Worthington Steel, Inc. (NYSE: WS), a market-leading,
value-added metals processing company, today reported financial
results for the fiscal 2025 second quarter ended November 30,
2024.
Second Quarter Highlights (all comparisons to the second
quarter of fiscal 2024):
- Net sales of $739.0 million decreased 9% compared to $808.0
million.
- Operating income of $18.9 million compared to operating loss of
$8.8 million.
- Net earnings attributable to controlling interest of $12.8
million compared to net loss attributable to controlling interest
of $6.0 million.
- Net earnings per diluted share attributable to controlling
interest of $0.25 compared to net loss per dilutive share
attributable to controlling interest of $0.12; Adjusted net
earnings per diluted share attributable to controlling interest of
$0.19 compared to $0.11.
- Adjusted EBIT of $14.3 million compared to $6.6 million.
- Executed a definitive agreement to acquire a controlling equity
stake in Italy-based Sitem S.p.A. (together with its subsidiaries,
Stanzwerk AG, Decoup S.A.S. and Sitem Slovakia spol. s r.o., “Sitem
Group”). Sitem Group produces electric motor laminations and
accessory products for automotive and industrial applications in
Europe.
- Declared a quarterly dividend of $0.16 per share payable on
March 28, 2025, to shareholders of record at the close of business
on March 14, 2025.
“Worthington Steel delivered a solid quarter despite headwinds
across a number of end markets,” said Geoff Gilmore, president and
CEO of Worthington Steel. “As we mark our first full year as a
publicly traded, stand-alone company, Worthington Steel employees
are driving our strategy and achieving new milestones. We continue
to provide innovative solutions to our customers and partners, and
we are well-positioned to capitalize on key end market trends with
our high value-added solutions to generate returns for our
shareholders.”
Financial highlights for the fiscal
2025 periods and the fiscal 2024 comparative periods are as
follows:
(In millions, except volume and per share
amounts)
2Q 2025
2Q 2024
6M 2025
6M 2024
Volume (tons)
936,069
968,595
1,930,162
1,992,140
Net sales
$
739.0
$
808.0
$
1,573.0
$
1,713.8
Operating income (loss)
18.9
(8.8
)
62.3
60.9
Net earnings (loss) attributable to
controlling interest
12.8
(6.0
)
41.2
52.5
Adjusted EBIT (Non-GAAP)(1)
14.3
6.6
53.7
87.1
Equity in net income (loss) of
unconsolidated affiliate
(0.9
)
3.8
0.4
12.8
Net earnings (loss) per diluted share
attributable to controlling interest
$
0.25
$
(0.12
)
$
0.82
$
1.07
Impairment of long-lived assets per
diluted share (after-tax)
-
-
-
0.01
Separation costs per diluted share
(after-tax)
-
0.23
-
0.29
Pension settlement gain per diluted share
(after-tax)
(0.04
)
-
(0.04
)
-
Gain on land sale per diluted share
(after-tax)
(0.02
)
-
(0.02
)
-
Adjusted net earnings per diluted share
attributable to controlling interest (Non-GAAP)(1)
$
0.19
$
0.11
$
0.76
$
1.37
_______________________________
(1)
Results in both the current year
period and prior year period were impacted by certain items, as
further discussed in the Non-GAAP Financial Measures / Supplemental
Data section later in this release.
Quarterly Results
Net sales for the second quarter of fiscal 2025 were $739.0
million, a decrease of $69.0 million, or 9%, compared to the prior
year quarter. The decrease was driven primarily by lower volumes
and direct selling prices. Direct tons sold decreased 5% and toll
tons sold decreased 1% in the second quarter of fiscal 2025
compared to the prior year quarter. Direct selling prices decreased
4% in the second quarter of fiscal 2025 compared to the prior year
quarter. The mix of direct tons versus toll tons processed was 55%
to 45% in the second quarter of fiscal 2025 compared to 56% to 44%
in the prior year quarter.
Gross margin increased by $19.8 million over the prior year
quarter to $80.0 million. The increase was driven primarily by
higher direct spreads, offset by lower volume. Direct spreads, up
$31.1 million, were impacted by a $21.4 million favorable change
from an estimated $34.8 million inventory holding loss in the prior
year quarter to an estimated $13.4 million inventory holding loss
in the second quarter of fiscal 2025.
Operating income increased $27.7 million from the prior year
quarter to $18.9 million, primarily due to a $19.8 million increase
in gross margin and a $14.9 million decrease in costs associated
with the Company’s December 1, 2023, separation from Worthington
Enterprises, Inc. (“Separation”), partially offset by a $7.0
million increase in selling, general and administrative
(“SG&A”) expense as compared to the prior year quarter. The
increase in SG&A expense was driven by an increase in wage and
benefit costs, incremental costs of being a stand-alone public
company, an increase in bad debt expenses, and additional
professional fees associated with the Sitem Group transaction.
