(Decrease)		2023		2022			(Decrease)
Miscellaneous income, net	$	1.3	$	0.4	$	0.9
Miscellaneous income (expense), net							$	1.0	$	(5.1	)	$	6.1

•

Miscellaneous expense in the prior year quarter was driven primarily from the annuitization of approximately 31% of the total projected benefit obligation of the inactive Gerstenslager Company Bargaining Unit Employees’ Pension Plan as of the purchase date of the annuity contract, which resulted in a pre-tax, non-cash settlement charge of $4.8 million in the first quarter of fiscal 2023 to accelerate a portion of deferred pension cost.

Loss on extinguishment of debt


	Three Months Ended
	August 31,
					Increase/
	2023		2022		(Decrease)
Loss on extinguishment of debt	$	1.5	$	-	$	1.5

•

Loss on extinguishment of debt in the first quarter of fiscal 2024 reflected the loss recognized in connection with the July 28, 2023 early redemption of the 2026 Notes and consisted primarily of unamortized debt issuance costs and the remaining loss deferred in AOCI associated with an interest rate swap executed prior to the issuance of the 2026 Notes.

Interest ~~Expense,~~expense, net

Three Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Interest expense, net
$
6.0

$
8.1

$
(2.1
)


	Three Months Ended
	August 31,
					Increase/
(In millions)	2023		2022		(Decrease)
Interest expense, net	$	3.1	$	8.6	$	(5.5	)

•

Interest expense, ~~was $6.0~~net of $3.1 million in the ~~current~~first quarter ~~down $2.1~~of fiscal 2024 was favorable compared to the first quarter of fiscal 2023 by $5.5 million ~~over the prior year quarter due to~~driven primarily by higher interest income ~~earned on the Company’s cash balances,~~ and, to a lesser extent, ~~the impact of~~ lower average long-term debt levels ~~associated with short-term borrowings.~~due to the July 28, 2023 redemption of our 2026 Notes. Refer to “Note H – Debt” for additional information

~~Equity Income~~

Three Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

WAVE
$
18.9

$
18.6

$
0.3

ClarkDietrich

18.9

21.4

(2.5
)
Serviacero Worthington

(0.2
)

4.7

(4.9
)
ArtiFlex (1)

(0.3
)

1.8

(2.1
)
Workhorse

(0.4
)

1.0

(1.4
)
Total Equity Income
$
36.9

$
47.5

$
(10.6
)

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~~(1)~~

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

Equity income


	Three Months Ended
	August 31,
						Increase/
(In millions)	2023		2022			(Decrease)
WAVE	$	28.3	$	23.8		$	4.5
ClarkDietrich		16.7		20.1			(3.4	)
Serviacero Worthington		9.0		1.8			7.2
ArtiFlex		-		(13.4	)		13.4
Workhorse		0.4		(0.6	)		1.0
Total Equity Income	$	54.4	$	31.7		$	22.7

•

Equity income ~~from unconsolidated joint ventures decreased $10.6~~increased $22.7 million ~~from~~over the first quarter of fiscal 2023, which included a $15.8 million loss on the sale of our former equity investment in ArtiFlex. Excluding this loss in the prior year quarter, ~~driven~~equity income was up $6.9 million, as higher contributions by ~~lower contributions from~~both Serviacero ~~Worthington~~ and ~~ClarkDietrich, down $4.9~~WAVE were partially offset by a decline at ClarkDietrich. Serviacero was the biggest driver of the overall increase with equity earnings up $7.2 million, ~~and $2.5 million, respectively, combined with the divestiture of ArtiFlex which contributed $1.8 million in the prior year quarter. Lower contributions from Serviacero Worthington were~~ primarily the result of reduced spreads driven by falling steel prices. ClarkDietrich’s results have declined from historical levels as prior year results benefited from customers executing purchases in advance of rising steel prices. ClarkDietrich’s current year volumes have been impacted by reduced demand in the construction end market.due to higher direct spreads.

Income Taxes


														Three Months Ended
	Three Months Ended													August 31,
	February 28,															Effective					Effective			Increase/
(In millions)	2023		Effective Tax Rate			2022		Effective Tax Rate			Increase/ (Decrease)			2023		Tax Rate			2022		Tax Rate			(Decrease)
Income tax expense	$	12.1		22.8	%	$	18.7		23.2	%	$	(6.6	)	$	28.8		23.3	%	$	19.5		23.9	%	$	9.3

•

Income tax expense was ~~$12.1~~$28.8 million in the ~~current~~first quarter of fiscal 2024 compared to income tax expense of ~~$18.7~~$19.5 million in the ~~prior year quarter.~~first quarter of fiscal 2023. The ~~decrease~~increase was driven by ~~lower~~higher pre-tax earnings. Tax expense in the ~~current~~first quarter of fiscal 2024 reflected an estimated annual effective rate of ~~22.8%~~23.3% compared to ~~23.2%~~23.9% for the prior year quarter. For additional information regarding our income taxes, refer to “Note ML – Income Taxes.”

Table of Contents

Adjusted EBIT

We evaluate operating performance on the basis of adjusted ~~EBIT.~~earnings before interest and taxes (“adjusted EBIT”). EBIT, a non-GAAP financial measure, is calculated by adding interest expense and income tax expense to net earnings attributable to controlling interest. Adjusted EBIT excludes impairment and restructuring expense (income), but may also exclude other items, as described below, that management believes are not reflective of, and thus should not be included when evaluating the performance of our ongoing operations. Adjusted EBIT is a non-GAAP financial measure and is used by management to evaluate operating performance, engage in financial and operational planning and determine incentive compensation because we believe that this financial measure provides additional perspective on the performance of our ongoing operations. Additionally, management believes these non-GAAP financial measures provide useful information to investors because they allow for meaningful comparisons and analysis of trends in our businesses and enable investors to evaluate operations and future prospects in the same manner as management.