The Company reported net earnings attributable to controlling
interest of $12.8 million, or $0.25 per diluted share, for its
fiscal 2025 second quarter. For the prior year quarter, the Company
recorded net loss attributable to controlling interest of $6.0
million, or $0.12 per diluted share.
Adjusted net earnings attributable to controlling interest of
$9.7 million, or $0.19 per diluted share, compares to the prior
year quarter adjusted net earnings attributable to controlling
interest of $5.4 million, or $0.11 per diluted share. The current
year quarter adjusted results exclude a $2.0 million after-tax
pension settlement gain, or $0.04 per diluted share, and a $1.1
million after-tax gain on land sale, or $0.02 per diluted share.
The prior year quarter adjusted results exclude an $11.4 million in
after-tax Separation costs, or $0.23 per diluted share.
Balance Sheet, Cash Flow and Capital Allocation
As of November 30, 2024, the Company had cash and cash
equivalents of $52.0 million. During the second quarter of fiscal
2025, net cash provided by operating activities equaled $68.0
million compared to $139.9 million in the prior year quarter.
Investment in property, plant and equipment for the second quarter
of fiscal 2025 equaled $34.8 million compared to $18.9 million in
the prior year quarter. The increase in investment in property,
plant and equipment was substantially related to the previously
announced strategic expansions of the Company’s electrical steel
operations in Mexico and Canada, as well as certain other assets.
The Company generated free cash flow (as defined in the Non-GAAP
Financial Measures / Supplemental Data section later in this
release) of $33.2 million in the second quarter of fiscal 2025
compared to free cash flow of $121.0 million in the prior year
quarter.
The Company ended the second quarter of fiscal 2025 with debt of
$115.0 million under its revolving credit facility and $52.0
million in cash and cash equivalents, resulting in a net debt (as
defined in the Non-GAAP Financial Measures / Supplemental Data
section later in this release) position of $63.0 million.
The Board of Directors declared a quarterly dividend of $0.16
per common share. The dividend is payable on March 28, 2025, to
shareholders of record at the close of business on March 14,
2025.
Conference Call
The Company will review fiscal 2025 second quarter results
during its quarterly conference call on December 19, 2024,
beginning at 8:30 a.m., Eastern Time. Details regarding the
conference call are located in the investor section of the
Company’s website at www.WorthingtonSteel.com.
About Worthington Steel
Worthington Steel (NYSE:WS) is a metals processor that partners
with customers to deliver highly technical and customized
solutions. Worthington Steel’s expertise in carbon flat-roll steel
processing, electrical steel laminations and tailor welded
solutions is driving steel toward a more sustainable future.
As one of the most trusted metals processors in North America,
Worthington Steel and its approximately 5,000 employees harness the
power of steel to advance its customers’ visions through
value-added processing capabilities including galvanizing,
pickling, configured blanking, specialty cold reduction,
lightweighting and electrical lamination. Headquartered in
Columbus, Ohio, Worthington Steel operates 32 facilities in seven
states and six countries. Following a people-first Philosophy,
commitment to sustainability and proven business system,
Worthington Steel’s purpose is to generate positive returns by
providing trusted and innovative solutions for customers, creating
opportunities for employees and strengthening its communities.
Safe Harbor Statement
Selected statements contained in this release constitute
“forward-looking statements,” as that term is used in the Private
Securities Litigation Reform Act of 1995 (the “Act”). The Company
wishes to take advantage of the safe harbor provisions included in
the Act. Forward-looking statements reflect the Company’s current
expectations, estimates or projections concerning future results or
events. These statements are often identified by the use of
forward-looking words or phrases such as “believe,” “anticipate,”
“may,” “could,” “should,” “would,” “intend,” “plan,” “will,”
“likely,” “expect,” “estimate,” “project,” “position,” “strategy,”
“target,” “aim,” “seek,” “foresee” and similar words or phrases.
These forward-looking statements include, without limitation,
statements relating to: future or expected cash positions,
liquidity and ability to access financial markets and capital;
outlook, strategy or business plans; the anticipated benefits of
the Company’s separation from Worthington Enterprises, Inc. (the
“Separation”); the expected financial and operational performance
of, and future opportunities for, the Company following the
Separation; the tax treatment of the Separation transaction; the
leadership of the Company following the Separation; future or
expected growth, growth potential, forward momentum, performance,
competitive position, sales, volumes, cash flows, earnings,
margins, balance sheet strengths, debt, financial condition or
other financial measures; pricing trends for raw materials and
finished goods and the impact of pricing changes; the ability to
improve or maintain margins; expected demand or demand trends for
the Company or its markets; additions to product lines and
opportunities to participate in new markets; expected benefits from
transformation and innovation efforts; the ability to improve
performance and competitive position at the Company’s operations;
anticipated working capital needs, capital expenditures and asset
sales; anticipated improvements and efficiencies in costs,
operations, sales, inventory management, sourcing and the supply
chain and the results thereof; projected profitability potential;
the ability to make acquisitions and the projected timing, results,
benefits, costs, charges and expenditures related to acquisitions,
joint ventures, headcount reductions and facility dispositions,
shutdowns and consolidations; projected capacity and the alignment
of operations with demand; the ability to operate profitably and
generate cash in down markets; the ability to capture and maintain
market share and to develop or take advantage of future
opportunities, customer initiatives, new businesses, new products
and new markets; expectations for Company and customer inventories,
jobs and orders; expectations for the economy and markets or
improvements therein; expectations for generating improving and
sustainable earnings, earnings potential, margins or shareholder
value; effects of judicial rulings; the ever-changing effects of
the novel coronavirus (“COVID-19”) pandemic and the various
responses of governmental and nongovernmental authorities thereto
on economies and markets, and on our customers, counterparties,
employees and third-party service providers; and other
non-historical matters.
Because they are based on beliefs, estimates and assumptions,
forward-looking statements are inherently subject to risks and
uncertainties that could cause actual results to differ materially
from those projected. Any number of factors could affect actual
results, including, without limitation, those that follow: our
ability to successfully realize the anticipated benefits of the
Separation; the effect of conditions in national and worldwide
financial markets, including inflation, increases in interest rates
and economic recession, and with respect to the ability of
financial institutions to provide capital; the impact of tariffs,
the adoption of trade restrictions affecting the Company’s products
or suppliers, a United States withdrawal from or significant
renegotiation of trade agreements, the occurrence of trade wars,
the closing of border crossings, and other changes in trade
regulations or relationships; changing oil prices and/or supply;
product demand and pricing; changes in product mix, product
substitution and market acceptance of the Company’s products;
volatility or fluctuations in the pricing, quality or availability
of raw materials (particularly steel), supplies, transportation,
utilities, labor and other items required by operations (especially
in light of Russia’s invasion of Ukraine); effects of sourcing and
supply chain constraints; the outcome of adverse claims experience
with respect to workers’ compensation, product recalls or product
liability, casualty events or other matters; effects of facility
closures and the consolidation of operations; the effect of
financial difficulties, consolidation and other changes within the
steel, automotive, construction and other industries in which the
Company participates; failure to maintain appropriate levels of
inventories; financial difficulties (including bankruptcy filings)
of original equipment manufacturers, end-users and customers,
suppliers, joint venture partners and others with whom the Company
does business; the ability to realize targeted expense reductions
from headcount reductions, facility closures and other cost
reduction efforts; the ability to realize cost savings and
operational, sales and sourcing improvements and efficiencies, and
other expected benefits from transformation initiatives, on a
timely basis; the overall success of, and the ability to integrate,
newly acquired businesses and joint ventures, maintain and develop
their customers, and achieve synergies and other expected benefits
and cost savings therefrom; capacity levels and efficiencies,
within facilities, within major product markets and within the
industries in which the Company participates as a whole; the effect
of disruption in the business of suppliers, customers, facilities
and shipping operations due to adverse weather, casualty events,
equipment breakdowns, labor shortages, interruption in utility
services, civil unrest, international conflicts (especially in
light of Russia’s invasion of Ukraine), terrorist activities or
other causes; changes in customer demand, inventories, spending
patterns, product choices, and supplier choices; risks associated
with doing business internationally, including economic, political
and social instability (especially in light of Russia’s invasion of
Ukraine), foreign currency exchange rate exposure and the
acceptance of the Company’s products in global markets; the ability
to improve and maintain processes and business practices to keep
pace with the economic, competitive and technological environment;
the effect of inflation, interest rate increases and economic
recession, as well as potential adverse impacts as a result of the
Inflation Reduction Act of 2022, which may negatively impact the
Company’s operations and financial results; deviation of actual
results from estimates and/or assumptions used by the Company in
the application of its significant accounting policies; the level
of imports and import prices in the Company’s markets; the impact
of environmental laws and regulations or the actions of the United
States Environmental Protection Agency or similar regulators which
increase costs or limit the Company’s ability to use or sell
certain products; the impact of increasing environmental,
greenhouse gas emission and sustainability regulations and
considerations; the impact of judicial rulings and governmental
regulations, both in the United States and abroad, including those
adopted by the United States Securities and Exchange Commission
(“SEC”) and other governmental agencies as contemplated by the
Coronavirus Aid, Relief and Economic Security (CARES) Act, the
Consolidated Appropriations Act, 2021, the American Rescue Plan Act
of 2021, and the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010; the effect of healthcare laws in the United
States and potential changes for such laws, which may increase the
Company’s healthcare and other costs and negatively impact the
Company’s operations and financial results; the effect of tax laws
in the United States and potential changes for such laws, which may
increase the Company's costs and negatively impact its operations
and financial results; cyber security risks; the effects of privacy
and information security laws and standards; and other risks
described from time to time in the Company’s filings with the SEC,
including those described in “Part I – Item 1A. – Risk Factors” of
the Company’s Annual Report on Form 10-K for the fiscal year ended
May 31, 2024.