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


	Three Months Ended						Three Months Ended
	February 28,						August 31,
(In millions)	2023			2022			2023		2022
Net earnings attributable to controlling interest	$	46.3		$	56.3		$	96.1	$	64.1
Interest expense, net		6.0			8.1			3.1		8.6
Income tax expense		12.1			18.7			28.8		19.5
EBIT	$	64.4		$	83.1			128.0		92.2
True-up of Level5 earnout accrual (1)		(1.0	)		-
Incremental expense related to Level5 earnout (1)								-		0.5
Impairment of long-lived assets (2)		0.5			2.0			0.9		0.1
Restructuring and other expense (income), net (3)		0.8			(0.5	)
Restructuring and other income, net (3)								-		(1.1	)
Separation costs (4)		6.3			-			6.0		-
Loss on sale of investment in ArtiFlex (5)		0.3			-
Loss on extinguishment of debt (5)								1.5		-
Pension settlement charge (6)								-		4.8
Loss on sale of investment in ArtiFlex (7)								-		15.8
Adjusted EBIT	$	71.3		$	84.6		$	136.4	$	112.3

(1)

Reflects ~~a pre-tax benefit of $1.0 million within SG&A expense to reverse the~~incremental compensation expense ~~accrued during the first six months of fiscal 2023 for anticipated payout under the first annual earnout opportunity associated with~~attributable to the Level5 ~~acquisition.~~earnout.

~~Table of Contents~~

(2)

Impairment charges are excluded because they do not occur in the ordinary course of our ongoing business operations, are inherently unpredictable in timing and amount, and are non-cash, so their exclusion facilitates the comparison of historical, current and forecasted financial results. Non-cash impairment charges in both periods were driven by changes in the estimated fair market value less cost to sell related to ongoing efforts to divest certain production equipment of our Samuel joint venture’s former toll processing facility in Cleveland, Ohio, and exclude the impact of the noncontrolling interest.

(3)

Restructuring activities consist of established programs that are not part of our ongoing operations, such as divestitures, closing or consolidating facilities, employee severance (including rationalizing headcount or other significant changes in personnel), and realignment of existing operations (including changes to management structure in response to underlying performance and/or changing market conditions). ~~Excludes~~The net gain recognized in the ~~impact~~prior year quarter resulted primarily from the sale of ~~noncontrolling interests.~~the remaining real property of our legacy oil & gas equipment business.

(4)

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

(5)

OnReflects a $1.5 million loss realized in connection with the July 28, 2023 early redemption of the 2026 Notes.

(6)

Reflects a non-cash settlement charge to accelerate a portion of the overall deferred pension cost associated with The Gerstenslager Company Bargaining Unit Employees' Pension Plan as a result of a pension lift-out transaction completed in August 2022 to transfer a portion of the total projected benefit obligation to a third-party insurance company.

(7)

Reflects the loss realized in connection with the August 3, 2022 ~~we sold our~~sale of the Company’s 50% noncontrolling equity investment in ~~ArtiFlex, resulting in a pre-tax loss~~ArtiFlex.

Table of ~~$16.1 million in equity income related to the sale, including a loss of $0.3 million for the settlement of final transaction costs related to the sale during the three months ended February 28, 2023.~~

Contents

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

Three Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Steel Processing
$
7.8

$
7.1

$
0.7

Consumer Products

17.9

26.7

(8.8
)
Building Products

51.5

49.6

1.9

Sustainable Energy Solutions

(1.4
)

(2.8
)

1.4

Other

(4.5
)

4.0

(8.5
)
Total Adjusted EBIT
$
71.3

$
84.6

$
(13.3
)


	Three Months Ended
	August 31,
				% of Adjusted						% of Adjusted			Increase/
(In millions)	2023			EBIT			2022			EBIT			(Decrease)
Steel Processing	$	78.0			57.2	%	$	34.9			31.1	%	$	43.1
Consumer Products		9.0			6.6	%		20.9			18.6	%		(11.9	)
Building Products		54.0			39.6	%		52.7			46.9	%		1.3
Sustainable Energy Solutions		(4.7	)		(3.5	%)		(1.4	)		(1.2	%)		(3.3	)
Other		0.1			0.1	%		5.1			4.6	%		(5.0	)
Total Adjusted EBIT	$	136.4			100.0	%	$	112.3			100.0	%	$	24.1

•

Steel Processing – Steel Processing – Adjusted EBIT was ~~up $0.7~~$78.0 million over the prior year quarter to $7.8 million due to an improvement in operating income which was largely offset by a $4.9 million decline in contribution of equity income from Serviacero Worthington due to inventory holding losses in the ~~current~~first quarter ~~versus~~of fiscal 2024, an increase of $43.1 million compared to the first quarter of fiscal 2023, due primarily to favorable direct spreads, including $17.0 million associated with the quarter-over-quarter swing in estimated inventory holding gains ~~in the prior year quarter. Operating income was~~and losses, and, to a lesser extent, higher equity earnings at Serviacero, up ~~$8.1 million over the prior year quarter to $10.8~~$7.2 million. Excluding the $3.2 million of combined impairment and restructuring charges in the prior year quarter, operating income was up $4.9 million over the prior year quarter, as the favorable impact of higher spreads was partially offset by a $12.3 million increase in manufacturing costs due to increased wages, benefits and maintenance costs. Inventory holding losses, estimated to be $26.6 million in the current quarter, were comparable to the estimated inventory holding losses of $24.9 million in the prior year quarter.

•

Consumer Products – Adjusted EBIT was ~~down $8.8~~$9.0 million in the ~~current~~first quarter of fiscal 2024, down $11.9 million compared to ~~$17.9 million, as~~ the ~~favorable impact~~first quarter of ~~higher average selling prices was more than offset~~fiscal 2023, driven primarily by lower volumes, ~~and higher input and production costs due to inflationary cost pressures. Adjusted EBIT in the prior year quarter benefitted from~~partially offset by a favorable pricing spread as price increases ~~ahead of inflationary pressures.~~implemented in fiscal 2023 held steady through August 31, 2023.

•

Building Products – Adjusted EBIT ~~increased $1.9~~was $54.0 million ~~from~~in the ~~prior year~~first quarter of fiscal 2024, an increase of $1.3 million compared to ~~$51.5 million~~the first quarter of fiscal 2023, driven primarily ~~due to a favorable product mix and higher average selling prices, partially offset~~ by higher ~~input and production costs and lower~~ contributions of equity ~~income. Equity~~ income, ~~for the current quarter totaled $37.8~~up $1.2 million. Operating income was up slightly as nominal improvements in gross margin were largely offset by $1.5 million ~~down $2.2 million from the prior year quarter, as ClarkDietrich’s results declined $2.5 million from the record levels in the prior year quarter while WAVE’s results improved slightly.~~of incremental SG&A expense on higher healthcare and other benefit related costs and higher wages.

•

Sustainable Energy Solutions – Adjusted EBIT was a loss of ~~$1.4~~$4.7 million ~~favorable by $1.4 million to the prior year quarter’s loss, as higher average selling prices improved margins, but were partially offset by higher production costs.~~

~~Table of Contents~~

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

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

Nine Months Ended

February 28,

(In millions, except per share amounts)
2023

2022

Increase/
(Decrease)

Net sales
$
3,687.5

$
3,721.9

$
(34.4
)
Operating income

89.8

263.9

(174.1
)
Equity income

105.5

160.6

(55.1
)
Net earnings attributable to controlling interest

126.6

299.1

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

$
5.83

$
(3.26
)

~~Net Sales and Volume~~

~~The following table provides~~first quarter of fiscal 2024, a ~~breakdown~~decline of ~~our consolidated net sales by operating segment, along with the respective percentage of the consolidated net sales represented by each, for the periods indicated.~~

Nine Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Steel Processing
$
2,637.8

71.5
%

$
2,813.2

75.6
%

$
(175.4
)
Consumer Products

505.1

13.7
%

450.3

12.1
%

54.8

Building Products

443.9

12.0
%

368.8

9.9
%

75.1

Sustainable Energy Solutions

100.7

2.8
%

89.6

2.4
%

11.1

Consolidated Net Sales
$
3,687.5

100.0
%

$
3,721.9

100.0
%

$
(34.4
)

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

Nine Months Ended

February 28,

Increase/

2023

2022

(Decrease)

Steel Processing (Tons)

2,817,752

3,128,466

(310,714
)
Consumer Products (Units)

58,124,832

60,384,101

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

7,784,814

8,237,296

(452,482
)
Sustainable Energy Solutions (Units)

410,959

429,785

(18,826
)

•

~~Steel Processing –~~ ~~Net sales decreased $175.4~~$3.3 million from the prior year period, as the impact of lower average selling prices and lower tolling volumes more than offset the impact of the Tempel Steel Company (“Tempel”) acquisition. The mix of direct versus toll tons processed was 56% to 44% in the current year period, compared to 49% to 51% in the prior year period. The shift in mix towards direct tons was driven primarily by lower tolling volume with our mill customers and the sale of WSP’s remaining manufacturing facility on October 31, 2022.

•

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

•

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

•

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

~~Table of Contents~~

~~Gross Margin~~

Nine Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Gross Margin
$
418.9

11.4
%

$
547.1

14.7
%

$
(128.2
)

•

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

~~Selling, General and Administrative Expense~~

Nine Months Ended

February 28,

% of

% of

Increase/

(In millions)
2023

Net sales

2022

Net sales

(Decrease)

Selling, general and administrative expense
$
317.3

8.6
%

$
294.9

7.9
%

$
22.4

•

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

~~Other Operating Costs/Income~~

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Impairment of long-lived assets
$
0.8

$
3.1

$
(2.3
)
Restructuring and other income, net

(4.6
)

(14.8
)

10.2

Separation costs

15.6

-

(15.6
)

•

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

•

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

•

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

~~Table of Contents~~

~~Miscellaneous income (expense), net~~

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Miscellaneous income (expense), net
$
(2.4
)

$
2.1

$
(4.5
)

•

Miscellaneous expense in the current year period was driven primarily by the annuitization of a portion of the total projected benefit obligation of the inactive Gerstenslager Company Bargaining Unit Employees’ Pension Plan, as of the purchase date of the annuity contract, which resulted in a pre-tax, non-cash settlement charge of $4.8 million in the first quarter of fiscal 2023 ~~to accelerate a portion of deferred pension cost.~~

~~Interest Expense, net~~

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Interest expense, net
$
22.2

$
23.2

$
(1.0
)

•

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

~~Equity Income~~

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

  WAVE
$
61.7

$
66.7

$
(5.0
)
  ClarkDietrich

55.1

66.2

(11.1
)
  Serviacero Worthington

3.5

22.9

(19.4
)
  ArtiFlex (1)

(13.7
)

4.8

(18.5
)
  Workhorse

(1.1
)

-

(1.1
)
   Total Equity Income
$
105.5

$
160.6

$
(55.1
)

~~(1)~~

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

•

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

~~Income Taxes~~

Nine Months Ended

February 28,

(In millions)
2023

Effective Tax Rate

2022

Effective Tax Rate

Increase/
(Decrease)

Income tax expense
$
35.7

22.8
%

$
90.1

23.2
%

$
(54.4
)

~~Table of Contents~~

•

Income tax expense was down $54.4 million in the current year period to $35.7 million. The decrease was driven primarily by lower pre-tax earnings. Tax expense in the current year period reflected an estimated annual effective rate of 22.8% compared to 23.2% for the prior year period. For additional information regarding our income taxes, refer to “Note M – Income Taxes.”