Forward-looking statements should be construed in the light of
such risks. The Company notes these factors for investors as
contemplated by the Act. It is impossible to predict or identify
all potential risk factors. Consequently, you should not consider
the foregoing list to be a complete set of all potential risks and
uncertainties. Readers are cautioned not to place undue reliance on
any forward-looking statements, which speak only as of the date
made. The Company does not undertake, and hereby disclaims, any
obligation to update any forward-looking statements, whether as a
result of new information, future developments or otherwise, except
as required by applicable law.
WORTHINGTON STEEL, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF EARNINGS (In
millions, except per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
November 30,
November 30,
2024
2023
2024
2023
Net sales
$
739.0
$
808.0
$
1,573.0
$
1,713.8
Cost of goods sold
659.0
747.8
1,392.6
1,525.1
Gross margin
80.0
60.2
180.4
188.7
Selling, general and administrative
expense
61.1
54.1
118.1
107.9
Impairment of long-lived assets
-
-
-
1.4
Separation costs
-
14.9
-
18.5
Operating income (loss)
18.9
(8.8
)
62.3
60.9
Other income (expense):
Miscellaneous income (expense), net
3.8
0.6
(2.1
)
1.5
Interest expense, net
(2.1
)
(0.2
)
(4.7
)
(0.7
)
Equity in net income (loss) of
unconsolidated affiliate
(0.9
)
3.8
0.4
12.8
Earnings (loss) before income taxes
19.7
(4.6
)
55.9
74.5
Income tax expense (benefit)
3.6
(2.5
)
7.6
14.5
Net earnings (loss)
16.1
(2.1
)
48.3
60.0
Net earnings attributable to
noncontrolling interests
3.3
3.9
7.1
7.5
Net earnings (loss) attributable to
controlling interest
$
12.8
$
(6.0
)
$
41.2
$
52.5
Basic
Weighted average common shares
outstanding(1)
49.5
49.3
49.4
49.3
Earnings (loss) per share attributable
to controlling interest
$
0.26
$
(0.12
)
$
0.83
$
1.07
Diluted
Weighted average common shares
outstanding(2)
50.6
49.3
50.5
49.3
Earnings (loss) per share attributable
to controlling interest
$
0.25
$
(0.12
)
$
0.82
$
1.07
Common shares outstanding at end of
period(1)
49.5
49.3
49.5
49.3
Cash dividends declared per share
$
0.16
n/a
$
0.32
n/a
________________________________________ (1)
Prior to the third quarter of fiscal 2024,
reported Weighted average common shares outstanding (Basic) and
Common shares outstanding at end of period reflects the basic
shares at the Separation. This share amount is being utilized for
the calculation of basic earnings per share for periods presented
prior to the Separation.
(2) Prior to the third quarter of fiscal 2024, reported Weighted
average common shares outstanding (Diluted) reflects the basic
shares at the Separation. This share amount is being utilized for
the calculation of diluted earnings per share for periods presented
prior to the Separation.
WORTHINGTON STEEL, INC.
CONSOLIDATED BALANCE SHEETS (In millions, except share
amounts)
(Unaudited)
November 30,
May 31,
2024
2024
Assets
Current assets:
Cash and cash equivalents
$
52.0
$
40.2
Receivables, less allowances of $4.9 and
$3.2, respectively
372.9
472.6
Inventories
Raw materials
135.9
150.2
Work in process
127.5
176.8
Finished products
79.6
78.3
Total inventories
343.0
405.3
Income taxes receivable
9.2
4.2
Assets held for sale
1.8
2.9
Prepaid expenses and other current
assets
78.5
76.6
Total current assets
857.4
1,001.8
Investment in unconsolidated affiliate
130.4
135.0
Operating lease assets
68.8
72.9
Goodwill
79.5
79.6
Other intangible assets, net of
accumulated amortization of $48.4 and $45.3, respectively
73.9
77.0
Deferred tax asset
8.5
8.5
Other assets
15.6
16.8
Property, plant and equipment:
Land
37.7
37.9
Buildings and improvements
178.3
177.1
Machinery and equipment
924.0
893.8
Construction in progress
110.0
83.6
Total property, plant and equipment
1,250.0
1,192.4
Less: accumulated depreciation
744.8
717.6
Total property, plant and equipment,
net
505.2
474.8
Total assets
$
1,739.3
$
1,866.4
Liabilities and equity
Current liabilities:
Accounts payable
$
285.5
$
380.4
Short-term borrowings
115.0
148.0
Accrued compensation, contributions to
employee benefit plans and related taxes
34.1
52.8
Dividends payable
9.0
8.7
Other accrued items
15.5
15.7
Current operating lease liabilities
7.4
7.6
Income taxes payable
1.2
5.2
Total current liabilities
467.7
618.4
Other liabilities
35.3
34.3
Noncurrent operating lease liabilities
64.6
68.3
Deferred income taxes
26.6
27.9
Total liabilities
594.2
748.9
Preferred shares, without par value;
authorized – 1,000,000 shares; no shares issued or outstanding
-
-
Common shares, without par value;
authorized – 150,000,000 shares; issued
and outstanding 49,482,982 shares and
49,331,514 shares, respectively
-
-
Additional Paid-in Capital
909.6
905.3
Retained Earnings
111.0
86.1
Accumulated other comprehensive loss, net
of taxes of $(1.5) and $(1.7), respectively
(9.8
)
(6.1
)
Total Shareholders’ equity - controlling
interest
1,010.8
985.3
Noncontrolling interests
134.3
132.2
Total equity
1,145.1
1,117.5
Total liabilities and equity
$
1,739.3
$
1,866.4
WORTHINGTON STEEL, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (In
millions)
(Unaudited)
Six Months Ended
November 30,
2024
2023
Operating activities:
Net earnings
$
48.3
$
60.0
Adjustment to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
32.5
33.3
Impairment of long-lived assets
-
1.4
Benefit from deferred income taxes
(2.3
)
(0.2
)
Bad debt expense (income)
2.1
(0.4
)
Equity in net income (loss) of
unconsolidated affiliate, net of distributions
4.6
(12.8
)
Net gain on sale of assets
(1.2
)
(0.4
)
Stock-based compensation
5.3
6.1
Changes in assets and liabilities, net of
impact of acquisitions:
Receivables
94.7
56.5
Inventories
62.4
48.3
Accounts payable
(99.6
)
(49.9
)
Accrued compensation and employee
benefits
(18.7
)
(2.7
)
Other operating items, net
(5.5
)
(20.0
)
Net cash provided by operating
activities
122.6
119.2
Investing activities:
Investment in property, plant and
equipment
(56.3
)
(36.2
)
Proceeds from sale of assets, net of
selling costs
1.1
0.8
Acquisitions, net of cash acquired
-
(21.0
)
Net cash used in investing
activities
(55.2
)
(56.4
)
Financing activities:
Transfers to the Former Parent, net
-
(51.4
)
Proceeds from (repayments of) short-term
borrowings, net
(25.0
)
172.2
Proceeds from revolving credit facility
borrowings - swing loans
223.8
-
Repayments of revolving credit facility
borrowings - swing loans
(231.8
)
-
Proceeds from issuance of common shares,
net of tax withholdings
(1.7
)
-
Payments to noncontrolling interests
(5.0
)
(1.9
)
Dividends paid
(15.9
)
-
Net cash provided by (used in)
financing activities
(55.6
)
118.9
Increase in cash and cash equivalents
11.8
181.7
Cash and cash equivalents at beginning of
period
40.2
32.7
Cash and cash equivalents at end of
period
$
52.0
$
214.4
WORTHINGTON STEEL, INC. NON-GAAP
FINANCIAL MEASURES / SUPPLEMENTAL DATA (In millions, except
volume and per share amounts)
The Company reports its financial results in accordance with
accounting principles generally accepted in the United States
(“GAAP”). The Company also presents certain non-GAAP financial
measures including (a) adjusted operating income, (b) adjusted
earnings before income taxes, (c) adjusted income tax expense, (d)
adjusted net earnings attributable to controlling interest, (e)
adjusted net earnings per diluted share attributable to controlling
interest, (f) net earnings (loss) before interest and taxes
attributable to controlling interest (“EBIT”), (g) adjusted net
earnings before interest and taxes attributable to controlling
interest (“adjusted EBIT”), (h) net earnings before interest,
taxes, depreciation and amortization attributable to controlling
interest (“EBITDA”), (i) adjusted net earnings before interest,
taxes, depreciation and amortization attributable to controlling
interest (“adjusted EBITDA”), (j) free cash flow, (k) total debt
less cash and cash equivalents (“net debt”), and (l) pro forma
adjusted net earnings before interest and taxes attributable to
controlling interest (“pro forma adjusted EBIT”).