~~Adjusted EBIT~~

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

Nine Months Ended

February 28,

(In millions)
2023

2022

Net earnings attributable to controlling interest
$
126.6

$
299.1

Interest expense, net

22.2

23.2

Income tax expense

35.7

90.1

EBIT
$
184.5

$
412.4

Impairment of long-lived assets (1)

0.7

2.0

Restructuring and other income, net (2)

(2.7
)

(8.9
)
Separation costs (3)

15.6

-

Pension settlement charge (4)

4.8

-

Loss on sale of investment in ArtiFlex

16.1

-

Adjusted EBIT
$
219.0

$
405.5

~~(1)~~

~~(2)~~

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

~~(3)~~

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

~~(4)~~

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

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

Nine Months Ended

February 28,

Increase/

(In millions)
2023

2022

(Decrease)

Steel Processing
$
25.5

$
186.7

$
(161.2
)
Consumer Products

52.4

64.8

(12.4
)
Building Products

145.4

153.0

(7.6
)
Sustainable Energy Solutions

(1.7
)

(4.6
)

2.9

Other

(2.6
)

5.6

(8.2
)
Total Adjusted EBIT
$
219.0

$
405.5

(186.5
)

~~Table of Contents~~

•

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

•

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

•

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

•

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

Liquidity and Capital Resources

During the ~~nine~~three months ended ~~February 28,~~August 31, 2023, we generated ~~$396.1~~$59.7 million of cash from operating activities, invested ~~$68.7~~$29.3 million in property, plant and equipment ~~spent $56.1~~and invested $15.0 million ~~to acquire Level5, and generated net cash proceeds of $71.3 million from the sale of assets, including $35.8 million from the sale of our 50% noncontrolling equity interest~~ in ~~ArtiFlex.~~a note receivable. Additionally, we repaid ~~$44.4~~$243.8 million to redeem our 2026 Notes, repaid $2.8 million of short-term borrowings and paid dividends of ~~$44.2~~$15.7 million on the common shares. The following table summarizes our consolidated cash flows for the periods presented:


	Nine Months Ended						Three Months Ended
	February 28,						August 31,
(in millions)	2023			2022
Net cash provided (used) by operating activities	$	396.1		$	(94.7	)
(In millions)							2023			2022
Net cash provided by operating activities							$	59.7		$	81.0
Net cash used by investing activities		(53.7	)		(413.2	)		(44.3	)		(29.8	)
Net cash used by financing activities		(109.6	)		(88.1	)		(269.3	)		(49.9	)
Increase (decrease) in cash and cash equivalents		232.8			(596.0	)		(253.9	)		1.3
Cash and cash equivalents at beginning of period		34.5			640.3			454.9			34.5
Cash and cash equivalents at end of period	$	267.3		$	44.3		$	201.0		$	35.8

We believe that the available borrowing capacity of our committed line of credit 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, and expenditures related to the planned Separation. Our resources include cash and cash equivalents and unused committed lines of credit. There were no borrowings outstanding under the Credit Facility at August 31, 2023, leaving up to $500.0 million available for future use.

Table of Contents

Although we do not currently anticipate a need, ~~based on our current operating structure,~~ we believe that we could access the financial markets to be in a position to sell long-term debt or equity securities. However, ~~lingering supply chain disruptions and other challenges caused by~~ the ~~COVID-19 pandemic and softening~~continuation of soft economic conditions and an uncertain interest rate environment could create ~~further uncertainty and~~ volatility in the financial markets, which may impact our ability to access capital and the terms under which we can do so. AsDuring fiscal 2023, the financial markets experienced disruption due to certain bank failures. Given the diversification and credit profile of our exposure to bank counterparties, we do not foresee any material financial impact ~~of such challenges on the economy and our operations is evolving, we~~from this disruption. We will continue to ~~review~~monitor the economic environment and its impact on our ~~discretionary spending~~operations and ~~other variable costs as well as our~~ liquidity needs.

~~Table of Contents~~

We routinely monitor current operational requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities to strengthen our liquidity or capital structure. We are also in the process of evaluating our post-Separation capital structure. Should we seek ~~such~~ additional capital, there can be no assurance that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing shareholders and/or increase our interest costs. We may also from time to time seek to retire or repurchase our outstanding debt through cash purchases, in open-market purchases, ~~privately negotiated~~privately-negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transaction may or may not be material. On July 28, 2023, we redeemed in full our 2026 Notes for $243.8 million. The redemption price approximated the par value of debt of $243.6 million plus accrued interest. See “Note H” – Debt” for additional information.

Operating Activities

Our business is cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic and industry conditions. We rely on cash and short-term borrowings to meet cyclical increases in working capital needs. These needs generally rise during periods of increased economic activity or increasing raw material prices, requiring higher levels of inventory and accounts receivable. During economic slowdowns, or periods of decreasing raw material costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.

Net cash provided by operating activities was ~~$396.1~~$59.7 million during the ~~nine months ended February 28, 2023,~~first quarter of fiscal 2024, compared to ~~net cash used by operating activities of $94.7~~$81.0 million during the ~~nine months ended February 28, 2022.~~prior year quarter. This change was primarily due to a ~~$466.2~~$49.9 million ~~decrease~~increase in net operating working capital (accounts receivable, inventories, and accounts payable) requirements over the prior year ~~nine-month period,~~quarter, mainly driven by ~~the impact of lower average~~higher inventory balances, fluctuations in steel ~~prices.~~prices and lagging price indices.