These non-GAAP financial measures typically exclude impairment
and restructuring charges (gains), but may also exclude other items
that management believes are not reflective of, and thus should not
be included when evaluating the performance of, the Company’s
ongoing operations. Management uses these non-GAAP financial
measures to evaluate the Company’s performance, engage in financial
and operational planning, and determine incentive compensation and
believes these non-GAAP financial measures provide useful
information to investors because they provide additional
perspective on the performance of the Company’s ongoing operations.
Additionally, management believes these non-GAAP financial measures
provide useful information to investors because they allow for
meaningful comparisons and analysis of trends in the Company’s
business and enable investors to evaluate operations and future
prospects in the same manner as management.
For the purposes of the subsequent tables, the non-GAAP measures
have been adjusted for the items identified below:
- Impairment of long-lived assets -
impairments are excluded because they do not occur in the ordinary
course of the Company’s ongoing business operations, are inherently
unpredictable in timing and amount, and are non-cash, so their
exclusion facilitates the comparison of historical and current
financial results.
- Separation costs - direct and
incremental costs incurred in connection with the Separation from
the Worthington Enterprises, Inc. (the “Former Parent”), including
audit, legal, and other fees paid to third-party advisors as well
as direct and incremental costs associated with the separation of
shared corporate functions which are not part of the Company’s
ongoing operations.
- Tax indemnification adjustment -
tax benefit and indemnification payable adjustments reported in
miscellaneous income (expense), net and income tax expense related
to an indemnification agreement with the former owners of Tempel
Steel Company (“Tempel”) as a result of a first quarter of fiscal
2025 favorable tax ruling in one of the jurisdictions in which
Tempel operates. The indemnification agreement, which was entered
into with the former Tempel owners at the time the Company acquired
Tempel, provides protection to the Company from rulings by tax
authorities through the acquisition date.
- Pension settlement gain - pension
lift-out transaction to transfer a portion of the total projected
benefit obligation of the Tempel pension plan to a third-party
insurance company, which resulted in a pre-tax non-cash gain
reported in miscellaneous income (expense), net, is excluded as it
is not part of the Company’s ongoing operations.
- Gain on land sale - sale of unused
land on the campus of the Tempel subsidiary in China, which
resulted in a pre-tax gain in miscellaneous income (expense), net,
is excluded as it is not part of the Company’s ongoing
operations.
The following provides a reconciliation to the non-GAAP
financial measures adjusted operating income, adjusted earnings
before income taxes, adjusted income tax expense, adjusted net
earnings attributable to controlling interest and adjusted net
earnings per diluted share attributable to controlling interest
from the most comparable GAAP measures for the three- and six-month
periods ended November 30, 2024, and November 30, 2023.
Three Months Ended November
30, 2024
Operating Income
Earnings Before Income Taxes
Income Tax Expense
Net Earnings Attributable to
Controlling Interest
Net Earnings per Diluted Share
Attributable to Controlling Interest
GAAP
$
18.9
$
19.7
$
3.6
$
12.8
$
0.25
Pension settlement gain
-
(2.7
)
(0.7
)
(2.0
)
(0.04
)
Gain on land sale
-
(1.5
)
(0.4
)
(1.1
)
(0.02
)
Non-GAAP
$
18.9
$
15.5
$
2.5
$
9.7
$
0.19
Three Months Ended November
30, 2023
Operating Income (Loss)
Earnings (Loss) Before Income
Taxes
Income Tax Expense (Benefit)
Net Earnings (Loss) Attributable
to Controlling Interest
Net Earnings (Loss) per Diluted
Share Attributable to Controlling Interest
GAAP
$
(8.8
)
$
(4.6
)
$
(2.5
)
$
(6.0
)
$
(0.12
)
Separation costs
14.9
14.9
3.5
11.4
0.23
Non-GAAP
$
6.1
$
10.3
$
1.0
$
5.4
$
0.11
Six Months Ended November 30,
2024
Operating Income
Earnings Before Income Taxes
Income Tax Expense
Net Earnings Attributable to
Controlling Interest
Net Earnings per Diluted Share
Attributable to Controlling Interest
GAAP
$
62.3
$
55.9
$
7.6
$
41.2
$
0.82
Tax indemnification adjustment
-
4.4
4.4
-
-
Pension settlement gain
-
(2.7
)
(0.7
)
(2.0
)
(0.04
)
Gain on land sale
-
(1.5
)
(0.4
)
(1.1
)
(0.02
)
Non-GAAP
$
62.3
$
56.1
$
10.9
$
38.1
$
0.76
Six Months Ended November 30,
2023
Operating Income
Earnings Before Income Taxes
Income Tax Expense
Net Earnings Attributable to
Controlling Interest
Net Earnings per Diluted Share
Attributable to Controlling Interest
GAAP
$
60.9
$
74.5
$
14.5
$
52.5
$
1.07
Impairment of long-lived assets
1.4
1.4
0.2
0.7
0.01
Separation costs
18.5
18.5
4.3
14.2
0.29
Non-GAAP
$
80.8
$
94.4
$
19.0
$
67.4
$
1.37
To further assist in the analysis of results for the periods
presented, the following volume and net sales information for
three- and six-month periods ended November 30, 2024, and November
30, 2023, has been provided along with a reconciliation of the
non-GAAP financial measures, EBIT, adjusted EBIT and adjusted
EBITDA to the most comparable GAAP measure, which is net earnings
attributable to controlling interests. Net earnings margin is
calculated by dividing net earnings (loss) attributable to
controlling interest by net sales. Adjusted EBIT margin is
calculated by dividing adjusted EBIT by net sales. Adjusted EBITDA
margin is calculated by dividing adjusted EBITDA by net sales.