Investing Activities

Net cash used by investing activities was ~~$53.7~~$44.3 million during the ~~nine months ended February 28, 2023~~first quarter of fiscal 2024, compared to ~~$413.2~~$29.8 million during the prior year period. Net cash used by investing activities in the prior year period resulted primarily from cash used to acquire certain assets of the Shiloh Industries’ U.S BlankLight ® business on June 8, 2021, for $104.8 million and Tempel on December 1, 2021 for $272.5 million.quarter. Net cash used by investing activities in the current year ~~period~~quarter resulted from capital expenditures of $29.3 million and investment in a note receivable of $15.0 million. Net cash used by investing activities in the first quarter of fiscal 2023 resulted primarily from the purchase of the Level5 business on June 2, 2022, for $56.1 million, net of cash acquired, and capital expenditures of ~~$68.7~~$21.5 million, partially offset by combined cash proceeds of ~~$71.3~~$47.9 million from the sale of our 50% noncontrolling equity investment in ArtiFlex and ~~the sale of our WSP Jackson, Michigan facility and~~ other long-lived ~~assets.~~assets, including the related real property that was owned by Worthington and leased to ArtiFlex.

Investment activities are largely discretionary, and future investment activities could be reduced significantly, or eliminated, as economic conditions warrant. We assess acquisition opportunities as they arise, and such opportunities may require additional financing. There can be no assurance, however, that any such opportunities will arise, that any such acquisition opportunities will be consummated, or that any needed additional financing will be available on satisfactory terms if required.

Financing Activities

Net cash used by financing activities was ~~$109.6~~$269.3 million during the ~~nine months ended February 28, 2023~~first quarter of fiscal 2024, compared to ~~$88.1~~$49.9 million in the prior year ~~period.~~quarter. The change was primarily due to ~~$44.4~~the repayment of $243.8 million of ~~net repayments~~long-term debt associated with the redemption of ~~short-term borrowings~~the 2026 Notes in ~~the current year period and the repurchase of 2,235,000 common shares, at a cost of $127.8 million, in the prior year period.~~July 2023.

Common shares – On ~~March 22,~~September 27, 2023, the Board declared a quarterly dividend of ~~$0.31~~$0.32 per share payable on ~~June 29,~~December 15, 2023, to shareholders of record on ~~June~~November 15, 2023.

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

On March 24, 2021, the Board authorized the repurchase of up to an additional ~~5,618,464~~5.6 million common shares, increasing the total number of common shares then authorized for repurchase to ~~10,000,000.~~10.0 million. As of ~~February 28,~~August 31, 2023, ~~6,065,000~~6.1 million common shares remained available for repurchase under these two authorizations.

The common shares may be repurchased under these authorizations from time to time, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flows from operations, general economic conditions and other relevant considerations. Repurchases may be made on the open market or through privately negotiated transactions.

~~Table of Contents~~

Long-term debt and short-term borrowings – As of ~~February 28,~~August 31, 2023, we were in compliance with the financial covenants of our short-term and long-term financial debt agreements. Our debt agreements do not include credit rating triggers or material adverse change provisions. There were no outstanding borrowings drawn against our ARCredit Facility at ~~February 28,~~August 31, 2023, leaving the full borrowing capacity of ~~$175.0~~$500.0 million available for future use. ~~This is in addition to $500.0 million of short-term borrowing capacity available under our Credit Facility.~~

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

Dividend Policy

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

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates, including those related to our valuation of receivables, inventories, intangible assets, accrued liabilities, income and other tax accruals, contingencies and litigation, and business combinations. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. These results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Critical accounting policies are defined as those that reflect our significant judgments and uncertainties that could potentially result in materially different results under different assumptions and conditions. Although actual results historically have not deviated significantly from those determined using our estimates, our consolidated financial position or results of operations could be materially different if we were to report under different conditions or to use different assumptions in the application of such policies. Our critical accounting policies have not significantly changed from those discussed in “Part II – Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting ~~Policies”~~Estimates” of the ~~2022~~2023 Form 10-K.

Item 3. – Quantitative and Qualitative Disclosures About Market Risk

Market risks have not materially changed from those disclosed in “Part II – Item 7A. – Quantitative and Qualitative Disclosures About Market Risk” of the ~~2022~~2023 Form 10-K.

Item 4. – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that Worthington Industries files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including Worthington Industries’ principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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Management, under the supervision of and with the participation of Worthington Industries’ principal executive officer and principal financial officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q (the quarterly period ended ~~February 28,~~August 31, 2023). Based on that evaluation, Worthington Industries’ principal executive officer and principal financial officer have concluded that such disclosure controls and procedures were effective at a reasonable assurance level as of the end of the quarterly period covered by this Form 10-Q.

Changes in Internal Control Over Financial Reporting

There were no changes that occurred during the period covered by this Form 10-Q (the quarterly period ended ~~February 28,~~August 31, 2023) in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. – Legal Proceedings

We are involved in various judicial and administrative proceedings, as both plaintiff and defendant, arising in the ordinary course of business. We do not believe that any such proceedings will have a material adverse effect on our business, financial position, results of operation or cash flows.

Item 1A. – Risk Factors

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In “PART I – Item 1A. – Risk Factors” of the ~~2022~~2023 Form 10-K, as filed with the SEC on ~~August 1, 2022,~~July 31, 2023, and available at www.sec.gov or at www.worthingtonindustries.com, we included a detailed discussion of our risk factors. ~~Our~~Other than as noted below, our risk factors have not changed significantly from those disclosed in the ~~2022~~2023 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and investments in the common shares and in connection with the forward-looking statements and other information contained in this Form 10-Q. Any of the risks described in the ~~2022~~2023 Form 10-K, 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 ~~2022~~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.

The UAW strikes against the Detroit Three automakers could have material adverse effects on our business, financial position, results of operations and cash flows as well as the planned Separation. The automotive industry is one of the largest consumers of flat-rolled steel, and the largest end market for our Steel Processing operating segment. While the duration and scope of the initial and any future UAW strikes against the Detroit Three automakers, as well as the corresponding impact on the business of suppliers to the Detroit Three automakers and the impact on our own business, financial position, results of operations and cash flow, are impossible to predict at this time, the prolonged idling of our customers’ production facilities in response to the strikes could have a material adverse impact on us. Prolonged strikes by the UAW may also impact the Separation, including the timing of the Separation and the expected performance of each of the two independent, publicly-traded companies following the planned Separation. The extent to which the UAW strikes will impact us and the Separation will depend on future developments, which cannot be predicted and are highly uncertain. The ultimate impact on our business, financial position, results of operations and cash flows, as well as the planned Separation, will depend on factors beyond our control including the duration and scope of the strikes.

Item 2. – Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities

Unregistered Sales of Equity Securities

There were no ~~unregistered sales of~~ equity securities of Worthington Industries sold by Worthington Industries during the three months ended August 31, 2023 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 (2)		Plans or Programs (1)
June 1-30, 2023		81,828	$	61.62		-		6,065,000
July 1-31, 2023		57,734		69.64		-		6,065,000
August 1-31, 2023		-		-		-		6,065,000
Total		139,562	$	65.72		-

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(1)

The number shown represents, as of the end of each period, ~~covered by this Form 10-Q.~~ the maximum number of common shares that could be purchased under the publicly announced repurchase authorizations then in effect. On March 20, 2019, the Board authorized the repurchase of up to 6,600,000 million common shares. On March 24, 2021, the Board authorized the repurchase of up to an additional 5,618,464 million common shares, increasing the total number of common shares then authorized for repurchase to 10,000,000 million (net of previously repurchased common shares). A total of 3,935,000 million common shares have been repurchased since the latest authorization, leaving 6,065,000 million common shares available for repurchase under these authorizations at August 31, 2023. The common shares available for repurchase under the authorizations currently in effect may be purchased from time to time, with consideration given to the market price of the common shares, the nature of other investment opportunities, cash flows from operations, general economic conditions and other relevant considerations. Repurchases may be made on the open market or through privately-negotiated transactions.

(2)

There were no common shares ~~repurchased by, or on behalf of, Worthington Industries or any affiliated purchaser (as defined in Rule 10b - 18(a)(3) under the Exchange Act)~~purchased during the ~~three months ended February 28, 2023.~~

first fiscal quarter of 2024 as part of publicly announced plans or programs.

Item 3. – Defaults Upon Senior Securities

Not applicable.

Item 4. – Mine Safety Disclosures

Not applicable.

Item 5. – Other Information

~~Not applicable.~~No response required.

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Item 6. – Exhibits


Exhibit No.		Description

~~2.1~~		Equity Interest Purchase Agreement, dated as of October 29, 2021, by and among Worthington Steel of Michigan, Inc., Tempel Holdings Inc., and Tempel Steel Company (Incorporated herein by reference to Exhibit 2.01 to the Current Report on Form 8-K of Worthington Industries, Inc. dated November 1, 2021 and filed with the SEC on the same date (SEC File No. 1-8399)) †

3.1		Amended Articles of Incorporation of Worthington Industries, Inc., as filed with the Ohio Secretary of State on October 13, 1998 (Incorporated herein by reference to Exhibit 3(a) to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 1998 (SEC File No. 0-4016)) P

3.2		Code of Regulations of Worthington Industries, Inc. (reflecting all amendments through the date of this Quarterly Report on Form 10-Q) [This document represents the Code of Regulations of Worthington Industries, Inc. in compiled form incorporating all amendments.] (Incorporated herein by reference to Exhibit 3(b) to the Quarterly Report on Form 10-Q of Worthington Industries, Inc. for the quarterly period ended August 31, 2000 (SEC File No. 1-8399))

10.1		Summary of Annual Base Salaries Approved for Named Executive Officers of Worthington Industries, Inc. (Incorporated by reference to Exhibit 10.29 to the Annual Report on Form 10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2023 (SEC File No. 1-8399)) †

10.2		Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2024 or Named Executive Officers of Worthington Industries, Inc. (Incorporated by reference to Exhibit 10.40 to the Annual Report on Form 10-K of Worthington Industries, Inc. for the fiscal year ended May 31, 2023 (SEC File No. 1-8399)) †

31.1		Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Executive Officer) *

31.2		Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Financial Officer) *

32.1		Certifications of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.2		Certifications of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Date File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document #

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document #

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document #

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document #

101.DEF		Inline XBRL Taxonomy ~~Extension~~ Definition Linkbase Document #

104		Cover Page Interactive Data File – the cover page from this Quarterly Report on Form 10-Q for the quarterly period ended ~~February 28,~~August 31, 2023, formatted in Inline XBRL ~~(included~~(is included within the Exhibit 101 attachments).

* Filed herewith.

** Furnished herewith.

† The Disclosure Schedules and Exhibits referenced in the Equity Interest Purchase Agreement have been omitted pursuant to Item 601(a)(5) of SEC Regulation S-K. Worthington Industries will supplementally furnishIndicates a ~~copy of any of the omitted Disclosure Schedules and Exhibits to the SEC on a confidential basis upon request.~~management contract or compensatory plan or arrangement.