Three Months Ended
November 30,
(In millions, except volume)
2024
2023
Volume (tons)
936,069
968,595
Net sales
$
739.0
$
808.0
Net earnings (loss) attributable to
controlling interest
$
12.8
$
(6.0
)
Interest expense, net
2.1
0.2
Income tax expense (benefit)
3.6
(2.5
)
EBIT
18.5
(8.3
)
Separation costs
-
14.9
Pension settlement gain
(2.7
)
-
Gain on land sale
(1.5
)
-
Adjusted EBIT
14.3
6.6
Depreciation and amortization
16.3
16.4
Adjusted EBITDA
$
30.6
$
23.0
Net earnings margin
1.7
%
-0.7
%
Adjusted EBIT margin
1.9
%
0.8
%
Adjusted EBITDA margin
4.1
%
2.8
%
Six Months Ended
November 30,
(In millions, except volume)
2024
2023
Volume (tons)
1,930,162
1,992,140
Net sales
$
1,573.0
$
1,713.8
Net earnings attributable to
controlling interest
$
41.2
$
52.5
Interest expense, net
4.7
0.7
Income tax expense
7.6
14.5
EBIT
53.5
67.7
Impairment of long-lived assets(1)
-
0.9
Separation costs
-
18.5
Tax indemnification adjustment
4.4
-
Pension settlement gain
(2.7
)
-
Gain on land sale
(1.5
)
-
Adjusted EBIT
53.7
87.1
Depreciation and amortization
32.5
33.3
Adjusted EBITDA
$
86.2
$
120.4
Net earnings margin
2.6
%
3.1
%
Adjusted EBIT margin
3.4
%
5.1
%
Adjusted EBITDA margin
5.5
%
7.0
%
________________________________________
(1)
Excludes the noncontrolling
interest portion of impairment of long-lived assets of $0.5 million
in the prior year period.
The table below provides a reconciliation from net earnings
(loss) attributable to controlling interest (the most comparable
GAAP financial measure) to the non-GAAP financial measures, EBITDA
and adjusted EBITDA, for each of the past five fiscal quarters and
the 12 months ended November 30, 2024, and the 12 months ended
August 31, 2024.
Second
First
Fourth
Third
Second
Quarter
Quarter
Quarter
Quarter
Quarter
2025
2025
2024
2024
2024
Net earnings (loss) attributable to
controlling interest
$
12.8
$
28.4
$
53.2
$
49.0
$
(6.0
)
Interest expense, net
2.1
2.6
2.4
2.9
0.2
Income tax expense (benefit)
3.6
4.0
17.6
14.0
(2.5
)
Depreciation and amortization
16.3
16.2
16.1
15.9
16.4
EBITDA
34.8
51.2
89.3
81.8
8.1
Separation costs
-
-
-
1.0
14.9
Tax indemnification adjustment
-
4.4
(2.8
)
-
-
Pension settlement gain
(2.7
)
-
-
-
-
Gain on land sale
(1.5
)
-
-
-
-
Adjusted EBITDA
$
30.6
$
55.6
$
86.5
$
82.8
$
23.0
Trailing 12 months adjusted
EBITDA
$
255.5
$
247.9
The following provides a reconciliation of net cash provided by
operating activities (the most comparable GAAP financial measure)
to free cash flow for each of the past five fiscal quarters and the
12 months ended November 30, 2024. Free cash flow is a non-GAAP
financial measure that management believes measures the Company’s
ability to generate cash beyond what is required for its business
operations and capital expenditures.
Second
First
Fourth
Third
Second
Quarter
Quarter
Quarter
Quarter
Quarter
2025
2025
2024
2024
2024
Net cash provided by operating
activities
$
68.0
$
54.6
$
35.6
$
44.7
$
139.9
Investment in property, plant and
equipment
(34.8
)
(21.5
)
(44.8
)
(22.4
)
(18.9
)
Free cash flow
$
33.2
$
33.1
$
(9.2
)
$
22.3
$
121.0
Trailing 12 months free cash
flow
$
79.4
The following provides a reconciliation of total debt (the most
comparable GAAP financial measure) to the non-GAAP financial
measure net debt. Net debt is calculated by subtracting cash and
cash equivalents from total debt (defined as the aggregate of
short-term borrowings, current maturities of long-term debt, and
long-term debt). As of November 30, 2024, the Company had no
long-term debt borrowings. The calculation of net debt as of
November 30, 2024, is outlined below.
November 30,
2024
Total debt
$
115.0
Less: cash and cash equivalents
(52.0
)
Net debt
$
63.0
To further assist in the analysis of results for the periods
presented, the following information for the three-month periods
ended November 30, 2024, and November 30, 2023, has been provided
along with a reconciliation of net earnings attributable to
controlling interest (the most comparable GAAP financial measure)
to pro forma adjusted EBIT. Pro forma adjusted EBIT is a non-GAAP
financial measure that management believes includes incremental and
on-going impacts to the Company’s operating results as a
stand-alone public company resulting from the Separation from the
Former Parent. The pro forma financial information assumes the
Separation occurred on June 1, 2022, the first day of the Company’s
2023 fiscal year.
The pro forma financial information has been prepared based upon
the best available information and management estimates and is
subject to assumptions and adjustments described in the
accompanying footnotes. It is not intended to be a complete
presentation of the Company’s financial position or results of
operations had the Separation occurred as of and for the periods
indicated. In addition, the pro forma financial information is
being provided for informational purposes only, and is not
necessarily indicative of the Company’s future results of
operations or financial condition had the Separation and related
transactions been completed on the dates assumed. Management
believes these assumptions and estimates are reasonable, given the
information available on the date of this release.
There were no incremental pro forma adjustments made for the
three and six months ended November 30, 2024, given this period
included the actual results of operating as a stand-alone public
company. For the three and six months ended November 30, 2023, the
adjustments included in the information below represent the
adjustments for the period prior to the Separation.
Three Months Ended
November 30,
2024
2023
Net earnings (loss) attributable to
controlling interest
$
12.8
$
(6.0
)
Interest expense, net
2.1
0.2
Income tax expense (benefit)
3.6
(2.5
)
EBIT
18.5
(8.3
)
Separation costs
-
14.9
Pension settlement gain
(2.7
)
-
Gain on land sale
(1.5
)
-
Adjusted EBIT
14.3
6.6
Pro Forma Adjustments:
Incremental steel supply agreement
margin(1)
-
1.0
Incremental stand-alone corporate
costs(2)
-
(4.1
)
Total Pro Forma Adjustments
-
(3.1
)
Pro Forma Adjusted EBIT
$
14.3
$
3.5
Six Months Ended
November 30,
2024
2023
Net earnings attributable to
controlling interest
$
41.2
$
52.5
Interest expense, net
4.7
0.7
Income tax expense
7.6
14.5
EBIT
53.5
67.7
Impairment of long-lived assets(3)
-
0.9
Separation costs
-
18.5
Tax indemnification adjustment
4.4
-
Pension settlement gain
(2.7
)
-
Gain on land sale
(1.5
)
-
Adjusted EBIT
53.7
87.1
Pro Forma Adjustments:
Incremental steel supply agreement
margin(1)
-
1.9
Incremental stand-alone corporate
costs(2)
-
(8.5
)
Total Pro Forma Adjustments
-
(6.6
)
Pro Forma Adjusted EBIT
$
53.7
$
80.5
_________________________________________
(1)
Reflects the incremental margin
on sales to the Former Parent under the steel supply agreement
between the Company and the Former Parent.
(2)
Includes an increase in SG&A
expense for the three and six months ended November 30, 2023, to
capture the effects of recurring and ongoing costs required to
operate the Company’s stand-alone corporate functions as well as
public company costs, offset by lower corporate profit sharing and
bonus expense post-separation than what was allocated to the
Company in the combined financial statements due to the employee
matters agreement with the Former Parent.
(3)
Excludes the noncontrolling
interest portion of impairment of long-lived assets of $0.5 million
in the prior year period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241217611611/en/
Melissa Dykstra Vice President Corporate Communications and
Investor Relations Phone: 614-840-4144
Melissa.Dykstra@worthingtonsteel.com
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