# Attached as Exhibit 101 to this Quarterly Report on Form 10-Q of Worthington Industries are the following documents formatted in Inline XBRL (Extensible Business Reporting Language):

(i)

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

(ii)

Consolidated Statements of Earnings for the three months ~~and nine months~~ ended ~~February 28,~~August 31, 2023 and ~~February 28,~~August 31, 2022;

(iii)

Consolidated Statements of Comprehensive Income for the three months ~~and nine months~~ ended ~~February 28,~~August 31, 2023 and ~~February 28,~~August 31, 2022;

(iv)

Consolidated Statements of Cash Flows for the three months ~~and nine months~~ ended ~~February 28,~~August 31, 2023 and ~~February 28,~~August 31, 2022; and

(v)

Condensed Notes to Consolidated Financial Statements.

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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.


		WORTHINGTON INDUSTRIES, INC.

Date: ~~April 10,~~October 4, 2023	By:	/s/ Joseph B. Hayek
		Joseph B. Hayek,
		Vice President and Chief Financial Officer
		(On behalf of the Registrant as Duly Authorized Officer and as Principal Financial Officer)


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

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


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


	(Unaudited)				(Unaudited)
	February 28,		May 31,		August 31,		May 31,
	2023		2022		2023		2023
Assets
Current assets:
Cash and cash equivalents	$	267,244	$	34,485	$	201,009	$	454,946
Receivables, less allowances of $5,233 and $1,292 at February 28, 2023
and May 31, 2022, respectively		715,899		857,493
Receivables, less allowances of $2,582 and $3,383 at August 31, 2023 and May 31, 2023, respectively						698,287		692,887
Inventories:
Raw materials		271,518		323,609		302,626		264,568
Work in process		160,688		255,019		192,344		183,248
Finished products		168,918		180,512		177,326		160,152
Total inventories		601,124		759,140		672,296		607,968
Income taxes receivable		15,619		20,556		2,593		4,198
Assets held for sale		5,191		20,318		1,979		3,381
Prepaid expenses and other current assets		105,689		93,661		115,692		104,957
Total current assets		1,710,766		1,785,653		1,691,856		1,868,337
Investments in unconsolidated affiliates		244,277		327,381		241,564		252,591
Operating lease assets		102,474		98,769		97,316		99,967
Goodwill		413,989		401,469		415,813		414,820
Other intangible assets, net of accumulated amortization of $107,167 and
$93,973 at February 28, 2023 and May 31, 2022, respectively		318,483		299,017
Other intangible assets, net of accumulated amortization of $116,912 and $112,202 at August 31, 2023 and May 31, 2023, respectively						310,030		314,226
Other assets		25,454		34,394		38,245		25,323
Property, plant and equipment:
Land		49,695		51,483		49,739		49,697
Buildings and improvements		306,296		303,269		309,752		308,669
Machinery and equipment		1,247,994		1,196,806		1,266,341		1,263,962
Construction in progress		57,307		59,363		64,414		45,165
Total property, plant and equipment		1,661,292		1,610,921		1,690,246		1,667,493
Less: accumulated depreciation		979,063		914,581		1,008,378		991,839
Total property, plant and equipment, net		682,229		696,340		681,868		675,654
Total assets	$	3,497,672	$	3,643,023	$	3,476,692	$	3,650,918

Liabilities and equity
Current liabilities:
Accounts payable	$	489,346	$	668,438	$	526,686	$	528,920
Short-term borrowings		3,605		47,997		-		2,813
Accrued compensation, contributions to employee benefit plans and related taxes		84,098		117,530		76,960		93,810
Dividends payable		17,630		15,988		18,603		18,330
Other accrued items		57,703		70,125		47,899		53,362
Current operating lease liabilities		12,166		11,618		12,610		12,608
Income taxes payable		-		300		35,913		7,451
Current maturities of long-term debt		261		265		150,268		264
Total current liabilities		664,809		932,261		868,939		717,558
Other liabilities		118,736		115,991		109,840		113,286
Distributions in excess of investment in unconsolidated affiliate		116,825		81,149		116,377		117,297
Long-term debt		689,339		696,345		298,083		689,718
Noncurrent operating lease liabilities		92,481		88,183		87,626		89,982
Deferred income taxes, net		100,224		115,132		93,911		101,449
Total liabilities		1,782,414		2,029,061		1,574,776		1,829,290
Shareholders' equity - controlling interest		1,585,426		1,480,752		1,774,623		1,696,011
Noncontrolling interests		129,832		133,210		127,293		125,617
Total equity		1,715,258		1,613,962		1,901,916		1,821,628
Total liabilities and equity	$	3,497,672	$	3,643,023	$	3,476,692	$	3,650,918


	Three Months Ended					Nine Months Ended
	February 28,					February 28,
	2023		2022			2023			2022
Net earnings	$	50,258	$	58,647		$	135,007		$	313,307
Other comprehensive income (loss)
Foreign currency translation, net of tax		1,563		(1,482	)		(7,680	)		(10,324	)
Pension liability adjustment, net of tax		323		1,368			3,180			1,364
Cash flow hedges, net of tax		34,342		(19,234	)		17,042			(72,520	)
Other comprehensive income (loss)		36,228		(19,348	)		12,542			(81,480	)
Comprehensive income		86,486		39,299			147,549			231,827
Comprehensive income attributable to noncontrolling interests		3,933		2,305			8,382			14,173
Comprehensive income attributable to controlling interest	$	82,553	$	36,994		$	139,167		$	217,654


	Three Months Ended						Nine Months Ended						Three Months Ended
	February 28,						February 28,						August 31,
	2023			2022			2023			2022			2023			2022
Operating activities:
Net earnings	$	50,258		$	58,647		$	135,007		$	313,307		$	99,703		$	65,244
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		28,153			27,425			84,508			70,579			28,325			28,001
Impairment of long-lived assets		484			3,076			796			3,076			1,401			312
Provision for (benefit from) deferred income taxes		(5,525	)		10,661			(20,198	)		13,336
Benefit from deferred income taxes														(5,453	)		(11,056	)
Loss on extinguishment of debt														1,534			-
Bad debt expense		2,346			382			3,786			896			(799	)		342
Equity in net income of unconsolidated affiliates, net of distributions		23,218			(18,604	)		84,415			(83,096	)		10,225			42,845
Net loss (gain) on sale of assets		46			(628	)		(4,988	)		(13,830	)		105			(769	)
Stock-based compensation		4,975			4,408			13,758			11,959			4,516			4,236
Changes in assets and liabilities, net of impact of acquisitions:
Receivables		3,382			(33,766	)		160,475			(155,451	)		(8,843	)		37,419
Inventories		53,499			31,051			166,959			(229,813	)		(64,327	)		41,167
Accounts payable		6,627			51,893			(195,489	)		50,967			278			(101,581	)
Accrued compensation and employee benefits		(2,900	)		(21,105	)		(33,432	)		(52,924	)		(12,014	)		(33,868	)
Income taxes payable		-			(14,422	)		(300	)		(1,487	)		28,462			7,329
Other operating items, net		17,588			(24,828	)		833			(22,245	)		(23,417	)		1,417
Net cash provided (used) by operating activities		182,151			74,190			396,130			(94,726	)
Net cash provided by operating activities														59,696			81,038

Investing activities:
Investment in property, plant and equipment		(22,748	)		(23,645	)		(68,715	)		(71,804	)		(29,298	)		(21,477	)
Investment in note receivable														(15,000	)		-
Investment in non-marketable equity securities		(20	)		-			(270	)		-			(40	)		(110	)
Proceeds from sale of assets, net of selling costs														51			11,755
Acquisitions, net of cash acquired		-			(269,511	)		(56,088	)		(377,261	)		-			(56,088	)
Net proceeds from sale of investment in ArtiFlex		(300	)		-			35,795			-			-			36,095
Proceeds from sale of assets, net of selling costs		51			4,083			35,545			35,904
Net cash used by investing activities		(23,017	)		(289,073	)		(53,733	)		(413,161	)		(44,287	)		(29,825	)

Financing activities:
Net proceeds from (repayments of) short-term borrowings		(1,330	)		105,638			(44,392	)		105,638
Net repayments of short-term borrowings														(2,813	)		(32,443	)
Principal payments on long-term obligations		(5,759	)		(152	)		(5,909	)		(554	)		(243,757	)		(137	)
Proceeds from issuance of common shares, net of tax withholdings		704			269			(3,411	)		(6,516	)		(5,130	)		(3,466	)
Payments to noncontrolling interests		-			(3,360	)		(11,760	)		(15,436	)		(1,921	)		-
Repurchase of common shares		-			(54,255	)		-			(127,842	)
Dividends paid		(15,101	)		(14,127	)		(44,166	)		(43,390	)		(15,725	)		(13,884	)
Net cash provided (used) by financing activities		(21,486	)		34,013			(109,638	)		(88,100	)
Net cash used by financing activities														(269,346	)		(49,930	)

Increase (decrease) in cash and cash equivalents		137,648			(180,870	)		232,759			(595,987	)		(253,937	)		1,283
Cash and cash equivalents at beginning of period		129,596			225,194			34,485			640,311			454,946			34,485
Cash and cash equivalents at end of period	$	267,244		$	44,324		$	267,244		$	44,324		$	201,009		$	35,768


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


Safe Harbor Statement			ii

Part I. Financial Information

	Item 1.	Financial Statements

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

		Consolidated Statements of Earnings – Three ~~Months and Nine Months Ended February 28,~~months ended August 31, 2023 and 2022	2

		Consolidated Statements of Comprehensive Income – Three ~~Months and Nine Months Ended February 28,~~months ended August 31, 2023 and 2022	3

		Consolidated Statements of Cash Flows – Three ~~Months and Nine Months Ended February 28,~~months ended August 31, 2023 and 2022	4
		Condensed Notes to Consolidated Financial Statements	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2421

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3832

	Item 4.	Controls and Procedures	3832

Part II. Other Information

	Item 1.	Legal Proceedings	4034

	Item 1A.	Risk Factors	4034

	Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities	4034

	Item 3.	Defaults Upon Senior Securities (Not applicable)	4035

	Item 4.	Mine Safety Disclosures (Not applicable)	4035

	Item 5.	Other Information (Not applicable)	4035

	Item 6.	Exhibits	4136

Signatures			4237


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


	Three Months Ended
	February 28, 2023							February 28, 2022
	Before-Tax		Tax			Net-of-Tax		Before-Tax			Tax			Net-of-Tax
(in thousands)
Foreign currency translation	$	1,421	$	142		$	1,563	$	(1,348	)	$	(134	)	$	(1,482	)
Pension liability adjustment		415		(92	)		323		1,700			(332	)		1,368
Cash flow hedges		43,963		(9,621	)		34,342		(26,529	)		7,295			(19,234	)
Other comprehensive income (loss)	$	45,799	$	(9,571	)	$	36,228	$	(26,177	)	$	6,829		$	(19,348	)


Dividend yield	~~2.33~~2.39	%
Expected volatility	~~41.63~~43.00	%
Risk-free interest rate	~~3.19~~4.05	%
Expected term (years)	6.0


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


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


		Gain (Loss) Recognized
		In Earnings for the
	Location of Gain (Loss)	Three Months Ended February 28,
(in thousands)	Recognized in Earnings	2023			2022
Commodity contracts	Cost of goods sold	$	(6,523	)	$	(4,694	)
Foreign currency exchange contracts	Miscellaneous income, net		79			(23	)
Total		$	(6,444	)	$	(4,717	)

(In thousands)

Maturity Date(s)

Commodity contracts

September 2023 - December 2024